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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[(check)] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
For the transition period from to
Commission File Number: 1-10646
CENTURA BANKS, INC.
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(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-1688522
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
134 North Church Street, Rocky Mount,
North Carolina 27804
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 977-4400
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, No Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [(check)] No
Indicate by check mark if the 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 28, 1998, there were 25,980,541 shares outstanding of the
Registrant's common stock, no par value. The aggregate market value of the
Registrant's common stock held by those persons deemed by the Registrant to be
nonaffiliates was approximately $1.7 billion. Portions of the Proxy Statement
of the Registrant for the Annual Meeting of Shareholders to be held on April
15, 1998, are incorporated by reference in Part III of this report.
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CROSS REFERENCE
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PART I Item 1 Business Page II-
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Description of Business 4-11
Year 2000 Compliance 11-12
Selected Financial Data 13
Loans 15-17, 40-41, 48
Investment Securities 18-19, 39, 46-47
Funding Sources 19-20, 50-52
Average Balance Sheets 17
Net Interest Income and Net Interest Margin 20-21
Net Interest Income Analysis -- Taxable Equivalent Basis 17
Net Interest Income and Volume/Rate Variance -- Taxable Equivalent
Basis 21
Asset Quality and Allowance for Loan Losses 22-24, 40, 48-49
Noninterest Income and Noninterest Expense 24-25, 57
Equity and Capital Resources 25-26, 37, 64-65
Liquidity 26
Market Risk 26-29
Asset/Liability and Interest Rate Risk Management 27-29
Item 2 Properties 12, 40, 49
Item 3 Legal Proceedings
Registrant and its subsidiary Centura Bank had been parties since 1994
in a civil action and a related administrative proceeding instituted by
seven individuals claiming to represent the depositors of First Savings
Bank of Forest City, SSB ("First Savings"), a mutual thrift institution
acquired by Registrant and its subsidiary Centura Bank in 1993. The
action was originally filed in the Superior Court of Wake County, North
Carolina, against the Registrant, Centura Bank, the North Carolina
Savings Institutions Division ("NCSID") and six individuals who were
directors of First Savings at the time of the acquisition (the "First
Savings directors") and sought damages and injunctive relief on a
number of theories including breach of fiduciary duty by the First
Savings directors in connection with the acquisition. In 1995, the civil
case was certified as a class action and the claims against NCSID were
severed from the claims against Registrant, Centura Bank and the First
Savings directors. The court in the NCSID case, after a hearing on the
matter, remanded the NCSID decision approving the transaction to that
agency for a hearing on plaintiffs' claims of fiduciary breach, on the
basis of which plaintiffs sought an order unwinding the transaction or
obtaining from the First Savings directors a disgorgement of benefits
alleged to have been wrongfully obtained. By agreement of the parties,
approved by the plaintiff class and a final order of the court having
jurisdiction, both the civil and administrative proceedings were settled,
effective February 4, 1998. Both proceedings were dismissed with
prejudice as of that date upon payment by Registrant of an agreed
amount to the representatives of the plaintiff class. The Registrant,
Centura Bank and the First Savings directors did not admit any
wrongdoing in connection with the settlement. The settlement was agreed
to by Registrant to end an expensive and time-consuming piece of
litigation. The settlement of these proceedings have been accounted for
in the consolidated financial statements of Registrant and its subsidiaries
at December 31, 1997, and for the year then ended. Registrant is of the
view that the settlement is not material to the financial position or results
of operations of the Registrant and its subsidiaries taken as a whole.
Various other legal proceedings against the Registrant and its subsidiaries
have arisen from time to time in the normal course of business.
Management believes liabilities arising from these proceedings, if any,
will have no material adverse effect on the financial position or results of
operations of the Registrant or its subsidiaries.
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Item 4 Submission of Matters to a Vote of Security Holders
There has been no submission of matters to a vote of shareholders
during the quarter ended December 31, 1997.
PART II Item 5 Market for the Registrant's Common Equity and Related 7, 8, 25-26, 55-56
Stockholder Matters 30, 64-65
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 14-32
Item 7A Quantitative and Qualitative Disclosures About Market Risk 26-29
Item 8 Financial Statements and Supplementary Data
Independent Auditors' Report 34
Consolidated Balance Sheets at December 31, 1997 and 1996 35
Consolidated Statements of Income for each of the years in the
three-year period ended December 31, 1997 36
Consolidated Statements of Shareholders' Equity for each of the years
in the three-year period ended December 31, 1997 37
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1997 38
Notes to Consolidated Financial Statements 39-65
Quarterly Financial Summary for 1997 and 1996 30
Item 9 Changes in and disagreements with accountants on accounting and
financial disclosure
There have been no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III Item 10 Directors and Executive Officers of the Registrant *
Item 11 Executive Compensation *
Item 12 Security Ownership of Certain Beneficial Owners and Management *
Item 13 Certain Relationships and Related Transactions *
PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements (See Item 8 for reference)
(2) Financial Statement Schedules normally required on Form 10-K
are omitted since they are not applicable or because the required
information is included in the Consolidated Financial Statements
or related Notes to Consolidated Financial Statements.
(3) Exhibits have been filed separately with the Commission and are
available upon written request. 66-67
(b) Reports on Form 8-K:
On October 6, 1997, the Registrant filed a Form 8-K announcing
earnings for the nine months ended September 30, 1997. A press
release dated October 6, 1997 was included as an exhibit.
On November 20, 1997, the Registrant filed a Form 8-K
announcing the completion of the purchase of five North Carolina
banking centers from NationsBank, N.A. The transaction added
approximately $86 million in deposits and $52 million in loans.
</TABLE>
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* Information called for by Part III (Items 10 through 13) is incorporated by
reference to the Registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders filed with the Securities and Exchange Commission.
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DESCRIPTION OF BUSINESS
Registrant
Centura Banks, Inc. (the "Registrant") is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") and operating under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). The Registrant has two wholly-owned subsidiaries,
Centura Bank, a North Carolina chartered bank (the "Bank"), and Centura Capital
Trust I ("CCTI"). The Registrant, the Bank, and CCTI are collectively referred
to as "Centura". The Registrant provides services and assistance to the Bank
and the Bank's subsidiaries in the areas of strategic planning, administration,
and general corporate activities. In return, the Registrant receives income and
dividends from the Bank, where most of the operations of the Registrant are
carried on. The Registrant also receives income from its 49 percent ownership
interest in First Greensboro Home Equity, Inc., a home equity mortgage company
headquartered in Greensboro, North Carolina ("FGHE"). The majority of the
Registrant's executive officers, who are also officers of the Bank, receive
their entire salaries from the Registrant. The executive offices of the
Registrant and the Bank are located at 134 North Church Street, Rocky Mount,
Nash County, North Carolina. At December 31, 1997, the Registrant had total
consolidated assets of $7.1 billion.
CCTI is a statutory business trust created under the laws of the State of
Delaware. In June 1997, CCTI issued $100 million of fixed-rate 8.845 percent
Capital Securities, Series A ("Capital Securities"). The proceeds from the
Capital Securities issuance and from the common stock issued to the Registrant
were invested in Junior Subordinated Deferrable Interest Debentures (the
"junior debentures") issued by the Registrant. The junior debentures are the
primary assets of CCTI. The Registrant has guaranteed the obligations of CCTI
under the Capital Securities.
The Bank is a North Carolina banking corporation and Federal Reserve
member bank with deposits insured by the Bank Insurance Fund (the "BIF") and
the Savings Association Insurance Fund (the "SAIF") of the Federal Deposit
Insurance Corporation (the "FDIC"). As of December 31, 1997, the Bank had 2,211
full-time and 464 part-time employees. The Bank is not a party to any
collective bargaining agreements, and, in the opinion of management, the Bank
enjoys good relations with its employees. The Bank, either directly or through
its wholly-owned subsidiaries, provides a wide range of financial services
through a variety of delivery channels.
Centura's strategic intent is to become the primary provider of financial
services for each of its customers. Therefore, Centura offers: full-service
commercial and consumer banking services, including bill paying services;
retail securities brokerage services; insurance brokerage services covering a
full line of personal and commercial lines; commercial and retail leasing;
trust department activities for individual estates and for various types of
employee benefit plans; and mortgage banking activities.
Another component of the strategic intent is the convenient delivery of
financial products and services to each customer. At December 31, 1997, Centura
serviced its customers through 192 financial stores, including 23 supermarket
locations, and through more than 300 automated teller machines throughout North
Carolina, Virginia, and South Carolina. Alternatively, Centura offers Centura
Highway, a centralized telephone operation which handles a full line of
financial services; a home page on the Internet; and home banking through a
telephone network operated by a third party and connected to the personal
computers of customers.
In keeping with its strategic intent Centura concentrates on expanding its
customer knowledge through the use of a customer database and sales tracking
system that combines financial, demographic, behavioral and psychographic data.
The information supports decision making about services offered, delivery
channels, locations, staffing, and marketing. Management anticipates it will
continue to refine Centura's product and service offerings and related delivery
systems and technologies in order to achieve Centura's strategic intent.
Centura's growth plan continues to include acquisitions that create
strategic market entry or enhancement opportunities. During 1997, Centura
completed three deposit assumption transactions within North Carolina and one
acquisition of an insurance agency. These transactions are described further in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in Note 2 of the notes to consolidated financial statements.
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Competition
The financial services industry is highly competitive. Centura, through
the Bank, competes for all types of loans, deposits, and financial services
with other bank and nonbank institutions located within the State. Since the
amount of money a state bank may lend to a single borrower, or to a group of
related borrowers, is limited to a percentage of the bank's shareholders'
equity, the Bank's larger competitors for commercial loan customers have higher
lending limits than does the Bank. Centura was the seventh largest bank holding
company in North Carolina based on its assets at December 31, 1997.
Centura also competes with out-of-state banks and bank holding companies
serving North Carolina, various savings and loan associations, money market and
other mutual funds, brokerage houses, and various other financial institutions.
Additionally, Centura competes with insurance companies, leasing companies,
regulated small loan companies, credit unions, governmental agencies and
commercial entities offering financial services products.
Supervision and Regulation
The following discussion is intended to be a summary of the material
regulations and policies applicable to the Registrant and its subsidiaries and
does not purport to be a comprehensive discussion.
General. The Registrant is a bank holding company, registered with the
Federal Reserve under the BHC Act and with the North Carolina Commissioner of
Banks (the "Commissioner") under the North Carolina Bank Holding Company Act of
1984, as amended (the "North Carolina Act"). As such, the Registrant and its
subsidiaries are subject to the supervision, examination, and reporting
requirements of the BHC Act and the North Carolina Act and the regulations of
the Federal Reserve and the Commissioner.
The Bank is a member of the FDIC, and as such, its deposits are insured by
the FDIC to the extent provided by law. The Bank is also subject to numerous
state and federal statutes and regulations that affect its business,
activities, and operations, and the Bank, as a North Carolina bank and member
of the Federal Reserve, is supervised and examined by the Federal Reserve and
the Commissioner, and is also subject to the backup supervisory authority of
the FDIC. Such agencies regularly examine the operations of the Bank and are
given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. Such agencies also
have the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of law.
Regulation of Bank Holding Companies
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5 percent of the voting shares of the bank, (ii) it or any of
its subsidiaries, other than a bank, may acquire all or substantially all of
the assets of the bank, or (iii) it may merge or consolidate with any other
bank holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977 (the "CRA").
Both capital adequacy and the CRA are discussed below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that Centura and any other bank holding company
located in North Carolina may now acquire a bank located in any other state,
and any bank holding company located outside North Carolina may lawfully
acquire any North Carolina-based bank, regardless of state law to the contrary,
in either case subject to certain deposit-percentage limitations, aging
requirements, and other restrictions. The Interstate Banking Act also generally
provides that, after June 1, 1997, national and state-chartered banks may
branch interstate through acquisitions of banks in other states. By adopting
legislation prior to that date, a state has the ability either to "opt in" and
accelerate the date after which interstate branching is permissible or "opt
out" and prohibit interstate branching altogether.
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North Carolina has enacted "opt in" legislation that permits interstate
branching in North Carolina on a reciprocal basis through June 1, 1997, and on
an unlimited basis thereafter. Accordingly, the Bank is able to establish and
operate branches in other states, unless such states have enacted "opt out"
legislation.
It is anticipated that the Interstate Banking Act will increase
competition within the markets in which the Bank now operates, although the
extent to which such competition will increase in such markets or the timing of
such increase cannot be predicted.
The BHC Act generally prohibits the Registrant from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether the
performance of such an activity reasonably can be expected to produce benefits
to the public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. For example, factoring accounts receivable,
acquiring or servicing loans, leasing personal property, conducting discount
securities brokerage activities, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions, and performing
certain insurance underwriting activities all have been determined by the
Federal Reserve to be permissible activities of bank holding companies. The BHC
Act does not place territorial limitations on permissible bank-related
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Capital Adequacy
The Registrant and the Bank are required to comply with the capital
adequacy standards established by the Federal Reserve. There are two basic
measures of capital adequacy: a risk-based measure and a leverage measure. All
applicable capital standards must be satisfied for an institution to be
considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance sheet items.
The minimum guideline for the ratio ("Risk Based Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0 percent. At
least half of the Total Capital must be composed of common equity, retained
earnings, minority interests in the equity accounts of consolidated
subsidiaries, noncumulative perpetual preferred stock, and a limited amount of
cumulative perpetual preferred stock, less goodwill and certain other
intangible assets ("Tier 1 Capital"). The remainder may consist of subordinated
debt, other preferred stock, and a limited amount of loan loss reserves ("Tier
II Capital"). At December 31, 1997, the Registrant and the Bank were in
compliance with the total capital ratio and the Tier I capital ratio
requirements. Note 19 of the notes to consolidated financial statements
presents Centura's and the Bank's capital ratios.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio") of 3.0 percent for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3.0 percent plus an additional cushion of
100 to 200 basis points. The Registrant was in compliance with the minimum
Leverage Ratio requirement as of December 31, 1997. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
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The Bank is subject to risk-based and leverage capital requirements
adopted by the Federal Reserve and was in compliance with applicable minimum
capital requirements as of December 31, 1997. Neither the Registrant nor the
Bank has been advised by any federal banking agency of any specific minimum
Leverage Ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "Prompt Corrective
Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have, pursuant to the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FIDICIA"),
proposed an amendment to the risk-based capital standards that would calculate
the change in an institution's net economic value attributable to increases and
decreases in market interest rates and would require banks with excessive
interest rate risk exposure to hold additional amounts of capital against such
exposures.
Support of Subsidiary Bank
Under Federal Reserve policy, the Registrant is expected to act as a
source of financial strength to, and to commit resources to support, the Bank.
This support may be required at times when, absent such Federal Reserve policy,
the Registrant may not be inclined to provide it. In addition, any capital
loans by a bank holding company to its subsidiary bank are subordinate in right
of payment to deposits and to certain other indebtedness of the subsidiary
bank. In the event of a bank holding company's bankruptcy, any commitment by
the bank holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Payment of Dividends
The Registrant is a legal entity separate and distinct from the Bank. The
principal source of cash flow of the Registrant, including cash flow to pay
dividends to its shareholders, is dividends from the Bank. There are statutory
and regulatory limitations on the payment of dividends by the Bank to the
Registrant as well as the Registrant to its shareholders.
Under North Carolina law, the Bank may pay cash dividends only out of
undivided profits and only if the Bank has surplus of a specified level. If a
bank having capital stock of $15,000 or more has surplus of less than 50
percent of its paid-in capital stock, no cash dividend may be declared until
the bank has transferred from undivided profits to surplus 25 percent of its
undivided profits or any lesser percentage sufficient to raise the bank surplus
to an amount equal to 50 percent of its paid-in capital. Furthermore, if, in
the opinion of the federal regulatory agencies, a bank under its jurisdiction
is engaged in or is about to engage in an unsafe or unsound practice (which,
depending on the financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and hearing, that such
bank cease and desist from such practice. The Federal Reserve and the FDIC have
indicated that paying dividends that deplete a bank's capital base to an
inadequate level would be an unsafe and unsound banking practice. Under the
FIDICIA an insured bank may not pay any dividend if payment would cause it to
become undercapitalized or once it is undercapitalized. See "Prompt Corrective
Action." Moreover, the Federal Reserve and the FDIC have issued policy
statements which provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings. See Note 19 of
the notes to consolidated financial statements for amounts available for
dividends.
The payment of dividends by the Registrant and the Bank may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
Community Reinvestment Act ("CRA")
The Bank is subject to the provisions of the CRA. Under the terms of the
CRA, the appropriate federal bank regulatory agency is required, in connection
with its examination of a bank, to assess such bank's record in meeting the
credit needs of the communities served by that bank, including low and
moderate-income neighborhoods. The regulatory agency's assessment of the bank's
record is made available to the public. Further, such assessment is required of
any bank which has applied to (i) charter a national bank, (ii) obtain deposit
insurance coverage for a newly chartered institution, (iii) establish a new
branch office that will accept deposits, (iv) relocate an office, or (v) merge
or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding
company applying for approval to acquire a bank or other bank holding company,
the Federal Reserve will assess the records of each subsidiary bank of the
applicant bank holding company, and such records may be the basis for denying
the application.
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Under CRA regulations jointly adopted by all federal bank regulatory
agencies, the former process-based CRA assessment factors were replaced with a
new evaluation system that rates institutions based on their actual performance
in meeting community credit needs. The evaluation system used to judge an
institution's CRA performance consists of three tests: a lending test; an
investment test; and a service test. Each of these tests will be applied by the
institution's federal regulator in an assessment context that would take into
account such factors as: (i) demographic data about the community; (ii) the
institution's capacity and constraints; (iii) the institution product offerings
and business strategy; and (iv) data on the prior performance of the
institution and similarly-situated lenders. The new lending test -- the most
important of the three tests for all institutions other than wholesale and
limited purpose (e.g. credit card) banks -- will evaluate an institution's
lending activities as measured by its home mortgage loans, small business and
farm loans, community development loans, and, at the option of the institution,
its consumer loans. The institution's regulator will weigh each of these
lending categories to reflect its relative importance to the institution's
overall business and, in the case of community development loans, the
characteristics and needs of the institution's service area and the
opportunities available for this type of lending. Assessment criteria for the
lending test will include: (i) geographic distribution of the institution's
lending; (ii) distribution of the institution's home mortgage and consumer
loans among different economic segments of the community; (iii) the number and
amount of small business and small farm loans made by the institution; (iv) the
number and amount of community development loans outstanding; and (v) the
institution's use of innovative or flexible lending practices to meet the needs
of low-to-moderate income individuals and neighborhoods. At the election of an
institution, or if particular circumstances so warrant, the banking agencies
will take into account in making their assessments lending by the institution's
affiliates as well as community development loans made by the lending consortia
and other lenders in which the institution has invested. All financial
institutions will be required to report data on their small business and small
farm loans as well as their home mortgage loans.
The joint agency CRA regulations provide that an institution evaluated
under a given test would receive one of five ratings for that test:
outstanding; high satisfactory; low satisfactory; needs to improve; or
substantial non-compliance. The ratings for each test would then be combined to
produce an overall composite rating of either outstanding, satisfactory
(including both high and low satisfactory), needs to improve, or substantial
non-compliance. In the case of a retail-oriented institution, its lending test
rating would form the basis for its composite rating. That rating would then be
increased by up to two levels in the case of outstanding or high satisfactory
investment performance, increased by one level in the case of outstanding
service, and decreased by one level in the case of substantial non-compliance
in service. An institution found to have engaged in illegal lending
discrimination would be rebuttably presumed to have a less-than-satisfactory
composite CRA rating. The Bank's current CRA rating is Satisfactory.
Prompt Corrective Action
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system the federal
banking regulators are required to rate supervised institutions on the basis of
five capital categories ("well-capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized") and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the banking regulator to appoint a receiver
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital
level for each category.
Under the Federal Reserve rule implementing the prompt corrective action
provisions, a bank that (i) has a Total Capital ratio of 10.0 percent or
greater, a Tier 1 Capital ratio of 6.0 percent or greater, and a Leverage Ratio
of 5.0 percent or greater, and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
Federal Reserve, is deemed to be "well-capitalized." An institution with a
Total Capital ratio of 8.0 percent or greater, a Tier 1 Capital ratio of 4.0
percent or greater and a Leverage Ratio of 4.0 percent or greater (or 3.0
percent or greater in the case of an institution rated composite 1 under the
CAMEL rating system) is considered to be "adequately capitalized." A bank that
has a Total Capital ratio of less than 8.0 percent or a Tier 1 Capital ratio of
less than 4.0 percent or a Leverage Ratio that is less than 4.0 percent (or
less than 3.0 percent in the case of a bank rated composite 1 under the CAMEL
rating system) is considered to be "undercapitalized." A bank that has a Total
Capital ratio of less than 6.0 percent, a Tier 1 Capital ratio of less than 3
percent, or a Leverage Ratio that is less than 3.0 percent is considered to be
"significantly undercapitalized" and an institution that has a tangible equity
capital to assets ratio equal to or less than 2.0 percent is deemed to be
"critically undercapitalized." For purposes of the regulation, the term
"tangible equity" includes core capital elements
II-8
<PAGE>
counted as Tier 1 capital for purposes of the risk-based capital standards plus
the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus all intangible assets with certain exceptions. A bank
may be deemed to be in a capitalization category that is lower than is
indicated by its actual capital position if it receives an unsatisfactory
examination rating.
In the case of a bank that is categorized as undercapitalized,
significantly undercapitalized, or critically undercapitalized, the institution
is required to submit an acceptable capital restoration plan to its appropriate
federal banking agency. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking agency is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purposes" of FDICIA.
At December 31, 1997, the Bank had the requisite capital levels to qualify
as well-capitalized.
FDIC Insurance Assessments
Pursuant to FDICIA, the FDIC adopted a risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The
risk-based system, which went into effect January 1, 1994, assigns an
institution to one of three capital categories: (i) well-capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned.
Under the final risk-based assessment system there are nine assessment
risk classifications (i.e., combinations of capital groups and supervisory
subgroups) to which different assessment rates are applied.
The Deposit Insurance Funds Act of 1996 (the "Funds Act") was enacted by
Congress as part of omnibus budget legislation and signed into law on September
30, 1996. As directed by the Funds Act, the FDIC implemented a special one-time
assessment of approximately 65.7 basis points (0.657 percent) on a depository
institution's SAIF-insured deposits held as of March 31, 1995 (or approximately
52.6 basis points on SAIF deposits acquired by banks in certain qualifying
transactions). The Bank recorded a pre-tax charge against earnings for the
special assessment in the quarter ended September 30, 1996 in the amount of
approximately $7.3 million.
In addition, on December 24, 1996, in order to avoid collecting more than
needed to maintain the SAIF's capitalization rate at 1.25 percent of aggregate
insured deposits, the FDIC revised the SAIF assessment rate schedule, which
retroactively resulted in, as of December 11, 1996, (i) a widening in the
assessment rate spread among institutions in the different capital and risk
assessment categories, (ii) an overall reduction of the assessment rate range
assessable on SAIF deposits of from 0 to 27 basis points, and (iii) a special
interim assessment rate range for the last quarter of 1996 of from 18 to 27
basis points on institutions subject to Financing Corporation ("FICO")
assessments. Effective January 1, 1997, FICO assessments are imposed on both
BIF- and SAIF-insured deposits in annual amounts presently estimated at 1.29
basis points and 6.44 basis points, respectively. The Bank anticipates that the
net effect of the decrease in the premium assessment rate on SAIF deposits will
result in a reduction in its total deposit insurance premium assessments for
the years 1997 through 1999, assuming no further changes in announced premium
assessment rates.
Under the Federal Deposit Insurance Act, ("FDIA") insurance of deposits
may be terminated by the FDIC upon a finding that the institution has engaged
in unsafe and unsound practices, is in an unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, rule,
order or condition imposed by the FDIC. Management does not know of any
practice, condition or violation that might lead to termination of deposit
insurance.
II-9
<PAGE>
Safety and Soundness Standards
The FDIA, as amended by FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted a set of
guidelines prescribing safety and soundness standards pursuant to FDICIA, as
amended. The guidelines establish general standards relating to internal
controls and information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation,
fees, and benefits. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director, or principal
stockholders. The federal banking agencies determined that stock valuation
standards were not appropriate. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
been given notice by an agency that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so notified,
an institution fails to submit an acceptable compliance plan, the agency must
issue an order directing action to correct the deficiency and may issue an
order directing other actions of the types to which an undercapitalized
association is subject under the prompt correction action provisions of FDICIA.
See "Prompt Corrective Action." If an institution fails to comply with such an
order, the agency may seek to enforce such order in judicial proceedings and to
impose civil money penalties. The federal bank regulatory agencies also
proposed guidelines for asset quality and earnings standards.
Depositor Preference
Legislation enacted by Congress establishes a nationwide depositor
preference rule in the event of a bank failure. Under this arrangement, all
deposits and certain other claims against a bank, including the claim of the
FDIC as subrogee of insured depositors, would receive payment in full before
any general creditor of the bank would be entitled to any payment in the event
of an insolvency or liquidation of the bank.
Technology Risk Management
Federal banking regulators have recently issued various policy statements
emphasizing the importance of technology risk management and supervision in
evaluating the safety and soundness of depository institutions. A fundamental
change in the banking business has been brought on by advances in technology.
Notably, banks are contracting increasingly with outside vendors to provide
data processing and core banking functions. Furthermore, the use of
technology-related products, services, delivery channels, and processes expose
a bank to various risks, particularly transaction, strategic, reputation and
compliance risk. Banks are generally expected to successfully manage technology
related risks with all other risks to ensure that a bank's risk management is
integrated and comprehensive, primarily through identifying, measuring,
monitoring and controlling risks associated with the use of technology.
Registrant and Centura Bank are engaged in an active program of risk
management related to technology. Management has adopted, and the Audit
Committee of the Board has reviewed and approved, an Information Security
Policy for Registrant and its subsidiaries, covering (i) information security
generally, (ii) end user computing, (iii) electronic mail, (iv) the Internet,
and (v) remote access to corporate systems. In addition, Registrant has
retained an independent auditing firm to audit the information technology
systems of the Registrant on all platforms, including the security of such
systems. The initial audit has been completed and has found the systems to be
acceptable. The audit report contained a number of suggestions for further
improvements that management has reviewed with the Audit Committee. Management
continues to work on system security as a matter of priority among corporate
goals.
Transactions with Related Parties
The Bank's authority to engage in transactions with its "affiliates" is
limited by Sections 23A and 23B of the Federal Reserve Act ("FRA") and the
regulations of the Federal Reserve thereunder. In general, an affiliate of the
Bank is any company that controls the Bank or any other company that is under
common control with the Bank, excluding the Bank's subsidiaries. At present,
the provisions of Sections 23A and 23B apply to extensions of credit by the
Bank to the Registrant, CCTI and FGHE. Section 23A limits the aggregate amount
of transactions with any individual affiliate to 10% of capital and surplus and
also limits the aggregate amount of transactions with all affiliates to 20% of
capital and surplus. Extensions of credit to affiliates are required to be
secured by collateral in an amount of a type described in Section 23A and
purchase
II-10
<PAGE>
of low quality assets from affiliates is generally prohibited. Section 23B
provides that certain transactions with affiliates, including loans and asset
purchases, must be on terms and under circumstances, including credit standards
that are substantially the same or at least as favorable to the Bank as those
prevailing at the time for comparable transactions with nonaffiliated
companies.
The Bank's authority to extend credit to its directors, executive officers
and 10% shareholders, as well as to entities controlled by such persons, is
currently governed by the requirements of of Sections 22(g) and 22(h) of the
FRA and Regulation O of the FRB thereunder. Among other things, these
provisions require that extensions of credit to insiders (a) be made on terms
that are substantially the same as, and follow credit underwriting procedures
that are not less stringent than, those prevailing for comparable transactions
with unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features and (b) do not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of the Bank's
capital.
Federal Securities Law
The Registrant's Common Stock is registered with the SEC under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Registrant is subject to information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.
Year 2000 Compliance
The "Year 2000" issue confronting Registrant and its suppliers, customers,
customers' suppliers and competitors centers on the inability of computer
systems to recognize the Year 2000. Many existing computer programs and systems
were originally programmed with six digit dates that provided only two digits
to identify the calendar year in the date field, without considering the
upcoming change in the century. With the impending new millennium, these
programs and computers will recognize "00" as the year 1900 rather than the
year 2000. Like most financial service providers, Centura and its operations
may be significantly affected by the Year 2000 issue due to its dependence on
computer generated financial information. Software, hardware, and equipment
both within and outside Centura's direct control and with whom Centura
electronically or operationally interfaces (e.g. third party vendors providing
data processing, information system management, maintenance of computer
systems, and credit bureau information) are likely to be affected. Furthermore,
if computer systems are not adequately changed to identify the Year 2000, many
computer applications could fail or create erroneous results. As a result, many
calculations which rely on date field information, such as interest, payment or
due dates and other operating functions, could generate results which are
significantly misstated, and Centura could experience a temporary inability to
process transactions, prepare statements or engage in similar normal business
activities. In addition, under certain circumstances, failure to adequately
address the Year 2000 issue could adversely affect the viability of Centura's
suppliers and creditors and the creditworthiness of its borrowers. Thus, if not
adequately addressed, the Year 2000 matter could result in a significant
adverse impact on products, services and the competitive condition of Centura.
Financial institution regulators have recently increased their focus upon
Year 2000 compliance issues, issuing guidance concerning the responsibilities
of senior management and directors. The Federal Financial Institutions
Examination Council ("FFIEC") has issued several interagency statements on Year
2000 Project Management Awareness. These statements require financial
institutions to, among other things, examine the Year 2000 implications of
reliance on vendors, data exchange and potential impact on customers, suppliers
and borrowers. These statements also require each federally regulated financial
institution to survey its exposure, measure its risk and prepare a plan in
order to solve the Year 2000 issue. In addition, the federal banking regulators
have issued safety and soundness guidelines to be followed by insured
depository institutions, such as the Bank, to assure resolution of any Year
2000 problems. The federal banking agencies have asserted that Year 2000
testing and certification is a key safety and soundness issue in conjunction
with regulatory exams, and thus an institution's failure to address
appropriately the Year 2000 issue could result in supervisory action, including
such enforcement actions as the reduction of the institution's supervisory
ratings, the denial of applications for approval of a merger or acquisition, or
the imposition of civil money penalties.
In order to address the Year 2000 issue and to minimize its potential
adverse impact, management has begun a process to identify areas that will be
affected by the Year 2000, assess their potential impact on the operations of
the Bank, monitor the progress of third party software vendors in addressing
the matter, test changes provided by these vendors, and develop contingency
plans for any critical systems which are not effectively reprogrammed. The plan
is divided into the five phases: (1) awareness, (2) assessment, (3) renovation,
(4) validation, and (5) implementation.
Centura has substantially completed the first two phases of the plan and
is currently working internally and with external vendors on the final three
phases. Because Centura outsources its item processing operations, a
significant component
II-11
<PAGE>
of the Year 2000 plan is working with external vendors to test and certify
their systems as Year 2000 compliant. Centura's inquiries indicate that
Centura's external vendors have surveyed their programs to inventory the
necessary changes and have begun correcting the applicable computer programs
and replacing equipment so that information systems will be Year 2000 compliant
prior to the end of 1998. This will enable Centura to devote substantial time
to the testing of the upgraded systems prior to the arrival of the millennium
in order to comply with all applicable regulations.
For additional discussion on Year 2000 matters, see "Management's
Discussion and Analysis of Financial Condition and Results of Operation."
Properties
The main executive offices of the Registrant and the Bank are located in
Rocky Mount, North Carolina. The Bank operates 192 financial stores, the
substantial majority of which are located in North Carolina. The Bank also
operates financial stores in South Carolina and the Hampton Roads region of
Virginia.
II-12
<PAGE>
Table 1
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five-Year
Compounded
Growth
1997 1996 1995 1994 1993 Rate
------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income ............................. $ 515,089 $ 469,760 $ 417,635 $ 324,950 $ 282,819 13.4%
Interest expense ............................ 247,184 219,676 192,990 123,657 112,306 14.7
--------- --------- --------- --------- ---------
Net interest income ......................... 267,905 250,084 224,645 201,293 170,513 12.3
Provision for loan losses ................... 13,418 9,596 7,904 7,220 9,151 (4.9)
Noninterest income .......................... 117,221 100,847 80,110 63,756 66,642 15.6
Noninterest expense ......................... 246,230 233,981 195,777 170,207 157,040 12.0
Income taxes ................................ 42,420 39,203 36,421 31,849 26,688 20.7
--------- --------- --------- --------- ---------
Net icome .................................. $ 83,058 $ 68,151 $ 64,653 $ 55,773 $ 44,276 19.9
========= ========= ========= ========= =========
Net interest income, taxable equivalent ..... $ 275,632 $ 256,109 $ 229,827 $ 207,033 $ 176,610 12.0
========= ========= ========= ========= =========
Cash dividends paid ......................... $ 27,354 $ 24,001 $ 18,731 $ 15,874 $ 12,833 22.3
========= ========= ========= ========= =========
PER COMMON SHARE
Net income -- basic ......................... $ 3.22 $ 2.66 $ 2.50 $ 2.23 $ 1.92 15.2%
Net income -- diluted ....................... 3.15 2.60 2.45 2.19 1.90 15.1
Cash dividends .............................. 1.06 1.00 .85 .74 .69 11.0
Book value .................................. 20.82 18.51 17.19 14.95 14.09 11.2
SELECTED AVERAGE BALANCES
(millions)
Assets ...................................... $ 6,601 $ 5,956 $ 5,178 $ 4,478 $ 3,937 13.7%
Earning assets .............................. 6,056 5,485 4,754 4,118 3,614 13.8
Loans ....................................... 4,309 4,014 3,638 3,005 2,650 12.6
Investment securities ....................... 1,716 1,436 1,083 1,083 905 19.4
Core deposits ............................... 4,512 4,102 3,646 3,445 3,058 10.6
Total deposits .............................. 4,899 4,505 4,036 3,718 3,334 10.5
Shareholders' equity ........................ 510 454 425 360 301 14.9
SELECTED YEAR-END BALANCES
(millions)
Assets ...................................... $ 7,125 $ 6,294 $ 5,785 $ 4,658 $ 4,518 14.3%
Earning assets .............................. 6,458 5,720 5,274 4,230 4,091 14.5
Loans ....................................... 4,587 4,109 3,898 3,244 2,834 13.2
Investment securities ....................... 1,828 1,578 1,329 966 1,201 20.1
Core deposits ............................... 4,893 4,387 3,948 3,428 3,538 11.5
Total deposits .............................. 5,365 4,733 4,444 3,736 3,854 11.5
Shareholders' equity ........................ 538 475 443 369 351 15.1
SELECTED RATIOS
Return on average assets .................... 1.26% 1.14% 1.25% 1.25% 1.12%
Return on average equity .................... 16.28 15.02 15.22 15.48 14.73
Average equity to average assets ............ 7.73 7.62 8.21 8.04 7.64
Dividend payout ratio ....................... 32.93 35.22 28.97 28.46 28.98
</TABLE>
II-13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of Centura Banks, Inc. ("Centura"). It should be read in conjunction
with the audited consolidated financial statements and footnotes presented on
pages 35-65 and the supplemental financial data appearing throughout this
report. Centura is a bank holding company operating in North Carolina and
Virginia. Note 1 of the notes to consolidated financial statements discusses
its wholly-owned subsidiaries, Centura Bank (the "Bank") and Centura Capital
Trust I ("CCTI").
Much of the financial discussion that follows refers to the impact of
Centura's merger and acquisition activity. The following table provides a
summary of merger and acquisition activity for the three-year period ending
December 31, 1997. The transactions allowed Centura to leverage upon existing
market presence as well as expand into adjacent and complimentary markets
within North Carolina.
Table 2
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institution Acquisition Date Total Assets
- ------------------------------------------------------------------------ ------------------ -------------
<S> <C> <C>
ACQUISITIONS ACCOUNTED FOR AS PURCHASES:
(Dollars in millions)
Branch Banking and Trust Company and United Carolina Bank, deposit
assumption ("BB&T") ................................................... 8/15/97 $313
Betts & Company ("Betts"), insurance agency ............................ 11/03/97 1
NationsBank, N.A., deposit assumption ("NationsBank") .................. 11/13/97 86
First Union National Bank, deposit assumption ("First Union") .......... 12/05/97 16
----
Total 1997 Purchase Acquisitions ...................................... $416
====
Essex Savings Bank, deposit assumption ................................. 7/26/96 $ 71
First Community Bank, Gastonia ......................................... 8/16/96 121
First Greensboro Home Equity, Inc., Greensboro, 49% purchase ("FGHE") .. 10/01/96 --
----
Total 1996 Purchase Acquisitions ...................................... $192
====
Cleveland Federal Bank, A Savings Bank, Shelby ......................... 3/30/95 $ 86
First Southern Bancorp, Inc., Asheboro ................................. 6/02/95 325
----
Total 1995 Purchase Acquisitions ...................................... $411
====
MERGERS ACCOUNTED FOR AS POOLINGS OF INTERESTS:
First Commercial Holding Corp., Asheville .............................. 2/27/96 $172
FirstSouth Bank, Burlington ............................................ 10/25/96 170
CLG, Inc., Raleigh ..................................................... 11/01/96 126
----
Total 1996 Mergers .................................................... $468
====
</TABLE>
The 1996 mergers were accounted for as poolings-of-interests. Therefore,
all financial data previously reported prior to the dates of merger have been
restated as though the entities had been combined for all the periods
presented. For the completed acquisitions accounted for under the purchase
method of accounting, the financial position and results of operations of each
entity were not included in the consolidated financial statements until the
consummation date of the transaction.
On January 30, 1998, Centura consummated the acquisition of Moore and
Johnson, Inc. ("M&J"), an insurance agency with its principal operations in
Raleigh, North Carolina. M&J added approximately $3 million in assets. As this
transaction was accounted for as a purchase, its financial position and results
of operations are not included in the consolidated financial statements until
the consummation of the transaction.
Centura has one merger of a South Carolina financial institution, Pee Dee
Bankshares, Inc. ("Pee Dee"), pending completion during the first quarter of
1998. Pee Dee is expected to be accounted for as a pooling-of-interests. At
December 31, 1997, Pee Dee had $138 million in assets, $119 million in deposits
and $90 million in loans.
Centura continually evaluates acquisition opportunities and will continue
seeking to acquire healthy thrift and banking institutions and financial
services entities as allowed under current regulatory guidelines.
II-14
<PAGE>
SUMMARY
Centura recorded net earnings of $83.1 million for the year ended December
31, 1997, an increase of $14.9 million or 21.9 percent from the year ended
December 31, 1996. Earnings per diluted share were $3.15 compared to $2.60 for
the prior year. Excluding a one-time Savings Association Insurance Fund
("SAIF") charge in 1996, net income for 1997 rose 14.7 percent and earnings per
diluted share increased $0.39. Key factors responsible for such results follow:
o Taxable equivalent net interest income increased by $19.5 million, or
7.6 percent, to $275.6 million in 1997 despite a 10 basis point decline
in the net interest margin to 4.56 percent. The volume of average
interest earning assets increased $570.6 million to $6.1 billion which
outpaced the $520.2 million increase in interest-bearing liabilities,
producing a $22.2 million rise in taxable equivalent net interest
income. The net impact of changes in interest rates and product spreads
lowered taxable equivalent net interest income by $2.7 million.
o Excluding acquisition activity, average loan volume increased 5.6
percent over 1996 while average deposits grew 5.8 percent over last
year. Including 1997 acquisitions, average loan and deposit growth over
last year was 7.3 percent and 8.7 percent, respectively. At December 31,
1997, loans and deposits were $4.6 billion and $5.4 billion,
respectively, compared to loans of $4.1 billion and deposits of $4.7
billion at year-end 1996.
o Asset quality measures remained sound for 1997. Nonperforming assets
were $27.9 million at December 31, 1997, representing only 0.39 percent
of total assets, compared to $22.9 million, or 0.36 percent of total
assets last year.
o The allowance for loan losses was $64.3 million, representing 1.40
percent of outstanding loans at December 31, 1997, compared to $58.7
million, or 1.43 percent of loans, the previous year. Net charge-offs
were 0.25 percent of average loans, compared to 0.18 percent of average
loans for the year ended December 31, 1996.
o Noninterest income, before securities transactions, for 1997 increased
$18.0 million to $117.1 million compared to $99.0 million last year.
Service charges on deposit accounts, insurance and brokerage
commissions, ATM fees and credit card activity accounted for the
majority of the increase.
o Noninterest expenses for 1997 increased 8.6 percent to $246.2 million
over the 1996 SAIF-adjusted level. Personnel expenses, professional
fees, and outsourcing charges were responsible for a majority of this
increase.
INTEREST-EARNING ASSETS
Interest-earning assets, consisting primarily of loans and investment
securities, averaged $6.1 billion for the year ended December 31, 1997 as
compared to $5.5 billion for the prior year. At December 31, 1997, earning
assets were $6.5 billion, representing a $738.1 million or 12.9 percent
increase over the $5.7 billion at December 31, 1996. These assets are subject
to credit risk and interest rate risk, which are discussed in detail in the
"Asset Quality and Allowance for Loan Losses" section and the "Market Risk" and
"Asset/Liability and Interest Rate Risk Management" sections, respectively.
Loans
Loans and leases (collectively referred to as "loans") at December 31,
1997, were $4.6 billion, an increase of $477.1 million or 11.6 percent, over
the $4.1 billion recorded last year. Loans of approximately $223 million were
acquired in connection with the 1997 acquisitions. Excluding these
acquisitions, period-end loans grew 6.2 percent. Table 3 summarizes the mix of
total loans outstanding. The portfolio mix did not change significantly from
year-end 1996. The commercial loan portfolio (commercial mortgage, commercial,
industrial and agricultural; and real estate construction) comprised 51.6
percent of the loan portfolio at December 31, 1997, compared to 51.7 percent
last year. Consumer loans and leases ended the year at 38.1 percent and 10.3
percent, respectively, of total loans versus 38.1 percent and 10.2 percent,
respectively, at December 31, 1996.
Commercial loans at December 31, 1997 were $2.4 billion with over 90
percent of the commercial loans secured. Centura, by preference, is a secured
lender. Unsecured commercial loans are generally seasonal in nature (to be
repaid in one year or less) and, like secured loans, are supported by current
financial statements and cash flow analyses. Commercial loans secured by
commercial real estate are supported by appraisals prepared by independent
appraisers approved by the Bank in accordance with regulatory guidelines and by
current financial statements, cash flow analyses, and such other information
deemed necessary by the Bank to evaluate each proposed credit. All loans of
$500,000 or more require complete and thorough financial and nonfinancial
analyses, including in-depth credit memos and ratio analyses. In some cases,
borrowers are visited at their places of business and most collateral is
inspected by a lending officer. Systematic independent credit
II-15
<PAGE>
reviews ensure proper monitoring of post-closing compliance. Weaknesses in
credit and noncompliance with terms, conditions and loan agreements are
promptly reported to the credit review area and reviewed.
In connection with commercial lending activities, Centura had $64.2
million of standby letters of credit outstanding at December 31, 1997. These
letters of credit are subject to the same credit approval and monitoring
process as commercial loans.
Consumer loans (equity lines, residential mortgages, installment loans,
and other credit line loans) increased $182.1 million to $1.7 billion at
December 31, 1997. During the last half of 1997, Centura completed a loan
campaign focusing sales efforts on consumer loan growth. Equity lines and other
credit lines increased $101.2 million between the year-ends. Residential
mortgages at December 31, 1997 increased $63.2 million over the prior year-end.
The continued integration of CLG, Inc., acquired in late 1996, and the
increased demand for lease financing in the markets served, supported the $50.1
million growth in leases from year-end 1996.
Credit is extended by the Bank principally to customers in its market
areas of North Carolina and the Hampton Roads region of Virginia. Although not
a significant part of Centura's lending activities, foreign credit is extended
on a case by case basis and is subject to the same credit and approval process
as other commercial loans including an assessment of country risk. Management
discourages loans to high technology start-up companies, to highly speculative
real estate development projects, and to participation in highly leveraged
transactions. The loan portfolio is reviewed on an on-going basis to maintain
diversification by industry, geography, type of loan, collateral, and borrower.
Loans and other assets which were not performing in accordance with their
original terms and past-due loans are discussed under the section "Asset
Quality and Allowance for Loan Losses."
Average loan volume increased to $4.3 billion during 1997, up $294.7
million, or 7.3 percent, over 1996. Excluding acquisitions, average loans grew
5.6 percent over 1996 levels. During 1997, average loans as a percent of
average earning assets declined slightly to 71.2 percent, compared to 73.2
percent last year.
Taxable equivalent interest income generated by loans increased $27.1
million or 7.1 percent during 1997 to $406.5 million compared to $379.4 million
for the prior year. Given that over 50 percent of the loan portfolio is
affected by changes in the prime rate or other indices, loan interest income is
impacted by changes in the rate environment. As shown in Table 5, "Net Interest
Income Analysis -- Taxable Equivalent Basis," the average loan yield declined 2
basis points to 9.43 percent in 1997. Consequently, most of the increase in the
taxable equivalent interest income was due to volume as illustrated in Table 7,
"Net Interest Income and Volume/Rate Variance Taxable Equivalent Basis."
Interest income on loans without the taxable equivalent adjustment for 1997 was
$406.1 million as compared to $379.0 million for the prior year.
Table 3
- --------------------------------------------------------------------------------
TYPES OF LOANS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
% of % of
Amount Total Amount Total
------------- ----------- ------------- -----------
(thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural .................. $ 846,074 18.45% $ 743,477 18.09%
Consumer ....................... 321,513 7.00 274,733 6.69
Real estate -- mortgage(1) ..... 2,320,320 50.59 2,097,757 51.05
Real estate -- construction
and land development .......... 578,304 12.61 524,246 12.76
Leases ......................... 470,376 10.26 420,240 10.23
Other .......................... 49,995 1.09 49,001 1.18
---------- ------ ---------- ------
Total loans .................... $4,586,582 100.00% $4,109,454 100.00%
========== ====== ========== ======
<CAPTION>
1995 1994 1993
------------------------- ------------------------- -------------------------
% of % of % of
Amount Total Amount Total Amount Total
------------- ----------- ------------- ----------- ------------- -----------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural .................. $ 671,803 17.23% $ 591,317 18.23% $ 493,021 17.39%
Consumer ....................... 270,889 6.95 234,438 7.23 208,001 7.34
Real estate -- mortgage(1) ..... 2,211,607 56.73 1,843,423 56.82 1,712,254 60.41
Real estate -- construction
and land development .......... 434,014 11.13 336,889 10.38 246,781 8.71
Leases ......................... 269,677 6.92 199,982 6.16 141,383 4.99
Other .......................... 40,446 1.04 38,106 1.18 32,924 1.16
---------- ------ ---------- ------ ---------- ------
Total loans .................... $3,898,436 100.00 % $3,244,155 100.00% $2,834,364 100.00%
========== ========= ========== ====== ========== ======
</TABLE>
- ---------
(1) Real estate -- mortgage represents loans secured by real estate, which
includes loans secured by multifamily residential property, residential
mortgage loans, residential mortgage loans held for sale, loans secured by
farmland, and loans secured by other commercial property.
II-16
<PAGE>
Table 4
- --------------------------------------------------------------------------------
MATURITY SCHEDULE OF SELECTED LOANS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------------------------------------
One
Within Through Over
One Five Five
Year Years Years Total
------------ ----------- ---------- -----------
(thousands)
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural:
Fixed interest rates ........................... $ 68,093 $ 91,275 $ 13,530 $ 172,898
Floating interest rates ........................ 367,707 266,812 38,657 673,176
--------- --------- -------- ---------
Total ........................................ $ 435,800 $ 358,087 $ 52,187 $ 846,074
========= ========= ======== =========
Real estate -- construction and land development:
Fixed interest rates ........................... $ 28,026 $ 51,820 $ 4,785 $ 84,631
Floating interest rates ........................ 274,552 203,362 15,759 493,673
--------- --------- -------- ---------
Total ........................................ $ 302,578 $ 255,182 $ 20,544 $ 578,304
========= ========= ======== =========
</TABLE>
Table 5
- --------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS -- TAXABLE EQUIVALENT BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------------------------------- -------------------------------------
Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Yield/Rate Balance Expense Yield/Rate
------------- ---------- ------------ ------------- ---------- ------------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans ........................... $4,309,064 $406,487 9.43% $4,014,391 $379,411 9.45%
Taxable securities .............. 1,669,017 110,906 6.64 1,394,307 90,374 6.48
Tax-exempt securities ........... 42,272 3,775 8.93 47,450 4,211 8.87
Short-term investments .......... 30,741 1,648 5.36 34,368 1,789 5.20
---------- -------- ---------- --------
Interest-earning assets,
gross .......................... 6,051,094 522,816 8.64 5,490,516 475,785 8.67
Net unrealized gains
(losses) on available
for sale securities ............ 4,512 (5,542)
Other assets, net ............... 545,478 471,316
---------- ----------
Total assets .................. $6,601,084 $5,956,290
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest checking ............... $ 651,774 $ 10,828 1.66% $ 611,342 $ 11,085 1.81%
Money market .................... 795,397 33,633 4.23 489,281 17,093 3.49
Savings ......................... 288,128 5,451 1.89 306,772 6,311 2.06
Time ............................ 2,446,648 134,029 5.48 2,450,809 134,556 5.49
---------- -------- ---------- --------
Total interest-bearing
deposits ....................... 4,181,947 183,941 4.40 3,858,204 169,045 4.38
Borrowed funds .................. 763,043 40,453 5.30 588,008 30,427 5.17
Long-term debt .................. 341,067 22,790 6.68 319,634 20,204 6.32
---------- -------- ---------- --------
Interest-bearing liabilities 5,286,057 247,184 4.68 4,765,846 219,676 4.61
-------- --------
Demand, noninterest-
bearing ........................ 717,506 647,245
Other liabilities ............... 87,191 89,453
Shareholders' equity ............ 510,330 453,746
---------- ----------
Total liabilities and
shareholders'
equity ....................... $6,601,084 $5,956,290
========== ==========
Interest rate spread ............ 3.96% 4.06%
Net yield on interest-
earning assets, gross .......... $6,051,094 $275,632 4.56% $5,490,516 $256,109 4.66%
========== ======== ========== ========
Taxable equivalent
adjustment ..................... $ 7,727 $ 6,025
======== ========
<CAPTION>
1995
-------------------------------------
Interest
Average Income/ Average
Balance Expense Yield/Rate
------------- ----------- -----------
(thousands)
<S> <C> <C> <C>
ASSETS
Loans ........................... $3,638,129 $349,301 9.60%
Taxable securities .............. 1,041,994 66,956 6.43
Tax-exempt securities ........... 50,765 4,418 8.70
Short-term investments .......... 33,022 2,142 6.49
---------- --------
Interest-earning assets,
gross .......................... 4,763,910 422,817 8.88
Net unrealized gains
(losses) on available
for sale securities ............ (10,064)
Other assets, net ............... 424,005
----------
Total assets .................. $5,177,851
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest checking ............... $ 567,764 $ 12,866 2.27%
Money market .................... 396,841 12,833 3.23
Savings ......................... 329,877 8,057 2.44
Time ............................ 2,169,535 120,151 5.54
---------- --------
Total interest-bearing
deposits ....................... 3,464,017 153,907 4.44
Borrowed funds .................. 364,293 21,144 5.80
Long-term debt .................. 270,269 17,939 6.64
---------- --------
Interest-bearing liabilities 4,098,579 192,990 4.71
--------
Demand, noninterest-
bearing ........................ 571,606
Other liabilities ............... 82,789
Shareholders' equity ............ 424,877
----------
Total liabilities and
shareholders'
equity ....................... $5,177,851
==========
Interest rate spread ............ 4.17%
Net yield on interest-
earning assets, gross .......... $4,763,910 $229,827 4.82%
========== ========
Taxable equivalent
adjustment ..................... $ 5,182
========
</TABLE>
- ---------
(1) Nonaccrual loans are included in average balances for yield computations.
(2) Yields related to loans and securities exempt from both federal and state
income taxes, federal income taxes only, or state income taxes only are
stated on a taxable equivalent basis assuming statutory tax rates for 1997
of 35% and 7.50%, for 1996 of 35% and 7.75%, and for 1995 of 35% and 7.75%
for federal and state purposes, respectively.
(3) Average balances of taxable and tax-exempt securities available for sale do
not include the unrealized gains (losses) recorded on such securities.
Such amounts, net of taxes, are included in the average balances of
shareholders' equity.
II-17
<PAGE>
Investment Securities
The investment portfolio at year-end 1997 was $1.8 billion, up 15.9
percent from the $1.6 billion at the end of 1996. On average, investments
increased $279.6 million or 19.5 percent to $1.7 billion for 1997 versus $1.4
billion for 1996. As a percentage of average earning assets, investments gained
ground during 1997, representing 28.3 percent of average earnings assets
compared to 26.2 percent for the prior year, primarily a result of deposit
growth out-pacing loan growth. Refer to Note 3 of the notes to consolidated
financial statements for a summary of investment securities as of December 31,
1997, 1996 and 1995.
The investment portfolio consists primarily of securities for which an
active market exists. Centura's policy is to invest primarily in securities of
the U.S. Government and its agencies and in other high grade fixed income
securities so as to minimize any credit risk in the investment portfolio. At
the end of 1997, over 97 percent of the investment portfolio consisted of
obligations of the U.S. Government and its agencies or other investment grade
fixed income securities. At December 31, 1997, the average duration of the
investment portfolio was approximately 2.13 years, compared to 2.34 years at
year-end 1996. The duration of a financial instrument is the weighted average
maturity of the instrument's total cash flows in present value terms. See Table
6, "Investment Securities -- Maturity/Yield Schedule," for a more detailed
analysis of the investment portfolio's remaining contractual maturities.
Table 6
- --------------------------------------------------------------------------------
INVESTMENT SECURITIES -- MATURITY/YIELD SCHEDULE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1997
---------------------------------------------------------------------------------------------------
Remaining Maturities
---------------------------------------------------------------------------------------------------
Within 1 Year 1 to 5 Years 6 to 10 Years Over 10 Years
------------------------ ------------------------ ------------------------ ------------------------
Taxable Taxable Taxable Taxable
Amortized Equivalent Amortized Equivalent Amortized Equivalent Amortized Equivalent
Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1)
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
(thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity:
U.S. Treasury .............. $52,188 5.56% $34,756 6.37% $ -- --% $ -- --%
U.S. Government agencies
and corporations .......... 22,249 5.75 26,778 6.34 -- -- -- --
State and municipal ........ 4,136 9.63 16,287 9.65 12,088 8.09 5,953 7.90
Mortgage-backed ............ -- -- 6,912 5.70 5,359 6.75 -- --
Other securities ........... 1,800 6.00 50 10.25 -- -- -- --
------- ---- ------- ----- ------- ---- ------ ----
Total held to maturity ..... $80,373 5.83% $84,783 6.94% $17,447 7.68% $5,953 7.90%
======= ==== ======= ===== ======= ==== ====== ====
<CAPTION>
As of December 31, 1997
-----------------------
Total
-----------------------
Taxable
Amortized Equivalent
Cost Yield (1)
----------- -----------
(thousands)
<S> <C> <C>
Held to Maturity:
U.S. Treasury .............. $ 86,944 5.88%
U.S. Government agencies
and corporations .......... 49,027 6.07
State and municipal ........ 38,464 8.89
Mortgage-backed ............ 12,271 6.16
Other securities ........... 1,850 6.11
-------- ----
Total held to maturity ..... $188,556 6.57%
======== ====
</TABLE>
<TABLE>
<CAPTION>
Remaining Maturities
--------------------------------------------------------------------------
Within 1 Year 1 to 5 Years 6 to 10 Years
------------------------ ------------------------ ------------------------
Taxable Taxable Taxable
Amortized Equivalent Amortized Equivalent Amortized Equivalent
Cost Yield (1) Cost Yield (1) Cost Yield (1)
----------- ------------ ----------- ------------ ----------- ------------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury .................. $ 63,703 5.81% $122,797 6.80% $ --- --%
U.S. Government agencies
and corporations .............. 60,609 6.13 98,784 7.01 -- --
State and municipal ............ 275 6.55 465 7.87 1,403 7.68
Mortgage-backed and
asset-backed .................. -- -- 62,104 6.72 44,181 6.72
Other securities ............... 24,725 5.13 7,651 6.00 8,750 7.71
-------- ---- -------- ---- ------- ----
Total held to maturity ......... $149,312 5.83% $291,801 6.84% $54,334 6.90%
======== ==== ======== ==== ======= ====
<CAPTION>
Remaining Maturities
--------------------------
Over 10 Years Total
-------------------------- -------------------------
Taxable Taxable
Amortized Equivalent Amortized Equivalent
Cost Yield (1) Cost Yield (1)
------------- ------------ ------------- -----------
(thousands)
<S> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury .................. $ -- --% $ 186,500 6.46%
U.S. Government agencies
and corporations .............. 19,836 7.03 179,229 6.71
State and municipal ............ -- -- 2,143 7.57
Mortgage-backed and
asset-backed .................. 964,610 6.78 1,070,895 6.78
Other securities ............... 143,437 6.55 184,563 6.39
---------- ---- ---------- ----
Total held to maturity ......... $1,127,883 6.76% $1,623,330 6.69%
========== ==== ========== ====
</TABLE>
- ---------
(1) Yields are based on amortized cost, and yields related to securities exempt
from federal and/or state income taxes are stated on a taxable equivalent
basis assuming statutory tax rates of 35% for federal and 7.50% for state
purposes.
II-18
<PAGE>
The classification of securities as held to maturity ("HTM") or available
for sale ("AFS") is determined at the time of purchase. Centura intends and has
the ability to hold its HTM portfolio until maturity. The HTM portfolio is
carried at amortized cost. At December 31, 1997, HTM securities amounted to
$188.6 million compared with $257.8 million at year-end 1996. The decrease was
primarily a result of scheduled maturities within the portfolio. At December
31, 1997 and 1996, the fair value of the HTM portfolio exceeded its amortized
cost by $3.1 million and $246,000, respectively.
The AFS portfolio, representing the remainder of the investment portfolio,
is reported at estimated fair value. These securities are used as a part of
Centura's asset/liability management strategy and may be sold in response to
changes in interest rates, changes in prepayment risk, the need to increase
regulatory capital and other factors. At December 31, 1997, the AFS portfolio
was $1.6 billion compared with $1.3 billion at year-end 1996. At December 31,
1997, the recorded fair value of the AFS portfolio was greater than cost by
$16.2 million, which amount has been recorded, net of tax, as a separate
component of shareholders' equity. The fair value of the AFS securities at
December 31, 1996 was $2.6 million above amortized cost. Net gains of $136,000
on AFS investment securities were realized during 1997 from sales and issuer
call activity, compared to $1.8 million of realized net gains during 1996.
Investment securities contributed $114.7 million in taxable equivalent
interest income during 1997, up from the $94.6 million earned in 1996. The
average yield on investments was 6.70 percent in 1997 versus 6.56 percent in
1996. The increase in investment securities volume was responsible for $17.7
million of the increase in taxable equivalent interest income while changes in
interest rates and in the mix of the investment portfolio contributed $2.4
million. For additional information see Table 5 "Net Interest Income -- Taxable
Equivalent Basis" and Table 7 "Net Interest Income and Volume/Rate Variance --
Taxable Equivalent Basis." Investment interest income, as recorded in the
consolidated income statement, was $107.4 million for 1997 versus $88.9 million
for 1996.
FUNDING SOURCES
Total funding sources averaged $6.0 billion during 1997, an increase of
$590.5 million or 10.9 percent from the average volume in 1996. Funding sources
include deposits, short-term borrowings and long-term borrowings.
Deposits
The deposit base increased $631.9 million to $5.4 billion at December 31,
1997, compared to $4.7 billion at December 31, 1996. Internal growth was
supported by the addition of approximately 45,000 new households during 1997,
excluding those acquired through acquisition. Deposit assumption transactions
added $415 million in deposits. Excluding the 1997 acquisitions, total deposits
increased 4.6 percent over the prior year end.
On average, total deposits increased $394.0 million in 1997 to $4.9
billion, or 8.7 percent over the 1996 average of $4.5 billion. Excluding the
acquired deposits, average deposit growth over 1996 was approximately 5.8
percent.
Deposit mix trends demonstrated a shift from passbook savings and
certificates of deposits to market sensitive money market accounts. On average,
money market accounts grew dramatically in 1997 to $795.4 million, a $306.1
million increase from the 1996 average, and grew to represent 16.2 percent of
average total deposits during 1997, increasing from 10.9 percent averaged
during 1996. Time deposits declined by $4.2 million, and as a percent of total
deposits fell from 54.4 percent in 1996 to 49.9 percent in 1997. Total time
deposits with denominations of $100,000 or greater averaged $381.9 million
during 1997 and $403.7 million during 1996. Transaction account balances
(interest checking and noninterest-bearing demand deposits) on average
increased 8.8 percent, while holding steady at approximately 28.0 percent of
average total deposits.
Core deposits include noninterest-bearing demand, interest checking, money
market, savings and certificates of deposits with balances less than $100,000.
Core deposits grew $506.2 million between the year-end periods to $4.9 billion
at December 31, 1997. Average core deposit growth between the periods was
moderate at 10.0 percent. Core deposits provide a stable source of low cost
funds and continued to represent a majority of Centura's total deposit base at
year-end 1997, 91.2 percent compared to 92.7 percent at December 31, 1996.
These are very high levels by industry standards. The acquisition activity
during 1997 contributed to adding core deposits.
Interest expense on deposits increased $14.9 million to $183.9 million for
1997 compared to $169.0 million for 1996. As shown in Table 5, "Net Interest
Income Analysis -- Taxable Equivalent Basis," the cost of interest-bearing
deposits increased 2 basis points to average 4.40 percent for 1997. The
increase in deposit interest expense was due primarily to volume. The change in
interest rates paid on deposits was responsible for an increase of $2.4 million
in interest expense while the increased volume of interest-bearing deposits
contributed $12.5 million.
II-19
<PAGE>
Other Funding Sources
Borrowed funds at December 31, 1997 were $733.2 million, compared with
$685.3 million at year-end 1996. Borrowed funds, consisting principally of
federal funds purchased, securities sold under agreements to repurchase, and
master notes, averaged $763.0 million in 1997, representing a 29.8 percent
increase over the 1996 average volume of $588.0 million. On average, borrowed
funds represented 12.7 percent of Centura's total average funding sources for
1996 compared with 10.9 percent in 1996. Interest expense on borrowed funds
increased by $10.0 million, of which $9.3 million was due to higher volume. A
13 basis point increase in the interest rates paid for borrowed funds impacted
interest expense by $763,000. The average interest rate paid for these funds
for 1997 was 5.30 percent and 5.17 percent for 1996.
Long-term debt at December 31, 1997 was $382.1 million, increasing $71.3
million over year-end 1996. Long-term debt at year-end 1997 consisted
predominantly of Federal Home Loan Bank Advances and the $100 million of
Capital Securities issued in June 1997 (described in the "Liquidity" section).
The average volume of long-term debt increased $21.4 million to $341.1 million
during 1997, compared to $319.6 million last year. Interest expense on
long-term debt increased $2.6 million, $1.4 million due to greater volume and
$1.2 million due to an increase in interest rates paid. Capital Securities
carry an interest rate of 8.845 percent, influencing the 36 basis point
increase in the 1997 average rate paid on long-term debt as compared with 1996.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for 1997 was $267.9 million up $17.8 million from the
$250.1 million for 1996. Taxable equivalent net interest income in 1997
increased by $19.5 million, or 7.6 percent, to $275.6 million from $256.1
million in 1996. This increase was primarily due to a $570.6 million increase
in average earning asset volume, which outpaced the $520.2 million increase in
interest-bearing liabilities volume. The mix of this growth impacted net
interest income positively by $22.2 million while the interest rate
environment's impact was less dramatic, lowering net interest income by $2.7
million. Management's focus is to stimulate growth in net interest income.
The net interest margin, net taxable equivalent interest income divided by
average interest-earning assets, declined 10 basis points to 4.56 percent for
1997 compared to 4.66 percent for 1996. The interest rate spread, the
difference between the average earning asset yield and the average rate paid on
interest-bearing liabilities, also declined 10 basis points to 3.96 percent for
1997. The average yield on earning assets was 8.64 percent in 1997 and 8.67
percent in 1996 while the rate paid for funding was 4.68 percent and 4.61
percent, respectively. The margin was negatively impacted by investments
growing to represent a greater percentage of earning assets during 1997,
principally because investments carry lower yields than loans. Although
moderate, the seven basis point increased funding costs and the three basis
point decline in the average asset yield also compressed the net interest
margin.
Table 5 and Table 7 provide additional information related to net interest
income and the net interest margin.
II-20
<PAGE>
Table 7
- --------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE VARIANCE -- TAXABLE EQUIVALENT BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997-1996 1996-1995
--------------------------------------- ---------------------------------------
Variances Variance
Income/ Attributable to Income/ Attributable to
Expense ------------------------- Expense -------------------------
Variance Volume Rate Variance Rate Volume
----------- ---------- ------------ ----------- ---------- ------------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans ...................................... $27,076 $27,799 $ (723) $ 30,110 $35,635 $ (5,525)
Taxable securities ......................... 20,532 18,204 2,328 23,418 22,831 587
Tax-exempt securities ...................... (436) (462) 26 (207) (293) 86
Short-term investments ..................... (141) (193) 52 (354) 84 (438)
------- ------- -------- -------- ------- --------
Total interest income ................... 47,031 45,348 1,683 52,967 58,257 (5,290)
------- ------- -------- -------- ------- --------
INTEREST EXPENSE
Interest-bearing deposits
Interest checking ......................... (257) 706 (963) (1,781) 933 (2,714)
Money market .............................. 16,540 12,378 4,162 4,260 3,168 1,092
Savings deposits .......................... (860) (370) (490) (1,746) (537) (1,209)
Time deposits ............................. (527) (228) (299) 14,405 15,451 (1,046)
------- ------- -------- -------- ------- --------
Total interest-bearing deposits ......... 14,896 12,486 2,410 15,138 19,015 (3,877)
Borrowed funds ............................. 10,026 9,263 763 9,283 11,788 (2,505)
Long-term debt ............................. 2,586 1,397 1,189 2,264 3,153 (889)
------- ------- -------- -------- ------- --------
Total interest expense .................. 27,508 23,146 4,362 26,685 33,956 (7,271)
------- ------- -------- -------- ------- --------
Net interest income ..................... $19,523 $22,202 $ (2,679) $ 26,282 $24,301 $ 1,981
======= ======= ======== ======== ======= ========
</TABLE>
The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
II-21
<PAGE>
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
The investment and loan portfolios are the primary types of interest
earning assets for Centura. While the investment portfolio is structured with
minimum credit exposure to Centura, the loan portfolio is the primary asset
subject to credit risk. Credit risk is controlled and monitored through the use
of lending standards, thorough review of potential borrowers and on-going
review of loan payment performance.
Total nonperforming assets, including nonperforming loans and foreclosed
properties, were $27.9 million at December 31, 1997 compared with $22.9 million
at December 31, 1996. Nonperforming assets at year-end 1997 were 0.39 percent
of total assets, up 3 basis points from the 0.36 percent at year-end 1996.
Table 10, "Nonperforming Assets and Past Due Loans," discloses the components
and balances of nonperforming assets over the past five years. Based on
nonaccrual loans segmented by regulatory definition, real estate nonaccrual
loans were responsible for $4.7 million of the increase while industrial and
agricultural commercial loan nonaccruals increased by $556,000. Real estate
nonaccrual loans as a percent of the real estate portfolio were 0.67 percent
and 0.52 percent at December 31, 1997 and 1996, respectively.
Net charge-offs were 0.25 percent of average loans for 1997 versus 0.18
percent for 1996, while the volume of net charge-offs increased $3.8 million to
$11.0 million. Gross charge-offs were $14.4 million for the year-ended December
31, 1997 compared with $10.4 million for the prior year. Recoveries remained
relatively unchanged at $3.4 million and $3.2 million for December 31, 1997 and
1996, respectively. In response to the level of charge-offs and growth in the
loan portfolio, the provision for loan losses increased $3.8 million to $13.4
million for 1997. The provision for loan losses exceeded net charge-offs by
$2.4 million during 1997 and 1996.
The allowance for loan losses ("AFLL") grew by 9.5 percent to $64.3
million at December 31, 1997, compared to $58.7 million last year. As of
year-end 1997, the AFLL to total loans was 1.40 percent and covered 271 percent
of nonperforming loans, compared to 1.43 percent and 306 percent, respectively,
at December 31, 1996. For additional information with respect to the activity
in the AFLL, see Tables 8 and 9, "Analysis of Allowance for Loan Losses" and
"Allocation of the Allowance for Loan Losses," respectively.
The AFLL represents management's estimate of an amount adequate to provide
for potential losses inherent in the loan portfolio. Management's evaluation of
the adequacy of the AFLL is based on management's ongoing review and grading of
the loan portfolio, and consideration of past loan loss experience, trends in
past due and nonperforming loans, risk characteristics of the various
classifications of loans, current economic conditions, the fair value of
underlying collateral and other factors which affect potential credit losses.
Based on the current loan portfolio and levels of current problem assets and
potential problem loans, management believes the AFLL to be adequate at
December 31, 1997. While management uses available information to recognize
losses on loans, future additions to the AFLL may be necessary based on changes
in economic conditions and the impact of such change on the Bank's borrowers.
As an integral part of their examination process, various regulatory agencies
also review the AFLL. Such agencies may require that changes in the AFLL be
recognized when their credit evaluations differ from those of management, based
on their judgments about information available to them at the time of their
examination.
Loans past due ninety or more days were $7.0 million at December 31, 1997,
compared to $8.9 million at December 31, 1996. Accrual of interest on loans is
discontinued when management has serious doubts that such interest will be
collected in a reasonable period of time. Generally, open-end credit lines that
reach 120 days or more past due and substantially all other loans that reach 90
days or more past due are placed on nonaccrual status unless the loan is
adequately secured and in the process of collection. Generally, all loans past
due 180 days are placed on nonaccrual status regardless of security. Recorded
accrued interest is reversed or charged off. When borrowers demonstrate, over
an extended period, the ability to repay a loan Centura has classified as
nonaccrual in accordance with its contractual terms, such loan is returned to
accrual status.
Asset quality measures for 1997 and 1996 moved in line with industry
averages. While the loan portfolio is evaluated by sector and credit quality
analysis, and existing credit policies are reviewed in light of current
economic conditions, management recognizes that growth in the loan portfolio
opens opportunity for new credit problems to develop. The impact of
ever-changing economic conditions and changes to interest rates and/or
inflation on the operations of Centura's customers is unknown, but gives
opportunity for increased nonperforming asset levels. In addition to the
nonperforming assets and past due loans shown in Table 10, management believes
that an estimated $10 to $15 million of additional nonperforming and past due
loans may exist, depending upon economic conditions generally and the
particular situations of various borrowers whose loans are currently
"performing" in accordance with their contractual terms.
II-22
<PAGE>
Table 8
- --------------------------------------------------------------------------------
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning of year ........... $ 58,715 $ 55,070 $ 48,164 $ 43,430 $ 35,344
Allowance for acquired loans ............................. 3,133 1,240 3,460 170 4,670
Provision for loan losses ................................ 13,418 9,596 7,904 7,220 9,151
Loans charged off:
Real estate loans ....................................... 1,662 1,024 1,526 2,525 3,078
Commercial and industrial loans ......................... 4,674 3,900 2,893 1,189 3,080
Agricultural loans (excluding real estate) .............. 256 70 229 61 46
Consumer loans .......................................... 5,536 4,690 3,226 1,971 1,596
Leases .................................................. 2,164 668 381 245 232
Other ................................................... 133 56 51 30 40
-------- -------- -------- -------- --------
Total ................................................. 14,425 10,408 8,306 6,021 8,072
-------- -------- -------- -------- --------
Recoveries on loans previously charged off:
Real estate loans ....................................... 699 543 641 659 725
Commercial and industrial loans ......................... 1,640 1,391 2,166 1,867 631
Agricultural loans (excluding real estate) .............. 45 10 -- 8 2
Consumer loans .......................................... 1,007 1,195 1,019 766 963
Leases .................................................. 47 78 22 65 16
-------- -------- -------- -------- --------
Total ................................................. 3,438 3,217 3,848 3,365 2,337
-------- -------- -------- -------- --------
Net loans charged off .................................... 10,987 7,191 4,458 2,656 5,735
-------- -------- -------- -------- --------
Allowance for loan losses at end of year ................. $ 64,279 $ 58,715 $ 55,070 $ 48,164 $ 43,430
======== ======== ======== ======== ========
Allowance for loan losses to loans at year-end ........... 1.40% 1.43% 1.41% 1.48% 1.53%
Net charge-offs to average loans ......................... .25 .18 .12 .09 .22
Allowance for loan losses to nonperforming loans ......... 2.71x 3.06x 2.86x 2.59x 2.07x
</TABLE>
Table 9
- --------------------------------------------------------------------------------
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- --------- ---------
(thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural ................... $14,230 $13,255 $12,442 $ 7,163 $ 7,320
Consumer ................................................. 10,819 8,249 8,572 8,684 6,241
Real estate -- mortgage .................................. 14,502 15,663 17,851 12,700 13,088
Real estate -- construction and land development ......... 5,922 7,267 6,561 4,810 3,808
Leases ................................................... 5,865 2,142 1,060 921 366
Unallocated .............................................. 12,941 12,139 8,584 13,886 12,607
------- ------- ------- ------- -------
Allowance for loan losses at end of year ................. $64,279 $58,715 $55,070 $48,164 $43,430
======= ======= ======= ======= =======
</TABLE>
The allocation of the allowance for loan losses to the respective loan
classifications is not necessarily indicative of future losses or future
allocations. Refer to Table 3 for percentages of loans in each category to
total loans.
II-23
<PAGE>
Table 10
- --------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ............................. $ 23,722 $ 18,713 $ 18,321 $ 18,375 $ 20,261
Restructured loans ........................... -- 497 954 222 745
-------- -------- -------- -------- --------
Nonperforming loans ......................... 23,722 19,210 19,275 18,597 21,006
Foreclosed property .......................... 4,155 3,663 2,872 2,907 5,803
-------- -------- -------- -------- --------
Total nonperforming assets ................... $ 27,877 $ 22,873 $ 22,147 $ 21,504 $ 26,809
======== ======== ======== ======== ========
Accruing loans past due ninety days .......... $ 6,985 $ 8,916 $ 6,132 $ 3,700 $ 4,250
======== ======== ======== ======== ========
Nonperforming assets to:
Loans and total foreclosed property ......... 0.61% 0.56% 0.57% 0.66% 0.94%
Total assets ................................ 0.39 0.36 0.38 0.46 0.59
======== ======== ======== ======== ========
</TABLE>
NONINTEREST INCOME AND EXPENSE
Traditionally, Centura has generated most of its revenue from net interest
income. With Centura's strategic goal to become the primary financial services
provider, opportunities to enhance noninterest revenue sources have developed.
Noninterest income ("NII") as a percentage of total revenues, defined as the
sum of taxable equivalent net interest income and noninterest income, trended
upward during 1997, reaching 29.8 percent compared with 28.3 percent in 1996.
Total NII increased $16.4 million, or 16.2 percent, to $117.2 million for 1997.
NII excluding securities gains totaled $117.1 million in 1997 increasing $18.0
million over the 1996 level.
Service charges on deposits, the largest component of NII, increased $5.9
million to $40.7 million, principally due to growth in new deposits, a mid-year
increase to non-sufficient funds ("NSF) charges, and the reduction of waived
service charges. Service charges on deposits represented 34.7 percent of NII
for 1997 versus 34.5 percent for 1996, indicating that growth in NII continued
to be generated from the traditional banking activities as well as alternative
sources. As compared to 1996, insurance and brokerage revenue increased $1.2
million and $1.7 million, respectively, through the delivery of a broad range
of mutual fund, insurance and annuity services offered by the Bank's
broker-dealer and insurance subsidiaries. The acquisition of Betts had minimal
impact on 1997 NII, but the acquisition of Betts & M&J should support growth in
1998 insurance commissions. Other deposit related fees increased $2.0 million
to $7.9 million for 1997 as compared to 1996, primarily due to an increase in
ATM fees assessed on non-Centura customers who use Centura ATMs and to a
significant increase in debit card activity, fueled by marketing campaigns.
Credit card fees and trust fees were $6.6 million and $7.7 million,
respectively, for 1997, up from the $5.0 million and $6.8 million,
respectively, earned in 1996. Operating leases, the investment in First
Greensboro, and bank-owned life insurance contributed an additional $5.3
million increase to NII over the 1996 level.
Noninterest expense ("NIE") increased 8.6 percent to $246.2 million for
year-end 1997, compared to the SAIF-adjusted 1996 NIE of $226.7 million. During
1996, Centura expensed $7.3 million or $4.2 million, net of tax, related to the
one-time special assessment on financial institutions to capitalize the "SAIF"
fund. Including the SAIF assessment, NIE increased 5.2 percent over the prior
year.
The increase in personnel costs, the single largest component of NIE, was
held to 3.6 percent or $4.0 million over the 1996 level although Centura added
personnel from acquisitions and instore financial offices. Occupancy and
equipment expenses in 1997 carried the full expenditures related to the ten
"instores" opened in late 1996, costs associated with the twelve instores
opened this year and the depreciation for equipment upgrades and enhancements.
Accordingly, occupancy and equipment expenses increased $1.1 million and $2.1
million, respectively, over 1996. Professional fees were $15.9 million for 1997
as compared with $11.3 million for 1996. Efforts to evaluate operational
efficiencies, both in the branch network and in support areas, contributed to a
majority of the increase in professional fees with some of the benefit derived
in reduced personnel expenses. Fees for outsourced services continued to rise
in 1997, reaching $8.2 million in comparison with $3.3 million for 1996.
Centura outsources several functions including item processing, property
management, and call processing generated from the Centura Highway. Outsourcing
these functions contributed to the slow growth in personnel expenses. A
combination of increased volumes and absorbing a full year of item processing
outsourcing expenses in 1997
II-24
<PAGE>
contributed to the rise in outsourcing expenditures over 1996. Marketing
expenses increased by $1.5 million over 1996 in response to an expanded
customer base, the support of new markets, and an increased emphasis on
target-marketing customer segments. The amortization of intangibles increased
$1.5 million in 1997 over 1996 due to increased goodwill recorded for the 1997
acquisitions. The reduction in the rates of federal deposit insurance premiums
that began in late 1996 was responsible for a $1.6 million decline in other
operating SAIF-adjusted NIE.
In 1997, the efficiency ratio, an important productivity measure, improved
83 basis points to 62.68 percent from 63.51 percent, the SAIF-adjusted ratio
for 1996. The efficiency ratio for 1996 including the SAIF assessment was 65.55
percent. Total revenues increased by $35.9 million while noninterest expenses
increased over last year by $19.5 million, excluding the SAIF assessment,
benefiting the efficiency ratio. Since 1995, Centura has invested significant
resources to expand product services and delivery channels and to enhance
technologies in response to a competitive and changing industry. These
investments included the rollout of loan platform automation and customer
profitability database efforts. During 1997, Centura began to benefit from
these strategic investments as revenue growth outpaced noninterest expense
increases.
INCOME TAX EXPENSE
The amount of income tax expense for 1997 was $42.4 million compared to
$39.2 million in 1996. The 1997 and 1996 effective tax rates were 33.81 percent
and 36.52 percent, respectively. Refer to Note 14 of the notes to consolidated
financial statements for a reconciliation of the statutory Federal income tax
rate of 35% to the effective tax rates for 1997, 1996, and 1995.
EQUITY AND CAPITAL RESOURCES
Shareholders' equity at the end of 1997 was $538.3 million, compared to
$475.2 million and $443.3 million at December 31, 1996 and 1995, respectively.
The ratio of shareholders' equity to year-end assets was 7.6 percent, 7.6
percent, and 7.7 percent for 1997, 1996 and 1995, respectively. The growth in
shareholders' equity has been a function of the retention of earnings and the
issuance of common stock in connection with Centura's insurance agency
acquisition and the exercise of stock options, curbed by dividends paid and by
the repurchase of common stock. From time to time, management repurchases
Centura common stock.
Centura's common stock is traded on the New York Stock Exchange under the
symbol CBC. At December 31, 1997, Centura had approximately 13,535 shareholders
and 25,862,375 shares outstanding. Annual cash dividends have increased
consistently and have been paid without interruption over the past 31 years.
Generally, dividends are paid on or about the 15th day of the final month in
the quarter. Cash dividends paid were $27.4 million, $24.0 million and $18.7
million during 1997, 1996 and 1995, respectively, which represents $1.06,
$1.00, and $.85 on a per share basis, respectively. Of the cash dividends paid
during 1997, $6.4 million were declared and accrued during the fourth quarter
of 1996. During the fourth quarter of 1997, Centura declared and accrued $7.0
million in dividends, or $.27 per share, for the first quarter of 1998 cash
dividend.
Unrealized net gains or losses, net of tax, on AFS securities held by
Centura are included as a component of shareholders' equity. At December 31,
1997 and 1996, the unrealized net gains, net of tax, were $10.0 million and
$1.6 million, respectively. The unrealized net gains, net of tax, on AFS
securities were $631,000 at December 31, 1995.
Centura's capital ratios are greater than the minimums required by
regulatory guidelines. It is Centura's intent to maintain an optimal capital
and leverage mix. At December 31, 1997, Centura had the requisite capital
levels to qualify as well-capitalized. At December 31, 1997, Tier I capital was
$520.2 million and total capital was $549.3 million. Centura's and the Bank's
capital ratios are presented in Note 19 of the notes to consolidated financial
statements. As discussed in the "Liquidity" section, Capital Securities are a
component of Tier I capital.
Table 11
- --------------------------------------------------------------------------------
CAPITAL RATIOS OF CENTURA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tier I Total Tier I
Capital Capital Leverage
----------- ----------- -------------
<S> <C> <C> <C>
1997 ........................ 10.60% 11.19% 7.51%
1996 ........................ 9.48 10.02 6.56
Minimum requirement ......... 4.00 8.00 3.00-5.00
</TABLE>
II-25
<PAGE>
Regulatory agencies have generally taken the position not to include net
unrealized gains or losses on investment securities in calculating Tier 1
capital.
As a result of its well-capitalized status, the Bank is assessed at the
lowest FDIC insurance premium rates available for financial institutions under
each insurance fund. Centura has deposits insured under both of the FDIC's
insurance funds, the BIF and the SAIF. On September 30, 1996, legislation was
enacted to recapitalize the SAIF, which consisted of a one-time special
assessment on financial institutions that had or had acquired SAIF-insured
deposits in recent years. The special SAIF assessment for Centura of $7.3
million, or $4.2 million after tax, was expensed on September 30, 1996.
LIQUIDITY
Centura's liquidity management objective is to meet maturing debt
obligations, provide a reliable source of funding to borrowers, and fund
operations on a cost effective basis. Management believes that sufficient
resources are available to meet Centura's liquidity objective through its debt
maturity structure, holdings of liquid assets, and access to the capital
markets through a variety of funding vehicles.
Investment securities are an important tool to Centura's liquidity
management objective. Some AFS securities were sold during 1997 and 1996 to
reposition the investment portfolio in a fluctuating interest rate environment.
Management may continue to reposition the investment portfolio in order to
enhance future results of operations with no expected material impact on
liquidity.
The Bank has multiple funding sources that could be used to increase
liquidity and provide additional financial flexibility. These sources consist
primarily of established federal funds lines with major banks totaling
approximately $1.6 billion, and the ability to borrow approximately $500
million from the FHLB ($229 million outstanding to FHLB at December 31, 1997
and 1996, respectively). The Bank also has the ability to issue debt up to a
maximum of $300 million under an offering by the Bank to institutional
investors of unsecured bank notes due from 30 days to 15 years from the date of
issue. Each bank note would be a direct, unconditional and unsecured general
obligation solely of the Bank and would not be an obligation of or guaranteed
by Centura. Interest rate and maturity terms would be negotiated between the
Bank and the purchaser, within certain parameters set forth in the offering
circular. At December 31, 1996, an aggregate principal amount of $16 million in
bank notes were outstanding. There were no bank notes outstanding at year-end
1997. In addition, Centura also accepts Eurodeposits, has a master note
commercial paper facility, and offers brokered certificates of deposits.
Long-term debt includes $100 million of fixed-rate, thirty-year Capital
Securities issued in June 1997 by CCTI, a consolidated subsidiary of Centura.
CCTI issued $3.1 million of common securities to the Holding Company of
Centura. CCTI invested the proceeds of $103.1 million, generated from the
Capital Securities and common securities issuances, in fixed-rate Junior
Subordinated Deferrable Interest Debentures ("the junior debentures") issued by
Centura. The junior debentures, scheduled to mature in June 2027, are the
primary assets of CCTI. Centura has guaranteed the obligations of CCTI under
the Capital Securities. For risk-based capital calculations, the Capital
Securities are included as a component of Tier I capital.
Centura also has an unsecured line of credit of $60 million bearing a
variable interest rate with $40 million and $60 million outstanding under this
line of credit at December 31, 1997 and 1996, respectively.
Management is not aware of any events that are reasonably likely to have a
material effect on Centura's liquidity, capital resources or operations. In
addition, management is not aware of any regulatory recommendations which, if
implemented, would have a material effect on Centura.
MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and
rates. Centura's market risk primarily stems from interest rate risk, the
potential economic loss due to future changes in interest rates, which is
inherent in lending and deposit gathering activities. Centura's objective is to
manage the mix of interest-sensitive assets and liabilities to moderate
interest rate risk and stabilize the net interest margin while enhancing
profitability. Centura does not maintain a trading account nor is the
corporation subject to currency exchange risk or commodity price risk.
II-26
<PAGE>
The table below illustrates the scheduled maturity of selected on-balance
sheet financial instruments and their estimated fair values at December 31,
1997. For loans, investment securities, and long-term debt obligations,
principal cashflows are presented by expected maturity date including the
weighted average interest rate by exposure category. Weighted average variable
rates are based on implied forward rates in the yield curve at year-end.
Prepayment assumptions are based on rates evolving along the implied forward
yield curve at year-end and reflect market conventional prepayment behavior.
For deposits without contractual maturities, including interest checking,
savings, and money market accounts, cashflows are separated into a core and
"non-core" component. The "non-core" cashflows are scheduled to mature in 1998
while the core cashflows are presented based on management's assessment of
runoff.
Centura utilizes off-balance sheet derivative financial instruments as one
means of managing its interest rate risk associated with on-balance sheet
financial instruments. Refer to Table 13 for a summary of market risk
information relative to off-balance sheet financial instruments and to the
section "Asset/Liability and Interest Risk Management" for further information
on how Centura manages its interest rate risk.
Table 12
- --------------------------------------------------------------------------------
RATE SENSITIVE ON-BALANCE SHEET FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturing in:
-----------------------------------------------------------------------------------
1998 1999 2000 2001 2002 Thereafter
-------------- ------------- ------------- ------------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans
Fixed rate ................... $ 761,740 $ 447,505 $ 324,473 $ 191,180 $ 130,693 $ 118,241
Average rate (%) ............. 8.79 8.94 9.36 9.08 9.06 10.41
Variable rate ................ 1,046,587 297,739 279,660 219,335 219,239 485,911
Average rate (%) ............. 9.07 8.98 9.09 9.27 9.41 9.91
Investment securities
Fixed rate ................... 279,488 153,978 124,655 124,670 141,287 289,904
Average rate (%) ............. 6.09 6.69 6.57 6.42 6.37 6.57
Variable rate ................ 167,174 77,482 78,937 90,046 48,160 252,275
Average rate (%) ............. 5.90 5.76 6.31 5.89 5.93 5.68
Rate Sensitive Liabilities:
Interest-bearing checking,
savings, money market ........ $1,200,236 $ 126,987 $ 126,987 $ 126,987 $ 126,987 $ 253,975
Average rate (%) ............. 3.93 1.27 1.27 1.27 1.27 1.27
Certificates of deposit ....... 1,759,368 523,851 102,508 37,298 163,266 --
Average rate (%) ............. 5.39 5.78 6.02 5.77 6.21 --
Borrowed funds ................ 733,192 -- -- -- -- --
Average rate (%) ............. 5.39 -- -- -- -- --
Long-term debt ................ 92,759 130,664 7,310 1,168 50,202 100,026
Average rate (%) ............. 6.12 5.69 7.40 8.16 6.15 8.84
<CAPTION>
Fair Value
December 31,
Total 1997
--------------- -------------
(In thousands)
<S> <C> <C>
Rate Sensitive Assets:
Loans
Fixed rate ................... $ 1,973,832 $2,033,397
Average rate (%) ............. 9.06
Variable rate ................ 2,548,471 2,553,609
Average rate (%) ............. 9.27
Investment securities
Fixed rate ................... 1,113,982 1,305,578
Average rate (%) ............. 6.42
Variable rate ................ 714,074 525,611
Average rate (%) ............. 5.85
Rate Sensitive Liabilities:
Interest-bearing checking,
savings, money market ........ $ 1,962,159 $1,962,159
Average rate (%) ............. 2.90
Certificates of deposit ....... 2,586,291 2,582,900
Average rate (%) ............. 5.52
Borrowed funds ................ 733,192 733,192
Average rate (%) ............. 5.39
Long-term debt ................ 382,129 420,943
Average rate (%) ............. 6.77
</TABLE>
ASSET/LIABILITY AND INTEREST RATE RISK MANAGEMENT
Centura's Asset/Liability Management Committee seeks to maintain a general
balance between interest-sensitive assets and liabilities to insulate net
interest income and shareholders' equity from significant adverse changes in
market interest rates. Mismatches in interest rate repricings of assets and
liabilities arise from the interaction of customer business needs and Centura's
discretionary asset and liability management activities. Exposure to changes in
the level and direction of interest rates is managed by adjusting the
asset/liability mix through the use of various interest rate risk management
products, including derivative financial instruments.
Off-balance sheet derivative financial instruments, such as interest rate
swaps, interest rate floor and cap arrangements and interest rate futures and
option contracts ("swaps, floors, caps, futures and options," respectively),
are an integral part of Centura's interest rate risk management activities.
Centura has principally utilized interest rate swaps. Swaps are used to
II-27
<PAGE>
manage interest rate risk, reduce funding costs, and diversify sources of
funding. Floors are used to protect certain designated variable rate financial
instruments from the downward effects of their repricing in the event of a
decreasing rate environment. Caps are used to protect certain designated
financial instruments from the negative repricing effects of an increasing rate
environment. Options provide the right, but not the obligation, to put or call
securities back to another third party at an agreed upon price under the
specific terms of each agreement. Table 13 summarizes Centura's off-balance
sheet derivative financial instruments at December 31, 1997. Notional amounts
represent the amount on which calculations of interest payments to be exchanged
are based. Refer to Note 16 of the notes to consolidated financial statements
for a comparative summary of off-balance sheet derivative financial instruments
at December 31, 1997 and 1996 and for a detailed discussion of related risks
and to Note 1 of notes to the consolidated financial statements for discussion
of the accounting policy for these off-balance sheet financial instruments.
On-balance-sheet and off-balance-sheet financial instruments are managed on an
integrated basis as part of Centura's overall asset/liability management
function. The value of any single component of the balance sheet or
off-balance-sheet position should not be viewed independently.
Table 13
- --------------------------------------------------------------------------------
RATE SENSITIVE DERIVATIVE FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Notional Amounts Maturing In:
-------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 Thereafter Total
------------ ------------ ------------ ------------ ------------ ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Corporation pays fixed
rates/receives variable ........... $ 75,000 $ 55,000 $ 63,000 $ 25,000 $ 60,000 $ -- $ 278,000
Average rate paid (%) ............. 6.75 6.52 6.27 6.04 6.22 -- 6.42
Average rate received (%) ......... 5.82 5.82 5.94 5.91 5.84 -- 5.86
Corporation pays variable
rates/receives fixed .............. -- -- 3,000 100,000 140,000 30,000 273,000
Average rate paid (%) ............. -- -- 8.50 5.87 5.70 5.91 5.83
Average rate received (%) ......... -- -- 8.90 6.30 6.44 7.65 6.55
Corporation pays variable/receives
variable .......................... 100,000 100,000 -- -- -- -- 200,000
Average rate paid (%) LIBOR ....... 5.75 5.88 -- -- -- -- 5.82
Average rate received (%) (US
T-Bill) .......................... 5.83 5.81 -- -- -- -- 5.82
Interest rate floors ............... 50,000 50,000 50,000 30,000 50,000 -- 230,000
Average strike rate ............... 6.00 5.50 6.00 6.00 5.50 5.78
Interest rate caps ................. -- -- -- -- 20,000 18,000 38,000
Average strike rate ............... -- -- -- -- 7.50 7.00 7.26
Call options ....................... 2,000 -- -- -- -- -- 2,000
<CAPTION>
Weighted
Average
Fair Value Carrying Remaining
December Value Contractual
31, 1997 December Term
Gain/(Loss) 31, 1997 (Years)
------------- ---------- ------------
(In thousands)
<S> <C> <C> <C>
Corporation pays fixed
rates/receives variable ........... $ (1,737) -- 2.5
Average rate paid (%) .............
Average rate received (%) .........
Corporation pays variable
rates/receives fixed .............. 4,660 -- 6.8
Average rate paid (%) .............
Average rate received (%) .........
Corporation pays variable/receives
variable .......................... (370) -- 1.0
Average rate paid (%) LIBOR .......
Average rate received (%) (US
T-Bill) ..........................
Interest rate floors ............... 1,589 907 2.3
Average strike rate ...............
Interest rate caps ................. (465) 972 5.5
Average strike rate ...............
Call options ....................... 16 7 0.2
</TABLE>
The Financial Accounting Standards Board is developing new accounting
standards which could significantly affect the accounting treatment of
Centura's derivatives and other financial instruments. It is not possible to
determine at this time how such changes could affect the nature and extent of
these activities.
Asset/liability simulation models are utilized to evaluate the dynamics of
the balance sheet and to estimate earnings' volatility under different interest
rate environments. These simulations include calculating the impact of
significant fluctuations in interest rates, both increases and decreases, on
net interest income and the estimated fair value of assets and liabilities.
Based on a 100 basis point rate shock in either direction, this simulation as
of December 31, 1997 shows Centura's interest rate risk position to be
relatively neutral: net interest income would not vary by more than
approximately 1 percent and the estimated market value of equity would not vary
by more than approximately 2 percent. Centura seeks a reasonable balance
between a satisfactorily high and stable return on average shareholders' equity
and a satisfactorily high and stable estimated market value of equity.
Centura's interest rate gap analysis is shown in Table 14 as of December
31, 1997. Gap analysis is generally based on the timing of contractual
maturities and repricing opportunities of interest-sensitive assets and
liabilities including management assumptions relative to financial instruments
subject to prepayment and indeterminate life deposits. A gap is considered
positive when the amount of interest sensitive assets exceeds the amount of
interest sensitive liabilities. At December 31, 1997, Centura had a positive
one-year cumulative interest-sensitivity gap of approximately $69.0 million.
The interest rate gap analysis is a static indicator which does not reflect
various repricing characteristics and may not necessarily indicate the
sensitivity of net interest income in a changing interest rate environment.
II-28
<PAGE>
Table 14
- --------------------------------------------------------------------------------
INTEREST SENSITIVITY ANALYSIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1997(2)(3)
--------------------------------------------
1-30 31-60 61-90
Days Days Days
--------------- ------------- --------------
(Thousands)
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans .................................... $ 1,882,375 $ 457,863 $ 437,638
Investment securities .................... 148,040 130,908 66,192
Other short-term investments ............. 43,425 -- --
----------- --------- ----------
Total interest-earning assets ............ 2,073,840 588,771 503,830
Notional amount of interest rate
swaps ................................... 343,000 60,000 50,000
- ------------------------------------------ ----------- --------- ----------
Total interest-earning assets and
off-balance sheet derivative
financial instruments ................... $ 2,416,840 $ 648,771 $ 553,830
=========== ========= ==========
INTEREST-BEARING LIABILITIES
Time deposits over $100 .................. $ 123,590 $ 52,112 $ 50,923
All other deposits (1) ................... 990,440 258,022 543,416
Short-term borrowed funds ................ 560,192 25,000 25,000
Long-term debt ........................... 36,266 62,874 76,282
----------- --------- ----------
Total interest-bearing liabilities ....... 1,710,488 398,008 695,621
Notional amount of interest rate
swaps ................................... 48,000 270,000 120,000
- ------------------------------------------ ----------- --------- ----------
Total interest-bearing liabilities and
off-balance sheet derivative
financial instruments ................... $ 1,758,488 $ 668,008 $ 815,621
=========== ========= ==========
Interest sensitivity gap per period ...... $ 658,352 $ (19,237) $ (261,791)
Cumulative interest sensitivity gap ...... 658,352 639,115 377,324
Cumulative ratio of interest-
sensitive assets to interest-
sensitive liabilities ................... 1.37x 1.26x 1.12x
<CAPTION>
As of December 31, 1997(2)(3)
-----------------------------------------------------------------------
Total Total
91-180 181-365 Under Over
Days Days One Year One Year Total
-------------- -------------- ------------- ------------- -------------
(Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans .................................... $ 215,711 $ 371,919 $3,365,506 $1,221,076 $4,586,582
Investment securities .................... 269,268 286,668 901,076 926,980 1,828,056
Other short-term investments ............. -- -- 43,425 -- 43,425
---------- ---------- ---------- ---------- ----------
Total interest-earning assets ............ 484,979 658,587 4,310,007 2,148,056 6,458,063
Notional amount of interest rate
swaps ................................... 25,000 -- 478,000 273,000 751,000
- ------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets and
off-balance sheet derivative
financial instruments ................... $ 509,979 $ 658,587 $4,788,007 $2,421,056 $7,209,063
========== ========== ========== ========== ==========
INTEREST-BEARING LIABILITIES
Time deposits over $100 .................. $ 79,013 $ 90,543 $ 396,181 $ 75,897 $ 472,078
All other deposits (1) ................... 365,431 692,950 2,850,259 2,042,588 4,892,847
Short-term borrowed funds ................ 98,000 25,000 733,192 -- 733,192
Long-term debt ........................... 5,896 10,022 191,340 190,789 382,129
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities ....... 548,340 818,515 4,170,972 2,309,274 6,480,246
Notional amount of interest rate
swaps ................................... 85,000 25,000 548,000 203,000 751,000
- ------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities and
off-balance sheet derivative
financial instruments ................... $ 633,340 $ 843,515 $4,718,972 $2,512,274 $7,231,246
========== ========== ========== ========== ==========
Interest sensitivity gap per period ...... $ (123,361) $ (184,928) $ 69,035
Cumulative interest sensitivity gap ...... 253,963 69,035
Cumulative ratio of interest-
sensitive assets to interest-
sensitive liabilities ................... 1.07x 1.01x
</TABLE>
- ---------
(1) To be consistent with simulation modeling, NOW, money market, and regular
savings accounts are separated into a core and non-core component. The
non-core component is treated as a bullet security and reprices in the
61-90 days category. The core component's principal cash flows are spread
evenly over a 7 year period.
(2) Expected maturities may differ from contractual maturities because
borrowers have the right to prepay obligations with or without call or
prepayment penalties. Mortgages and mortgage-backed securities' principal
cash flows are modeled by aggregating similar coupon and age instruments
and applying the appropriate median prepayment speeds.
(3) All prime based loans are assumed to reprice such that 50% of the principal
cashflows run-off in the first month and 50% are spread evenly over the
next three months.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 1997 was $23.5 million, up $5.0
million over the prior year fourth quarter. Primary factors for the increase in
earnings were increased net interest income and noninterest income. Average
earning assets for the fourth quarter of 1997 were $6.4 billion, up $713
million from the quarter ending December 31, 1996. Taxable equivalent interest
income increased $14.0 million due to the growth in average earning assets.
Average interest-bearing liabilities increased 13.3 percent over the prior year
fourth quarter while the rates paid for these funds increased 7 basis points.
Interest expense for the three months ended December 31, 1997 was $66.0
million, an increase of $9.0 million over the prior year quarter, with $8.0
million additional interest expense due to greater volume and $1.0 million
attributed to the increase in interest rates paid. The net interest margin
declined 15 basis points to 4.51 percent for fourth quarter 1997 compared to
4.66 percent for fourth quarter 1996. Total noninterest income increased to
$34.1 million for fourth quarter 1997, $6.8 million over the comparable quarter
last year. Noninterest revenue sources showing improvement were service charges
on deposit accounts, credit card and related fees, and other financial services
income sources. Noninterest expense increased to $67.0 million, $5.2 million
greater than the comparable quarter last year. Increases in personnel expenses,
outsourcing fees, intangible amortization, and depreciation on leased equipment
were responsible for most of the rise in noninterest expenses. The efficiency
ratio improved to 62.58 percent compared to the prior year fourth quarter of
65.09 percent.
II-29
<PAGE>
Table 15, "Quarterly Financial Summary," presents the quarterly results of
operations, selected average balances and certain other selected data for the
years ended December 31, 1997 and 1996.
Table 15
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
-------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income ................... $ 137,136 $ 131,844 $ 126,266 $ 119,843
Interest expense .................. 66,041 64,385 60,800 55,958
--------- --------- --------- ---------
Net interest income ............... 71,095 67,459 65,466 63,885
Provision for loan losses ......... 3,849 3,486 3,189 2,894
Noninterest income ................ 34,117 29,923 27,196 25,985
Noninterest expense ............... 67,033 61,169 58,996 59,033
Income taxes ...................... 10,826 11,027 10,497 10,069
--------- --------- --------- ---------
Net income ........................ $ 23,504 $ 21,700 $ 19,980 $ 17,874
========= ========= ========= =========
PER COMMON SHARES
Net income -- basic ............... $ .91 $ .84 $ .78 $ .69
Net income -- diluted ............. .89 .82 .76 .68
Cash dividends paid ............... .27 .27 .27 .25
SELECTED AVERAGE BALANCES
(millions)
Assets ............................ $ 7,016 $ 6,739 $ 6,454 $ 6,185
Loans ............................. 4,562 4,372 4,189 4,107
Deposits .......................... 5,241 4,967 4,726 4,657
Shareholders' equity .............. 532 519 501 489
MARKET PRICES
High ............................. $ 69.000 $ 58.500 $ 47.625 $ 44.875
Low .............................. 55.875 47.625 35.750 39.000
Close ............................ 69.000 55.0625 45.875 39.000
<CAPTION>
1996
-------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share)
Interest income ................... $ 123,095 $ 118,995 $ 114,366 $ 113,304
Interest expense .................. 57,011 55,201 53,188 54,276
--------- --------- --------- ---------
Net interest income ............... 66,084 63,794 61,178 59,028
Provision for loan losses ......... 2,746 2,400 2,385 2,065
Noninterest income ................ 27,303 25,132 23,833 24,579
Noninterest expense ............... 61,860 63,573 55,086 53,462
Income taxes ...................... 10,246 8,237 10,281 10,439
--------- --------- --------- ---------
Net income ........................ $ 18,535 $ 14,716 $ 17,259 $ 17,641
========= ========= ========= =========
PER COMMON SHARES
Net income -- basic ............... $ .72 $ .57 $ .68 $ .69
Net income -- diluted ............. .70 .57 .66 .67
Cash dividends paid ............... .25 .25 .25 .25
SELECTED AVERAGE BALANCES
(millions)
Assets ............................ $ 6,198 $ 6,024 $ 5,848 $ 5,751
Loans ............................. 4,182 4,098 3,955 3,820
Deposits .......................... 4,723 4,593 4,349 4,354
Shareholders' equity .............. 472 457 438 447
MARKET PRICES
High ............................. $ 47.000 $ 40.125 $ 37.500 $ 36.750
Low .............................. 38.000 35.125 36.000 33.875
Close ............................ 44.625 38.625 36.750 36.750
</TABLE>
II-30
<PAGE>
1996 COMPARED TO 1995
Centura recorded net earnings of $68.2 million for the year ended December
31, 1996, an increase of $3.5 million or 5.4 percent from the year ended
December 31, 1995. Earnings per diluted share were $2.60 compared to $2.45 for
the prior year. Items of specific importance are discussed below.
Taxable equivalent net interest income increased by $26.3 million, or 11.4
percent, to $256.1 million in 1996, principally as a function of continued
growth in earning assets. This increase in volume compensated for the decline
in the net interest spread earned. The net interest margin decreased to 4.66
percent during 1996 from 4.82 percent during 1995. The change in the mix of
interest-earning assets was a primary factor in the continued decline in the
net interest margin. Net interest income, excluding the taxable equivalent
adjustment, was $250.1 million in 1996, compared to $224.6 million in 1995.
The mix of average interest-earning assets and interest-bearing funding
sources returned to historical levels in 1996 compared to 1995. Loans decreased
to comprise 73.2 percent of average earning assets for 1996 compared to 76.5
percent for 1995. Despite several acquisitions in 1996, interest-bearing
deposits, which have a lower cost of funds in the aggregate than external
funding sources, declined to represent only 81.0 percent of interest-bearing
liabilities in 1996 compared to 84.5 percent in 1995. This decline increased
the overall cost of funds.
Nonperforming assets remained low at $22.9 million at December 31, 1996,
representing only 0.36 percent of total assets, compared to $22.1 million, or
0.38 percent of total assets in 1995. The allowance for loan losses grew to
$58.7 million, representing 1.43 percent of outstanding loans at December 31,
1996, compared to $55.1 million, or 1.41 percent of loans, the previous year.
Net charge-offs also remained low at 0.18 percent of average loans, compared to
0.12 percent of average loans for the year ended December 31, 1995, despite an
increase of $2.7 million in net charge-off volume.
Noninterest income, before securities transactions, for 1996 increased
$18.3 million to $99.0 million compared to $80.7 million last year. Insurance
and brokerage commissions and service charges on deposit accounts continued to
account for the majority of the increase, increasing $9.2 million over 1995.
Income from mortgage activities also kept pace in 1996, increasing $4.4 million
to $11.5 million. This trend was primarily the result of a favorable rate
environment which positively impacted mortgage loan production and secondary
marketing activities. Additionally, CLG's operating lease activity added a new
revenue source in 1996, contributing $12.7 million in operating fee income, an
8.2 percent increase over 1995 results.
Noninterest expense for 1996 increased by 19.5 percent to $234.0 million
compared to $195.8 million in 1995. Excluding the third quarter special SAIF
assessment of $7.3 million, total noninterest expense increased only 15.8
percent to $226.7 million. Expenses for 1996 continued to be impacted by
Centura's strategy to further the progress of technological, delivery channel
and product initiatives ("reinvention strategy"). In 1996, Centura incurred
costs of approximately $13 million related to this strategy compared to
approximately $14 million in 1995. The majority of these expenses are reflected
in equipment costs and professional fees related to the rollout of Sellstation
automation and customer profitability database efforts. Additionally, the
start-up costs of the instore locations added almost $2 million of additional
expenses in 1996 with revenues being realized in later years. Personnel
expenses increased $13.9 million to $109.7 million in 1996 compared to $95.8
million in the prior year. This increase was primarily due to the addition of
personnel related to the 1996 acquisitions, increased bonus accruals, and
commissions from the sales force incentive system responding to loan, deposit
and financial services growth. Equipment expense increased $5.1 million to
$12.7 million in 1996 compared to the prior year. As indicated above, the
increase was primarily the result of Centura's reinvention strategy. Legal and
professional fees were $11.3 million in 1996, up $1.9 million over 1995, due to
a greater number of acquisitions in 1996 compared to 1995 and to an increase
use of information system professionals related to the reinvention strategy
noted above. The outsourcing of items processing lead to a $3.3 million
increase over 1995 in fees for outsourcing.
CURRENT ACCOUNTING ISSUES
In June 1997, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 130 "Reporting Comprehensive Income" ("SFAS No. 130") which
establishes standards for the reporting and display of comprehensive income and
its components in a full set of financial statements. Comprehensive income is
defined as the change in equity during a period for non-owner transactions and
is divided into net income and other comprehensive income. Other comprehensive
income includes revenues, expenses, gains, and losses that are excluded from
earnings under current accounting standards. This statement does not change or
modify the reporting or display in the income statement. SFAS No. 130 is
effective for interim
II-31
<PAGE>
and annual periods beginning after December 15, 1997 although early adoption is
permitted. Comparative financial statements provided for earlier periods are
required to be reclassed to reflect the application of this statement. Centura
has elected not to adopt this statement early. Centura, as required, will adopt
SFAS No. 130 with first quarter 1998 financial reporting.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"). The statement requires
management to report selected financial and descriptive information about
reportable operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Generally, disclosures are required for segments internally identified to
evaluate performance and resource allocation. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated, if it is practical to do so. SFAS No. 131 does not have to be
applied to interim financial statements in the initial year of application,
but, comparative information must be provided for interim periods in the second
year of application. Centura, as required, will adopt this statement for year
ended December 31, 1998.
In February 1998, the FASB issued SFAS No. 132 "Employer's Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS No. 132"). The
statement revises the required disclosures for pensions and other post
retirement plans but does not change the measurement or recognition of such
plans. SFAS No. 132 is effective for fiscal years beginning after December 31,
1997. Centura, as required, will adopt this statement during 1998.
The FASB also issues exposure drafts for proposed statements of financial
accounting standards. Such exposure drafts are subject to comment from the
public, to revisions by the FASB and to final issuance by the FASB as
statements of financial accounting standards. Management considers the effect
of the proposed statements on the consolidated financial statements of Centura
and monitors the status of changes to issued exposure drafts and to proposed
effective dates.
YEAR 2000
Monitoring and managing the Year 2000 project will result in additional
direct costs. Direct costs include potential charges by third party software
vendors for product enhancements, costs involved in testing software products
for Year 2000 compliance, and any resulting costs for developing and
implementing contingency plans for critical software products which are not
enhanced. The Emerging Issues Task Force provided guidance concerning the
accounting for these costs related to Year 2000 modification. The costs of the
modifications should be treated as regular maintenance and repair and be
charged to expense as incurred. Management currently estimates that the
aggregate direct costs for 1998 and 1999 will be approximately $1.7 million and
$1.0 million, respectively. In addition to the direct costs, indirect costs
will also be incurred. These indirect costs will consist principally of the
time devoted by existing employees in monitoring software vendor progress,
testing enhanced software products and implementing any necessary contingency
plans. During 1997, Centura expensed approximately $1.3 million in direct costs
related to the Year 2000 issue. Expenditures for Year 2000 compliance including
direct and indirect costs are estimated to total $6-$8 million.
Management presently believes that with modifications to existing software
and conversions to new software, the Year 2000 matter will be mitigated without
causing a material adverse impact on the operations of Centura. However, if
such modifications and conversions are not made, or are not completed timely,
the Year 2000 issue could have a material impact on the operations of Centura.
In addition, Centura has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which it
is vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Year 2000 project cost estimates include the estimated costs and
time associated with the assessment and monitoring of a third party's Year 2000
risk, and are based on presently available information. However, there can be
no guarantee that the systems of other companies on which Centura's systems
rely will be timely converted, or that a failure to convert by another company,
or a conversion that is incompatible with Centura's systems, would not have a
material adverse effect on Centura in future periods.
The Year 2000 Compliance is also discussed under "Description of
Business".
II-32
<PAGE>
STATEMENT OF MANAGEMENT RESPONSIBILITY
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CENTURA BANKS, INC.
Management of Centura Banks, Inc. and its subsidiaries has prepared the
consolidated financial statements and other information in the annual report in
accordance with generally accepted accounting principles and is responsible for
its accuracy.
In meeting its responsibility, management relies on internal controls,
which include selection and training of qualified personnel, establishment and
communication of accounting and administrative policies and procedures, and
appropriate segregation of responsibilities and programs of internal audits.
These controls are designed to provide reasonable assurance that financial
records are reliable for preparing financial statements and maintaining
accountability for assets, and that assets are safeguarded against unauthorized
use or disposition. Such assurance cannot be absolute because of inherent
limitations in internal controls.
Management also recognizes its responsibility to foster a climate in which
corporate affairs are conducted with the highest ethical standards. Centura's
Code of Ethics, furnished to each employee and director, addresses the
importance of open internal communications, potential conflicts of interest,
compliance with applicable laws, including those related to financial
disclosure, the confidentiality of proprietary information and other items.
There is an ongoing program to assess compliance with these policies.
The Audit Committee of Centura's Board of Directors consists solely of
outside directors. The Audit Committee meets periodically with management and
the independent accountants to discuss audit, financial reporting and related
matters. KPMG Peat Marwick LLP and the Corporation's internal auditors have
direct access to the Audit Committee.
/s/ Cecil W. Sewell, Jr.
Cecil W. Sewell, Jr.
Chairman of the Board and
Chief Executive Officer
/s/ Steven J. Goldstein
Steven J. Goldstein
Chief Financial Officer
II-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
CENTURA BANKS, INC.
We have audited the accompanying consolidated balance sheets of Centura
Banks, Inc. and subsidiaries (the "Corporation") as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1997. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on the
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 Centura
Banks, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Raleigh, North Carolina
January 7, 1998
II-34
<PAGE>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
------------- -------------
(thousands, except share data)
<S> <C> <C>
ASSETS
Cash and due from banks ................................................... $ 268,248 $ 283,224
Due from banks, interest-bearing .......................................... 13,873 11,254
Federal funds sold ........................................................ 29,552 21,413
Investment securities:
Available for sale (cost of $1,623,330 and $1,317,449, respectively)..... 1,639,500 1,320,074
Held to maturity (fair value of $191,689 and $258,052, respectively)..... 188,556 257,806
Loans ..................................................................... 4,586,582 4,109,454
Less allowance for loan losses .......................................... 64,279 58,715
---------- ----------
Net loans ............................................................. 4,522,303 4,050,739
Premises and equipment .................................................... 115,464 112,198
Other assets .............................................................. 347,934 237,264
---------- ----------
Total assets .............................................................. $7,125,430 $6,293,972
========== ==========
LIABILITIES
Deposits:
Demand, noninterest-bearing ............................................. $ 816,475 $ 721,029
Interest-bearing ........................................................ 4,076,372 3,665,587
Time deposits over $100.................................................. 472,078 346,453
---------- ----------
Total deposits ........................................................ 5,364,925 4,733,069
Borrowed funds ............................................................ 733,192 685,291
Long-term debt ............................................................ 382,129 310,802
Other liabilities ......................................................... 106,848 89,575
---------- ----------
Total liabilities ......................................................... 6,587,094 5,818,737
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 25,000,000 shares authorized; none issued .. -- --
Common stock, no par value, 50,000,000 shares authorized; shares issued and
outstanding of 25,862,375 and 25,668,524, respectively .................. 187,435 187,563
Common stock acquired by ESOP ............................................. (251) (395)
Unrealized securities gains, net .......................................... 9,970 1,568
Retained earnings ......................................................... 341,182 286,499
---------- ----------
Total shareholders' equity ................................................ 538,336 475,235
---------- ----------
Total liabilities and shareholders' equity ................................ $7,125,430 $6,293,972
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
II-35
<PAGE>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -----------
(thousands, except share and per share data)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees .................................................... $ 406,078 $ 379,044 $348,823
Investment securities:
Taxable ................................................................. 104,885 86,162 63,672
Tax-exempt .............................................................. 2,484 2,766 2,998
Short-term investments ................................................... 1,642 1,788 2,142
--------- --------- --------
Total interest income .................................................... 515,089 469,760 417,635
INTEREST EXPENSE
Deposits ................................................................. 183,941 169,046 153,907
Borrowed funds ........................................................... 40,453 30,427 21,144
Long-term debt ........................................................... 22,790 20,203 17,939
--------- --------- --------
Total interest expense ................................................... 247,184 219,676 192,990
--------- --------- --------
NET INTEREST INCOME ...................................................... 267,905 250,084 224,645
Provision for loan losses ................................................ 13,418 9,596 7,904
--------- --------- --------
Net interest income after provision for loan losses ...................... 254,487 240,488 216,741
NONINTEREST INCOME
Service charges on deposit accounts ...................................... 40,703 34,758 29,686
Credit card and related fees ............................................. 6,643 4,979 4,220
Other service charges, commissions and fees .............................. 21,956 17,023 10,416
Fees for trust services .................................................. 7,737 6,841 6,108
Mortgage income .......................................................... 11,568 11,486 7,104
Other noninterest income ................................................. 28,478 23,962 23,190
Securities gains (losses), net ........................................... 136 1,798 (614)
--------- --------- --------
Total noninterest income ................................................. 117,221 100,847 80,110
NONINTEREST EXPENSE
Personnel ................................................................ 113,625 109,667 95,786
Occupancy ................................................................ 13,796 12,657 11,732
Equipment ................................................................ 21,632 19,556 14,478
Foreclosed real estate losses and related operating expense, net ......... 1,373 756 682
Other operating expense .................................................. 95,804 91,345 73,099
--------- --------- --------
Total noninterest expense ................................................ 246,230 233,981 195,777
--------- --------- --------
Income before income taxes ............................................... 125,478 107,354 101,074
Income taxes ............................................................. 42,420 39,203 36,421
--------- --------- --------
NET INCOME ............................................................... $ 83,058 $ 68,151 $ 64,653
========= ========= ========
NET INCOME PER COMMON SHARE
Basic .................................................................... $ 3.22 $ 2.66 $ 2.50
Diluted .................................................................. 3.15 2.60 2.45
</TABLE>
<TABLE>
<S> <C> <C> <C>
AVERAGE COMMON SHARES OUTSTANDING
Basic .................................................................... 25,798,324 25,605,621 25,840,915
Diluted .................................................................. 26,331,392 26,261,830 26,367,771
</TABLE>
See accompanying notes to consolidated financial statements.
II-36
<PAGE>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Common Securities
Common Stock Stock Gains Total
---------------------------- Acquired (Losses), Retained Shareholders'
Shares Amount By ESOP Net Earnings Equity
--------------- ------------ ---------- ------------- ------------ --------------
(thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994 .......................... 24,705,480 $ 178,936 $ (683) $ (12,238) $ 203,416 $ 369,431
Net income ................................. -- -- -- -- 64,653 64,653
Common stock issued:
Stock option plans and stock awards ....... 252,819 3,384 -- -- -- 3,384
Acquisitions .............................. 2,812,271 75,794 -- -- -- 75,794
Redemption of common stock ................. (1,985,200) (58,822) -- -- -- (58,822)
Unrealized securities gains, net ........... -- -- -- 12,869 -- 12,869
Cash dividends declared .................... -- -- -- -- (24,142) (24,142)
Other ...................................... -- -- 144 -- -- 144
---------- --------- ------ --------- --------- ---------
December 31, 1995 .......................... 25,785,370 $ 199,292 $ (539) $ 631 $ 243,927 $ 443,311
Net income ................................. -- -- -- -- 68,151 68,151
Common stock issued:
Stock option plans ........................ 344,550 5,523 -- -- -- 5,523
Acquisitions .............................. 776,441 28,261 -- -- -- 28,261
Redemption of common stock ................. (1,237,837) (45,513) -- -- -- (45,513)
Net equity adjustment of merged entity ..... -- -- -- -- (818) (818)
Unrealized securities gains, net ........... -- -- -- 937 -- 937
Cash dividends declared .................... -- -- -- -- (25,005) (25,005)
Other ...................................... -- -- 144 -- 244 388
---------- --------- ------ --------- --------- ---------
December 31, 1996 .......................... 25,668,524 $ 187,563 $ (395) $ 1,568 $ 286,499 $ 475,235
Net income ................................. -- -- -- -- 83,058 83,058
Common stock issued:
Stock option plans and stock awards ....... 324,408 5,443 -- -- -- 5,443
Acquisition ............................... 44,443 2,528 -- -- -- 2,528
Redemption of common stock ................. (175,000) (10,289) -- -- -- (10,289)
Unrealized securities gains, net ........... -- -- -- 8,402 -- 8,402
Cash dividends declared .................... -- -- -- -- (27,920) (27,920)
Other ...................................... -- 2,190 144 -- (455) 1,879
---------- --------- ------ --------- --------- ---------
December 31, 1997 .......................... 25,862,375 $ 187,435 $ (251) $ 9,970 $ 341,182 $ 538,336
========== ========= ====== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
II-37
<PAGE>
CENTURA BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1997 1996 1995
--------------- ------------- ------------
(thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ....................................................................... $ 83,058 $ 68,151 $ 64,653
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ........................................................ 13,418 9,596 7,904
Depreciation and amortization .................................................... 38,190 33,736 23,316
Deferred income taxes ............................................................ 12,587 493 (10,476)
Loan fees deferred ............................................................... 211 51 1,247
Bond premium amortization and discount accretion, net ............................ 1,956 2,966 1,709
(Gain) loss on sales of investment securities .................................... (136) (1,798) 614
Loss on sales of foreclosed real estate .......................................... 661 176 27
Gain on sales of equipment used in leasing activities ............................ (3,534) (3,075) (3,815)
Proceeds from sales of mortgage loans held for sale .............................. 372,841 424,039 443,281
Originations, net of principal repayments, of mortgage loans held for sale ....... (385,418) (425,622) (464,139)
Increase in accrued interest receivable .......................................... (2,400) (2,030) (8,791)
Increase (decrease) in accrued interest payable .................................. 382 (4,004) 10,687
Net (increase) decrease in other ................................................. (33,625) (17,158) 6,444
------------ ---------- ----------
Net cash provided by operating activities ........................................ 98,191 85,521 72,661
------------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans ............................................................ (256,696) (380,724) (446,163)
Purchases of:
Securities available for sale ................................................... (1,470,876) (594,186) (542,684)
Securities held to maturity ..................................................... (52,222) (213,023) (142,250)
Premises and equipment .......................................................... (17,505) (26,177) (17,772)
Other ........................................................................... (50,000) (29,250) --
Proceeds from:
Sales of securities available for sale .......................................... 576,752 398,139 215,112
Maturities and issuer calls of securities available for sale .................... 608,485 167,318 50,993
Maturities and issuer calls of securities held to maturity ...................... 99,410 258,238 167,016
Sales of foreclosed real estate ................................................. 4,349 3,216 2,214
Dispositions of premises and equipment .......................................... 1,858 4,412 6,214
Dispositions of equipment utilized in leasing activities ........................ 4,016 4,689 18,002
Cash acquired, net of cash paid, in purchase acquisitions ........................ 149,315 13,371 79,677
------------ ---------- ----------
Net cash used by investing activities ............................................ (403,114) (393,977) (609,641)
------------ ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits ......................................................... 216,315 190,132 367,770
Net increase in short-term borrowings ............................................ 47,901 152,854 202,518
Proceeds from issuance of long-term debt ......................................... 178,691 218,298 163,938
Repayment of long-term debt ...................................................... (107,364) (188,082) (62,454)
Cash dividends paid .............................................................. (27,354) (24,001) (18,731)
Proceeds from issuance of common stock, net ...................................... 4,274 4,442 3,209
Redemption of common stock ....................................................... (10,289) (45,513) (58,822)
Other ............................................................................ (1,469) -- --
------------ ---------- ----------
Net cash provided by financing activities ........................................ 300,705 308,130 597,428
------------ ---------- ----------
Increase (decrease) in cash and cash equivalents ................................. (4,218) (326) 60,448
Cash and cash equivalents, beginning of year ..................................... 315,891 316,217 255,769
------------ ---------- ----------
Cash and cash equivalents, end of year ........................................... $ 311,673 $ 315,891 $ 316,217
============ ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ........................................................................ $ 246,802 $ 223,680 $ 182,304
Income taxes .................................................................... 26,390 29,073 43,039
Noncash transactions:
Net equity adjustment of merged entity .......................................... -- 818 --
Stock issued for acquisitions and other stock issuances, net .................... 4,045 28,649 76,113
Unrealized securities gains, net ................................................ 13,545 1,681 21,274
Dividends declared, but not yet paid ............................................ 6,981 6,415 5,411
Transfer of securities between portfolios ....................................... -- -- 243,195
Loans securitized into mortgage-backed securities ............................... -- 242,729 56,971
Loans transferred to foreclosed property ........................................ 5,502 4,183 1,574
============ ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
II-38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts of
Centura Banks, Inc. ("Centura") and its wholly-owned subsidiaries, Centura
Capital Trust I ("CCTI") and Centura Bank (the "Bank"). The Bank also has
various wholly-owned subsidiaries which in the aggregate represent less than 15
percent of total assets. All significant intercompany transactions are
eliminated in consolidation.
In addition, certain amounts for prior years have been reclassified to
conform with statement presentations for 1997. The reclassifications have no
effect on shareholders' equity or net income as previously reported.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheets and income statements for the periods presented. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosure or in satisfaction of loans.
Business
The Bank, either directly or through its subsidiaries, provides a wide
range of financial services, including: full-service commercial and consumer
banking services; retail securities brokerage services; insurance brokerage
services covering a full line of personal and commercial lines; mortgage
banking services; commercial and retail leasing; and trust activities. The Bank
principally offers its services through its branch and automated teller network
located throughout North Carolina and the Hampton Roads region of Virginia and
through alternative delivery channels that include a centralized telephone
operation offering a full line of financial services, and home banking through
a telephone network operated by a third party and connected to the personal
computers of customers. The Bank is subject to competition from other
depository institutions and numerous other non-depository institutions offering
financial services products. The Bank is further subject to the regulations of
certain Federal and state agencies and undergoes periodic examinations by those
regulatory authorities.
The primary function of CCTI is to facilitate the issuance of the Capital
Securities described in detail in Note 10 to the consolidated financial
statements
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks,
interest-bearing balances due from other banks, and federal funds sold.
Investment Securities
Centura's investments are classified in three categories and accounted for
as follows: (1) debt securities that the entity has the positive intent and the
ability to hold to maturity are classified as held to maturity ("HTM") and
reported at amortized cost; (2) debt and equity securities that are bought and
held 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; and (3) debt and equity securities not
classified as either held to maturity securities or trading securities are
classified as available for sale ("AFS") securities and reported at fair value,
with net unrealized gains or losses excluded from earnings and reported as a
separate component of shareholders' equity.
The classification of securities is determined at the time of purchase.
Investment securities HTM are stated at cost, net of the amortization of
premium and the accretion of discount. Centura intends and has the ability to
hold such securities until maturity. Investment securities AFS will be used as
a part of Centura's asset/liability management strategy and may be sold in
response to changes in interest rates, changes in prepayment risk, the need to
increase regulatory capital and other factors.
The cost of securities sold is determined on a specific identification,
trade-date basis. Premiums and discounts are amortized or accreted into income
using the level-yield method over the estimated lives of the assets.
II-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
In November 1995 the Financial Accounting Standards Board ("FASB")
published an implementation guide for Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The FASB stated that the transition provisions included in
this guide permit a one-time opportunity for companies to reconsider their
ability and intent to hold securities accounted for under SFAS No. 115 to
maturity, allowing entities to transfer securities from the HTM category
without "tainting" their remaining HTM securities. The FASB emphasized that
this would be a one-time event where entities would have until December 31,
1995 to make any transfers from the HTM category under this provision.
Management transferred $243 million of investment securities from the HTM
category to the AFS category as allowed under the provisions of the
implementation guide. On the date of the transfer, the HTM investment
securities were recorded as AFS investment securities at their current fair
value, which resulted in the recognition of an unrealized loss of $1.3 million
that was recorded net of tax as a component of shareholders' equity.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. For financial reporting purposes, depreciation expense is
computed by the straight-line method based upon the estimated useful lives of
the assets. Leasehold improvements and assets acquired under capital leases are
amortized on a straight-line basis over the shorter of the life of the leased
asset or the lease term. Expenditures for maintenance and repairs are charged
to expense as incurred and gains or losses on disposal of assets are reflected
in current operations.
Allowance for Loan Losses
The allowance for loan losses ("AFLL") is established through provisions
for losses charged against income. Loans deemed to be uncollectible are charged
against the AFLL, and subsequent recoveries, if any, are credited to the AFLL.
The AFLL represents management's estimate of the amount necessary to provide
for potential future losses in the loan portfolio. Management believes that the
AFLL is adequate. Management's periodic evaluation of the adequacy of the
allowance is based on individual loan reviews, the loan loss experience of
prior years, economic conditions in the Bank's market areas, the fair value and
adequacy of underlying collateral, and the growth and risk composition of the
loan portfolio. This evaluation is inherently subjective as it requires
material estimates, including the amounts and timing of future cash flows
expected to be received on impaired loans, that may be susceptible to
significant change. Thus, future additions to the AFLL may be necessary based
on the impact of changes in economic conditions on the Bank's borrowers. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Bank's AFLL. Such agencies may require the
Bank to recognize additions to the AFLL based on their judgments about
information available to them at the time of their examination.
Impaired Loans, Nonaccrual Loans and Other Real Estate
A loan is considered to be impaired when, based on current information, it
is probable Centura will not receive all amounts due in accordance with the
contractual terms of a loan agreement. The discounted expected cash flow method
is used in determining the value of impaired loans, except in cases involving
collateral-dependent loans, in which case the fair value is determined using
the fair value of the collateral. When the ultimate collectibility of an
impaired loan's principal is in doubt, wholly or partially, all cash receipts
are applied to principal. Once the recorded principal balance has been reduced
to zero, future cash receipts are applied to interest income, to the extent any
interest has been foregone, and then they are recorded as recoveries of any
amounts previously charged off. When this doubt does not exist, cash receipts
are applied under the contractual terms of the loan agreement. The accrual of
interest is generally discontinued on all loans when management has doubts that
principal and interest will be collected in a reasonable period of time.
Generally, open-end credit lines that reach 120 days or more past due and
substantially all other loans that reach 90 days or more past due are placed on
nonaccrual status unless the loan is adequately secured and in the process of
collection. Generally, all loans past due 180 days are placed on nonaccrual
status regardless of security. Recorded accrued interest is reversed or charged
off.
Interest received on nonaccrual loans is generally applied against
principal or may be reported as interest income depending on management's
judgment as to the collectibility of principal. A loan classified as nonaccrual
is returned to accrual status when the obligation has been brought current, has
performed in accordance with its contractual terms over an extended period of
time and the ultimate collectibility of the total contractual principal and
interest is no longer in doubt.
II-40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Other real estate is included in other assets and is comprised of property
acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of
foreclosure and loans classified as in-substance foreclosure. At December 31,
1997 and 1996, the net book value of other real estate properties was
$4,155,000 and $3,663,000, respectively.
Loans
Substantially all loans accrue interest using the level-yield method based
on the principal amount outstanding.
Centura originates certain residential mortgage loans with the intent to
sell. Such loans held for sale are included in loans in the accompanying
consolidated balance sheets and are carried at the lower of cost or fair value
on an aggregate loan basis as determined by outstanding commitments from
investors or current quoted market prices.
Mortgage Servicing Rights
The rights to service mortgage loans for others are included in other
assets on the consolidated balance sheet. Capitalization of the allocated cost
of MSRs occurs when the underlying loans are sold or securitized. Capitalized
MSRs are amortized in proportion to and over the period of estimated net
servicing income using a method that is designed to approximate a level-yield
method, taking into consideration the estimated prepayment of the underlying
loans. Additionally, capitalized MSRs are evaluated periodically for impairment
based on the excess of the carrying amount of such rights over their fair
value. For purposes of measuring impairment, capitalized MSRs are stratified on
the basis of one or more of the predominant risk characteristics of the
underlying loans, including loan type, term and interest rate. Fair value is
estimated using current commitment prices from investors or current quoted
market prices to sell similar products.
Effective January 1, 1997, Centura adopted SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS No. 125"). Among other provisions, SFAS No. 125 provides accounting
standards for contractually specified servicing fees and for excess servicing
fees receivables. Centura's excess servicing fees generally do not exceed
contractually specified servicing fees, and as a result the present value of
such excess servicing fees are classified as mortgage servicing rights in the
accompanying financial statements in accordance with SFAS No. 125. Amounts
classified as excess servicing fees receivable for all periods prior to January
1, 1997, have been combined with mortgage servicing rights for all periods
presented in accordance with SFAS No. 125.
Other Assets and Other Liabilities
Intangibles are principally comprised of goodwill and are included in
other assets. Goodwill represents the excess of cost over the fair value of net
assets acquired in purchase acquisitions and is being amortized generally over
15 years. At December 31, 1997 and 1996 goodwill, net of accumulated
amortization, was $106.1 million and $66.8 million, respectively.
Negative goodwill, included in other liabilities, represents the excess of
fair value of net assets acquired over cost after recording the liability for
recaptured tax bad debt reserve and reducing the basis in bank premises and
equipment and other noncurrent assets acquired to zero. Negative goodwill is
being accreted into earnings on a straight-line basis over a period of ten
years, the period estimated to be benefited.
Centura has included as other assets equipment under operating lease
contracts. For the years ended December 31, 1997, 1996, and 1995, $11.9
million, $12.7 million, and $11.8 million, respectively, of operating lease
rental income was recorded in other noninterest income.
Long-lived assets and certain intangibles are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. An impairment loss is recognized if the sum of the
undiscounted future cash flows is less than the carrying amount of the asset.
Those assets to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell.
Income Taxes
Centura uses the asset and liability method to account for income taxes.
The objective of the asset and liability method is to establish deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the income tax basis of Centura's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled.
II-41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Net Income Per Share
For the year ended December 31, 1997, Centura adopted SFAS No. 128,
"Earnings Per Share" ("SFAS No. 128"). The standard provides guidance for
computing and presenting earnings per share. In accordance with this statement,
primary net income per common share is replaced with basic income per common
share which is calculated by dividing net income by the weighted-average number
of common shares outstanding for the period. Fully diluted net income per
common share is replaced with diluted net income per common share reflecting
the maximum dilutive effect of common stock issuable upon exercise of stock
options. The difference between the weighted average shares outstanding used in
the basic net income per share computation and the weighted average shares
outstanding used in the diluted net income per share calculation is
attributable to shares which arise from the assumed exercise of dilutive stock
options. Prior period per share data has been restated to reflect the adoption
of SFAS No. 128.
Stock-Based Employee Compensation
Most of Centura's stock-based employee compensation plans provide for the
deferral of compensation in exchange for stock options. As allowed under SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), Centura
measures stock-based compensation cost using APB Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"). See Note 12.
Off-Balance Sheet Derivative Financial Instruments
Off-balance sheet derivative financial instruments, such as interest rate
swaps, interest rate floor and cap arrangements, and interest rate futures and
options contracts, are available to Centura to assist in managing its exposure
to changes in interest rates. Centura has principally utilized interest rate
swaps and interest rate floor and cap arrangements. The fair value of these
off-balance sheet derivative financial instruments are based on dealer quotes
and third party financial models. Interest rate swaps, floors and caps are
accounted for on an accrual basis, and the net interest differential, including
premiums paid, if any, is recognized as an adjustment to interest income or
interest expense of the related designated asset or liability. Centura
considers its interest rate swaps to be a synthetic alteration of an asset or
liability as long as (i) the swap is designated with a specific asset or
liability or a finite pool of assets or liabilities; (ii) there is a high
correlation, at inception and throughout the period of the synthetic
alteration, between changes in the interest income or expense generated by the
swap and changes in the interest income or expense generated by the designated
asset or liability; (iii) the notional amount of the swap is less than or equal
to the principal amount of the designated asset or liability or pools of assets
or liabilities; and (iv) the swap term is less than or equal to the remaining
term of the designated asset or liability or pools of assets or liabilities. If
these criteria are not met, then changes in the fair value of the floors,
swaps, and caps are no longer considered a synthetic alteration and changes in
their fair value are included in other income. The criteria for consideration
of a floor or cap as a synthetic alteration are generally the same as those for
a swap arrangement.
If the swap, floor, or cap arrangements are terminated before their
maturity, the net proceeds received or paid are deferred and amortized over the
shorter of the remaining contract life or the maturity of the designated asset
or liability as an adjustment to interest income or expense. If the designated
asset or liability is sold or matures, the swap agreement is marked to market
and the gain or loss is included with the gain or loss on the sale/maturity of
the designated asset or liability. Changes in the fair value of any
undesignated swaps, floors, and caps would be included in other income in the
consolidated statement of income.
Fair Value of Financial Instruments
The following methods and assumptions were used by Centura in estimating
the fair value disclosures for financial instruments in 1997 and 1996.
Cash and Due From Banks (including those that are interest-bearing),
Federal Funds Sold, and Accrued Interest Receivable -- The fair value of these
instruments are considered equal to their carrying amounts due to the
short-term nature of these financial instruments.
Investment Securities -- The fair value of investment securities is
estimated based on bid quotations received from securities dealers.
II-42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Loans -- For disclosure purposes, loans are segregated into performing and
nonperforming loan categories. Each performing loan category is further
segmented into fixed and adjustable rate interest terms. The fair value of
adjustable rate performing loans with repricing dates less than 90 days from
December 31, 1997 is assumed to be equal to the book value of such loans. The
fair value of fixed rate performing loans and adjustable rate loans with more
than 90 days to repricing are calculated by discounting scheduled cash flows
through the loan's estimated maturity or repricing using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
loan. The estimate of maturity, except for residential mortgage loans, is based
on the stated term of the loan or Centura's estimates of prepayments for each
loan classification considering current economic and lending conditions. For
residential mortgage loans, maturity is estimated using the contractual term
adjusted for prepayment estimates based on secondary market sources. The fair
value of nonperforming loans is based on the book value of each loan less an
applicable reserve for credit losses. This reserve for credit losses is
determined on a loan by loan basis based on one or a combination of the
following: external appraisals, internal assessments using available market
information and specific borrower information, or discounted cash flow
analysis.
Deposits -- The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, interest checking, money market and
savings accounts, is considered to be equal to the amount payable on demand at
year-end. The fair value of individual retirement accounts and time deposits
are based on the discounted values of contractual cash flows. The discount rate
is estimated using the rates currently offered for deposits of similar
remaining maturities.
Borrowed Funds, Accrued Interest Payable and Long-term Debt -- The fair
values for borrowed funds and accrued interest payable are considered equal to
their carrying amounts due to the short-term nature of these financial
instruments. The fair value of long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
Centura for debt of the same remaining maturities.
Current Accounting Matters
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 130 "Reporting Comprehensive
Income" ("SFAS No. 130") which establishes standards for the reporting and
display of comprehensive income and its components in a full set of financial
statements. Comprehensive income is defined as the change in equity during a
period for non-owner transactions and is divided into net income and other
comprehensive income. Other comprehensive income includes revenues, expenses,
gains, and losses that are excluded from earnings under current accounting
standards. This statement does not change or modify the reporting or display in
the income statement. SFAS No. 130 is effective for interim and annual periods
beginning after December 15, 1997 although early adoption is permitted.
Comparative financial statements provided for earlier periods are required to
be reclassed to reflect the application of this statement. Centura has elected
not to adopt this statement early. Centura, as required, will adopt SFAS No.
130 with first quarter 1998 financial reporting.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"). The statement requires
management to report selected financial and descriptive information about
reportable operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Generally, disclosures are required for segments internally identified to
evaluate performance and resource allocation. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated, if it is practical to do so. SFAS No. 131 does not have to be
applied to interim financial statements in the initial year of application,
but, comparative information must be provided for interim periods in the second
year of application. Centura, as required, will adopt this statement for 1998.
II-43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 2 -- MERGERS AND ACQUISITIONS
Centura consummated the following mergers and acquisitions of North
Carolina financial institutions during 1997, 1996 and 1995.
<TABLE>
<CAPTION>
(Millions, except shares)
------------------------------------------
Acquisition
Institution Date Assets Loans Deposits Shares Issued
- ----------------------------------------------------------------- ------------ -------- ------- ---------- --------------
<S> <C> <C> <C> <C> <C>
ACQUISITIONS ACCOUNTED FOR AS PURCHASES IN 1997:
Branch Banking and Trust Company and United Carolina Bank
("BB&T"), deposit assumption 8/15/97 $313 $171 $313 --
Betts & Company ("Betts") 11/3/97 1 -- -- 44,443
NationsBank, N.A., deposit assumption ("NationsBank") 11/13/97 86 52 86 --
First Union National Bank, deposit assumption ("First Union") 12/5/97 16 -- 16 --
- ----------------------------------------------------------------- -------- ---- ---- ---- ------
Total 1997 Purchase Acquisitions $416 $223 $415 44,443
==== ==== ==== ======
ACQUISITIONS ACCOUNTED FOR AS PURCHASES IN 1996:
Essex Savings Bank, FSB ("Essex"), deposit assumption 7/26/96 $ 71 $ -- $ 71 --
First Community Bank ("First Community") 8/16/96 121 83 99 776,441
- ----------------------------------------------------------------- -------- ---- ---- ---- -------
Total 1996 Purchase Acquisitions $192 $ 83 $170 776,441
==== ==== ==== =======
MERGERS ACCOUNTED FOR AS POOLINGS IN 1996:
First Commercial Holding Company ("FCHC") 2/27/96 172 120 140 1,607,564
FirstSouth Bank ("FirstSouth") 10/25/96 170 132 150 1,075,559
CLG, Inc. ("CLG") 11/01/96 126 85 -- 1,661,970
- ----------------------------------------------------------------- -------- ---- ---- ---- ---------
Total 1996 Mergers $468 $337 $290 4,345,093
- ----------------------------------------------------------------- ---- ---- ---- ---------
Total 1996 Acquisitions and Mergers $660 $420 $460 5,121,534
==== ==== ==== =========
ACQUISITIONS ACCOUNTED FOR AS PURCHASES IN 1995:
Cleveland Federal Bank, A Savings Bank ("Cleveland") 3/30/95 86 69 74 645,719
First Southern Bancorp, Inc. ("First Southern") 6/02/95 325 224 266 2,166,552
- ----------------------------------------------------------------- -------- ---- ---- ---- ---------
Total 1995 Purchase Acquisitions $411 $293 $340 2,812,271
==== ==== ==== =========
</TABLE>
II-44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 2 -- MERGERS AND ACQUISITIONS -- Continued
For the mergers accounted for under the pooling-of-interests method, all
financial data previously reported prior to the date of merger were restated as
though the entities had been combined for the periods presented. CLG was on a
January 31 fiscal year while Centura is on a calendar year. Therefore, an
adjustment to retained earnings in the consolidated statement of stockholders'
equity for the period ended December 31, 1996 of $818,000 was made for the
one-month period ended January 31, 1996 to bring the combination of accounts
with CLG in line with Centura's calendar year reporting basis.
For the acquisitions accounted for under the purchase method, the results
of their operations prior to their respective consummation dates are not
included in the accompanying consolidated financial statements. The pro forma
results of operations as though Centura had consummated each of the 1997
acquisitions at the beginning of the periods presented are considered
immaterial.
On August 15, 1997, Centura consummated its assumption of deposit
liabilities and acquisition of certain loans from BB&T. Centura acquired
thirteen offices located in ten communities in eastern and southeastern North
Carolina. The purchase price exceeded the fair value of net assets acquired
which resulted in $34.7 million recorded as goodwill, included in other assets
on the consolidated balance sheet.
On November 3, 1997, Centura consummated its acquisition of Betts, an
independent insurance agency based in Rocky Mount, North Carolina. The merger
was consummated through the issuance of 44,443 shares of Centura common stock.
The purchase price exceeded the fair value of the net assets acquired and
accordingly, goodwill of $2.6 million was recorded as an other asset on the
consolidated balance sheet. The activities of Betts continue through Centura
Insurance Services, Inc., a wholly-owned subsidiary of Centura Bank.
On November 13, 1997, Centura consummated its assumption of deposit
liabilities and acquisition of certain loans from NationsBank. Centura acquired
five banking centers, all located in North Carolina. Goodwill of $7.7 million
was recorded as an other asset on the consolidated balance sheet. In addition,
on December 5, 1997, Centura completed the deposit assumption transaction with
First Union resulting in the recording of $820,000 of goodwill.
During 1996, Centura completed the acquisition of three financial
institutions and one deposit assumption transaction. For the acquisitions
accounted for as purchases, goodwill was increased by $16.7 million. The merger
with FCHC was consummated through the issuance of 0.63 shares of Centura common
stock for each share of FCHC outstanding common stock while First Community and
FirstSouth were consummated under exchange ratios of 0.96 and 0.55,
respectively. In addition, Centura completed its merger with CLG, a privately
owned company based in Raleigh, North Carolina, that specializes in leasing
computer equipment to companies throughout the United States. CLG operates as a
wholly-owned subsidiary of Centura Bank.
On October 1, 1996, Centura completed the cash transaction to purchase 49
percent of First Greensboro Home Equity, Inc. ("First Greensboro"). First
Greensboro, headquartered in Greensboro, North Carolina, is a mortgage and
finance company specializing in alternative equity lending for homeowners whose
borrowing needs are generally not met by traditional financial institutions.
First Greensboro retains the controlling interest of the company. Centura
recorded this investment as an other asset and recognizes 49 percent of the net
income of First Greensboro into the earnings stream as required under the
equity method of accounting for investments. The excess of the purchase price
over the net assets acquired is amortized over 20 years as a charge against
earnings of future periods.
In 1995, Centura completed the acquisitions of Cleveland and First
Southern. Cleveland was consummated under an exchange ratio of 3.381 shares of
Centura common stock for each outstanding share of Cleveland, while First
Southern was consummated under an exchange ratio of 1.25. Both acquisitions
were accounted for as purchases. The purchase price exceeded the fair value of
net assets acquired for each transaction. Accordingly, Centura recorded $25.7
million of goodwill relative to the Cleveland and First Southern transactions.
The unamortized goodwill is recorded in other assets on the consolidated
balance sheet.
Centura and Pee Dee Bankshares, Inc. ("Pee Dee"), a South Carolina bank
holding company with its principal office in Timmonsville, South Carolina have
executed an agreement pursuant to which Pee Dee will merge with and into
Centura. In addition, Pee Dee State Bank, a subsidiary of Pee Dee, will merge
with and into the Bank. Pee Dee owns 95.73 percent of the issued and
outstanding shares of Pee Dee State Bank while the remaining shares are owned
by individuals. The shareholders of Pee Dee and Pee Dee State Bank will be
entitled to receive shares of Centura common stock under the exchange ratio as
defined, subject to adjustment, in the agreement. Pee Dee has also granted to
Centura an option to purchase up to
II-45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 2 -- MERGERS AND ACQUISITIONS -- Continued
11,170 shares of Pee Dee common stock under certain conditions as outlined in
the executed stock option agreement. Pee Dee operates six branches located in
South Carolina, three in Florence and one each in Timmonsville, Dillon, and
Sumter. At December 31, 1997, Pee Dee had total consolidated assets of
approximately $138 million. Assuming satisfaction of certain conditions and
requisite approvals, it is anticipated that this merger will occur in the first
quarter of 1998. The Pee Dee merger is expected to be accounted for as a
pooling-of-interests.
On January 30, 1998, Centura acquired Moore and Johnson, Inc. ("Moore and
Johnson"), a North Carolina corporation with its principal office in Raleigh,
North Carolina. The transaction was consummated through the issuance of 48,950
shares of Centura common stock. Moore and Johnson is engaged in the insurance
brokerage business, primarily serving the eastern North Carolina market. The
transaction was accounted for as a purchase and, therefore, is appropriately
not reflected in the accompanying consolidated financial statements.
NOTE 3 -- INVESTMENT SECURITIES
A summary of amortized cost, fair values, and unrealized gains and losses
of investment securities by type at December 31, follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ----------------------------- ------------------------------
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
---------------- ------------- ---------------- ------------ ---------------- -------------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
Held to maturity:
U.S. Treasury .................. $ 86,944 $ 87,516 $ 76,373 $ 76,019 $ 127,405 $ 127,593
U.S. Government agencies and
corporations ................. 49,027 50,136 139,752 138,947 143,625 144,018
Mortgage-backed securities ..... 12,271 12,298 -- -- -- --
State and municipal ............ 38,464 39,879 40,669 42,074 47,992 50,201
Other securities ............... 1,850 1,860 1,012 1,012 83 83
---------- ---------- ---------- ---------- ---------- ----------
Total held to maturity ......... $ 188,556 $ 191,689 $ 257,806 $ 258,052 $ 319,105 $ 321,895
========== ========== ========== ========== ========== ==========
Available for sale:
U.S. Treasury .................. $ 186,500 $ 188,021 $ 193,577 $ 192,169 $ 156,600 $ 155,515
U.S. Government agencies and
corporations ................. 179,229 179,234 262,147 266,141 245,586 245,414
Mortgage-backed securities ..... 977,020 985,529 763,423 763,471 554,963 557,236
Asset-backed securities ........ 93,875 94,159 -- -- -- --
State and municipal ............ 2,143 2,183 3,334 3,325 10,000 10,000
Other securities ............... 184,563 190,374 94,968 94,968 41,427 41,355
---------- ---------- ---------- ---------- ---------- ----------
Total available for sale ....... $1,623,330 $1,639,500 $1,317,449 $1,320,074 $1,008,576 $1,009,520
========== ========== ========== ========== ========== ==========
</TABLE>
II-46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 3 -- INVESTMENT SECURITIES -- Continued
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ -------------------
Unrealized Unrealized Unrealized
------------------ ------------------ -------------------
Gains Losses Gains Losses Gains Losses
--------- -------- --------- -------- --------- ---------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
Held to maturity:
U.S. Treasury .............................. $ 660 $ 88 $ 81 $ 435 $ 588 $ 400
U.S. Government agencies and corporations .. 1,283 174 278 1,083 858 465
Mortgage-backed securities ................. 183 156 -- -- -- --
State and municipal ........................ 1,427 12 1,452 47 2,239 30
Other securities ........................... 10 -- -- -- -- --
------- ------ ------- ------ ------ ------
Total held to maturity ..................... $ 3,563 $ 430 $ 1,811 $1,565 $3,685 $ 895
======= ====== ======= ====== ====== ======
Available for sale:
U.S. Treasury .............................. $ 1,548 $ 27 $ 99 $1,507 $ 369 $1,454
U.S. Government agencies and corporations .. 475 470 4,474 480 1,407 1,579
Mortgage-backed securities ................. 10,939 2,430 5,525 5,477 4,905 2,632
Asset-backed securities .................... 299 15 -- -- -- --
State and municipal ........................ 40 -- 2 11 -- --
Other securities ........................... 6,006 195 -- -- -- 72
------- ------ ------- ------ ------ ------
Total available for sale ................... $19,307 $3,137 $10,100 $7,475 $6,681 $5,737
======= ====== ======= ====== ====== ======
</TABLE>
The following is a summary of investment securities by maturity at December 31,
1997:
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
----------------------------- ------------------------------
Amortized Cost Fair Value Amortized Cost Fair Value
---------------- ------------ ---------------- -------------
(thousands)
<S> <C> <C> <C> <C>
Remaining maturities:
Within one year ............................ $ 80,373 $ 80,376 $ 149,312 $ 150,190
One to five years .......................... 77,871 80,240 229,697 231,679
Six to ten years ........................... 12,088 12,643 10,153 10,186
Over ten years ............................. 5,953 6,132 163,273 167,757
Mortgage-backed and asset-backed securities 12,271 12,298 1,070,895 1,079,688
-------- -------- ---------- ----------
Total ...................................... $188,556 $191,689 $1,623,330 $1,639,500
======== ======== ========== ==========
</TABLE>
At December 31, 1997 and 1996, investment securities with book values of
approximately $750 million and $612 million, respectively, were pledged to
secure public funds on deposit and for other purposes required by law or
contractual arrangements. Securities collateralized in repurchase agreements as
set forth in Note 9 have been transferred to a third party. Sales of debt
securities during 1997 generated gross realized gains of $3,644,000 and losses
of $3,508,000. Gross gains of $3,212,000 and $1,432,000 and gross losses of
$1,414,000 and $2,046,000 were realized during 1996 and 1995, respectively.
II-47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 4 -- LOANS
A summary of loans at December 31 follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
(thousands)
<S> <C> <C>
Commercial, financial and agricultural ................... $ 846,074 $ 743,477
Consumer ................................................. 321,642 274,885
Real estate -- mortgage .................................. 2,320,320 2,097,757
Real estate -- construction and land development ......... 578,304 524,246
Leases ................................................... 470,376 420,240
Other .................................................... 49,995 49,001
---------- ----------
Gross loans .............................................. 4,586,711 4,109,606
Less unearned income on loans ............................ 129 152
---------- ----------
Total loans .............................................. $4,586,582 $4,109,454
========== ==========
Included in the above:
Nonaccrual loans ......................................... $ 23,722 $ 18,713
Restructured loans ....................................... -- 497
Accruing loans past due ninety days ...................... 6,985 8,916
========== ==========
</TABLE>
Loans classified as real estate - mortgage include mortgage loans held for sale
of $48.2 million and $53.6 million in 1997 and 1996, respectively. Most of
Centura's loan business is with customers located within North Carolina.
For the years ended December 31, 1997, 1996 and 1995 interest income that would
have been recorded on nonaccrual and restructured loans had they performed in
accordance with the original terms amounted to approximately $2.0 million, $1.7
million and $1.7 million, respectively. Interest income on all such loans
included in the results of operations amounted to approximately $634,000,
$624,000 and $527,000 for the years ended December 31, 1997, 1996, and 1995,
respectively. During 1997 and 1996, approximately $5,502,000 and $4,183,000,
respectively, in loans were transferred to foreclosed property.
The Bank makes loans to executive officers and directors of Centura and
the Bank and to their associates. It is management's opinion that such loans
are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not involve more than normal risk of collectibility. A
summary of the loan transactions with related parties is as follows:
<TABLE>
<CAPTION>
Beginning New Ending
Balance Loans Repayments Balance
----------- --------- ------------ ----------
(thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1997 ......... $23,208 $6,222 $ (7,150) $22,280
======= ====== ======== =======
</TABLE>
NOTE 5 -- ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ----------
(thousands)
<S> <C> <C> <C>
Balance at beginning of year ....................... $ 58,715 $ 55,070 $ 48,164
Provision for loan losses .......................... 13,418 9,596 7,904
Allowance from acquired loans ...................... 3,133 1,240 3,460
Loans charged off .................................. (14,425) (10,408) (8,306)
Recoveries on loans previously charged off ......... 3,438 3,217 3,848
--------- --------- --------
Net loans charged off .............................. (10,987) (7,191) (4,458)
--------- --------- --------
Balance at end of year ............................. $ 64,279 $ 58,715 $ 55,070
========= ========= ========
</TABLE>
II-48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 5 -- ALLOWANCE FOR LOAN LOSSES -- Continued
At December 31, 1997, the recorded investment in loans that were
considered to be impaired was $16.1 million (of which $12.7 million were on a
nonaccrual basis). Included in this amount is $11.4 million of impaired loans
for which the related AFLL is $5.3 million, and $4.7 million of impaired loans
for which there is no related allowance determined in accordance with SFAS No.
114.
At December 31, 1996, the recorded investment in loans that were
considered to be impaired was $10.9 million (of which $10.8 million were on a
nonaccrual basis). Included in this amount is $6.1 million of impaired loans
for which the related AFLL is $2.0 million, and $4.8 million of impaired loans
for which there is no related allowance determined in accordance with SFAS No.
114.
The average recorded investment in impaired loans for the years ended
December 31, 1997, 1996, and 1995 was approximately $14.2 million, $12.2
million, and $13.5 million, respectively. Interest recognized on a cash-basis
method of accounting and included in the results of operations on those
impaired loans for each of the years in the three-year period ended December
31, 1997, 1996, and 1995 was approximately $207,000, $50,000, and $111,000,
respectively.
NOTE 6 -- MORTGAGE SERVICING RIGHTS
A summary of capitalized MSRs follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(thousands)
<S> <C> <C>
Balance at beginning of year ......... $ 21,046 $ 14,388
MSRs capitalized during the year ..... 13,703 11,246
MSRs amortized during the year ....... (6,511) (4,588)
-------- --------
Balance at end of year ............... $ 28,238 $ 21,046
======== ========
</TABLE>
The fair value of capitalized MSRs at December 31, 1997 and 1996 was
approximately $35.9 million and $27.6 million, respectively. No valuation
allowance for capitalized MSRs was required during the years ended December 31,
1997 and 1996.
NOTE 7 -- PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(thousands)
<S> <C> <C>
Land ........................................... $ 17,389 $ 17,369
Buildings ...................................... 70,732 64,686
Buildings and equipment under capital lease .... 890 890
Leasehold improvements ......................... 13,320 10,750
Furniture, fixtures and equipment .............. 92,398 85,795
Construction in progress ....................... 6,704 8,636
-------- --------
Total .......................................... 201,433 188,126
Less accumulated depreciation and amortization . 85,969 75,928
-------- --------
Premises and equipment ......................... $115,464 $112,198
======== ========
</TABLE>
Depreciation and amortization on premises and equipment, included in
operating expenses, amounted to $16,288,000, $15,312,000, and $11,296,000 in
1997, 1996 and 1995, respectively.
II-49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 8 -- DEPOSITS
At December 31, 1997, the scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<S> <C>
1998 ........................ $1,759,368
1999 ........................ 523,851
2000 ........................ 102,508
2001 ........................ 37,298
2002 and thereafter ......... 163,266
----------
$2,586,291
==========
</TABLE>
NOTE 9 -- BORROWED FUNDS
At December 31, 1997 and 1996, borrowed funds consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(thousands)
<S> <C> <C>
Federal funds purchased and securities sold under agreements
to repurchase ................................................. $460,324 $435,470
Master notes ................................................... 195,391 141,649
U.S. Treasury demand note ...................................... 37,477 32,402
Bank note ...................................................... -- 15,770
Line of credit ................................................. 40,000 60,000
-------- --------
Total borrowed funds ........................................... $733,192 $685,291
======== ========
</TABLE>
Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to 30 days from the transaction date. Securities
collateralizing repurchase agreements have been transferred to a third party.
Master notes are issued by Centura under a master agreement with a term not to
exceed 270 days and mature on a daily basis. The bank's U.S. Treasury demand
note is payable on demand and interest on borrowings under this arrangement is
payable at 0.25 percent below the weekly federal funds rate as quoted by the
Federal Reserve.
The Bank has the ability to borrow up to a maximum of $300 million under
an offering by the Bank to institutional investors only of unsecured bank notes
due from 30 days to 15 years from the date of issue. Each bank note would be a
direct, unconditional and unsecured general obligation solely of the Bank and
would not be an obligation of or guaranteed by Centura. Interest rate and
maturity terms would generally be negotiated between the Bank and the
purchaser, within certain parameters set forth in the offering circular.
Borrowed funds as of December 31, 1996 included $15.8 million outstanding under
one fixed interest rate note which matured during 1997.
Centura has an unsecured line of credit of $60 million bearing a variable
interest rate (1 month LIBOR+ 25 basis points). On December 31, 1997, the line
was refinanced and assigned a December 1998 maturity.
II-50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 9 -- BORROWED FUNDS -- Continued
The following table presents certain information for federal funds
purchased and securities sold under agreements to repurchase and master notes:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
(thousands)
<S> <C> <C> <C>
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
Amount outstanding at December 31 ........................................ $ 460,324 $ 435,470 $ 362,654
Average outstanding balance .............................................. 516,958 405,373 224,616
Maximum amount outstanding at end of any month during the year ........... 647,219 554,699 364,773
Interest expense ......................................................... $ 28,607 $ 21,385 $ 13,068
Approximate weighted average interest rate:
During the year ......................................................... 5.53% 5.28% 5.82%
End of year ............................................................. 5.30 4.67 5.66
Master Notes
Amount outstanding at December 31 ........................................ $ 195,391 $ 141,649 $ 101,178
Average outstanding balance .............................................. 169,215 119,819 79,189
Maximum amount outstanding at end of any month during the year ........... 204,709 155,252 109,717
Interest expense ......................................................... $ 8,117 $ 5,613 $ 4,091
Approximate weighted average interest rate:
During the year ......................................................... 4.80% 4.68% 5.17%
End of year ............................................................. 4.82 5.00 5.00
</TABLE>
NOTE 10 -- LONG-TERM DEBT
At December 31, 1997 and 1996, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(thousands)
<S> <C> <C>
Federal Home Loan Bank advances ............ $229,052 $228,918
Capital Securities ......................... 100,000 --
Notes payable secured by lease rentals ..... 52,253 80,811
Obligations under capitalized leases ....... 458 531
Other ...................................... 366 542
-------- --------
Total long-term debt ....................... $382,129 $310,802
======== ========
</TABLE>
Centura has the ability to borrow up to $500 million under a blanket
collateral agreement with the FHLB whereby Centura maintains, free of other
encumbrances, qualifying mortgages (as defined) with unpaid principal balances
at least equal to, when discounted at 75 percent of the unpaid principal
balance, 100 percent of the FHLB advances. At December 31, 1997, FHLB advances
had maturities of up to 4.9 years and were at rates ranging from 5.00 percent
to 6.125 percent. At December 31, 1996, FHLB advances had maturities of up to
3.5 years and were at rates ranging from 5.00 percent to 8.90 percent.
On June 2, 1997, Centura Capital Trust I, a wholly-owned statutory
business trust of Centura, (the "Trust") issued $100 million of 8.845% Capital
Securities maturing June 2027 (the "Capital Securities"). The Trust also issued
$3.1 million of common securities to Centura. The Trust invested the proceeds
of $103.1 million, from the Capital Securities and common securities issuances,
in 8.845% Junior Subordinated Deferrable Interest Debentures issued by Centura
(the "Junior Debentures"), which upon consolidation are eliminated. The Junior
Debentures, with a maturity of June 2027, are the primary assets of the Trust.
With respect to the Capital Securities, Centura has irrevocably and
unconditionally guaranteed the Trust's obligations. The Capital Securities are
included in Tier I capital for regulatory capital adequacy requirements.
To finance some of the equipment utilized in its leasing activities,
Centura has fixed rate debt secured by the future lease rentals to be received
under the leasing contracts and first liens on the related equipment.
Generally, the terms to maturity of these obligations are equal to the terms to
maturity of the underlying contracts. At December 31, 1997, the
II-51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 10 -- LONG-TERM DEBT -- Continued
weighted average rate and maturity for the notes payable secured by lease
rentals were 8.64 percent and 2.3 years, respectively. At December 31, 1996,
the weighted average rate and maturity for the notes payable secured by lease
rentals were 7.98 percent and 2.7 years, respectively.
At December 31, 1997, maturities of long-term debt are as follows (in
thousands):
<TABLE>
<S> <C>
1998 ........................ $ 92,759
1999 ........................ 130,664
2000 ........................ 7,310
2001 ........................ 1,168
2002 ........................ 50,202
Thereafter .................. 100,026
--------
$382,129
========
</TABLE>
NOTE 11 -- PENSION AND OTHER BENEFIT PLANS
Centura has a noncontributory, qualified defined benefit pension plan (the
"Pension Plan") covering substantially all full-time employees. Benefits are
determined by applying a benefit ratio to the employees' average compensation
for each year of participation. The plan is funded using the Projected Unit
Credit method. Annual contributions consist of a normal service cost amount and
an amortization amount of prior service costs.
Centura also has an Omnibus Supplemental Executive Retirement Plan
("SERP") which provides various officers with certain benefits in excess of
Centura's standard pension plan. One of the benefits offered under the Omnibus
Plan are Supplemental Pension Contracts ("SPCs") which are nonqualified pension
plans providing benefits payable upon retirement, death or disability of an
eligible participant. Insurance policies on the lives of the covered employees
have been purchased and are intended to be adequate to fund future benefits
plus full recovery of any corporate paid premiums.
The following table sets forth the plans' funded status and amounts
recognized in the consolidated financial statements:
<TABLE>
<CAPTION>
Pension Plan SPCs-SERP
--------------------------- --------------------------
December 31, December 31,
1997 1996 1997 1996
------------- ------------- ------------- ------------
(thousands)
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit obligation ("ABO"):
Vested benefits ...................................................... $ 29,567 $ 26,760 $ 6,170 $ 5,380
Nonvested benefits ................................................... 1,346 1,360 2,997 3,008
--------- --------- --------- --------
$ 30,913 $ 28,120 $ 9,167 $ 8,388
========= ========= ========= ========
Projected benefit obligation ("PBO") for services rendered to date ... $ (37,953) $ (34,432) $ (10,651) $ (9,584)
Plan assets at fair value, primarily listed stocks and U.S. Government
securities .......................................................... 30,006 27,516 -- --
--------- --------- --------- --------
Plan assets under the PBO ............................................ (7,947) (6,916) (10,651) (9,584)
Unrecognized net loss ................................................ 5,983 6,004 1,765 1,164
Unrecognized prior service cost ...................................... 2,882 3,374 1,280 2,663
Additional liability related to unfunded ABO ......................... (1,508) (2,643) (1,561) (2,631)
Unrecognized net (asset) liability ................................... (317) (423) -- --
--------- --------- --------- --------
Accrued pension cost included in other liabilities ................... $ (907) $ (604) $ (9,167) $ (8,388)
========= ========= ========= ========
</TABLE>
II-52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 11 -- PENSION AND OTHER BENEFIT PLANS -- Continued
<TABLE>
<CAPTION>
Pension Plan
-----------------------------------
1997 1996 1995
----------- ----------- -----------
(thousands)
<S> <C> <C> <C>
Net periodic pension expense includes the following
components:
Service cost -- benefits earned during the period ............. $ 2,402 $ 1,965 $ 1,369
Interest cost on PBO .......................................... 2,552 2,394 1,987
Actual return on plan assets .................................. (3,272) (2,480) (4,220)
Net amortization and deferral ................................. 1,058 680 2,691
--------- --------- ---------
Net periodic pension expense included in personnel expense .... $ 2,740 $ 2,559 $ 1,827
========= ========= =========
Assumptions:
Weighted average discount rate at end of fiscal year .......... 7.25% 7.5% 7.5%
Rate of increase in future compensation levels used in
determining the actuarial present value of PBO ............... 5.5 5.5 5.5
Expected long-term rate of return on assets ................... 8.5 8.5 8.5
========= ========= =========
<CAPTION>
SPCs-SERP
-----------------------------------
1997 1996 1995
----------- ----------- -----------
(thousands)
<S> <C> <C> <C>
Net periodic pension expense includes the following
components:
Service cost -- benefits earned during the period ............. $ 722 $ 475 $ 310
Interest cost on PBO .......................................... 720 587 366
Actual return on plan assets .................................. -- -- --
Net amortization and deferral ................................. 945 1,123 683
------- ------- -------
Net periodic pension expense included in personnel expense .... $ 2,387 $ 2,185 $ 1,359
======= ======= =======
Assumptions:
Weighted average discount rate at end of fiscal year .......... 7.25% 7.5% 7.5%
Rate of increase in future compensation levels used in
determining the actuarial present value of PBO ............... 5.5 5.5 5.5
Expected long-term rate of return on assets ................... -- -- --
======= ======= =======
</TABLE>
In addition to providing pension benefits, Centura provides other employee
benefit plans. The amounts expensed for these are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(thousands)
<S> <C> <C> <C>
401-k .................................. $ 1,782 $ 2,016 $ 1,522
Sales commissions ...................... 9,409 8,320 7,394
EVA-based incentive compensation ....... 6,840 5,612 3,500
Other .................................. 234 340 296
------- ------- -------
$18,265 $16,288 $12,712
======= ======= =======
</TABLE>
The 401-k plan permits eligible employees to make contributions, with the
Bank matching 50 percent of contributions up to 6 percent of the employees'
base compensation. The plan is available for full-time employees after
completion of six months consecutive service or for part-time employees after
completion of 1,000 hours of service during a consecutive 12-month period.
Centura's sales incentive plan rewards all sales officers for the value of
products and services sold after covering the costs of their individual
salaries, benefits and other direct costs of producing new business. The
Economic Value Added ("EVA") incentive program provides for a total EVA
incentive pool for all non-sales employees based upon meeting a specific EVA
target. Calculation of the target incorporates the ability of current net
operating profits after tax to cover the annual cost of capital utilized. The
program also incorporates the use of bonus banking of a defined percentage of
incentives earned that are then placed at risk dependent upon future
performance plus the granting of leveraged stock options to specific members of
management. Other miscellaneous bonus and incentive awards are made primarily
under individual contracts.
Centura accounts for retiree health benefits and other retiree welfare
benefits, under the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The statement requires that a
liability for such benefits be accrued and the projected costs of providing
these benefits be recognized currently as an expense rather than when paid.
Centura's Postretirement Health Care and Death Benefits Program is for all
employees who work at least 30 hours per week and who retire at age 55 or later
with ten or more years of service. The program provides a catastrophic
postretirement health care plan to pre-age 65 retirees and a postretirement
health care benefit consisting of a fixed dollar cash payment for post-age 65
retirees. The program is funded as benefits are paid.
II-53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 11 -- PENSION AND OTHER BENEFIT PLANS -- Continued
The following table presents the plan's funded status reconciled with the
amounts recognized in Centura's consolidated financial statements:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
----------- -----------
(thousands)
<S> <C> <C>
Postretirement benefit obligation:
Retirees and beneficiaries ........................................... $ 2,350 $ 2,285
Dependents of retirees ............................................... 7 26
Fully eligible active employees ...................................... 971 895
Other active employees ............................................... 3,633 2,798
Less future service obligation ....................................... (1,967) (1,442)
-------- --------
Accumulated postretirement benefit obligation (APBO) .................. 4,994 4,562
Plan assets at fair value ............................................. -- --
-------- --------
Funded status ......................................................... 4,994 4,562
Unrecognized net gain ................................................. 181 447
Unrecognized transition obligation .................................... (3,329) (3,551)
-------- --------
Accrued postretirement benefit cost included in other liabilities ..... $ 1,846 $ 1,458
======== ========
</TABLE>
The net periodic postretirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996 1995
---------- ---------- -------
(thousands)
<S> <C> <C> <C>
Service cost .................................................. $ 189 $161 $ 135
Interest cost ................................................. 337 322 328
Actual return on plan assets .................................. -- -- --
nrecognized net gain ......................................... (6) (3) (21)
Amortization of transition obligation over 20 years ........... 222 222 222
Prior service cost ............................................ 16 -- --
------- ------ -----
Net periodic postretirement benefit cost ...................... $ 758 $702 $ 664
======= ====== =====
Assumptions:
Weighted average discount rate used in determining APBO ..... 7.25% 7.5% 7.5%
Annual health care cost trend rate .......................... 5.5 7.0 8.0
Ultimate medical trend rate ................................. 5.5 5.5 5.5
Medical trend rate select period (in years) ................. 0 1 2
Effect of 1% increase in assumed medical trend rate on:
Service and interest cost ................................... 0% 0% 1.0%
APBO ........................................................ 0 0 1.0
======= ====== =====
</TABLE>
II-54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 12 -- STOCK OPTIONS, AWARDS AND SHAREHOLDERS' EQUITY
At December 31, 1997, 1996, and 1995 Centura had approximately 2,121,000,
2,487,000, and 2,445,000 shares, respectively, of its authorized but unissued
common stock reserved for its incentive, nonqualified and deferred compensation
stock option plans (the "Plans").
A summary of stock option transactions under these plans follows:
<TABLE>
<CAPTION>
Option Option Price Weighted Average
Shares Per Share Exercise Price
----------- -------------- -----------------
<S> <C> <C> <C>
Outstanding at December 31, 1994 .............. 1,293,700 $ 3-$25 $ 14.21
Assumed through purchase acquisitions ......... 181,000 9 9.00
Granted ....................................... 345,000 5- 37 23.65
Exercised ..................................... 242,900 3- 22 14.45
Forfeited ..................................... 9,800 14- 20 18.95
--------- -------- --------
Outstanding at December 31, 1995 .............. 1,567,000 $ 3-$37 14.38
Assumed through purchase acquisitions ......... 61,600 13- 19 16.00
Granted ....................................... 85,200 9- 32 26.59
Exercised ..................................... 351,900 5- 26 12.58
Forfeited ..................................... 22,200 7- 21 14.40
--------- -------- --------
Outstanding at December 31, 1996 .............. 1,339,700 $ 3-$37 15.24
Granted ....................................... 147,203 9- 39 32.94
Exercised ..................................... 331,900 4- 26 13.99
Forfeited ..................................... 17,500 3- 39 12.81
--------- -------- --------
Outstanding at December 31, 1997 .............. 1,137,503 $ 3-$39 20.11
========= ======== ========
Exercisable at December 31, 1997 .............. 830,410 $ 3-$39 17.08
========= ======== ========
</TABLE>
The weighted-average fair values of options granted during 1997, 1996 and
1995 were $16.12, $26.08, and $8.13 respectively. The weighted average
remaining contractual lives of stock options were 5.03, 3.47, and 4.49 years at
December 31, 1997, 1996, and 1995, respectively.
The following table summarizes information related to stock options
outstanding on December 31, 1997:
<TABLE>
<CAPTION>
Number of Options Outstanding Number of Options Exercisable
Range of Exercise Prices at December 31, 1997 at December 31, 1997
- -------------------------- ------------------------------- ------------------------------
<S> <C> <C>
$3.00 to $6.03 67,896 67,896
$6.04 to $8.59 20,423 20,423
$8.60 to $8.89 118,474 106,054
$8.90 to $14.37 213,768 213,574
$14.38 to $21.50 262,956 242,647
$21.51 to $31.13 109,857 37,426
$31.14 to $33.55 102,569 46,884
$33.56 to $35.50 124,998 47,242
$35.51 to $39.00 116,562 48,264
------- -------
1,137,503 830,410
========= =======
</TABLE>
Prior to January 1, 1996, Centura accounted for the Plans in accordance
with the provisions of APB 25. As such, compensation expense would be recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, as required, Centura adopted
SFAS No. 123, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the provisions
of APB 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock awards and stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. Centura elected to continue to apply the provisions of APB 25 for
expense recognition.
II-55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 12 -- STOCK OPTIONS, AWARDS AND SHAREHOLDERS' EQUITY -- Continued
Centura, under APB 25, expensed approximately $1,636,200 in 1997,
$2,883,300 in 1996, and $905,900 in 1995 for employee stock awards and stock
option grants. Pro forma earnings per share disclosures are indicated below as
if the fair value based method of SFAS 123 had been adopted (dollars in
thousands except per share information):
<TABLE>
<CAPTION>
As Reported Pro Forma
-------------------------------------- --------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
(thousands, except per share)
<S> <C> <C> <C> <C> <C> <C>
Net Income ...... $ 83,058 $ 68,151 $ 64,653 $ 82,763 $ 67,681 $ 64,617
Basic EPS ....... 3.22 2.66 2.50 3.21 2.64 2.50
Diluted EPS ..... 3.15 2.60 2.45 3.14 2.58 2.45
</TABLE>
In determining the pro forma disclosures above, the fair value of options
granted was estimated using the Black-Scholes option-pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
Directors/Employee EVA Leveraged
Deferred Options Other
-------------------- -------------- ----------
<S> <C> <C> <C>
1995
Risk free interest rates .......... 6.29% 6.22% 6.22%
Dividend yield .................... 2.90 2.90 2.90
Volatility ........................ 24.99 24.99 24.99
Expected lives (in years) ......... 2.98 6.05 2.20
1996
Risk free interest rates .......... 6.00% 5.91% 5.91%
Dividend yield .................... 2.50 2.50 2.50
Volatility ........................ 23.59 23.59 23.59
Expected lives (in years) ......... 2.84 6.02 2.20
1997
Risk free interest rates .......... 6.14% 6.02% 6.02%
Dividend yield .................... 2.00 2.00 2.00
Volatility ........................ 24.16 24.16 24.16
Expected lives (in years) ......... 3.30 6.01 2.20
</TABLE>
The effects of applying SFAS No. 123 in the pro forma disclosures are not
indicative of future amounts.
Centura has a Dividend Reinvestment Stock Purchase Plan which allows
shareholders to invest dividends and optional cash payments in additional
shares of common stock. Shareholders of record are automatically eligible to
participate in the plan.
Cash dividends paid were $27.4 million, $24.0 million and $18.7 million
during 1997, 1996 and 1995, respectively, which represented $1.06, $1.00 and
$.85 on a per share basis, respectively. During the fourth quarter of 1997,
Centura declared and accrued $7.0 million, or $.27 per share, for the first
quarter of 1998 cash dividend.
Retained earnings at December 31, 1997 includes $3.8 million of
undistributed earnings of 50 percent or less owned investees accounted for by
the equity method.
II-56
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 13 -- OTHER OPERATING EXPENSE
Other operating expense consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(thousands)
<S> <C> <C> <C>
Marketing, advertising and public relations ......... $ 9,080 $ 7,549 $ 6,195
Stationery, printing and supplies ................... 5,921 6,712 5,458
Postage ............................................. 3,144 2,798 2,502
Telephone ........................................... 7,637 6,678 5,492
FDIC insurance ...................................... 1,304 10,197 5,727
Fees for outsourced services ........................ 8,219 3,299 --
Service and licensing fees .......................... 5,211 4,323 3,307
Legal and professional fees ......................... 15,914 11,290 9,432
Other administrative ................................ 8,555 8,544 7,930
Intangible amortization ............................. 6,520 5,034 4,148
Depreciation on equipment under operating lease ..... 7,247 7,944 7,192
Other ............................................... 17,052 16,977 15,716
------- ------- -------
Total other operating expense ....................... $95,804 $91,345 $73,099
======= ======= =======
</TABLE>
On September 30, 1996, the Federal Deposit Insurance Corporation ("FDIC")
levied a one-time special assessment to recapitalize the Savings Association
Insurance Fund ("SAIF"). The assessment was levied on SAIF-insured deposits and
Centura recognized $7.3 million of FDIC expense relative to this assessment for
the year ended December 31, 1996. The after-tax assessment totaled
approximately $4.2 million.
NOTE 14 -- INCOME TAXES
The components of income tax expense for the years ended December 31 were:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ------------
(thousands)
<S> <C> <C> <C>
Current expense:
Federal ......................... $28,943 $34,347 $ 40,242
State ........................... 890 4,363 6,655
------- ------- ---------
29,833 38,710 46,897
Deferred expense/ (benefit):
Federal ......................... 10,775 645 (8,114)
State ........................... 1,812 (152) (2,362)
------- ------- ---------
12,587 493 (10,476)
------- ------- ---------
Total income tax expense ......... $42,420 $39,203 $ 36,421
======= ======= =========
</TABLE>
Income tax expense is reconciled to the amount computed by applying the
federal statutory rate to income before income taxes as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Federal statutory rate .................. 35.00% 35.00% 35.00%
Non-taxable income ...................... (2.54) (1.67) (1.24)
Goodwill amortization (accretion), net .. .55 .54 .08
Acquisition adjustments ................. .18 .39 .09
State income tax, net of federal benefit 1.40 2.59 2.73
Other, net .............................. ( .78) ( .33) ( .63)
----- ----- -----
Effective tax rate ...................... 33.81% 36.52% 36.03%
===== ===== =====
</TABLE>
II-57
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 14 -- INCOME TAXES -- Continued
The tax effects of temporary differences which give rise to significant
portions of the net deferred tax liability at December 31, 1997 and 1996, are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------- ---------------
(thousands)
<S> <C> <C>
Deferred tax assets:
Loan loss reserve .................... $ (23,687) $(20,436)
Other reserves ....................... (1,890) (2,050)
Deferred compensation ................ (12,097) (11,061)
Deferred loan and lease fees ......... (90) (5)
Other assets ......................... (4,084) (4,742)
--------- ----------
Gross deferred tax assets ............ (41,848) (38,294)
--------- ----------
Deferred tax liabilities:
Premises and equipment ............... 2,842 2,880
Employee retirement plans ............ 1,789 1,530
Investment securities ................ 980 950
Leasing activities ................... 31,971 21,825
Other liabilities .................... 20,027 17,202
Unrealized securities gains .......... 6,200 1,056
--------- ----------
Gross deferred tax liabilities ....... 63,809 45,443
--------- ----------
Net deferred tax liability ........... $ 21,961 $ 7,149
========= ==========
</TABLE>
No valuation allowance for deferred tax assets was required at December
31, 1997 or 1996. Management has determined that it is more likely than not
that the deferred tax assets can be supported by carrybacks to federal taxable
income in the federal carryback period or offset against deferred tax
liabilities. During 1997, the net deferred tax liability increased
approximately $5,100,000 due to fair value adjustments required under SFAS 115
for securities available for sale, and decreased due to other adjustments
totaling $2,875,000.
NOTE 15 -- LEASE COMMITMENTS
At December 31, 1997, Centura was obligated under a number of
noncancelable leases for bank premises. In addition, obligations under
short-term equipment leases are generally cancelable upon thirty to ninety days
written notice. Most of the leases for bank premises provide that Centura pay
taxes, maintenance, insurance, and other expenses. It is expected that in the
normal course of business, leases that expire will be renewed or replaced by
other leases. Certain lease agreements contain options to renew for additional
periods of one to twenty years.
At December 31, 1997, future minimum lease payments under noncancelable
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Operating
Leases
----------
<S> <C>
1998 ............................. $ 4,569
1999 ............................. 4,287
2000 ............................. 4,086
2001 ............................. 3,366
2002 ............................. 2,667
Thereafter ....................... 9,001
-------
Total minimum lease payments ..... $27,976
=======
</TABLE>
II-58
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 15 -- LEASE COMMITMENTS -- Continued
Rent expense charged to operations was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(thousands)
<S> <C> <C> <C>
Bank premises ......... $4,581 $3,445 $3,146
Equipment ............. 3,151 2,247 2,601
------ ------ ------
Rent expense .......... $7,732 $5,692 $5,747
====== ====== ======
</TABLE>
NOTE 16 -- COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
Commitments and Off-Balance Sheet Risk
Centura may participate in various financial instruments with off-balance
sheet risk in order to satisfy the financing needs of its borrowers and to
manage its exposure to interest rate risk. These financial instruments include
commitments to extend credit, letters of credit, and off-balance sheet
derivative financial instruments.
At December 31, 1997 and 1996, Centura had commitments to extend credit of
$1.6 billion and $1.2 billion, respectively, and standby letters of credit of
$64.2 million and $75.8 million, respectively. These instruments at December
31, 1997 have no carrying value. With the exception of commitments to originate
residential mortgage loans which are discussed below, these financial
instruments are exercisable at the market rate prevailing at the date the
underlying transaction will be completed, and thus are deemed to have no
current fair value.
Commitments to extend credit are agreements to lend to customers at
predetermined interest rates as long as there is no violation of any condition
established in the contracts. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. These
commitments are subject to Centura's standard credit approval and monitoring
process. Centura's exposure to credit risk is represented by the contractual
amount of the commitment to extend credit. In the opinion of management, there
are no material commitments to extend credit that represent unusual risks.
Standby letters of credit are conditional commitments issued by Centura to
guarantee the performance of a customer to a third party. The risks and credit
approval process involved in issuing standby letters of credit are essentially
the same as that involved in commitments to extend credit.
Centura evaluates the collateral required for each extension of credit on
a case-by-case basis following the same guidelines set forth in normal lending
policy. The majority of commitments to extend credit and letters of credit are
secured, primarily with liquid financial instruments such as certificates of
deposit or income-producing assets. With the exception of guarantees for
approximately $29.4 million which extend for a period in excess of one year,
most guarantees in the form of commitments and letters of credit expire in less
than one year. If these commitments are drawn, Centura will obtain collateral
if it is deemed necessary based on management's credit evaluation of the
counterparty. Collateral held varies, but may include accounts receivable,
inventory, and commercial or residential real estate. Management expects that
these commitments can be funded through normal operations.
Included in commitments to extend credit are commitments issued by the
Bank to originate residential mortgage loans held for sale ("pipeline loans")
of approximately $33.9 million and $32.2 million at December 31, 1997 and 1996,
respectively, with terms generally not exceeding 90 days. As discussed in Note
4, mortgage loans held for sale ("MLHFS"), which are carried at the lower of
cost or fair value and are included in total loans, were $48.2 million and
$53.6 million at December 31, 1997 and 1996, respectively. In connection with
these MLHFS and pipeline loans, management entered into forward commitments to
sell residential mortgage loans totaling $48.5 million and $58.5 million at
December 31, 1997 and 1996, respectively. Such forward commitments are entered
into to reduce the Bank's exposure to market risk arising from potential
changes in interest rates, which could alter the underlying market value of
MLHFS and pipeline loans. The forward commitments are at fixed prices and are
scheduled to settle at specified dates which generally do not exceed 90 days.
MLHFS and pipeline loans are valued utilizing the fixed prices of the forward
commitments. MLHFS and pipeline loans not covered by existing forward
commitments are valued using quoted market prices appropriate for the
associated loan characteristics
II-59
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 16 -- COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES -- Continued
and interest rate levels. Commitments not fully satisfied by MLHFS and
pipelines loans are valued based on what it would cost to purchase loans in the
open market to fulfill the commitments. The net result of this valuation
process is used in recording the carrying value of MLHFS at the lower of cost
or fair value. At December 31, 1997 and 1996, cost exceeded fair value by
approximately $261,000 and $380,000, respectively, requiring a valuation
allowance which was reflected in the carrying value of MLHFS.
In connection with its asset/liability management program, Centura has
entered into interest rate swap, cap, and floor arrangements with other
counterparties. Centura does not trade the instruments, and Centura's policy
governing the use of these instruments, as approved by Centura's board of
directors, strictly forbids speculation of any kind.
Interest rate swap agreements ("swaps") are used to reduce funding costs,
diversify funding sources, and manage interest rate risk with the objective of
stabilizing Centura's net interest income over time. These swaps are used to
convert the fixed interest rates (or variable rates) on designated investment
securities, loans and long-term debt to variable interest rates (or fixed
rates). Typically, Centura pays a fixed rate of interest for a fixed period of
time and receives a variable rate of interest indexed to the London Interbank
Offered Rate ("LIBOR") or vice versa. Centura also enters into interest rate
swap agreements in which both interest rates are floating in order to reduce
its basis risk with respect to a given index. The difference between the rate
paid and the rate received is recorded in the consolidated statements of income
as a component of interest income or interest expense, depending upon the
financial instrument to which the swap is designated. Unrealized fair values of
the swaps are not recorded in the consolidated statements of income because the
swap agreements are being treated as a synthetic alteration of the designated
assets or liabilities.
Centura's interest rate swap agreements at December 31, 1997 and 1996, are
summarized below:
<TABLE>
<CAPTION>
Estimated
Notional Fair Value
Amount Gain (Loss)
---------- ------------
(thousands)
<S> <C> <C>
December 31, 1997
Corporation pays fixed rates/receives variable ..... $278,000 $ (1,737)
Corporation pays variable rates/receives fixed ..... 273,000 4,660
Corporation pays variable rates (LIBOR)/
receives variable (US T-Bill) ..................... 200,000 (370)
-------- --------
Total interest rate swaps .......................... $751,000 $ 2,553
======== ========
December 31, 1996
Corporation pays fixed rates/receives variable ..... $225,000 $ (2,296)
Corporation pays variable rates/receives fixed ..... 70,000 (222)
-------- --------
Total interest rate swaps .......................... $295,000 $ (2,518)
======== ========
</TABLE>
At December 31, 1997 and 1996, Centura had interest rate floor
arrangements ("floors") and interest rate cap arrangements ("caps"). The floors
are being used to protect certain designated variable rate loans from the
downward effects of their repricing in the event of a decreasing rate
environment. The caps are being used to protect certain designated floating
rate debt securities from the negative effects of an increasing rate
environment. Unrealized fair values of the floors and caps are not recorded in
the consolidated statements of income because the floors and caps are being
treated as a synthetic alteration of the designated assets or liabilities.
II-60
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 16 -- COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES -- Continued
Interest rate cap and floor agreements at December 31 are summarized as
follows:
<TABLE>
<CAPTION>
Estimated
Notional Carrying Fair Value
Amount Value Gain (Loss)
---------- ---------- ------------
(thousands)
<S> <C> <C> <C>
December 31, 1997
Interest rate caps ........... $ 38,000 $972 $ (465)
Interest rate floors ......... 230,000 907 1,589
December 31, 1996
Interest rate caps ........... $ 26,000 $775 $ (645)
Interest rate floors ......... 180,000 821 2,114
</TABLE>
Centura, on a limited basis, also utilizes financial futures contracts and
exchange traded options on financial futures contracts to reduce interest rate
risk in the AFS portfolio. Futures contract price changes settle on a daily
basis whereby Centura either makes or receives a cash payment. Such cash
receipt or cash payment is recorded as a component of the change in the value
of the securities held in the AFS portfolio. At December 31, 1997 and 1996
Centura had put options on 195 and call options on 2 ten-year Treasury futures
contracts, respectively. Each contract represents the notional amount of
$100,000 and gives Centura the right but not the obligation to exercise the
respective Treasury futures contracts. Cumulatively at December 31, 1997, the
carrying value and estimated fair value of the options were $7,000 and $16,000,
respectively. At December 31, 1996, the options had a carrying value of $97,000
and an estimated fair value of $75,000.
The risks generally associated with these derivative financial instruments
are the risk that the counterparty in the agreement may default ("credit
risk"); the risk that at the time of any such default, interest rates may have
moved unfavorably from the perspective of the nondefaulting party ("market
risk"); and the risk that amounts due to Centura previously reflected in the
consolidated balance sheets may not be received as a result of the default.
Centura's derivative financial instruments have been entered into with
nationally recognized commercial and investment banking firms. As such, Centura
does not anticipate non-performance by the counterparties. Additionally, to
mitigate credit risks, Centura's derivative contracts are generally governed by
master netting agreements and, where appropriate, Centura may obtain collateral
in the form of rights to securities. The master netting agreements provide for
net settlement of covered contracts with the same counterparty in the event of
default by the other party.
Contingencies
In December 1997, Centura settled a previously filed suit in connection
with a 1993 merger/conversion transaction with no material impact to the
consolidated financial position or results of operations of the company.
Various legal proceedings against Centura and the Bank have arisen from
time to time in the normal course of business. Management believes liabilities
arising from these proceedings, if any, will have no material adverse effect on
the financial position or results of operations of Centura or the Bank.
NOTE 17 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made by management at a specific point in time,
based on relevant information about the financial instrument and the market.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time Centura's entire holdings of a particular
financial instrument nor are potential taxes and other expenses that would be
incurred in an actual sale considered. Because no market exists for a
significant portion of Centura's financial instruments, fair value estimates
are based on judgments regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions and/or the methodology used
could significantly affect the estimates disclosed. Similarly, the fair values
disclosed could vary significantly from amounts realized in actual
transactions.
II-61
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 17 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, Centura has a substantial trust department
that contributes net fee income annually. The trust department is not
considered a financial instrument, and its value has not been incorporated into
the fair value estimates. Other significant assets and liabilities that are not
considered financial assets or liabilities include premises and equipment and
intangibles. In addition, tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in any of the estimates.
The following table presents the carrying values and estimated fair values
of Centura's financial instruments at December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------ ------------ ------------ ------------
(thousands)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks, including interest-bearing $ 282,121 $ 282,121 $ 294,478 $ 294,478
Federal funds sold ................................. 29,552 29,552 21,413 21,413
Investment securities .............................. 1,828,056 1,831,189 1,577,880 1,578,126
Accrued interest receivable ........................ 45,130 45,130 42,729 42,729
Net loans .......................................... 4,522,303 4,587,006 4,050,739 4,176,237
FINANCIAL LIABILITIES:
Deposits ........................................... 5,364,925 5,361,534 4,733,069 4,732,011
Accrued interest payable ........................... 16,259 16,259 15,877 15,877
Borrowed funds ..................................... 733,192 733,192 685,291 685,291
Long-term debt ..................................... $ 382,129 $ 420,943 $ 310,802 $ 310,724
========== ========== ========== ==========
</TABLE>
See Note 16 for information regarding the fair value of Centura's
off-balance sheet financial instruments at December 31, 1997 and 1996 and see
Note 6 for information regarding the fair value of Centura's capitalized
mortgage servicing rights.
NOTE 18 -- PARENT COMPANY FINANCIAL DATA
Centura's principal asset is its investment in the Bank; its primary
source of income is dividends and management fees from the Bank. Condensed
financial statements for the parent company are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
----------- -----------
(thousands)
<S> <C> <C>
BALANCE SHEETS
Assets:
Cash and deposits in banks ............................... $190,494 $158,076
Investment securities available for sale (cost of $91,531) 95,253 --
Loans to affiliate ....................................... 14,173 5,722
Investment in wholly-owned subsidiary, bank .............. 549,986 491,877
Investment in wholly-owned subsidiary, other ............. 3,116 --
Other assets ............................................. 40,221 35,774
-------- --------
Total assets ............................................. $893,243 $691,449
======== ========
Liabilities and Shareholder's Equity:
Junior subordinated debentures with affiliate ............ $103,093 $ --
Other liabilities ........................................ 251,814 216,214
Shareholders' equity ..................................... 538,336 475,235
-------- --------
Total liabilities and shareholders' equity ............... $893,243 $691,449
======== ========
</TABLE>
II-62
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 18 -- PARENT COMPANY FINANCIAL DATA -- Continued
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1997 1996 1995
---------- ------------ ----------
(thousands)
<S> <C> <C> <C>
INCOME STATEMENTS
Income:
Dividends from subsidiaries ................................................... $47,490 $ 81,251 $18,731
Other ......................................................................... 33,642 21,550 13,456
------- --------- -------
Total income ................................................................... 81,132 102,801 32,187
Expenses:
Interest ...................................................................... 15,795 8,473 4,458
Other ......................................................................... 13,707 13,139 9,583
------- --------- -------
Total expenses ................................................................. 29,502 21,612 14,041
------- --------- -------
Income before income tax and equity in undistributed net income of subsidiaries 51,630 81,189 18,146
Income tax expense (benefit) ................................................... 602 (68) (76)
------- --------- -------
Income before equity in undistributed net income of subsidiaries ............... 51,028 81,257 18,222
Equity in undistributed net income of subsidiaries ............................. 32,030 (13,106) 46,431
------- --------- -------
Net income ..................................................................... $83,058 $ 68,151 $64,653
======= ========= =======
</TABLE>
II-63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 18 -- PARENT COMPANY FINANCIAL DATA -- Continued
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1997 1996 1995
------------ ------------ ------------
(thousands)
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS
Operating activities:
Net income .................................................................... $ 83,058 $ 68,151 $ 64,653
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ............................................... 1,724 634 276
(Increase) decrease in equity in undistributed net income of subsidiary ..... (32,030) 13,106 (46,431)
Other, net .................................................................. (4,345) (1,829) 3,098
---------- --------- ---------
Net cash provided by operating activities ..................................... 48,407 80,062 21,596
---------- --------- ---------
Investing activities:
Net increase in investment in subsidiary .................................... (3,093) -- --
Net decrease in receivables from the Bank ................................... -- -- 11,000
Net increase in loan with affiliate ......................................... (8,451) (5,722) --
Purchases of securities available for sale .................................. (107,381) -- --
Maturities and issuer calls of securities available for sale ................ 1,083 -- --
Other ....................................................................... -- (29,250) --
Cash acquired, net of cash paid, in purchase acquisition .................... -- -- 7,739
---------- --------- ---------
Net cash provided (used) by investing activities .............................. (117,842) (34,972) 18,739
---------- --------- ---------
Financing activities:
Net increase in borrowings .................................................. 136,691 74,327 78,374
Issuance of common stock, net ............................................... 4,274 4,442 3,209
Redemption of common stock .................................................. (10,289) (45,513) (58,822)
Cash dividends paid ......................................................... (27,354) (24,001) (18,730)
Other ....................................................................... (1,469) -- --
---------- --------- ---------
Net cash provided by financing activities ..................................... 101,853 9,255 4,031
---------- --------- ---------
Increase in cash .............................................................. 32,418 54,345 44,366
Cash at beginning of year ..................................................... 158,076 103,731 59,365
---------- --------- ---------
Cash at end of year ........................................................... $ 190,494 $ 158,076 $ 103,731
========== ========= =========
Noncash transactions:
Net equity adjustment of merged entity ...................................... $ -- $ 818 $ --
Stock issued for acquisitions and other stock issuances, net ................ 4,045 28,649 76,113
Unrealized securities gains, net of parent and subsidiary ................... 13,545 1,681 21,274
Available-for-sale securities contributed to subsidiary as capital .......... 14,763 -- --
Dividends declared, but not yet paid ........................................ 6,981 6,415 5,411
========== ========= =========
</TABLE>
NOTE 19 -- REGULATORY MATTERS
Centura and the Bank are subject to certain requirements imposed by state
and federal banking statutes and regulations. These regulations require the
maintenance of a noninterest-bearing reserve balance at the Federal Reserve
Bank, restrict Bank dividend payments, and establish guidelines for minimum
capital levels. The total of the required Federal Reserve Bank reserve balances
at December 31, 1997 was $9,337,000. Subject to the regulatory restrictions,
the Bank had $58.9 million available from its retained earnings at December 31,
1997 for the payment of dividends from the Bank to Centura without obtaining
prior regulatory approval. The Bank is prohibited by law from paying dividends
from its capital stock account which totaled $78,207,000 at December 31, 1997.
Management believes that as of December 31, 1997, the Bank and Centura met all
capital adequacy requirements to which they are subject and was not aware of
any conditions or events that would change the capital categories.
II-64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 19 -- REGULATORY MATTERS -- Continued
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, there are minimum ratios of capital to risk-weighted assets
to which Centura and the Bank are subject. The capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly discretionary
actions by regulators that, if undertaken, could have a material effect on
Centura's consolidated financial statements.
Regulatory capital amounts and ratios are set forth in the table below.
Tier I capital consists of common stock, retained earnings, minority interests
in the equity accounts of consolidated subsidiaries less goodwill and certain
other intangible assets. For Centura, Tier I capital also consists of Capital
Securities described in Note 10. The remainder of Total Capital is Tier II
capital and includes subordinated debt, or other allowed equity equivalents and
a limited amount of loan loss reserves. Balance sheet assets and the credit
equivalent amount of off-balance sheet items per regulatory guidelines are
assigned to broad risk categories and a category risk weight is then applied.
The Bank is well-capitalized under the regulatory framework for prompt
corrective action. To be categorized as well-capitalized the Bank must meet
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table below.
<TABLE>
<CAPTION>
Capital Amount Ratio
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(thousands)
<S> <C> <C> <C> <C>
Total Capital (to Risk-Weighted Assets)
Centura ................................ $549,279 $426,025 11.19% 10.02%
Bank ................................... $496,509 $474,220 10.24% 11.18%
Tier I Capital (to Risk-Weighted Assets)
Centura ................................ $520,178 $402,687 10.60% 9.48%
Bank ................................... $435,625 $421,146 8.98% 9.93%
Tier I Capital (to Average Assets) .....
Centura ................................ $520,178 $402,687 7.51% 6.56%
Bank ................................... $435,625 $421,146 6.46% 6.91%
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Adequacy Purposes Action Provisions
------------------- ------------------------
Ratio Ratio
------------------- ------------------------
<S> <C> <C>
Total Capital (to Risk-Weighted Assets)
Centura ................................ >=8.00% NA
Bank ................................... >=8.00% >=10.00%
Tier I Capital (to Risk-Weighted Assets)
Centura ................................ >=4.00% NA
Bank ................................... >=4.00% >=6.00%
Tier I Capital (to Average Assets) .....
Centura ................................ >=4.00% NA
Bank ................................... >=4.00% >=5.00%
</TABLE>
II-65
<PAGE>
DESCRIPTION OF EXHIBITS
Restated Articles of Incorporation of Centura Banks, Inc.
Bylaws of Centura Banks, Inc., as amended
Excerpts from Centura's Articles of Incorporation and Bylaws relating to the
rights of holders of Centura capital stock
Specimen certificate of Centura common stock
Amended and Restated Trust Agreement between Centura Banks, Inc., as Depositor,
State Street Bank and Trust Company, as Property Trustee, Delaware Trust
Capital Management, as Delaware Trustee, and the Administrative Trustees named
therein relating to $100,000,000 Centura Capital Trust I, 8.845% Capital
Securities, Series A (the "Capital Securities")
Guarantee Agreement between Centura Banks, Inc., Guarantor, and State Street
Bank and Trust Company, as Guarantee Trustee, relating to the Capital
Securities
Junior Subordinated Indenture between Centura Banks, Inc. and State Street Bank
and Trust Company, as Trustee relating to $103,093,000 8.845% Junior
Subordinated Deferred Interest Debentures of the Corporation
Centura Banks, Inc. Omnibus Equity Compensation Plan, as amended and restated
effective April 16, 1997
Centura Banks, Inc. Directors' Deferred Compensation Plan, as amended and
restated effective February 15, 1995
Agreement, dated December 1996, by and between Centura Banks, Inc. and J.
Richard Futrell, Jr.
Centura Banks, Inc. Omnibus Supplemental Executive Retirement Plan
First Charlotte Financial Corporation 1984 Incentive Stock Option Plan
(including 1988 amendments), as assumed by Centura Banks, Inc.
Stock Grant Agreement Pursuant to Article X of Centura Banks, Inc. Omnibus
Equity Compensation Plan, dated November 20, 1996, between Centura Banks, Inc.
and Robert R. Mauldin
Centura Banks, Inc. Directors' Retirement Pay Plan as assumed by Centura Banks,
Inc.
The Planters Corporation Deferred Compensation Plan, as assumed by Centura
Banks, Inc.
Supplemental Executive Retirement Agreement dated May 14, 1996, between Centura
Banks, Inc. and Cecil W. Sewell, Jr.
Supplemental Executive Retirement Agreement as amended dated October 23, 1996,
between Centura Banks, Inc. and Cecil W. Sewell, Jr.
The Planters Corporation 1986 Incentive Stock Option Plan, as assumed by
Centura Banks, Inc.
The Planters Corporation 1988 Incentive Stock Option Plan, as assumed by
Centura Banks, Inc.
The Planters Corporation Non-qualified Stock Option Plan, as assumed by Centura
Banks, Inc.
Centura Banks, Inc. Split-Dollar Life Insurance Plan as assumed by Centura
Banks, Inc.
Centura Banks, Inc. Dividend Reinvestment Stock Purchase Plan, as amended and
restated effective October 3, 1994
Supplemental Executive Retirement Agreement dated May 14, 1996, between Centura
Banks, Inc. and William H. Wilkerson
Peoples Bancorporation 1987 Stock Option Plan, as assumed by Centura Banks,
Inc.
Orange Federal Savings and Loan Association Nonstatutory Stock Option Plan for
Directors, as assumed by Centura Banks, Inc.
Supplemental Executive Retirement Agreement, as amended dated October 23, 1996,
between Centura Banks, Inc. and William H. Wilkerson
Executive Employment Agreement, dated November 15, 1995, between Robert R.
Mauldin and Centura Banks, Inc.
Centura Banks, Inc. Omnibus Equity Compensation Plan Nonqualified Stock Option
Award Agreement, dated November 15, 1995, between Centura Banks, Inc. and
Robert R. Mauldin
Supplemental Executive Retirement Agreement dated May 13, 1996 between Centura
Banks, Inc. and Frank L. Pattillo
II-66
<PAGE>
DESCRIPTION OF EXHIBITS -- (continued)
Amendment Agreement, dated November 15, 1995, between Centura Banks, Inc. and
Robert R. Mauldin
Supplemental Executive Retirement Agreement as amended, dated October 23, 1996
between Centura Banks, Inc. and Frank L. Pattillo
Agreement of Assumption of Retirement Payment Agreement, dated as of June 2,
1995, by and between Centura Banks, Inc., First Southern Savings Bank, Inc.
SSB, and William H. Redding, Jr.
Agreement of Assumption of Agreement for Deferred Fees, dated as of June 2,
1995, by and between Centura Banks, Inc., First Southern Bancorp, Inc., and
William H. Redding, Jr.
1995 Outside Directors Stock Option Plan of First Commercial Holding
Corporation, as assumed by Centura Banks, Inc.
First Community Bank Omnibus Stock Plan of 1994, as assumed by Centura Banks,
Inc.
Amended and Restated FirstSouth Bank Stock Option Plan for Key Employees, as
assumed by Centura Banks, Inc.
FirstSouth Bank 1988 Stock Option Plan for Directors, as assumed by Centura
Banks, Inc.
First Southern Bancorp, Inc. Employee Stock Option Plan, as assumed by Centura
Banks, Inc.
First Southern Bancorp, Inc. Nonqualified Stock Option Plan for Directors, as
assumed by Centura Banks, Inc.
Executive Employment Agreement, dated November 1, 1996, between Dean E.
Painter, Jr. and CLG, Inc.
Executive Employment Agreement, dated November 3, 1997, between Thomas A.
Betts, Jr. and Centura Insurance Services, Inc.
Subsidiaries of Centura Banks, Inc.
Consent of KPMG Peat Marwick LLP
Financial Data Schedule included in the electronically filed document as
required
COPIES OF EXHIBITS ARE AVAILABLE UPON WRITTEN REQUEST TO STEVEN J. GOLDSTEIN,
CHIEF FINANCIAL OFFICER OF CENTURA BANKS, INC.
II-67
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Centura Banks, Inc. has duly caused this report to be signed on the
18th day of February, 1998, on its behalf by the undersigned, thereunto duly
authorized.
CENTURA BANKS, INC.
/s/ Cecil W. Sewell, Jr. /s/ Steven J. Goldstein
Cecil W. Sewell, Jr. Steven J. Goldstein
Chairman of the Board, Chief Financial Officer
Chief Executive Officer,
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this has
been signed below by the following persons on behalf of Centura Banks, Inc. and
in the capacities indicated on the 18th day of February, 1998.
/s/ Cecil W. Sewell, Jr. Chairman of the Board, Chief
Cecil W. Sewell, Jr. Executive Officer and President
/s/ Richard H. Barnhardt Director
Richard H. Barnhardt
/s/ Director
C. Wood Beasley
/s/ Thomas A. Betts, Jr. Director
Thomas A. Betts, Jr.
/s/ H. Tate Bowers Director
H. Tate Bowers
/s/ Ernest L. Evans Director
Ernest L. Evans
/s/ J. Richard Futrell, Jr. Director
J. Richard Futrell, Jr.
/s/ Director
John H. High
/s/ Michael K. Hooker Director
Michael K. Hooker
/s/ William D. Hoover Director
William D. Hoover
/s/ Robert L. Hubbard Director
Robert L. Hubbard
<PAGE>
/s/ William H. Kincheloe Director
William H. Kincheloe
/s/ Charles T. Lane Director
Charles T. Lane
/s/ Robert R. Mauldin Director
Robert R. Mauldin
/s/ Joseph H. Nelson Director
Joseph H. Nelson
/s/ Director
Dean E. Painter, Jr.
/s/ O. Tracy Parks, III Director
O. Tracy Parks, III
/s/ Frank L. Pattillo Director, Vice Chairman,
Frank L. Pattillo Administration
/s/ William H. Redding, Jr. Director
William H. Redding, Jr.
/s/ Charles M. Reeves, III Director
Charles M. Reeves, III
/s/ George T. Stronach, III Director
George T. Stronach, III
/s/ A. P. Thorpe, III Director
A. P. Thorpe, III
/s/ Joseph L. Wallace, Jr. Director
Joseph L. Wallace, Jr.
/s/ William H. Wilkerson Director, Vice Chairman,
William H. Wilkerson Credit Risk Management
/s/ Charles P. Wilkins Director
Charles P. Wilkins
<PAGE>
CENTURA BANKS, INC.
EXHIBIT LIST
Exhibit Description of Exhibit Sequential
No. Page No.
- --------------------------------------------------------------------------------
3.1 Restated Articles of Incorporation of Centura Banks, Inc. *(2)
3.2 Bylaws of Centura Banks, Inc., as amended *(13)
4.1 Excerpts from Centura's Articles of Incorporation and Bylaws *(1)
relating to the rights of holders of Centura capital stock
4.2 Specimen certificate of Centura common stock *(2)
4.3 Amended and Restated Trust Agreement between Centura Banks,
Inc., as Depositor, State Street Bank and Trust Company, as
Property Trustee, Delaware Trust Capital Management, as
Delaware Trustee, and the Administrative Trustees named
therein relating to $100,000,000 Centura Capital Trust I,
8.845% Capital Securities, Series A (the "Capital Securities")
4.4 Guarantee Agreement between Centura Banks, Inc., Guarantor,
and State Street Bank and Trust Company, as Guarantee Trustee,
relating to the Capital Securities
4.5 Junior Subordinated Indenture between Centura Banks, Inc. and
State Street Bank and Trust Company, as Trustee relating to
$103,093,000 8.845% Junior Subordinated Deferred Interest
Debentures of the Corporation
10.1 Centura Banks, Inc. Omnibus Equity Compensation Plan, as
amended and restated effective April 16, 1997
10.2 Centura Banks, Inc. Directors' Deferred Compensation Plan, as *(15)
amended and restated effective February 15, 1995
10.3 Agreement, dated December 1996, by and between Centura Banks, *(19)
Inc. and J. Richard Futrell, Jr.
10.4 Centura Banks, Inc. Omnibus Supplemental Executive Retirement *(13)
Plan
10.5 First Charlotte Financial Corporation 1984 Incentive Stock *4.2(9)
Option Plan (including 1988 amendments), as assumed by Centura
Banks, Inc.
10.6 Stock Grant Agreement Pursuant to Article X of Centura Banks, *(19)
Inc. Omnibus Equity Compensation Plan, dated November 20,
1996, between Centura Banks, Inc. and Robert R. Mauldin
10.7 Centura Banks, Inc. Directors' Retirement Pay Plan (previously *(4)
referred to as Directors Retirement Pay Plan of the Board of
Directors of Planters), as assumed by Centura Banks, Inc.
10.8 The Planters Corporation Deferred Compensation Plan, as *(5)
assumed by Centura Banks, Inc.
10.9 Supplemental Executive Retirement Agreement dated May 14, *(19)
1996, between Centura Banks, Inc. and Cecil W. Sewell, Jr.
10.10 Supplemental Executive Retirement Agreement as amended dated *(19)
October 23, 1996, between Centura Banks, Inc. and Cecil W.
Sewell, Jr.
10.11 The Planters Corporation 1986 Incentive Stock Option Plan, as *(7)
assumed by Centura Banks, Inc.
10.12 The Planters Corporation 1988 Incentive Stock Option Plan, as *(6)
assumed by Centura Banks, Inc.
10.13 The Planters Corporation Non-qualified Stock Option Plan, as *(4)
assumed by Centura Banks, Inc.
10.14 Centura Banks, Inc. Split-Dollar Life Insurance Plan *(5)
(previously referred to as Split-Dollar Life Insurance Plan of
The Planters Corporation), as assumed by Centura Banks, Inc.
10.15 Centura Banks, Inc. Dividend Reinvestment Stock Purchase Plan, *4.2(12)
as amended and restated effective October 3, 1994
10.16 Supplemental Executive Retirement Agreement dated May 14, *(19)
1996, between Centura Banks, Inc. and William H. Wilkerson
10.17 Peoples Bancorporation 1987 Stock Option Plan, as assumed by *(8)
Centura Banks, Inc.
<PAGE>
10.18 Orange Federal Savings and Loan Association Nonstatutory Stock *4.3(3)
Option Plan for Directors, as assumed by Centura Banks, Inc.
10.19 Supplemental Executive Retirement Agreement, as amended dated *(19)
October 23, 1996, between Centura Banks, Inc. and William H.
Wilkerson
10.20 Executive Employment Agreement, dated November 15, 1995, *(10)
between Robert R. Mauldin and Centura Banks, Inc.
10.21 Centura Banks, Inc. Omnibus Equity Compensation Plan *(10)
Nonqualified Stock Option Award Agreement, dated November 15,
1995, between Centura Banks, Inc. and Robert R. Mauldin
10.22 Supplemental Executive Retirement Agreement dated May 13, 1996 *(19)
between Centura Banks, Inc. and Frank L. Pattillo
10.23 Amendment Agreement, dated November 15, 1995, between Centura *(10)
Banks, Inc. and Robert R. Mauldin
10.24 Supplemental Executive Retirement Agreement as amended, dated *(19)
October 23, 1996 between Centura Banks, Inc. and Frank L.
Pattillo
10.25 Agreement of Assumption of Retirement Payment Agreement, dated *(10)
as of June 2, 1995, by and between Centura Banks, Inc., First
Southern Savings Bank, Inc. SSB, and William H. Redding, Jr.
10.26 Agreement of Assumption of Agreement for Deferred Fees, dated *(10)
as of June 2, 1995, by and between Centura Banks, Inc., First
Southern Bancorp, Inc., and William H. Redding, Jr.
10.27 1995 Outside Directors Stock Option Plan of First Commercial *(17)
Holding Corporation, as assumed by Centura Banks, Inc.
10.28 First Community Bank Omnibus Stock Plan of 1994, as assumed by *4.3(16)
Centura Banks, Inc.
10.29 Amended and Restated FirstSouth Bank Stock Option Plan for Key *4.2(18)
Employees, as assumed by Centura Banks, Inc.
10.30 FirstSouth Bank 1988 Stock Option Plan for Directors, as *4.3(18)
assumed by Centura Banks, Inc.
10.31 First Southern Bancorp, Inc. Employee Stock Option Plan, as *4.2(11)
assumed by Centura Banks, Inc.
10.32 First Southern Bancorp, Inc. Nonqualified Stock Option Plan *4.2(11)
for Directors, as assumed by Centura Banks, Inc.
10.33 Executive Employment Agreement, dated November 1, 1996,
between Dean E. Painter, Jr. and CLG, Inc.
10.34 Executive Employment Agreement, dated November 3, 1997,
between Thomas A. Betts, Jr. and Centura Insurance Services,
Inc.
21 Subsidiaries of Centura Banks, Inc.
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
* Incorporation by reference from the following document as noted:
(1) Included as the identified exhibit in Centura Banks, Inc. Form S-4 dated
March 8, 1990, as amended by Amendment No. 1 dated May 14, 1990.
(2) Included as the identified exhibit in Centura Banks, Inc. Annual Report on
Form 10-K for the year ended December 31, 1990.
(3) Included as the identified exhibit in Centura Banks, Inc. Form S-8
Registration Statement filed as Post-Effective Amendment No. 1 to Form S-4
Registration Statement (Registration No. 33-52160) filed on December 31,
1992.
(4) Included as the identified exhibit in Planters Corporation Form 10-K (File
No. 0-11061) dated March 20, 1984.
(5) Included as the identified exhibit in Planters Corporation Form 10-K (File
No. 0-11061) dated March 21, 1989.
(6) Included as the identified exhibit in Planters Corporation Form 10-K (File
No. 0-11061) dated March 15, 1988.
(7) Included as the identified exhibit in Planters Corporation Form 10-K (File
No. 0-11061) dated March 17, 1987.
(8) Included as the identified exhibit in Peoples Bancorporation Form 10-K
(File No. 0-10866) dated March 15, 1989.
(9) Included as the identified exhibit in Centura Banks, Inc. Form S-4
Registration Statement (No. 33-71198) filed on February 1, 1994.
(10) Included as the identified exhibit in Centura Banks, Inc. Annual Report on
Form 10-K for the year ended December 31, 1995.
(11) Included as the identified exhibit to Centura Banks, Inc. Form S-8
Registration Statement filed as Post-Effective Amendment No. 1 to Form S-4
Registration Statement (Registration No. 33-90568) filed on June 12, 1995.
<PAGE>
(12) Included as the identified exhibit in Centura Banks, Inc. Post-Effective
Amendment No. 1 to Form S-3 Registration Statement filed as Post-Effective
Amendment No. 3 to Form S-4 Registration Statement (Registration No.
33-33773) filed on September 2, 1994.
(13) Included as the identified exhibit in Centura Banks, Inc. Annual Report on
Form 10-K for the year ended December 31, 1993.
(14) Included as the identified exhibit in Centura Banks, Inc. Current Report on
Form 8-K dated November 28, 1995. (15) Included as the identified exhibit
in Centura Banks, Inc. Annual Report on Form 10-K for the year ended
December 31, 1994.
(16) Included as the identified exhibit to Centura Banks, Inc. Form S-8
Registration Statement filed as Post-Effective Amendment No. 1 to Form S-4
Registration Statement (Registration No. 333-04949) filed on August 26,
1996.
(17) Included as the identified exhibit to Centura Banks, Inc. Form S-8
Registration Statement filed as Post-Effective Amendment No. 1 to Form S-4
Registration Statement (Registration No. 33-80989) filed on March 21, 1996.
(18) Included as the identified exhibit to Centura Banks, Inc. Form S-8
Registration Statement filed as Post-Effective Amendment No. 1 to Form S-4
Registration Statement (Registration No. 333-08503) filed on October 20,
1996.
(19) Included as the identified exhibit to Centura Banks, Inc. Annual Report on
Form 10-K for the year ended December 31, 1996.
<PAGE>
Exhibit 4.3
================================================================================
AMENDED AND RESTATED TRUST AGREEMENT
among
CENTURA BANKS, INC.,
as Depositor
STATE STREET BANK AND TRUST COMPANY,
as Property Trustee
DELAWARE TRUST CAPITAL MANAGEMENT, INC.,
as Delaware Trustee
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
----------
Dated as of June 2, 1997
----------
CENTURA CAPITAL TRUST I
================================================================================
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I DEFINED TERMS
SECTION 1.1. Definitions................................................................................1
ARTICLE II CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name......................................................................................11
SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business...............................11
SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses...........................12
SECTION 2.4. Issuance of the Capital Securities........................................................12
SECTION 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures................12
SECTION 2.6. Continuation of Trust.....................................................................13
SECTION 2.7. Authorization to Enter into Certain Transactions..........................................13
SECTION 2.8. Assets of Trust...........................................................................16
SECTION 2.9. Title to Trust Property...................................................................16
ARTICLE III PAYMENT ACCOUNT
SECTION 3.1. Payment Account...........................................................................17
ARTICLE IV DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.............................................................................17
SECTION 4.2. Redemption................................................................................18
SECTION 4.3. Subordination of Common Securities........................................................20
SECTION 4.4. Payment Procedures........................................................................21
SECTION 4.5. Tax Returns and Reports...................................................................21
SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust........................................22
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions....................................22
ARTICLE V TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.........................................................................22
SECTION 5.2. The Trust Securities Certificates.........................................................22
SECTION 5.3. Execution and Delivery of Trust Securities Certificates...................................23
SECTION 5.4. Book-Entry Capital Securities.............................................................23
SECTION 5.5. Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges;
Securities Act Legends..................................................................25
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates........................28
SECTION 5.7. Persons Deemed Holders....................................................................29
SECTION 5.8. Access to List of Holders' Names and Addresses............................................29
SECTION 5.9. Maintenance of Office or Agency...........................................................29
SECTION 5.10. Appointment of Paying Agents.............................................................29
SECTION 5.11. Ownership of Common Securities by Depositor..............................................30
SECTION 5.12. Notices to Clearing Agency...............................................................30
SECTION 5.13. Rights of Holders; Waivers of Past Defaults..............................................30
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights..............................................................33
SECTION 6.2. Notice of Meetings........................................................................34
SECTION 6.3. Meetings of Holders of the Capital Securities.............................................34
SECTION 6.4. Voting Rights.............................................................................34
SECTION 6.5. Proxies, etc..............................................................................34
SECTION 6.6. Holder Action by Written Consent..........................................................35
SECTION 6.7. Record Date for Voting and Other Purposes.................................................35
SECTION 6.8. Acts of Holders...........................................................................35
SECTION 6.9. Inspection of Records.....................................................................36
ARTICLE VII REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee...........37
SECTION 7.2. Representations and Warranties of Depositor...............................................38
ARTICLE VIII THE ISSUER TRUSTEES; PAYING AGENTS
SECTION 8.1. Certain Duties and Responsibilities.......................................................38
SECTION 8.2. Certain Notices...........................................................................41
SECTION 8.3. Certain Rights of Property Trustee........................................................41
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities....................................43
SECTION 8.5. May Hold Securities.......................................................................44
SECTION 8.6. Compensation; Indemnity; Fees.............................................................44
SECTION 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees.......................45
SECTION 8.8. Conflicting Interests.....................................................................46
SECTION 8.9. Co-Trustees and Separate Trustee..........................................................46
SECTION 8.10. Resignation and Removal; Appointment of Successor........................................48
SECTION 8.11. Acceptance of Appointment by Successor...................................................49
SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business..............................50
SECTION 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust......................50
SECTION 8.14. Property Trustee May File Proofs of Claim................................................50
SECTION 8.15. Reports by Property Trustee..............................................................51
SECTION 8.16. Reports to the Property Trustee..........................................................51
SECTION 8.17. Evidence of Compliance with Conditions Precedent.........................................52
SECTION 8.18. Number of Issuer Trustees................................................................52
SECTION 8.19. Delegation of Power......................................................................52
SECTION 8.20. Appointment of Administrative Trustees...................................................52
ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date..........................................................53
SECTION 9.2. Early Dissolution.........................................................................53
SECTION 9.3. Termination...............................................................................54
SECTION 9.4. Liquidation...............................................................................54
SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of Issuer Trust....................55
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE X MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders..........................................................56
SECTION 10.2. Amendment................................................................................57
SECTION 10.3. Separability.............................................................................58
SECTION 10.4. Governing Law............................................................................58
SECTION 10.5. Payments Due on Non-Business Day.........................................................59
SECTION 10.6. Successors...............................................................................59
SECTION 10.7. Headings.................................................................................59
SECTION 10.8. Reports, Notices and Demands.............................................................59
SECTION 10.9. Agreement Not to Petition................................................................60
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act..................................60
SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement and Indenture...............61
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Capital Securities Certificate
Exhibit F Form of Restricted Securities Certificate
</TABLE>
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AMENDED AND RESTATED TRUST AGREEMENT, dated as of June 2, 1997, among (i)
Centura Banks, Inc., a North Carolina corporation (including any successors or
assigns, the "Depositor"), (ii) State Street Bank and Trust Company, a
Massachusetts trust company, as property trustee (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) Delaware Trust Capital
Management, Inc., a Delaware banking corporation, as Delaware trustee (in such
capacity, the "Delaware Trustee"), and (iv) Frank L. Pattillo, an individual,
and Joseph A. Smith, Jr., an individual, each of whose address is c/o Centura
Banks, Inc., 134 North Church Street, Rocky Mount, North Carolina 27892 (each an
"Administrative Trustee"), (the Property Trustee, the Delaware Trustee and the
Administrative Trustees being referred to collectively as the "Issuer
Trustees").
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and the Administrative
Trustees have heretofore duly declared and created a business trust pursuant to
the Delaware Business Trust Act by entering into the Trust Agreement, dated as
of May 19, 1997 (the "Original Trust Agreement"), and by the execution and
filing by the Delaware Trustee and the Administrative Trustees with the
Secretary of State of the State of Delaware of the Certificate of Trust, filed
on May 19, 1997, attached as Exhibit A; and
WHEREAS, the Depositor and the Issuer Trustees desire to amend and restate
the Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Issuer
Trust to the Depositor, (ii) the issuance and sale of the Capital Securities by
the Issuer Trust pursuant to the Purchase Agreement, (iii) the acquisition by
the Issuer Trust from the Depositor of all of the right, title and interest in
the Debentures, and (iv) the appointment of the Property Trustee and the
additional Administrative Trustee;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Holders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION I.1. Definitions.
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For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the meanings
assigned to them in accordance with United States generally accepted accounting
principles;
(e) Unless the context otherwise requires, any reference to an "Article", a
"Section" or an "Exhibit" refers to an Article, a Section or an Exhibit, as the
case may be, of or to this Trust Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Distributions" means, with respect to Trust Securities of a
given Liquidation Amount and/or a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each Person appointed in accordance with
Section 8.20 solely in such Person's capacity as Administrative Trustee of the
Issuer Trust heretofore created and continued hereunder and not in such Person's
individual capacity, or any successor Administrative Trustee appointed as herein
provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Applicable Procedures" means, with respect to any transfer or transaction
involving a Book-Entry Capital Security, the rules and procedures of the
Clearing Agency for such Book-Entry Capital Security, in each case to the extent
applicable to such transaction and as in effect from time to time.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises judging such Person a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
"Board of Directors" means the board of directors of the Depositor or the
Executive Committee of the board of directors of the Depositor (or any other
committee of the board of directors of the Depositor performing similar
functions) or a committee designated by the board of directors of the Depositor
(or any such committee), comprised of two or more members of the board of
directors of the Depositor or officers of the Depositor, or both.
"Book-Entry Capital Securities Certificate" means a Capital Securities
Certificate evidencing ownership of Book-Entry Capital Securities.
"Book-Entry Capital Security" means a Capital Security, the ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 5.4.
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"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed, or (c) a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Capital Security" means an undivided beneficial interest in the assets of
the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein, and
designated as 8.845% Capital Securities, Series A.
"Capital Securities Certificate" means a certificate evidencing ownership
of Capital Securities, substantially in the form attached as Exhibit E.
"Certificate Depository Agreement" means the agreement among the Issuer
Trust, the Depositor and DTC, as the initial Clearing Agency, dated as of the
Closing Date, substantially in the form attached as Exhibit B, as the same may
be amended and supplemented from time to time.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. DTC
will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means the Time of Delivery, which date is also the date of
execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Common Security" means an undivided beneficial interest in the assets of
the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein.
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located in Chicago,
Illinois, and (ii) when used with
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respect to the Debenture Trustee, the principal office of the Debenture Trustee
located in Chicago, Illinois.
"Debenture Event of Default" means any "Event of Default" specified in
Section 5.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption of such Debentures
under the Indenture.
"Debenture Trustee" means the Person identified as the "Trustee" in the
Indenture, solely in its capacity as Trustee pursuant to the Indenture and not
in its individual capacity, or its successor in interest in such capacity, or
any successor Trustee appointed as provided in the Indenture.
"Debentures" means the Depositor's 8.845% Junior Subordinated Deferrable
Interest Debentures, Series A, issued pursuant to the Indenture.
"Definitive Capital Securities Certificates" means either or both (as the
context requires) of (i) Capital Securities Certificates issued as Book-Entry
Capital Securities Certificates as provided in Section 5.2 or 5.4, and (ii)
Capital Securities Certificates issued in certificated, fully registered form as
provided in Section 5.2, 5.4 or 5.5.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss.3801 et seq., or any successor statute thereto, in each
case as amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement, solely in its capacity as Delaware Trustee
of the trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor Delaware trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 4.1.
"DTC" means The Depository Trust Company.
"Early Termination Event" has the meaning specified in Section 9.2.
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"Event of Default" means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Issuer Trust in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(c) default by the Issuer Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in this Trust Agreement
(other than those specified in clause (b) or (c) above) and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Issuer Trustees and to the
Depositor by the Holders of at least 25% in aggregate Liquidation Amount of
the Outstanding Capital Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee if a successor Property Trustee has not been appointed within 90
days thereof.
"Expense Agreement" means the Agreement as to Expenses and Liabilities,
dated as of the Closing Date, between Centura Banks, Inc. and the Issuer Trust,
substantially in the form attached as Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee Agreement" means the Guarantee Agreement executed and delivered
by the Depositor and State Street Bank and Trust Company, as guarantee trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the Holders of the Capital Securities, as amended from time to
time.
"Holder" means a Person in whose name a Trust Security or Trust Securities
are registered in the Securities Register; any such Person shall be a beneficial
owner within the meaning of the Delaware Business Trust Act.
"Indenture" means the Junior Subordinated Indenture, dated as of June 2,
1997, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
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"Institutional Accredited Investor" means an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act.
"Issuer Trust" means the Delaware business trust known as "Centura Capital
Trust I", which was created on May 19, 1997, under the Delaware Business Trust
Act pursuant to the Original Trust Agreement and is continued pursuant to this
Trust Agreement.
"Issuer Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Investment Company Act" means the Investment Company Act of 1940, or any
successor statute thereto, in each case as amended from time to time.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of any Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture, the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Issuer Trust, Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the Holder to whom such Debentures are
distributed, and (c) with respect to any distribution of Additional
Distributions to Holders of Trust Securities, Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities in respect of
which such distribution is made.
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
"Liquidation Date" means the date of the dissolution, winding-up or
termination of the Issuer Trust pursuant to Section 9.4.
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"Majority in Liquidation Amount of the Capital Securities" means, except as
provided by the Trust Indenture Act, Capital Securities representing more than
50% of the aggregate Liquidation Amount of all then Outstanding Capital
Securities.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or one of the Executive Vice
Presidents, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Depositor, and
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delivered to the Issuer Trustees. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate that
such officer has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers'
Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for or an employee of the Depositor or any Affiliate of the Depositor.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding", when used with respect to Trust Securities, means, as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee
or any Paying Agent; provided that, if such Trust Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Trust Agreement; and
(c) Trust Securities that have been paid or in exchange for or in lieu
of which other Capital Securities have been executed and delivered pursuant
to Sections 5.4, 5.5, 5.6 and 5.11;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
Securities owned by the Depositor, any Issuer Trustee or any Affiliate of the
Depositor or any Issuer Trustee shall be disregarded and deemed not to be
Outstanding, except that (a) in determining whether any Issuer Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or
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waiver, only Capital Securities that such Issuer Trustee knows to be so owned
shall be so disregarded, and (b) the foregoing clause (a) shall not apply at any
time when all of the Outstanding Capital Securities are owned by the Depositor,
one or more of the Issuer Trustees and/or any such Affiliate. Capital Securities
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Administrative Trustees the
pledgee's right so to act with respect to such Capital Securities and that the
pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of Book-Entry Capital
Securities as reflected in the records of the Clearing Agency or, if a Clearing
Agency Participant is not the Owner, then as reflected in the records of a
Person maintaining an account with such Clearing Agency (directly or indirectly,
in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.10 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Holders in which all amounts paid in respect of the
Debentures will be held and from which the Property Trustee, through the Paying
Agent, shall make payments to the Holders in accordance with Sections 4.1 and
4.2.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, unincorporated association, or government or
any agency or political subdivision thereof, or any other entity of whatever
nature.
"PORTAL" means the Private Offering, Resales and Trading through Automatic
Linkages (PORTAL) Market, and any successor market thereto.
"Plan" means an employee benefit or other plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Code.
"Plan Asset Entity" means any Person whose underlying assets include "plan
assets" by reason of any Plan's investment in such Person.
"Property Trustee" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement, solely in its capacity as Property Trustee
of the trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"PTCE" means a U.S. Department of Labor Prohibited Transaction Class
Exemption.
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"Purchase Agreement" means the Purchase Agreement, dated as of May 29,
1997, among the Issuer Trust, the Depositor and the Purchasers, as the same may
be amended from time to time.
"Purchasers" has the meaning specified in the Purchase Agreement and
Schedule I thereto.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures.
"Regulation D" means Regulation D under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Restricted Capital Securities" means all Capital Securities the Capital
Securities Certificate, including Book-Entry Capital Securities Certificate, for
which is required pursuant to Section 5.5(c) to bear a Restricted Capital
Securities Legend.
"Restricted Capital Securities Legend" means a legend substantially in the
form of the legend required in the form of Capital Securities Certificate set
forth in Exhibit E to be placed upon a Restricted Securities Certificate.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Exhibit F.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Securities Act" means the Securities Act of 1933, and any successor
statute thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.5.
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"Successor Capital Securities" of any particular Capital Securities
Certificate means every Capital Securities Certificate issued after, and
evidencing all or a portion of the same beneficial interest in the Issuer Trust
as that evidenced by, such particular Capital Securities Certificate; and, for
the purposes of this definition, any Capital Securities Certificate executed and
delivered under Section 5.6 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Capital Securities Certificate shall be deemed to
evidence the same beneficial interest in the Issuer Trust as the mutilated,
destroyed, lost or stolen Capital Securities Certificate.
"Time of Delivery" has the meaning specified in the Purchase Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the
same may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including (i) all Exhibits, and (ii) for all purposes of this
Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that if
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in, or
owing to, the Payment Account, and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION II.1. Name.
The trust continued hereby shall be known as "Centura Capital Trust I", as
such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Trust Securities and the other Issuer
Trustees, in which name the Issuer Trustees (other than the Delaware Trustee)
may conduct the business of the Issuer Trust, make and
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execute contracts and other instruments on behalf of the Issuer Trust and sue
and be sued.
SECTION II.2. Office of the Delaware Trustee; Principal Place of Business.
The address of the Delaware Trustee in the State of Delaware is 900 N.
Market Street, Second Floor, 5-4-82-12, Wilmington, Delaware 19801, Attention:
Corporate Trust, or such other address in the State of Delaware as the Delaware
Trustee may designate by written notice to the Holders, the Depositor, the
Property Trustee and the Administrative Trustees. The principal executive office
of the Issuer Trust is c/o Centura Banks, Inc., 134 North Church Street, Rocky
Mount, North Carolina 27802, Attention: Secretary.
SECTION II.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledges receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Issuer Trust as they arise or shall, upon request of any Issuer
Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by
such Issuer Trustee. The Depositor shall make no claim upon the Trust Property
for the payment of such expenses.
SECTION II.4. Issuance of the Capital Securities.
As of May 29, 1997, the Depositor, both on its own behalf and on behalf of
the Issuer Trust pursuant to the Original Trust Agreement, executed and
delivered the Purchase Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, an Administrative Trustee, on behalf of the
Issuer Trust, shall manually execute in accordance with Section 5.2 and 5.3 and
the Property Trustee shall deliver to the Purchasers, Capital Securities
Certificates, registered in the names requested by the Purchasers, evidencing an
aggregate of 100,000 Capital Securities having an aggregate Liquidation Amount
of $100,000,000, against receipt of the aggregate purchase price of such Capital
Securities of $100,000,000 (plus accrued Distributions, if any) by the Property
Trustee.
SECTION II.5. Issuance of the Common Securities; Subscription and Purchase
of Debentures.
Contemporaneously with the execution and delivery of this Trust Agreement,
an Administrative Trustee, on behalf of the Issuer Trust, shall execute in
accordance with Section 5.2 and 5.3 and the Property Trustee shall deliver to
the Depositor Common Securities Certificates, registered in the name of the
Depositor, evidencing an aggregate of 3,093 Common Securities having an
aggregate Liquidation Amount of $3,093,000, against receipt of the aggregate
purchase price of such Common Securities of $3,093,000 (plus accrued
Distributions, if any), to the Property Trustee. Contemporaneously therewith,
the Depositor shall issue and sell to the Issuer Trust, and the Issuer Trust
shall purchase from the Depositor, Debentures having an aggregate principal
amount equal to $103,093,000 registered in the name of the Property Trustee
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on behalf of the Issuer Trust and, in satisfaction of the purchase price for
such Debentures, the Property Trustee, on behalf of the Issuer Trust, shall
deliver to the Depositor the sum of $103,093,000 (plus accrued Distributions, if
any) (being the sum of the amounts delivered to the Property Trustee pursuant to
(i) the second sentence of Section 2.4, and (ii) the first sentence of this
Section 2.5).
SECTION II.6. Continuation of Trust.
The exclusive purposes and functions of the Issuer Trust are (a) to issue
and sell Trust Securities and use the proceeds from such sale to acquire the
Debentures, (b) to make Distributions to holders, and (c) to engage in only
those activities necessary or incidental thereto. The Depositor hereby appoints
the Issuer Trustees as trustees of the Issuer Trust, to have all the rights,
powers and duties to the extent set forth herein, and the respective Issuer
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the benefit of the Issuer Trust and the Holders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein, except as required by the Delaware Business Trust
Act. The Delaware Trustee shall be one of the trustees of the Issuer Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act and for taking such actions as are required to
be taken by a Delaware trustee under the Delaware Business Trust Act.
SECTION II.7. Authorization to Enter into Certain Transactions.
(a) The Issuer Trustees shall conduct the affairs of the Issuer Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section 2.7, and in accordance with the
following provisions (i) and (ii), the Property Trustee and the Administrative
Trustees shall have the authority to enter into all transactions and agreements
determined by the Property Trustee and Administrative Trustees to be appropriate
in exercising the authority, express or implied, otherwise granted to such
Issuer Trustees, as the case may be, under this Trust Agreement, and to perform
all acts in furtherance thereof, including the following:
(i) As among the Issuer Trustees, each Administrative Trustee, acting
individually or jointly, shall have the power and authority to act on
behalf of the Issuer Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) causing the Issuer Trust to enter into, and to execute,
deliver and perform on behalf of the Issuer Trust, the Expense
Agreement and the Certificate Depository Agreement and such other
agreements as may be necessary or
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desirable in connection with the purposes and function of the Issuer
Trust;
(C) assisting in compliance with the duties and obligations of
the Issuer Trust under and the Securities Act and under applicable
state securities or blue sky laws (including by means of registration
of the Capital Securities thereunder from time to time) and the Trust
Indenture Act;
(D) assisting in obtaining the designation of the Capital
Securities for trading in PORTAL;
(E) assisting in the sending of notices (other than notices of
default) and other information regarding the Trust Securities and the
Debentures to the Holders in accordance with this Trust Agreement;
(F) consenting to the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with this
Trust Agreement (which consent shall not be unreasonably withheld);
(G) executing the Trust Securities on behalf of the Issuer Trust
in accordance with this Trust Agreement;
(H) executing and delivering closing certificates, if any,
pursuant to the Purchase Agreement and application for a taxpayer
identification number for the Issuer Trust;
(I) unless otherwise determined by the Property Trustee or
Holders of at least a Majority in Liquidation Amount of the Capital
Securities or as otherwise required by the Delaware Business Trust Act
or the Trust Indenture Act, executing on behalf of the Issuer Trust
(either acting alone or together with any other Administrative
Trustee) any documents that the Administrative Trustees have the power
to execute pursuant to this Trust Agreement; and
(J) taking any action incidental to the foregoing as the Issuer
Trustees may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement.
(ii) The Property Trustee shall have the power, duty and authority to
act on behalf of the Issuer Trust with respect to the following matters:
(A) establishing the Payment Account;
(B) receiving the Debentures;
(C) collecting interest, principal and any other payments made in
respect
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of the Debentures and the holding of such amounts in the Payment
Account;
(D) distributing through any Paying Agent of amounts
distributable to the Holders in respect of the Trust Securities;
(E) exercising all of the rights, powers and privileges of a
holder of the Debentures;
(F) sending notices of default and other information regarding
the Trust Securities and the Debentures to the Holders in accordance
with this Trust Agreement;
(G) distributing the Trust Property in accordance with the terms
of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, winding up
the affairs of and liquidating the Issuer Trust and preparing,
executing and filing the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph (b),
(c), (d) or (e) of the definition of such term if such Event of
Default is by or with respect to the Property Trustee) taking of any
action incidental to the foregoing as the Property Trustee may from
time to time determine is necessary or advisable to give effect to the
terms of this Trust Agreement and to protect and conserve the Trust
Property for the benefit of the Holders (without consideration of the
effect of any such action on any particular Holder);
(J) performing any of the duties, liabilities, powers or the
authority of the Administrative Trustees set forth in Section
2.7(a)(i)(D), (E) and (I).
(b) So long as this Trust Agreement remains in effect, the Issuer Trust (or
the Issuer Trustees acting on behalf of the Issuer Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Issuer Trustees, acting in their
capacity as such, shall not (i) acquire any investments or engage in any
activities not authorized by this Trust Agreement, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust
Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected to
cause the Issuer Trust to become taxable as a corporation or classified as other
than a grantor trust for United States Federal income tax purposes, (iv) incur
any indebtedness for borrowed money or issue any other debt, or (v) take or
consent to any action that would result in the placement of a Lien on any of the
Trust Property. The Administrative Trustees shall defend all claims and demands
of all Persons at any time claiming any Lien on any of the Trust Property
adverse to the interest of the Issuer Trust or the Holders in their capacity as
Holders.
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(c) In connection with the issue and sale of the Capital Securities, the
Depositor shall have the right and responsibility to assist the Issuer Trust
with respect to, or effect on behalf of the Issuer Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation by the Issuer Trust of an Offering Circular in
relation to the Capital Securities, including any amendments thereto and
the taking of any action necessary or desirable to sell the Capital
Securities in a transaction or a series of transactions exempt from the
registration requirements of the Securities Act;
(ii) the determination of the States, or other jurisdictions, if any,
in which to take appropriate action to qualify or register for sale all or
part of the Capital Securities and the determination of any and all such
acts, other than actions that must be taken by or on behalf of the Issuer
Trust, and the advice to the Issuer Trustees of actions they must take on
behalf of the Issuer Trust, and the preparation for execution and filing of
any documents to be executed and filed by the Issuer Trust or on behalf of
the Issuer Trust, as the Depositor deems necessary or advisable in order to
comply with the applicable laws of any such States in connection with the
sale of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and delivery
of, the Purchase Agreement; and
(iv) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Issuer Trust
and to operate the Issuer Trust so that the Issuer Trust will not be deemed to
be an "investment company" required to be registered under the Investment
Company Act, and will not be taxable as a corporation or classified as other
than a grantor trust for United States Federal income tax purposes and so that
the Debentures will be treated as indebtedness of the Depositor for United
States Federal income tax purposes. In this connection, each Administrative
Trustee and the Holder of the Common Securities are authorized to take any
action, not inconsistent with applicable law, the Certificate of Trust or this
Trust Agreement, that such Administrative Trustee or Holder of the Common
Securities determines in its discretion to be necessary or desirable for such
purposes, as long as such action does not adversely affect in any material
respect the interests of the Holders of the Outstanding Capital Securities. In
no event shall the Issuer Trustees be liable to the Issuer Trust or the Holders
for any failure to comply with this section that results from a change in law or
regulation or in the interpretation thereof.
SECTION II.8. Assets of Trust.
The assets of the Issuer Trust shall consist of the Trust Property.
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SECTION II.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee in trust for the benefit of the Issuer Trust and the
Holders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION III.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and its agents shall have exclusive
control and sole right of withdrawal with respect to the Payment Account for the
purpose of making deposits in and withdrawals from the Payment Account in
accordance with this Trust Agreement. All monies and other property deposited or
held from time to time in the Payment Account shall be held by the Property
Trustee in the Payment Account for the exclusive benefit of the Holders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION IV.1. Distributions.
(a) The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including any Additional Distributions) will
be made on the Trust Securities at the rate and on the dates that payments of
interest (including any Additional Interest, as defined in the Indenture) are
made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Issuer Trust
available for the payment of Distributions. Distributions shall accumulate
from June 2, 1997, and, except in the event (and to the extent) that the
Depositor exercises its right to defer the payment of interest on the
Debentures pursuant to the Indenture, shall be payable semi-annually in
arrears on June 1 and December 1 of each year, commencing on December 1,
1997. If any date on
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which a Distribution is otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such next
succeeding Business Day falls within the next calendar year, such payment
will be made on the immediately preceding Business Day, in each case, with
the same force and effect as if made on the date on which such payment was
originally payable (each date on which distributions are payable in
accordance with this Section 4.1(a), a "Distribution Date").
(ii) The Trust Securities shall be entitled to Distributions payable
at a rate, not including Additional Distributions, of 8.845% per annum of
the Liquidation Amount of the Trust Securities. The amount of Distributions
payable for any period less than a full Distribution period shall be
computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in a partial month in a period. Distributions
payable for each full Distribution period will be computed by dividing the
rate per annum by two. The amount of Distributions payable for any period
shall include any Additional Distributions in respect of such period.
(iii) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Issuer Trust has funds then
on hand and available in the Payment Account for the payment of such
Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities at the close of business on the relevant
record date, which shall be at the close of business on the fifteenth day
(whether or not a Business Day) next preceding the relevant Distribution Date.
SECTION IV.2. Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Issuer Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the
estimate of the Redemption Price provided
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pursuant to (and as defined in) the Indenture together with a statement
that it is an estimate and that the actual Redemption Price will be
calculated on the third Business Day prior to the Redemption Date (and, if
an estimate is provided, that a further notice shall be sent of the actual
Redemption Price on the date on which such Redemption Price is calculated);
(iii) the CUSIP number or CUSIP numbers of the Capital Securities
affected;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the aggregate Liquidation Amount of the
particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will become due
and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accumulate on and after such date,
except as provided in Section 4.2(d) below; and
(vi) the place or places where the Trust Securities are to be
surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities may use "CUSIP" or
"private placement" numbers (if then generally in use), and, if so, the Property
Trustee shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of redemption and related materials as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Trust Securities
or as contained in any notice of redemption and related materials.
(c) The Trust Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption of
Debentures. Redemptions of the Trust Securities shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the
Issuer Trust has funds then on hand and available in the Payment Account for the
payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, subject to Section 4.2(c), the Property Trustee will, with respect to
Book-Entry Capital Securities, irrevocably deposit with the Clearing Agency for
such Book-Entry Capital Securities, to the extent available therefor, funds
sufficient to pay the applicable Redemption Price and will give such Clearing
Agency irrevocable instructions and authority to pay the Redemption Price to the
Holders of the Capital Securities. With respect to Capital Securities that are
not Book-Entry Capital Securities, the Property Trustee, subject to Section
4.2(c), will irrevocably deposit with the Paying Agent or Paying Agents, to the
extent available therefor, funds sufficient to pay the applicable Redemption
Price and will give the Paying Agent or Paying Agents irrevocable instructions
and authority to pay the Redemption Price to the Holders of the Capital
Securities
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upon surrender of their Capital Securities Certificates. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Trust Securities called for redemption shall be payable to the Holders of such
Trust Securities as they appear on the Securities Register on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of Holders holding Trust Securities so called for redemption
will cease, except the right of such Holders to receive the Redemption Price and
any Distribution payable in respect of the Trust Securities on or prior to the
Redemption Date, but without interest, and such Securities will cease to be
Outstanding. In the event that any date on which any Redemption Price is payable
is not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day that is a Business Day (without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case, with the same force and effect
as if made on such date. In the event that payment of the Redemption Price in
respect of any Trust Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer Trust or by the Depositor pursuant to
the Guarantee Agreement, Distributions on such Trust Securities will continue to
accumulate, as set forth in Section 4.1, from the Redemption Date originally
established by the Issuer Trust for such Trust Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the Redemption Price.
(e) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated pro
rata to the Common Securities and the Capital Securities based upon the relative
Liquidation Amounts of such classes. The particular Capital Securities to be
redeemed shall be selected on a pro rata basis based upon their respective
Liquidation Amounts not more than 60 days prior to the Redemption Date by the
Property Trustee from the Outstanding Capital Securities not previously called
for redemption, provided that so long as the Capital Securities are in
book-entry-only form, such selection shall be made in accordance with the
customary procedures for the Clearing Agency for the Capital Securities, and
provided further that, after giving effect to such redemption, no Holder shall
hold Capital Securities with an aggregate Liquidation Amount of less than
$1,000. The Property Trustee shall promptly notify the Securities Registrar in
writing of the Capital Securities selected for redemption and, in the case of
any Capital Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of Capital
Securities shall relate, in the case of any Capital Securities redeemed or to be
redeemed only in part, to the portion of the aggregate Liquidation Amount of
Capital Securities that has been or is to be redeemed.
SECTION IV.3. Subordination of Common Securities.
(a) Payment of Distributions (including any Additional Distributions) on,
the Redemption Price of, and the Liquidation Distribution in respect of the
Trust Securities, as applicable, shall be made, subject to Section 4.2(e), pro
rata among the Common Securities and the Capital
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Securities based on the Liquidation Amount of the Trust Securities; provided,
however, that if on any Distribution Date, Redemption Date or Liquidation Date
any Event of Default resulting from a Debenture Event of Default specified in
Section 5.1(1) or 5.1(2) of the Indenture shall have occurred and be continuing,
no payment of any Distribution (including any Additional Distributions) on,
Redemption Price of, or Liquidation Distribution in respect of any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including any Additional
Distributions) on all Outstanding Capital Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Capital Securities then called for redemption, or in the case of payment of the
Liquidation Distribution the full amount of such Liquidation Distribution on all
Outstanding Capital Securities, shall have been made or provided for, and all
funds immediately available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions (including any Additional
Distributions) on, the Redemption Price of or the Liquidation Distribution in
respect of the Capital Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holder of the Common Securities shall have
no right to act with respect to any such Event of Default under this Trust
Agreement until the effects of all such Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated. Until all
such Events of Default under this Trust Agreement with respect to the Capital
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the Holders of the Capital Securities and
not on behalf of the Holder of the Common Securities, and only the Holders of
the Capital Securities will have the right to direct the Property Trustee to act
on their behalf.
SECTION IV.4. Payment Procedures.
Payments of Distributions (including any Additional Distributions) or of
the Redemption Price, Liquidation Amount or any other amounts in respect of the
Capital Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Capital Securities are held by a Clearing Agency, such Distributions shall
be made to the Clearing Agency in immediately available funds. Payments in
respect of the Common Securities shall be made in such manner as shall be
mutually agreed between the Property Trustee and the Holder of all the Common
Securities.
SECTION IV.5. Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States Federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Issuer Trust. In this regard, the Administrative Trustees shall (a) prepare and
file (or cause to be prepared and filed) all Internal Revenue Service forms
required to be filed in respect of the Issuer Trust in each taxable year of the
Issuer Trust, and
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(b) prepare and furnish (or cause to be prepared and furnished) to each Holder
all Internal Revenue Service forms required to be provided by the Issuer Trust.
The Administrative Trustees shall provide the Depositor and the Property Trustee
with a copy of all such returns and reports promptly after such filing or
furnishing. The Issuer Trustees shall comply with United States Federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Holders under the Trust Securities.
SECTION IV.6. Payment of Taxes, Duties, Etc. of the Issuer Trust.
Upon receipt under the Debentures of Additional Sums, the Property Trustee
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Issuer Trust by the United
States or any other taxing authority with respect to which such Additional Sums
were paid.
SECTION IV.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Capital Securities shall be
reduced by the amount of any corresponding payment such Holder has directly
received pursuant to Section 5.8 of the Indenture or Section 5.13 of this Trust
Agreement.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION V.1. Initial Ownership.
Upon the creation of the Issuer Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are Outstanding, the Depositor shall
be the sole beneficial owner of the Issuer Trust.
SECTION V.2. The Trust Securities Certificates.
(a) The Capital Securities Certificates shall be issued in fully registered
form in minimum denominations of $1,000 Liquidation Amount and integral
multiples of $1,000 in excess thereof, and the Common Securities Certificates
shall be issued in denominations of $1,000 Liquidation Amount and integral
multiples thereof. The Trust Securities Certificates shall be executed on behalf
of the Issuer Trust by manual signature of at least one Administrative Trustee.
Trust Securities Certificates bearing the manual signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Issuer Trust, shall be validly issued and entitled to the
benefits of this Trust Agreement, notwithstanding that such individuals or any
of them shall have ceased to be so authorized prior to the delivery of such
Trust Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Holder, and
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shall be entitled to the rights and subject to the obligations of a Holder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Section 5.5.
(b) Upon their original issuance, Capital Securities Certificates shall be
issued in the form of one or more Book-Entry Capital Securities Certificates
registered in the name of DTC, as Clearing Agency, or its nominee and deposited
with DTC or a custodian for DTC for credit by DTC to the respective accounts of
the Owners thereof (or such other accounts as they may direct).
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION V.3. Execution and Delivery of Trust Securities Certificates.
At the Time of Delivery, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered
to or upon the written order of the Depositor, executed by an authorized officer
thereof, without further corporate action by the Depositor, in authorized
denominations.
SECTION V.4. Book-Entry Capital Securities.
(a) Each Book-Entry Capital Securities Certificate issued under this Trust
Agreement shall be registered in the name of the Clearing Agency or a nominee
thereof and delivered to such Clearing Agency or a nominee thereof or custodian
therefor, and each such Book-Entry Capital Securities Certificate shall
constitute a single Capital Securities Certificate for all purposes of this
Agreement.
(b) Notwithstanding any other provision in this Trust Agreement, no
Book-Entry Capital Securities Certificate may be exchanged in whole or in part
for Capital Securities Certificates registered, and no transfer of a Book-Entry
Capital Securities Certificate in whole or in part may be registered, in the
name of any Person other than the Clearing Agency or a nominee thereof unless
(i) the Clearing Agency advises the Property Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Book-Entry Capital Securities Certificates,
and the Property Trustee is unable to locate a qualified successor, (ii) the
Issuer Trust at its option advises the Clearing Agency in writing that it elects
to terminate the book-entry system through the Clearing Agency, or (iii) a
Debenture Event of Default has occurred and is continuing. Upon the occurrence
of any event specified in clause (i), (ii) or (iii) above, the Property Trustee
shall notify the Clearing Agency and instruct the Clearing Agency to notify all
Owners of Book-Entry Capital Securities and the Administrative Trustees of the
occurrence of such event and of the availability of the Definitive Capital
Securities Certificates to Owners of the Capital Securities requesting the same;
provided, however, that no Definitive Capital Securities Certificate shall be
issued in an amount representing less than 100 Capital
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Securities.
(c) If any Book-Entry Capital Securities Certificate is to be exchanged for
other Capital Securities Certificates or canceled in whole, it shall be
surrendered by or on behalf of the Clearing Agency or its nominee for exchange
or cancellation as provided in this Article V. If any Book-Entry Capital
Securities Certificate is to be exchanged for other Capital Securities
Certificates or canceled in part, or if any other Capital Securities Certificate
is to be exchanged in whole or in part for Book-Entry Capital Securities
represented by a Book-Entry Capital Securities Certificate, then either (i) such
Book-Entry Capital Securities Certificate shall be so surrendered for exchange
or cancellation as provided in this Article V or (ii) the aggregate Liquidation
Amount represented by such Book-Entry Capital Securities Certificate shall be
reduced, subject to Section 5.2, or increased by an amount equal to that portion
of the Liquidation Amount represented by the Book-Entry Capital Securities
Certificate to be so exchanged or canceled, or equal to that portion of the
Liquidation Amount represented by such other Capital Securities Certificates to
be so exchanged for Book-Entry Capital Securities represented thereby, as the
case may be, by means of an appropriate adjustment made on the records of the
Securities Registrar with notice to the Property Trustee, whereupon the Property
Trustee, in accordance with the Applicable Procedures, shall instruct the
Clearing Agency or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Book-Entry
Capital Securities Certificate by the Clearing Agency, accompanied by
registration instructions, the Administrative Trustees, or any one of them,
shall, subject to Section 5.5(b) and as otherwise provided in this Article V,
execute the Definitive Capital Securities Certificates issuable in exchange for
such Book-Entry Capital Securities Certificate (or any portion thereof) in
accordance with the instructions of the Clearing Agency; provided, however, that
no Definitive Capital Securities Certificate shall be issued in an amount
representing less than 100 Capital Securities. None of the Securities Registrar
or the Property Trustee or the Administrative Trustees shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. The Definitive Capital Securities
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Administrative Trustees, as
evidenced by the execution thereof by the Administrative Trustees or any one of
them.
(d) Every Capital Securities Certificate executed and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Book-Entry
Capital Securities Certificate or any portion thereof, whether pursuant to this
Article V or Section 4.2 or otherwise, shall be executed and delivered in the
form of, and shall be, a Book-Entry Capital Securities Certificate, unless such
Capital Securities Certificate is registered in the name of a Person other than
the Clearing Agency or a nominee thereof.
(e) The Clearing Agency or its nominee, as registered owner of a Book-Entry
Capital Securities Certificate, shall be the Holder of such Book-Entry Capital
Securities Certificate for all purposes under this Trust Agreement and the
Capital Securities, and Owners with respect to a Book-Entry Capital Securities
Certificate shall hold such interests pursuant to the Applicable Procedures. The
Securities Registrar and the Property Trustee or the Administrative Trustees
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shall be entitled to deal with the Clearing Agency for all purposes of this
Trust Agreement relating to the Book-Entry Capital Securities Certificates
(including the payment of the Liquidation Amount of and Distributions on the
Book-Entry Capital Securities represented thereby and the giving of instructions
or directions by or to Owners of Book-Entry Capital Securities represented
thereby) as the sole Holder of the Book-Entry Capital Securities represented
thereby and shall have no obligations to the Owners thereof. None of the
Depositor, the Issuer Trustees nor the Securities Registrar shall have any
liability in respect of any transfers effected by the Clearing Agency.
(f) The rights of the Owners of the Book-Entry Capital Securities shall be
exercised only through the Clearing Agency and shall be limited to those
established by law, the Applicable Procedures and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Solely for the
purposes of determining whether the Holders of the requisite amount of Capital
Securities have voted on any matter provided for in this Trust Agreement, so
long as Definitive Capital Securities Certificates have not been issued in
certificated fully registered form, the Property Trustee and the Administrative
Trustees may conclusively rely on, and shall be protected in relying on, any
written instrument (including a proxy) delivered to such Issuer Trustees by the
Clearing Agency setting forth the Holders' votes or assigning the right to vote
on any matter to any other Persons either in whole or in part.
SECTION V.5. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends.
(a) The Property Trustee shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 5.9, a register or registers (the
"Securities Register") in which the registrar and transfer agent with respect to
the Trust Securities (the "Securities Registrar"), subject to such reasonable
regulations as it may prescribe, shall provide for the registration of Capital
Securities Certificates and (subject to Section 5.11) Common Securities
Certificates and of transfers and exchanges of Capital Securities Certificates
as herein provided. The Property Trustee is hereby appointed Securities
Registrar for the purpose of registering Capital Securities Certificates and
(subject to Section 5.11) Common Securities and transfers and exchanges thereof
as provided herein.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.9, the
Administrative Trustees or any one of them shall execute and deliver to the
Property Trustee, and the Property Trustee shall deliver, in the name of the
designated transferee or transferees, one or more new Capital Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
and bearing such restrictive legends as may be required by this Trust Agreement,
dated the date of execution by such Administrative Trustee or Trustees.
At the option of the Holder, Capital Securities Certificates may be
exchanged for other Capital Securities Certificates of the same series of any
authorized denominations, of like tenor
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and aggregate Liquidation Amount, bearing such restrictive legends as may be
required by this Trust Agreement and bearing a number not contemporaneously
Outstanding, upon surrender of the Capital Securities Certificates to be
exchanged at such office or agency. Whenever any Capital Securities Certificates
are so surrendered for exchange, the Administrative Trustees or any one of them
shall execute and deliver to the Property Trustee, and the Property Trustee
shall deliver, the Capital Securities Certificates that the Holder making the
exchange is entitled to receive.
All Capital Securities issued upon any transfer or exchange of Capital
Securities shall evidence the same interest in the assets of the Issuer Trust,
and be entitled to the same benefits under this Trust Agreement, as the Capital
Securities surrendered upon such transfer or exchange.
The Securities Registrar shall not be required, (i) to issue, register the
transfer of or exchange any Capital Security during a period beginning at the
opening of business 15 days before the day of selection for redemption of such
Capital Securities pursuant to Article IV and ending at the close of business on
the day of mailing of the notice of redemption, or (ii) to register the transfer
of or exchange any Capital Security so selected for redemption in whole or in
part, except, in the case of any such Capital Security to be redeemed in part,
any portion thereof not to be redeemed.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to an Administrative
Trustee and the Securities Registrar duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Capital Securities
Certificate surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Property Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Issuer Trust may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Capital Securities
Certificates.
(b) Notwithstanding any other provision of this Trust Agreement, transfers
and exchanges of Capital Securities Certificates and Book-Entry Capital
Securities shall be made only in accordance with this Section 5.5(b).
(i) Non-Book-Entry Capital Securities Certificate to Book-Entry
Capital Securities Certificate. If the Holder of a Capital Securities
Certificate (other than a Book-Entry Capital Securities Certificate) wishes
at any time to transfer all or any portion of such Capital Securities
Certificate to a Person who wishes to take delivery thereof in the form of
a beneficial interest in a Book-Entry Capital Securities Certificate, such
transfer may be effected only in accordance with the provisions of this
Clause (b)(i) and subject to the Applicable Procedures. Upon receipt by the
Securities Registrar of (A) such Capital Securities Certificate as provided
in Section 5.5(a) and instructions satisfactory to the
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Securities Registrar directing that a specified number of Book-Entry
Capital Securities to be represented by such Book-Entry Capital Securities
Certificate not greater than the number of Capital Securities represented
by such Capital Securities Certificate be credited to a specified Clearing
Agency Participant's account and (B) if the Capital Securities Certificate
to be transferred evidences Restricted Capital Securities, a Restricted
Securities Certificate duly executed by such Holder or such Holder's
attorney duly authorized in writing, then the Securities Registrar shall
cancel such Capital Securities Certificate (and issue a new Capital
Securities Certificate in respect of any untransferred portion thereof) as
provided in Section 5.5(a) and increase the aggregate Liquidation Amount of
the Book-Entry Capital Securities Certificate by the Liquidation Amount of
such Capital Securities so transferred as provided in Section 5.4(c).
(ii) Non-Book-Entry Capital Securities Certificate to Non-Book-Entry
Capital Securities Certificate. A Capital Securities Certificate that is
not a Book-Entry Capital Securities Certificate may be transferred, in
whole or in part, to a Person who takes delivery in the form of another
Capital Securities Certificate that is not a Book-Entry Capital Securities
Certificate as provided in Section 5.5(a), provided that if the Capital
Securities Certificate to be transferred evidences Restricted Capital
Securities, then the Securities Registrar shall have received a Restricted
Securities Certificate duly executed by the transferor Holder or such
Holder's attorney duly authorized in writing.
(iii) Book-Entry Capital Securities Certificate to Non-Book-Entry
Capital Securities Certificate. A beneficial interest in a Book-Entry
Capital Securities Certificate may be exchanged for a Capital Securities
Certificate that is not a Book-Entry Capital Securities Certificate as
provided in Section 5.4.
(iv) Certain Initial Transfers of Non-Book-Entry Capital Securities
Certificates. In the case of Capital Securities Certificates initially
issued other than in global form, an initial transfer or exchange of such
Capital Securities Certificates that does not involve any change in
beneficial ownership may be made to an Institutional Accredited Investor or
Investors as if such transfer or exchange were not an initial transfer or
exchange, provided that written certification shall be provided by the
transferor and transferee of such Capital Securities to the Securities
Registrar that such transfer or exchange does not involve a change in
beneficial ownership.
(c) Except as set forth below, all Capital Securities Certificates shall
bear a Restricted Capital Securities Legend:
(i) subject to the following Clauses of this Section 5.5(c), a Capital
Securities Certificate or any portion thereof that is exchanged, upon
transfer or otherwise, for a Book-Entry Capital Securities Certificate or
any portion thereof shall bear the Restricted Capital Securities Legend;
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(ii) subject to the following Clauses of this Section 5.5(c), a new
Capital Securities Certificate that is not a Book-Entry Capital Securities
Certificate and is issued in exchange for another Capital Securities
Certificate (including a Book-Entry Capital Securities Certificate) or any
portion thereof, upon transfer or otherwise, shall bear a Restricted
Capital Securities Legend;
(iii) a new Capital Securities Certificate that does not bear a
Restricted Capital Securities Legend may be issued in exchange for or in
lieu of a Capital Securities Certificate or any portion thereof that bears
such a legend if, in the Depositor's sole judgment, placing such a legend
upon such new Capital Securities Certificate is not and will not be
necessary to ensure compliance with the registration requirements of the
Securities Act, and the Administrative Trustees, at the direction of the
Depositor, shall execute and deliver such a new Capital Securities
Certificate as provided in this Article V; and
(iv) notwithstanding the foregoing provisions of this Section 5.5(c),
a Successor Capital Securities Certificate of a Capital Securities
Certificate that does not bear a Restricted Capital Securities Legend shall
not bear such form of legend unless in the Depositor's sole judgement such
Successor Capital Securities Certificate is a "restricted security" within
the meaning of Rule 144 under the Securities Act, in which case the
Administrative Trustees, at the direction of the Depositor, shall execute
and deliver a new Capital Securities Certificate bearing a Restricted
Capital Securities Legend in exchange for such Successor Capital Securities
Certificate as provided in this Article V.
(d) Any purchaser or Holder of any Capital Securities or any interest
therein will be deemed to have represented by its purchase and holding thereof
that it either (i) is not a Plan or a Plan Asset Entity and is not purchasing
such Capital Securities on behalf of or with "plan assets" of any Plan, or (ii)
is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14 or another applicable exemption with respect to such purchase or
holding. The Securities Registrar may, and if the Depositor shall so request,
the Securities Registrar shall, before registering for transfer or exchange any
Capital Securities Certificates as provided in Sections 5.2, 5.4 or 5.5 of this
Trust Agreement, (A) require the purchaser or Holder of such Capital Securities
Certificates to confirm that it either (x) is not a Plan, a Plan Asset Entity or
a Person investing "plan assets" of any Plan or (y) is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, and
(B) if such purchaser or Holder does not provide such confirmation, require an
Opinion of Counsel or other evidence satisfactory to the Depositor of the
availability to such purchaser or Holder of another applicable exemption with
respect to such purchase or holding.
SECTION V.6. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction,
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loss or theft of any Trust Securities Certificate, and (b) there shall be
delivered to the Securities Registrar and the Administrative Trustees such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Securities Certificate shall have
been acquired by a bona fide purchaser, the Administrative Trustees, or any one
of them, on behalf of the Issuer Trust shall execute and make available for
delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Trust Securities Certificate, a new Trust Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new Trust
Securities Certificate under this Section 5.6, the Administrative Trustees or
the Securities Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Trust Securities Certificate issued pursuant to this
Section 5.6 shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Issuer Trust corresponding to that evidenced by
the lost, stolen or destroyed Trust Securities Certificate, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION V.7. Persons Deemed Holders.
The Issuer Trustees and the Securities Registrar shall each treat the
Person in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
none of the Issuer Trustees and the Securities Registrar shall be bound by any
notice to the contrary.
SECTION V.8. Access to List of Holders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold the
Depositor or the Issuer Trustees accountable by reason of the disclosure of its
name and address, regardless of the source from which such information was
derived.
SECTION V.9. Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or agency
or agencies where Capital Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuer Trustees in respect of the Trust Securities Certificates may be
served. The Administrative Trustees initially designate Centura Banks, Inc., 134
North Church Street, Rocky Mount, North Carolina 27802 as its office and agency
for such purposes. The Administrative Trustees shall give prompt written notice
to the Depositor, the Property Trustee and to the Holders of any change in the
location of the Securities Register or any such office or agency.
SECTION V.10. Appointment of Paying Agents.
The Paying Agent or Agents shall make Distributions to Holders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the
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Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account solely for the purpose of making the
Distributions referred to above. The Administrative Trustees may revoke such
power and remove the Paying Agent in its sole discretion. The Paying Agent shall
initially be the Bank and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Depositor. Any Person acting
as Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees and the Property Trustee. If the
Bank shall no longer be the Paying Agent or a successor Paying Agent shall
resign or its authority to act be revoked, the Administrative Trustees shall
appoint a successor (which shall be a bank or trust company) that is reasonably
acceptable to the Depositor to act as Paying Agent. Such successor Paying Agent
or any additional Paying Agent shall execute and deliver to the Issuer Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Issuer Trustees that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Holders in trust for the benefit of the Holders entitled thereto
until such sums shall be paid to such Holders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and upon removal of a Paying Agent such
Paying Agent shall also return all funds in its possession to the Property
Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the
Bank also in its role as Paying Agent, for so long as the Bank shall act as
Paying Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
SECTION V.11. Ownership of Common Securities by Depositor.
At the Time of Delivery, the Depositor shall acquire, and thereafter shall
retain, beneficial and record ownership of the Common Securities. Neither the
Depositor nor any successor Holder of the Common Securities may transfer less
than all the Common Securities (except in connection with a redemption thereof),
and the Depositor or any such successor Holder may transfer the Common
Securities only (i) in connection with a consolidation or merger of the
Depositor into another corporation, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, or (ii) to the Depositor or an
Affiliate of the Depositor in compliance with applicable law (including the
Securities Act and applicable state securities and blue sky laws). To the
fullest extent permitted by law, any attempted transfer of the Common Securities
other than as set forth in the next proceeding sentence shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT
TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN
COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT."
SECTION V.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Holders is
required under this
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Trust Agreement, for so long as Capital Securities are represented by a
Book-Entry Capital Securities Certificate, the Issuer Trustees shall give all
such notices and communications specified herein to be given to the Clearing
Agency, and shall have no obligations to the Owners.
SECTION V.13. Rights of Holders; Waivers of Past Defaults.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Holders shall not have any right or title therein other than the undivided
beneficial interest in the assets of the Issuer Trust conferred by their Trust
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Issuer Trust except as described below. The
Trust Securities shall be personal property giving only the rights specifically
set forth therein and in this Trust Agreement. The Trust Securities shall have
no preemptive or similar rights and when issued and delivered to Holders against
payment of the purchase price therefor will be fully paid and nonassessable by
the Issuer Trust. The Holders of the Trust Securities, in their capacities as
such, shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
(b) For so long as any Capital Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Capital Securities then
Outstanding shall have the right to make such declaration by a notice in writing
to the Property Trustee, the Depositor and the Debenture Trustee.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a Majority in Liquidation Amount of the
Capital Securities, by written notice to the Property Trustee, the Depositor and
the Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture Trustee a
sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
(B) any accrued Additional Interest (as defined in the Indenture)
on all of the Debentures,
(C) the principal of (and premium, if any, on) any Debentures
that have become due otherwise than by such declaration of
acceleration and interest and Additional Interest thereon at the rate
borne by the Debentures, and
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(D) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Property Trustee, their
agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other than
the non-payment of the principal of the Debentures that has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.13 of the Indenture.
The Holders of at least a Majority in Liquidation Amount of the Capital
Securities may, on behalf of the Holders of all the Trust Securities, waive any
past default or Event of Default under the Indenture, except a default or Event
of Default in the payment of principal or interest (unless such default or Event
of Default has been cured and a sum sufficient to pay all matured installments
of interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default or Event of Default in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Debenture. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of any part of the
Capital Securities, a record date shall be established for determining Holders
of Outstanding Capital Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided, that, unless such
declaration of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day that is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice that has been
canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section
5.13(b).
(c) For so long as any Capital Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Capital Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of any
amounts payable in respect of Debentures having an aggregate principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of such
Holder (a "Direct Action"). Except as set forth in Section 5.13(b) and this
Section 5.13(c), the Holders of Capital Securities
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shall have no right to exercise directly any right or remedy available to the
holders of, or in respect of, the Debentures.
(d) Except as otherwise provided in paragraphs (a), (b) and (c) of this
Section 5.13, the Holders of at least a Majority in Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Trust Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION VI.1. Limitations on Voting Rights.
(a) Except as expressly provided in this Trust Agreement and in the
Indenture and as otherwise required by law, no Holder of Capital Securities
shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Issuer Trust or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Trust Securities Certificates, be construed so as to constitute the
Holders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee on behalf of
the Issuer Trust, the Property Trustee shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or execute any trust or power conferred on the Property Trustee with
respect to the Debentures, (ii) waive any past default that may be waived under
Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be due and payable,
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of at least a Majority in
Liquidation Amount of the Capital Securities, provided, however, that where a
consent under the Indenture would require the consent of each Holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Capital Securities.
The Property Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Capital Securities, except by a
subsequent vote of the Holders of the Capital Securities. The Property Trustee
shall notify all Holders of the Capital Securities of any notice of default
received with respect to the Debentures. In addition to obtaining the foregoing
approvals of the Holders of the Capital Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that such
action shall not cause the Issuer Trust to be taxable as a corporation or
classified as other than a grantor trust for United
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States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Issuer Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Capital Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Issuer
Trust, other than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Capital Securities as a class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a Majority in Liquidation
Amount of the Capital Securities. Notwithstanding any other provision of this
Trust Agreement, no amendment to this Trust Agreement may be made if, as a
result of such amendment, it would cause the Issuer Trust to be taxable as a
corporation or classified as other than a grantor trust for United States
Federal income tax purposes.
SECTION VI.2. Notice of Meetings.
Notice of all meetings of the Holders of the Capital Securities, stating
the time, place and purpose of the meeting, shall be given by the Property
Trustee pursuant to Section 10.8 to each Holder of Capital Securities, at such
Holder's registered address, at least 15 days and not more than 90 days before
the meeting. At any such meeting, any business properly before the meeting may
be so considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
SECTION VI.3. Meetings of Holders of the Capital Securities.
No annual meeting of Holders is required to be held. The Administrative
Trustees, however, shall call a meeting of the Holders of the Capital Securities
to vote on any matter upon the written request of the Holders of at least 25% in
aggregate Liquidation Amount of the Outstanding Capital Securities and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of the Holders of the Capital Securities to vote on
any matters as to which such Holders are entitled to vote.
The Holders of at least a Majority in Liquidation Amount of the Capital
Securities, present in person or by proxy, shall constitute a quorum at any
meeting of the Holders of the Capital Securities.
If a quorum is present at a meeting, an affirmative vote by the Holders
present, in person or by proxy, holding Capital Securities representing at least
a majority of the aggregate Liquidation Amount of the Capital Securities held by
the Holders present, either in person or by proxy, at such meeting shall
constitute the action of the Holders of the Capital Securities, unless this
Trust Agreement requires a greater number of affirmative votes.
SECTION VI.4. Voting Rights.
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Holders shall be entitled to one vote for each $1,000 of Liquidation Amount
represented by their Outstanding Trust Securities in respect of any matter as to
which such Holders are entitled to vote.
SECTION VI.5. Proxies, etc.
At any meeting of Holders, any Holder entitled to vote thereat may vote by
proxy, provided that no proxy shall be voted at any meeting unless it shall have
been placed on file with the Administrative Trustees, or with such other officer
or agent of the Issuer Trust as the Administrative Trustees may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Property Trustee, proxies may be solicited in the name of the
Property Trustee or one or more officers of the Property Trustee. Only Holders
of record shall be entitled to vote. When Trust Securities are held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION VI.6. Holder Action by Written Consent.
Any action that may be taken by Holders of Capital Securities at a meeting
may be taken without a meeting if Holders holding at least a Majority in
Liquidation Amount of the Capital Securities entitled to vote in respect of such
action (or such larger proportion thereof as shall be required by any other
provision of this Trust Agreement) shall consent to the action in writing. Any
action that may be taken by the Holder of all the Common Securities may be taken
if such Holder shall consent to the action in writing.
SECTION VI.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Holders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Administrative Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of Holders or the payment of a
distribution or other action, as the case may be, as a record date for the
determination of the identity of the Holders of record for such purposes.
SECTION VI.8. Acts of Holders.
Any request, demand, authorization, direction, notice, consent, waiver or
other action
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provided or permitted by this Trust Agreement to be given, made or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to an Administrative Trustee. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Trust Agreement and (subject to Section 8.1)
conclusive in favor of the Issuer Trustees, if made in the manner provided in
this Section 6.8.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of such signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner that any Issuer Trustee receiving the same deems sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Trust Security shall bind every future Holder of
the same Trust Security and the Holder of every Trust Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Issuer Trustees,
the Depositor or the Issuer Trust in reliance thereon, whether or not notation
of such action is made upon such Trust Security.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise among the Holders or the Issuer Trustees with
respect to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Holder or Issuer
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
SECTION VI.9. Inspection of Records.
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Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Issuer Trust shall be open to inspection by Holders
(and other Issuer Trustees) during normal business hours for any purpose
reasonably related to such Holder's interest as a Holder (or such Issuer
Trustee's service as a Trustee hereunder).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION VII.1. Representations and Warranties of the Property Trustee and
the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on behalf of
and as to itself, hereby represents and warrants for the benefit of the
Depositor and the Holders that:
(a) the Property Trustee is a trust company, duly organized, validly
existing and in good standing under the laws of the State of Massachusetts;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware banking corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and satisfies for the Issuer Trust the requirements of Section 3807(a) of the
Delaware Business Trust Act;
(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and delivered
by the Property Trustee and the Delaware Trustee and constitutes the valid and
legally binding agreement of each of the Property Trustee and the Delaware
Trustee enforceable against each of them in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(f) the execution, delivery and performance of this Trust Agreement have
been duly authorized by all necessary corporate or other action on the part of
the Property Trustee and the Delaware Trustee and do not require any approval of
stockholders of the Property Trustee and the Delaware Trustee and such
execution, delivery and performance will not (i) violate the Charter or By-laws
of the Property Trustee or the Delaware Trustee, (ii) violate any provision of,
or
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constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of, any Lien on any properties included in the
Trust Property pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which the Property
Trustee or the Delaware Trustee is a party or by which it is bound, or (iii)
violate any law, governmental rule or regulation of the United States or the
State of Delaware, as the case may be, governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee (as appropriate in
context) or any order, judgment or decree applicable to the Property Trustee or
the Delaware Trustee;
(g) none of the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee, as
appropriate in context, contemplated herein requires the consent or approval of,
the giving of notice to, the registration with or the taking of any other action
with respect to any governmental authority or agency under any existing law of
the United States or the State of Delaware governing the banking, trust or
general powers of the Property Trustee or the Delaware Trustee, as the case may
be; and
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal that,
individually or in the aggregate, would materially and adversely affect the
Issuer Trust or would question the right, power and authority of the Property
Trustee or the Delaware Trustee, as the case may be, to enter into or perform
its obligations as one of the Issuer Trustees under this Trust Agreement.
SECTION VII.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the Holders
that:
(a) the Trust Securities Certificates issued at the Time of Delivery on
behalf of the Issuer Trust have been duly authorized and will have been duly and
validly executed, issued and delivered by the Issuer Trustees pursuant to the
terms and provisions of, and in accordance with the requirements of, this Trust
Agreement and the Holders will be, as of such date, entitled to the benefits of
this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under the
laws of the State of Delaware or any political subdivision thereof in connection
with the execution, delivery and performance by either Issuer Trustee of this
Trust Agreement.
ARTICLE VIII
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THE ISSUER TRUSTEES; PAYING AGENTS
SECTION VIII.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, but subject to Section
8.1(c), no provision of this Trust Agreement shall require any of the Issuer
Trustees to expend or risk its or their own funds or otherwise incur any
financial liability in the performance of any of its or their duties hereunder,
or in the exercise of any of its or their rights or powers, if it or they shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it or
them. Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Issuer Trustees shall be subject to the provisions
of this Section 8.1. Nothing in this Trust Agreement shall be construed to
release an Administrative Trustee from liability for his or her own gross
negligent action, his or her own gross negligent failure to act, or his or her
own wilful misconduct. To the extent that, at law or in equity, an Issuer
Trustee has duties and liabilities relating to the Issuer Trust or to the
Holders, such Issuer Trustee shall not be liable to the Issuer Trust or to any
Holder for such Issuer Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of the Issuer Trustees otherwise existing at
law or in equity, are agreed by the Depositor and the Holders to replace such
other duties and liabilities of the Issuer Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each Holder, by its
acceptance of a Trust Security, agrees that it will look solely to the revenue
and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Issuer Trustees are not
personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set
forth elsewhere in this Trust Agreement or, in the case of the Property Trustee,
in the Trust Indenture Act.
(c) If an Event of Default has occurred and is continuing, the Property
Trustee shall enforce this Trust Agreement for the benefit of the Holders.
(d) The Property Trustee, before the occurrence of any Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Trust Agreement (including pursuant to Section 10.10), and no implied covenants
shall be read into this Trust Agreement against the Property Trustee. If an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 5.13), the Property Trustee shall exercise such of the rights and powers
vested in it by this Trust Agreement, and use the same degree of care and skill
in its exercise thereof, as a prudent person
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would exercise or use under the circumstances in the conduct of his or her own
affairs.
(e) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee or the Delaware Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Trust Agreement
(including pursuant to Section 10.10), and the Property Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Trust Agreement
(including pursuant to Section 10.10); and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this Trust Agreement;
but in the case of any such certificates or opinions that by any
provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Property Trustee, the Property Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Trust Agreement.
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of at least a Majority in Liquidation Amount
of the Capital Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Trust Agreement;
(iv) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Payment
Account shall be to deal with such Property in a similar manner as the
Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property
Trustee under this Trust Agreement and the Trust Indenture Act;
(v) the Property Trustee shall not be liable for any interest on any
money received by it except as it may otherwise agree with the Depositor;
and money held by the Property Trustee need not be segregated from other
funds held by it except in relation to the
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Payment Account maintained by the Property Trustee pursuant to Section 3.1
and except to the extent otherwise required by law;
(vi) the Property Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the default or misconduct of any other Issuer Trustee
or the Depositor; and
(vii) No provision of this Trust Agreement shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Property Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Trust
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
(f) The Administrative Trustees shall not be responsible for monitoring the
compliance by the Issuer Trustees or the Depositor with their respective duties
under this Trust Agreement, nor shall either Administrative Trustee be liable
for the default or misconduct of any other Issuer Trustee or the Depositor. The
Delaware Trustee shall not be responsible for monitoring compliance by the
Property Trustee, the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall the Delaware Trustee be
liable for the default or misconduct of any other Issuer Trustee or the
Depositor.
SECTION VIII.2. Certain Notices.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such Event of
Default to the Holders and the Administrative Trustee, unless such Event of
Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the Depositor's
exercise of its right to defer the payment of interest on the Debentures
pursuant to the Indenture, the Property Trustee shall transmit, in the manner
and to the extent provided in Section 10.8, notice of such exercise to the
Holders and the Administrative Trustees, unless such exercise shall have been
revoked.
The Property Trustee shall not be deemed to have knowledge of any Event of
Default unless the Property Trustee shall have received written notice, or a
Responsible Officer charged with the administration of this Trust Agreement
shall have obtained actual knowledge, of such Event of Default.
SECTION VIII.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
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(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the Property
Trustee is required to decide between alternative courses of action, (ii) in
construing any of the provisions of this Trust Agreement the Property Trustee
finds the same ambiguous or inconsistent with any other provisions contained
herein, or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Holders of the Capital Securities are entitled to vote under the terms of this
Trust Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting the Depositor's opinion as to the course of action to be taken and
the Property Trustee shall take such action, or refrain from taking such action,
as the Property Trustee shall be instructed in writing to take, or to refrain
from taking, by the Depositor; provided, however, that if the Property Trustee
does not receive such instructions of the Depositor within ten Business Days
after it has delivered such notice, or such reasonably shorter period of time
set forth in such notice (which to the extent practicable shall not be less than
two Business Days), it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall deem
advisable and in the best interests of the Holders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
wilful misconduct;
(c) any direction or act of the Depositor contemplated by this Trust
Agreement shall be sufficiently evidenced by an Officers' Certificate;
(d) any direction or act of an Administrative Trustee contemplated by this
Trust Agreement shall be sufficiently evidenced by a certificate executed by
such Administrative Trustee and setting forth such direction or act;
(e) the Property Trustee shall have no duty to see to any recording, filing
or registration of any instrument (including any financing or continuation
statement or any filing under tax or securities laws) or any rerecording,
refiling or re-registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice; the Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Trust Agreement from any
court of competent jurisdiction;
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(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Holders pursuant to this Trust Agreement, unless such
Holders shall have offered to the Property Trustee reasonable security or
indemnity against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction; provided that, nothing
contained in this Section 8.3(g) shall be taken to relieve the Property Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Trust Agreement;
(h) the Property Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Holders, but the Property
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Property Trustee shall be responsible for its own
negligence, bad faith or wilful misconduct with respect to selection of any
agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders (which instructions may
only be given by the Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action), (ii)
may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in acting in
accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on any Issuer Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which it shall be unqualified or incompetent
in accordance with applicable law, to perform any such act or acts, or to
exercise any such right, power, duty or obligation. No permissive power or
authority available to any Issuer Trustee shall be construed to be a duty.
SECTION VIII.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Depositor and the Issuer Trust, and the
Issuer Trustees do not assume any
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responsibility for their correctness. The Issuer Trustees shall not be
accountable for the use or application by the Depositor of the proceeds of the
Debentures.
The Property Trustee may conclusively assume that any funds held by it
hereunder are legally available unless an officer of the Property Trustee
assigned to its Corporate Trust division shall have received written notice from
the Depositor, any Holder or any other Issuer Trustee that such funds are not
legally available.
SECTION VIII.5. May Hold Securities.
Any Issuer Trustee or any agent of any Issuer Trustee or the Issuer Trust,
in its individual or any other capacity, may become the owner or pledgee of
Trust Securities and, subject to Sections 8.8 and 8.13 and, except as provided
in the definition of the term "Outstanding" in Article I, may otherwise deal
with the Issuer Trust with the same rights it would have if it were not an
Issuer Trustee or such agent.
SECTION VIII.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to each Issuer Trustee and Paying Agent from time to time such
reasonable compensation for all services rendered by them hereunder as may be
agreed by the Depositor and such Issuer Trustee or Paying Agent, as the case may
be, from time to time (which compensation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse each Issuer
Trustee and Paying Agent upon request for all reasonable expenses, disbursements
and advances incurred or made by each Issuer Trustee and Paying Agent in
accordance with any provision of this Trust Agreement (including the reasonable
compensation and the expenses and disbursements of their agents and counsel),
except any such expense, disbursement or advance as may be attributable to their
negligence, bad faith or wilful misconduct; and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Issuer Trustee, (ii) each Paying Agent, (iii) any
Affiliate of any Issuer Trustee, (iv) any officer, director, shareholder,
employee, representative or agent of any Issuer Trustee, and (v) any employee or
agent of the Issuer Trust (referred to herein as an "Indemnified Person") from
and against any loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person by reason of the
creation, operation or termination of the Issuer Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Issuer Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this Trust
Agreement, except that no Indemnified Person shall be entitled to be indemnified
in
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respect of any loss, damage or claim incurred by such Indemnified Person by
reason of negligence, bad faith or wilful misconduct with respect to such acts
or omissions.
(d) to the fullest extent permitted by applicable law, the parties intend
that Section 3561 of Title 12 of the Delaware Code shall not apply to the Issuer
Trust and that compensation payable to any Issuer Trustee pursuant to this
Section 8.6 not be subject to review by any court under Section 3560 of Title 12
of the Delaware Code or otherwise.
The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement and the resignation or removal of any Issuer Trustee.
No Issuer Trustee or Paying Agent may claim any Lien on any Trust Property
as a result of any amount due pursuant to this Section 8.6.
The Depositor, any Issuer Trustee (subject to Section 8.8(a)) and any
Paying Agent may engage in or possess an interest in other business ventures of
any nature or description, independently or with others, similar or dissimilar
to the business of the Issuer Trust, and the Issuer Trust and the Holders of
Trust Securities shall have no rights by virtue of this Trust Agreement in and
to such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the Issuer
Trust, shall not be deemed wrongful or improper. Neither the Depositor, any
Paying Agent nor any Issuer Trustee shall be obligated to present any particular
investment or other opportunity to the Issuer Trust even if such opportunity is
of a character that, if presented to the Issuer Trust, could be taken by the
Issuer Trust, and the Depositor, any Issuer Trustee or any Paying Agent shall
have the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Issuer Trustee or Paying Agent may engage or be interested in
any financial or other transaction with the Depositor or any Affiliate of the
Depositor, or may act as depository for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the
Depositor or its Affiliates.
SECTION VIII.7. Corporate Property Trustee Required; Eligibility of Issuer
Trustees.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is a
national or state chartered bank and eligible pursuant to the Trust Indenture
Act to act as such, and that has at the time of such appointment securities
rated in one of the three highest rating categories by a nationally recognized
statistical rating organization and a combined capital and surplus of at least
$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section 8.7 and to the extent permitted
by the Trust Indenture Act, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Property Trustee
with respect to the Trust Securities shall cease to be eligible in accordance
with the provisions of this Section 8.7, it shall resign immediately in the
manner and with the effect hereinafter specified in this
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Article. At the time of appointment, the Property Trustee must have securities
rated in one of the three highest rating categories by a nationally recognized
statistical rating organization.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee hereunder with respect
to the Trust Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of Delaware,
or (ii) a legal entity with its principal place of business in the State of
Delaware and that otherwise meets the requirements of applicable Delaware law
and that shall act through one or more persons authorized to bind such entity.
SECTION VIII.8. Conflicting Interests.
(a) If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
(b) The Guarantee Agreement and the Indenture shall be deemed to be
specifically described in this Trust Agreement for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
SECTION VIII.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, Depositor and the Administrative Trustees, by agreed
action of the majority of them shall have power to appoint, and upon the written
request of the Administrative Trustee and the Depositor shall for such purpose
join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 8.9. Any co-trustee or separate
trustee appointed pursuant to this Section 8.9 shall either be (i) a natural
person who is at least 21 years of age and a resident of the United States, or
(ii) a legal entity with its principal place of business in the United States
that shall act through one or more persons authorized to bind such entity. If an
Event of Default under the Indenture shall have occurred and be continuing, the
Property Trustee alone shall have the power to make such appointment.
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Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:
(a) The Trust Securities shall be executed by one or more Administrative
Trustees, and the Trust Securities shall be delivered by the Property Trustee,
and all rights, powers, duties, and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or required to
be deposited or pledged with, the Property Trustee specified hereunder shall be
exercised solely by the Property Trustee and not by such co-trustee or separate
trustee.
(b) The rights, powers, duties, and obligations hereby conferred or imposed
upon the Property Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Property
Trustee or by the Property Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall be
incompetent or unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing executed
by it, with the written concurrence of the Depositor, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section
8.9, and, in case a Debenture Event of Default has occurred and is continuing,
the Property Trustee shall have power to accept the resignation of, or remove,
any such co-trustee or separate trustee without the concurrence of the
Depositor. Upon the written request of the Property Trustee, the Depositor shall
join with the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigning or
removed may be appointed in the manner provided in this Section 8.9.
(d) No co-trustee or separate trustee hereunder shall be personally liable
by reason of any act or omission of the Property Trustee or any other trustee
hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION VIII.10. Resignation and Removal; Appointment of Successor.
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No resignation or removal of any Issuer Trustee (the "Relevant Trustee")
and no appointment of a successor Issuer Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Issuer
Trustee in accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Holders. If the
instrument of acceptance by the successor Issuer Trustee required by Section
8.11 shall not have been delivered to the Relevant Trustee within 60 days after
the giving of such notice of resignation, the Relevant Trustee may petition, at
the expense of the Depositor, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by Act of the Holder of the Common
Securities. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a Majority in Liquidation
Amount of the Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and, in the case of the Property Trustee, on behalf of the
Issuer Trust). An Administrative Trustee may only be removed by the Holder of
the Common Securities and may be so removed at any time.
If any Issuer Trustee shall resign, be removed or become incapable of
acting as Issuer Trustee, or if a vacancy shall occur in the office of any
Issuer Trustee for any cause, at a time when no Debenture Event of Default shall
have occurred and be continuing, the Holder of the Common Securities, by Act
delivered to the retiring Issuer Trustee, shall promptly appoint a successor
Issuer Trustee or Issuer Trustees, and such successor Issuer Trustee shall
comply with the applicable requirements of Section 8.11. If the Property Trustee
or the Delaware Trustee shall resign, be removed or become incapable of
continuing to act as the Property Trustee or the Delaware Trustee, as the case
may be, at a time when a Debenture Event of Default shall have occurred and be
continuing, the Holders of Capital Securities, by Act of the Holders of a
Majority in Liquidation Amount of the Capital Securities delivered to the
retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee
or Trustees, and such successor Issuer Trustee shall comply with the applicable
requirements of Section 8.11. If an Administrative Trustee shall resign, be
removed or become incapable of acting as Administrative Trustee, at a time when
a Debenture Event of Default shall have occurred and be continuing, the Holder
of the Common Securities by Act delivered to the Administrative Trustee shall
promptly appoint a successor Administrative Trustee or Administrative Trustees
and such successor Administrative Trustee or Trustees shall comply with the
applicable requirements of Section 8.11. If no successor Relevant Trustee shall
have been so appointed by the Holder of the Common Securities or the Holders of
a Majority in Liquidation Amount of the Capital Securities, as the case may be,
and accepted appointment in the manner required by Section 8.11, any Holder who
has been a Holder of Trust Securities for at least six months may, on behalf of
such Holder and all others similarly situated, or any other Issuer Trustee, may
petition any court of
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competent jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each removal
of an Issuer Trustee and each appointment of a successor Issuer Trustee to all
Holders in the manner provided in Section 10.8 and shall give notice to the
Depositor. Each notice shall include the name of the successor Relevant Trustee
and the address of its Corporate Trust Office if it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Delaware Trustee who is a natural person dies or becomes, in
the opinion of the Depositor, incompetent or incapacitated, the vacancy created
by such death, incompetence or incapacity may be filled by (a) the unanimous act
of the remaining Administrative Trustees if there are at least two of them or
(b) otherwise by the Depositor (with the successor in either case being a Person
who satisfies the eligibility requirement for the Delaware Trustee set forth in
Section 8.7).
SECTION VIII.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Issuer Trust, and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Issuer Trust by more than one Relevant
Trustee, it being understood that nothing herein or in such amendment shall
constitute such Relevant Trustees co-trustees and upon the execution and
delivery of such amendment the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant
Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver
to such successor Relevant Trustee all Trust Property, all proceeds thereof and
money held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Issuer Trust.
Upon request of any Issuer Trustee or any such successor Relevant Trustee,
the retiring Relevant Trustee or the Issuer Trust, as the case may be, shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
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SECTION VIII.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person, succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided that such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION VIII.13. Preferential Collection of Claims Against Depositor or
Issuer Trust.
If and when the Property Trustee shall be or become a creditor of the
Depositor or the Issuer Trust (or any other obligor upon the Capital
Securities), the Property Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Depositor or
the Issuer Trust (or any such other obligor).
SECTION VIII.14. Property Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Issuer Trust or any other obligor upon the Trust
Securities or the property of the Issuer Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable and irrespective of whether
the Property Trustee shall have made any demand on the Issuer Trust for the
payment of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
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Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement adjustment or compensation affecting the Trust
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION VIII.15. Reports by Property Trustee.
(a) Not later than 60 days following December 31 of each year commencing
with December 31, 1997, the Property Trustee shall transmit to all Holders in
accordance with Section 10.8, and to the Depositor, a brief report dated as of
the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to the
best of its knowledge it has continued to be eligible under said Section, a
written statement to such effect;
(ii) a statement that the Property Trustee has complied with all of
its obligations under this Trust Agreement during the twelve-month period
(or, in the case of the initial report, the period since the Closing Date)
ending with such December 31 or, if the Property Trustee has not complied
in any material respect with such obligations, a description of such
noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken by
the Property Trustee in the performance of its duties hereunder which it
has not previously reported and which in its opinion materially affects the
Trust Securities.
(b) In addition the Property Trustee shall transmit to Holders such reports
concerning the Property Trustee and its actions under this Trust Agreement as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national stock exchange, the
Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, with the Commission and with the Depositor.
SECTION VIII.16. Reports to the Property Trustee.
Each of the Depositor and the Administrative Trustees on behalf of the
Issuer Trust shall provide to the Property Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314(a) of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act. The Depositor and the Administrative Trustees on behalf
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of the Issuer Trust shall annually file with the Property Trustee a certificate
specifying whether such Person is in compliance with all of the terms and
covenants applicable to such Person hereunder.
SECTION VIII.17. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Issuer Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION VIII.18. Number of Issuer Trustees.
(a) The number of Issuer Trustees shall be four, provided that the Property
Trustee and the Delaware Trustee may be the same Person.
(b) If an Issuer Trustee ceases to hold office for any reason, a vacancy
shall occur. The vacancy shall be filled with an Issuer Trustee appointed in
accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of an Issuer Trustee shall not operate to
annul, dissolve or terminate the Issuer Trust.
SECTION VIII.19. Delegation of Power.
(a) Any Administrative Trustee, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 such
Administrative Trustee's power for the purpose of executing any documents
contemplated in Section 2.7(a), including any registration statement or
amendment thereto filed with the Commission, or making any other governmental
filing; and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Issuer Trust or the
names of the Administrative Trustees or otherwise as the Administrative Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Trust Agreement.
SECTION VIII.20. Appointment of Administrative Trustees.
(a) The Administrative Trustee shall initially be Frank L. Pattillo and
Joseph A. Smith, Jr., and their successors shall be appointed by the Holder of
all the Common Securities. The
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Administrative Trustees may resign or be removed by the Holder of all the Common
Securities at any time. Upon any resignation or removal of an Administrative
Trustee, the Depositor shall appoint a successor Administrative Trustee. If at
any time there is no Administrative Trustee, the Property Trustee or any Holder
who has been a Holder of Trust Securities for at least six months may petition
any court of competent jurisdiction for the appointment of one or more
Administrative Trustees.
(b) Whenever a vacancy in the number of Administrative Trustees shall
occur, until such vacancy is filled by the appointment of an Administrative
Trustee in accordance with this Section 8.20, the Administrative Trustees in
office, regardless of their number (and notwithstanding any other provision of
this Agreement), shall have all the powers granted to the Administrative
Trustees and shall discharge all the duties imposed upon the Administrative
Trustees by this Trust Agreement.
(c) Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Administrative Trustee who is a natural person dies or
becomes, in the opinion of the Holder of all the Common Securities, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by the unanimous act of the remaining Administrative Trustees, if
there were at least two of them prior to such vacancy, and by the Depositor, if
there were not two such Administrative Trustees immediately prior to such
vacancy (with the successor being a Person who satisfies the eligibility
requirement for Administrative Trustees set forth in Section 8.7).
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION IX.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall automatically dissolve on
June 1, 2047 (the "Expiration Date"), and shall thereafter be terminated by
filing a Certificate of Cancellation with the Secretary of State of the State of
Delaware, following the distribution of the Trust Property in accordance with
Section 9.4.
SECTION IX.2. Early Dissolution.
The first to occur of any of the following events is an "Early Termination
Event" upon the occurrence of which the Trust shall be dissolved:
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Holder of all the Common Securities;
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(b) the written direction to the Property Trustee from the Holder of all
the Common Securities at any time to dissolve the Issuer Trust and to distribute
the Debentures to Holders in exchange for the Capital Securities (which
direction is optional and wholly within the discretion of the Holder of all the
Common Securities);
(c) the redemption of all of the Capital Securities in connection with the
redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Issuer Trust by a court of
competent jurisdiction.
SECTION IX.3. Termination.
The respective obligations and responsibilities of the Issuer Trustees and
the Issuer Trust created and continued hereby shall terminate upon the latest to
occur of the following: (a) the distribution by the Property Trustee to Holders
of all amounts required to be distributed hereunder upon the liquidation of the
Issuer Trust pursuant to Section 9.4, or upon the redemption of all of the Trust
Securities pursuant to Section 4.2; (b) the payment of any expenses owed by the
Issuer Trust; and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Issuer Trust or the Holders.
SECTION IX.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be
liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by Section 3808(e) of the Delaware
Business Trust Act and any other applicable law, to each Holder a Like Amount of
Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid mailed not less than
30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities Register. All
such notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities Certificates for Debentures, or if
Section 9.4(d) applies receive a Liquidation Distribution, as the Property
Trustee and the Administrative Trustees shall deem appropriate.
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(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the
liquidation of the Issuer Trust and distribution of the Debentures to Holders,
the Property Trustee, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and establish such procedures as it shall deem appropriate to effect the
distribution of Debentures in exchange for the Outstanding Trust Securities
Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures will be issued to Holders
of Trust Securities Certificates, upon surrender of such Trust Securities
Certificates to the exchange agent for exchange, (iii) any Trust Securities
Certificates not so surrendered for exchange will be deemed to represent a Like
Amount of Debentures bearing accrued and unpaid interest in an amount equal to
the accumulated and unpaid Distributions on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal will be made to Holders of
Trust Securities Certificates with respect to such Debentures), and (iv) all
rights of Holders holding Trust Securities will cease, except the right of such
Holders to receive Debentures upon surrender of Trust Securities Certificates.
(d) If, upon dissolution of the Trust, notwithstanding the other provisions
of this Section 9.4, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Debentures in
the manner provided herein is determined by the Property Trustee not to be
practical, or if an Early Termination Event specified in clause (c) of Section
9.2 occurs, the Trust Property shall be liquidated by the Property Trustee in
such manner as the Property Trustee determines. In such event, in connection
with the winding-up of the Issuer Trust, Holders will be entitled to receive out
of the assets of the Issuer Trust available for distribution to Holders, after
satisfaction of liabilities to creditors of the Issuer Trust as provided by
Section 3808(e) of the Delaware Business Trust Act and other applicable law, an
amount equal to the Liquidation Amount per Trust Security plus accumulated and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such winding up, the Liquidation
Distribution can be paid only in part because the Issuer Trust has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then,
subject to the next succeeding sentence, the amounts payable by the Issuer Trust
on the Trust Securities shall be paid on a pro rata basis (based upon
Liquidation Amounts). The Holder of all the Common Securities will be entitled
to receive Liquidation Distributions upon any such winding-up pro rata
(determined as aforesaid) with Holders of Capital Securities, except that, if a
Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the
Indenture has occurred and is continuing, the Capital Securities shall have a
priority over the Common Securities as provided in Section 4.3.
SECTION IX.5. Mergers, Consolidations, Amalgamations or Replacements of
Issuer Trust.
The Issuer Trust may not merge with or into, consolidate, amalgamate, or be
replaced by,
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or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other body, except pursuant to this Section 9.5.
At the request of the Holder of all the Common Securities, with the consent of
the Administrative Trustees, but without the consent of the Holders of the
Outstanding Capital Securities, the Property Trustee and the Delaware Trustee,
the Issuer Trust may merge with or into, consolidate, amalgamate, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of the Issuer Trust with respect to the Capital Securities, or (b)
substitutes for the Capital Securities other securities having substantially the
same terms as the Capital Securities (the "Successor Securities") so long as the
Successor Securities have the same priority as the Capital Securities with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) a trustee of such successor entity possessing the same powers
and duties as the Property Trustee is appointed to hold the Debentures, (iii)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Capital Securities (including any Successor Securities)
to be downgraded by any nationally recognized statistical rating organization
that then assigns a rating to the Capital Securities, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect,
(v) such successor entity has a purpose substantially identical to that of the
Issuer Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Capital
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Issuer Trust nor such successor entity will be
required to register as an "investment company" under the Investment Company
Act, and (vii) the Depositor or its permitted transferee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee Agreement. Notwithstanding the foregoing, the Issuer Trust
shall not, except with the consent of holders of all of the Capital Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer Trust or the successor
entity to be taxable as a corporation or classified as other than a grantor
trust for United States Federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
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SECTION X.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death, incapacity, dissolution,
termination or bankruptcy of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to annul, dissolve or terminate
this Trust Agreement, nor entitle the legal representatives, successors or heirs
of such Person or any Holder for such person, to claim an accounting, take any
action or bring any proceeding in any court for a partition or winding up of the
arrangements contemplated hereby, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.
SECTION X.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Holder of the Common Securities,
without the consent of the Delaware Trustee or any Holder of the Capital
Securities, (i) to cure any ambiguity, correct or supplement any provision
herein that may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this Trust
Agreement, which shall not be inconsistent with the other provisions of this
Trust Agreement, or (ii) to modify, eliminate or add to any provisions of this
Trust Agreement to such extent as shall be necessary to ensure that the Issuer
Trust will not be taxable as a corporation or will be classified as a grantor
trust for United States Federal income tax purposes at all times that any Trust
Securities are Outstanding or to ensure that the Issuer Trust will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that in either case (i) or (ii) such action shall not
adversely affect in any material respect the interests of the Delaware Trustee
or any Holder.
(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Property Trustee, the Administrative
Trustees and the Holder of the Common Securities, without the consent of the
Delaware Trustee, and with (i) the consent of Holders of at least a Majority in
Liquidation Amount of the Capital Securities, and (ii) receipt by the Issuer
Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not cause the Issuer Trust to be taxable as a corporation or as
other than a grantor trust for United States Federal income tax purposes or
affect the Issuer Trust's exemption from status as an "investment company" under
the Investment Company Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Holder, this Trust Agreement may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date,
or (ii) restrict the right of a Holder to institute suit for the enforcement of
any such payment on or after such date; and notwithstanding any other provision
herein, without the unanimous consent of the Holders, this paragraph (c) of this
Section 10.2 may
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not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no Issuer
Trustee shall enter into or consent to any amendment to this Trust Agreement
that would cause the Issuer Trust to fail or cease to qualify for the exemption
from status as an "investment company" under the Investment Company Act or to be
taxable as a corporation or to be classified as other than a grantor trust for
United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary, (i)
without the consent of the Depositor and the Administrative Trustees, this Trust
Agreement may not be amended in a manner that imposes any additional obligation
on the Depositor or the Administrative Trustees, and (ii) without the consent of
the Delaware Trustee, this Trust Agreement may not be amended in a manner that
imposes any additional obligation on the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees or the Property Trustee shall promptly provide to the
Depositor a copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be required
to enter into any amendment to this Trust Agreement that affects its own rights,
duties or immunities under this Trust Agreement. The Property Trustee shall be
entitled to receive an Opinion of Counsel and an Officers' Certificate stating
that any amendment to this Trust Agreement is in compliance with this Trust
Agreement.
SECTION X.3. Separability.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION X.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS,
THE ISSUER TRUST, THE DEPOSITOR AND THE ISSUER TRUSTEES WITH RESPECT TO THIS
TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS. THE PROVISIONS OF SECTION 3540 OF TITLE 12 OF THE
DELAWARE CODE SHALL NOT APPLY TO THIS TRUST.
To the fullest extent permitted by Delaware law, there shall not be
applicable to the Issuer
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Trust, the Issuer Trustees or this Trust Agreement any provisions of law
(whether statutory or common) of the State of Delaware pertaining to trusts
(other than the Delaware Business Trust Act) that relate to or regulate in a
manner inconsistent with the terms hereof (a) the filing with any court or
governmental body or agent of trustee accounts or schedules of trustee fees and
charges, (b) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (c) the acquisition, holding or disposition of
any proprty, (d) the allocation of receipts and expenditures between income and
principal, (e) restrictions or limitation on the permissible nature, amount or
concentration of trust investment or requirements relating to the titling,
storage or other manner of holding or investing trust assets, or (f) the
establishment of fiduciary or other standards of responsibility or limitations
on the acts or poers of trustees that are inconsistent (whether more or less
restrictive) with this provision.
SECTION X.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day that is a Business Day (except as otherwise
provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as
though made on the date fixed for such payment, and no Distributions shall
accumulate on such unpaid amount for the period after such date.
SECTION X.6. Successors.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Issuer Trust and any Issuer Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION X.7. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION X.8. Reports, Notices and Demands.
(a) Any report, notice, demand or other communication that by any provision
of this Trust Agreement is required or permitted to be given or served to or
upon any Holder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a Holder
of Capital Securities, to such Holder as such Holder's name and address may
appear on the Securities Register; and (b) in the case of the Holder of the
Common Securities or the Depositor, to Centura Banks, Inc., 134 North Church
Street, Rocky Mount, North Carolina 27802, Attention: Secretary, facsimile no.:
(919) 977-4800, or to such other address as may be
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<PAGE>
specified in a written notice by the Holder of the Common Securities or the
Depositor, as the case may be, to the Property Trustee. Such notice, demand or
other communication to or upon a Holder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission. Such notice, demand or other communication to or upon the
Depositor shall be deemed to have been sufficiently given or made only upon
actual receipt of the writing by the Depositor.
(b) Any notice, demand or other communication that by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Issuer Trust or any Issuer Trustee may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of the
Property Trustee to State Street Bank and Trust Company, 2 International Place,
4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Division; (b)
with respect to the Delaware Trustee, to Delaware Trust Capital Management,
Inc., 900 N. Market Street, Second Floor, 5-4-82-12, Wilmington, Delaware 19801,
Attention: Corporate Trust; (c) in the case of the Administrative Trustees, to
them at the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of Centura Capital Trust I"; and (d) in the case of the
Issuer Trust, to its principal executive office specified in Section 2.2, with a
copy to each of the Property Trustee, the Delaware Trustee and the
Administrative Trustees, or, in each such case, to such other address as may be
specified in a written notice by the applicable Person to the Property Trustee,
the Depositor and the Holders. Such notice, demand or other communication to or
upon the Property Trustee, the Delaware Trustee, the Administrative Trustees or
the Issuer Trust shall be deemed to have been sufficiently given or made only
upon actual receipt of the writing by the Property Trustee, the Delaware
Trustee, such Administrative Trustees or the Issuer Trust, as the case may be.
SECTION X.9. Agreement Not to Petition.
Each of the Issuer Trustees and the Depositor agree for the benefit of the
Holders that, until at least one year and one day after the Issuer Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Issuer Trust under any bankruptcy,
insolvency, reorganization or other similar law (including the United States
Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Issuer Trust under any Bankruptcy
Law. The Property Trustee and the Depositor agree, for the benefit of Holders,
that if the Depositor or any Issuer Trustee takes action in violation of this
Section 10.9, then at the expense of the Depositor, the Property Trustee or
Depositor, as the case may be, shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor against
the Issuer Trust or the commencement of such action and raise the defense that
the Depositor has agreed in writing not to take such action and should be
estopped and precluded therefrom and such other defenses, if any, as counsel for
the Issuer Trustees or the Issuer Trust may assert.
SECTION X.10. Trust Indenture Act; Conflict with Trust Indenture Act.
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(a) Except as otherwise expressly provided herein, the Trust Indenture Act
shall apply as a matter of contract to this Trust Agreement for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this Trust Agreement, the Depositor and the Property Trustee shall be deemed
for all purposes hereof to be subject to and governed by the Trust Indenture Act
to the same extent as would be the case if this Trust Agreement were qualified
under that Act on the date hereof. Except as otherwise expressly provided
herein, if and to the extent that any provision of this Trust Agreement limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(b) The Property Trustee shall be the only Issuer Trustee that is a trustee
for the purposes of the Trust Indenture Act.
(c) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Issuer Trust.
SECTION X.11. Acceptance of Terms of Trust Agreement, Guarantee Agreement
and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY
OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT
AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS
OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS
OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS.
This Trust Agreement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Trust Agreement as of the day and year first above written.
CENTURA BANKS, INC.
as Depositor
By: /s/ Frank L. Pattillo
Name: Frank L. Pattillo
Title: Executive Officer
STATE STREET BANK AND TRUST COMPANY
as Property Trustee
By: /s/ Paul D. Allen
Name: Paul D. Allen
Title: Vice President
DELAWARE TRUST CAPITAL MANAGEMENT, INC.
as Delaware Trustee
By: /s/ Richard N. Smith
Name: Richard N. Smith
Title: Vice President
By: /s/ Frank L. Pattillo
Name: Frank L. Pattillo
as Administrative Trustee
By: /s/ Joseph, A. Smith
Name: Joseph A. Smith, Jr.
as Administrative Trustee
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Exhibit 4.4
- --------------------------------------------------------------------------------
GUARANTEE AGREEMENT
between
CENTURA BANKS, INC.,
as Guarantor
and
STATE STREET BANK AND TRUST COMPANY,
as Guarantee Trustee
relating to
Centura Capital Trust I
-----------------
Dated as of June 2, 1997
-----------------
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
SECTION 1.1. Definitions.......................................................1
ARTICLE II TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application..................................5
SECTION 2.2. List of Holders...................................................5
SECTION 2.3. Reports by the Guarantee Trustee..................................5
SECTION 2.4. Periodic Reports to the Guarantee Trustee.........................6
SECTION 2.5. Evidence of Compliance with Conditions Precedent..................6
SECTION 2.6. Events of Default; Waiver.........................................6
SECTION 2.7. Event of Default; Notice..........................................6
SECTION 2.8. Conflicting Interests.............................................7
ARTICLE III POWERS, DUTIES AND
RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee........................7
SECTION 3.2. Certain Rights of Guarantee Trustee...............................8
SECTION 3.3. Compensation; Indemnity; Fees....................................10
ARTICLE IV GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility...................................11
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee....11
ARTICLE V GUARANTEE
SECTION 5.1. Guarantee........................................................12
SECTION 5.2. Waiver of Notice and Demand......................................12
SECTION 5.3. Obligations Not Affected.........................................12
SECTION 5.4. Rights of Holders................................................13
SECTION 5.5. Guarantee of Payment.............................................14
SECTION 5.6. Subrogation......................................................14
SECTION 5.7. Independent Obligations..........................................14
ARTICLE VI COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination....................................................14
SECTION 6.2. Pari Passu Guarantees............................................15
ARTICLE VII TERMINATION
SECTION 7.1. Termination......................................................15
ARTICLE VIII MISCELLANEOUS
SECTION 8.1. Successors and Assigns...........................................15
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SECTION 8.2. Amendments.......................................................16
SECTION 8.3. Notices..........................................................16
SECTION 8.4. Benefit..........................................................17
SECTION 8.5. Governing Law....................................................17
SECTION 8.6. Counterparts.....................................................17
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<PAGE>
GUARANTEE AGREEMENT, dated as of June 2, 1997, between CENTURA BANKS, INC.,
a North Carolina corporation (the "Guarantor"), having its principal office at
134 North Church Street, Rocky Mount, North Carolina 27892 and State Street Bank
and Trust Company, a Massachusetts trust company, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Capital Securities (as defined herein) of Centura Capital Trust I, a
Delaware statutory business trust (the "Issuer Trust").
RECITALS OF THE CORPORATION
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
June 2, 1997, among Centura Banks, Inc., as Depositor, State Street Bank and
Trust Company, as Property Trustee, Delaware Capital Trust Management, Inc., as
Delaware Trustee, and the Administrative Trustees named therein, the Issuer
Trust is issuing $100,000,000 aggregate Liquidation Amount (as defined in the
Trust Agreement) of its 8.845% Capital Securities, Series A (liquidation amount
$1,000 per capital security) (the "Capital Securities"), representing preferred
undivided beneficial interests in the assets of the Issuer Trust and having the
terms set forth in the Trust Agreement; and
WHEREAS, the Capital Securities will be issued by the Issuer Trust and the
proceeds thereof, together with the proceeds from the issuance of the Issuer
Trust's Common Securities (as defined herein), will be used to purchase the
Debentures (as defined in the Trust Agreement) of the Guarantor, which
Debentures will be deposited with State Street Bank and Trust Company, as
Property Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase Capital Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders of the Capital Securities the Guarantee
Payments (as defined herein) on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase of Capital Securities by
each Holder, which purchase the Guarantor hereby acknowledges will benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time.
ARTICLE I
DEFINITIONS
Section I.1. Definitions
For all purposes of this Guarantee Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
(a) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the meanings
assigned to them in accordance with United States generally accepted accounting
principles;
(e) Unless the context otherwise requires, any reference to an "Article" or
a "Section" refers to an Article or a Section, as the case may be, of this
Guarantee Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and other words
of similar import refer to this Guarantee Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Board of Directors" means the board of directors of the Guarantor or the
Executive Committee of the board of directors of the Guarantor (or any other
committee of the board of directors of the Guarantor performing similar
functions) or a committee designated by the board of directors of the Guarantor
(or such committee), comprised of two or more members of the board of directors
of the Guarantor or officers of the Guarantor, or both.
"Capital Securities" has the meaning specified in the recitals to this
Guarantee Agreement.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer Trust.
"Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.
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"Guarantee Agreement" means this Guarantee Agreement, as modified, amended
or supplemented from time to time.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or
made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Capital Securities, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; (ii) the Redemption Price (as defined in the
Trust Agreement) with respect to any Capital Securities called for redemption by
the Issuer Trust, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Issuer Trust, unless Debentures
are distributed to the Holders, the lesser of (a) the Liquidation Distribution
(as defined in the Trust Agreement) with respect to the Capital Securities, and
(b) the amount of assets of the Issuer Trust remaining available for
distribution to Holders on liquidation of the Issuer after satisfaction of
liabilities to creditors of the Issuer Trust as required by applicable law.
"Guarantee Trustee" means State Street Bank and Trust Company, solely in
its capacity as Guarantee Trustee and not in its individual capacity, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.
"Guarantor" has the meaning specified in the first paragraph of this
Guarantee Agreement.
"Holder" means any Holder (as defined in the Trust Agreement) of any
Capital Securities; provided, however, that in determining whether the holders
of the requisite percentage of Capital Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.
"Indenture" means the Junior Subordinated Indenture, dated as of June 2,
1997, between Centura Banks, Inc. and State Street Bank and Trust Company, as
trustee, as the same may be modified, amended or supplemented from time to time.
"Issuer Trust" has the meaning specified in the first paragraph of this
Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Capital Securities" means, except as
provided by the Trust Indenture Act, Capital Securities representing more than
50% of the aggregate Liquidation Amount (as defined in the Trust Agreement) of
all Capital Securities then
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<PAGE>
Outstanding (as defined in the Trust Agreement).
"Officers' Certificate" means a certificate signed by the Chairman or a
Vice Chairman of the Board of Directors of the Guarantor or the President or a
Vice President of the Guarantor, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Guarantor, and delivered to the
Guarantee Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement by each officer signing the Officers' Certificate that
such officer has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers'
Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, company,
limited liability company, trust, business trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any other officer of the Corporate
Trust Department of the Guarantee Trustee and also means, with respect to a
particular matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement of the
Issuer Trust referred to in the recitals to this Guarantee Agreement, as
modified, amended or supplemented from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Guarantee Agreement was executed; provided, however,
that if the Trust Indenture
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<PAGE>
Act of 1939 is amended after such date, "Trust Indenture Act" means, to the
extent required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION II.1. Trust Indenture Act; Application
Except as otherwise expressly provided herein, the Trust Indenture Act
shall apply as a matter of contract to this Guarantee Agreement for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this Guarantee Agreement, the Guarantor and the Guarantee Trustee shall be
deemed for all purposes hereof to be subject to and governed by the Trust
Indenture Act to the same extent as would be the case if this Guarantee
Agreement were qualified under that Act on the date hereof. Except as otherwise
expressly provided herein, if and to the extent that any provision of this
Guarantee Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION II.2. List of Holders
(a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (a) semiannually, on or before June 30 and December 31 of each year, a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders (a "List of Holders") as of a date not more than 15
days prior to the delivery thereof, and (b) at such other times as the Guarantee
Trustee may request in writing, within 30 days after the receipt by the
Guarantor of any such request, a List of Holders as of a date not more than 15
days prior to the time such list is furnished, in each case to the extent such
information is in the possession or control of the Guarantor and has not
otherwise been received by the Guarantee Trustee in its capacity as such. The
Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with the requirements of Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION II.3. Reports by the Guarantee Trustee
Not later than 60 days following December 31 of each year, commencing
December 31, 1997, the Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
If this Guarantee Agreement shall have been qualified under the Trust Indenture
Act, the Guarantee Trustee shall also comply with the requirements of Section
313(d)
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of the Trust Indenture Act.
SECTION II.4. Periodic Reports to the Guarantee Trustee
The Guarantor shall provide to the Guarantee Trustee and the Holders such
documents, reports and information, if any, as required by Section 314 of the
Trust Indenture Act and the compliance certificate required by Section 314 of
the Trust Indenture Act, in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act, provided that such documents, reports
and information shall not be required to be provided to the Securities and
Exchange Commission unless this Guarantee Agreement shall have been qualified
under the Trust Indenture Act.
SECTION II.5. Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer of the Guarantor pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION II.6. Events of Default; Waiver
The Holders of at least a Majority in Liquidation Amount of the Capital
Securities may, by vote, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION II.7. Event of Default; Notice
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default known to it, transmit by mail, first class postage prepaid, to
the Holders, notice of any such Event of Default, unless such Event of Default
has been cured before the giving of such notice, provided that, except in the
case of a default in the payment of a Guarantee Payment, the Guarantee Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained actual
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<PAGE>
knowledge, of such Event of Default.
SECTION II.8. Conflicting Interests
The Trust Agreement and the Indenture shall be deemed to be specifically
described in this Guarantee Agreement for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION III.1. Powers and Duties of the Guarantee Trustee
(a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Guarantee Trustee hereunder. The right, title and interest of the Guarantee
Trustee, as such, hereunder shall automatically vest in any Successor Guarantee
Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment
hereunder, and such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement (including pursuant to Section 2.1), and no implied
covenants shall be read into this Guarantee Agreement against the Guarantee
Trustee. If an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own wilful misconduct, except that:
(i) Prior to the occurrence of any Event of Default and after the
curing or waiving
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<PAGE>
of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee
Agreement (including pursuant to Section 2.1), and the Guarantee
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Guarantee
Agreement (including pursuant to Section 2.1); and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement.
(ii) The Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made.
(iii) The Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation
Amount of the Capital Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee
Trustee, under this Guarantee Agreement.
(iv) Subject to Section 3.1(b), no provision of this Guarantee
Agreement shall require the Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it under
the terms of this Guarantee Agreement or adequate indemnity against such
risk or liability is not reasonably assured to it.
SECTION III.2. Certain Rights of Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully protected in
acting or
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<PAGE>
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document reasonably believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the
written advice or opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its or their employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration of
this Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holder unless such Holder shall have provided
to the Guarantee Trustee such adequate security and indemnity as would
satisfy a reasonable person in the position of the Guarantee Trustee
against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided that nothing contained in this Section
3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights
and powers vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, and
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the Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed by it with
due care hereunder.
(viii) Whenever in the administration of this Guarantee Agreement the
Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION III.3. Compensation; Indemnity; Fees
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such reasonable
compensation for all services rendered by it hereunder as may be agreed by
the Guarantor and the Guarantee Trustee from time to time (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon request for all reasonable expenses, disbursements
and advances incurred or made by the Guarantee Trustee in accordance with
any provision of this Guarantee Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(c) to indemnify the Guarantee Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence, wilful
misconduct or bad faith on the part of the Guarantee Trustee, arising out
of or in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The Guarantee Trustee will not claim or exact any lien or charge on any
Guarantee Payments as a result of any amount due to it under this Guarantee
Agreement.
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The provisions of this Section 3.3 shall survive the termination of this
Guarantee Agreement or the resignation or removal of the Guarantee Trustee.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION IV.1. Guarantee Trustee; Eligibility
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is a national or state chartered bank and
eligible pursuant to the Trust Indenture Act to act as such, and that has
at the time of such appointment securities rated in one of the three
highest rating categories by a nationally recognized statistical rating
organization and a combined capital and surplus of at least $50,000,000,
and shall be a corporation meeting the requirements of Section 310(a) of
the Trust Indenture Act. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then, for the purposes of this Section
4.1 and to the extent permitted by the Trust Indenture Act, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2.
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION IV.2. Appointment, Removal and Resignation of the Guarantee Trustee
(a) Subject to Section 4.2(c), the Guarantee Trustee may be appointed or
removed at any time by the Guarantor.
(b) Subject to Section 4.2(c), the Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by giving written notice
thereof to the Holders and the Guarantor and by appointing a successor Guarantee
Trustee.
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(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed and shall have accepted
such appointment. No removal or resignation of a Guarantee Trustee shall be
effective until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and, in the case of any
resignation, the resigning Guarantee Trustee.
(d) If the Guarantee Trustee shall resign, be removed or become incapable
of acting as Guarantee Trustee and a replacement shall not be appointed prior to
such resignation or removal, or if a vacancy shall occur in the office of
Guarantee Trustee for any reason, and no Successor Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery to the Holders and the Guarantor of a notice of
resignation, the resigning Guarantee Trustee may petition, at the expense of the
Guarantor, any court of competent jurisdiction for appointment of a Successor
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION V.1. Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Issuer Trust may have or
assert, except the defense of payment. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer Trust to pay such amounts
to the Holders.
SECTION V.2. Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, the Issuer Trust or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION V.3. Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time
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of any of the following:
(a) the release or waiver, by operation of law or otherwise (other
than by Act (as defined in the Trust Agreement) of the Holders), of the
performance or observance by the Issuer Trust of any express or implied
agreement, covenant, term or condition relating to the Capital Securities
to be performed or observed by the Issuer Trust;
(b) the extension of time for the payment by the Issuer Trust of all
or any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any interest
payment period on the Debentures as provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms
of the Capital Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the
Capital Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer Trust granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Issuer Trust or any of the
assets of the Issuer Trust;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor (other than
payment of the underlying obligation), it being the intent of this Section
5.3 that the obligations of the Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION V.4. Rights of Holders
The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Capital Securities have the right to direct the
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time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other Person.
SECTION V.5. Guarantee of Payment
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer Trust) or upon the distribution of Debentures to Holders as
provided in the Trust Agreement.
SECTION V.6. Subrogation
The Guarantor shall be subrogated to all rights (if any) of the Holders
against the Issuer Trust in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION V.7. Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION VI.1. Subordination
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment
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to all Senior Indebtedness (as defined in the Indenture) of the Guarantor to the
extent and in the manner set forth in the Indenture with respect to the
Debentures, and the provisions of Article XIII of the Indenture will apply,
mutatis mutandis, to the obligations of the Guarantor hereunder. The obligations
of the Guarantor hereunder do not constitute Senior Indebtedness (as defined in
the Indenture) of the Guarantor.
SECTION VI.2. Pari Passu Guarantees
The obligations of the Guarantor under this Guarantee Agreement shall rank
pari passu with the obligations of the Guarantor under (i) any similar guarantee
agreements issued by the Guarantor on behalf of the holders of preferred or
capital securities issued by any Issuer Trust (as defined in the Indenture);
(ii) the Indenture and the Securities (as defined therein) issued thereunder;
(iii) the Expense Agreement (as defined in the Trust Agreement) and any similar
expense agreements entered into by the Guarantor in connection with the offering
of Capital Securities (as defined in the Indenture) by any Issuer Trust (as
defined in the Indenture); and (iv) any other security, guarantee or other
agreement or obligation that is expressly stated to rank pari passu with the
obligations of the Guarantor under this Guarantee Agreement or with any
obligation that ranks pari passu with the obligations of the Guarantor under
this Guarantee Agreement.
ARTICLE VII
TERMINATION
SECTION VII.1. Termination
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price (as defined in the Trust
Agreement) of all Capital Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the Capital Securities, or (iii) full payment of
the amounts payable in accordance with Article IX of the Trust Agreement upon
liquidation of the Issuer Trust. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder is required to repay any sums paid with respect to
Capital Securities or this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION VIII.1. Successors and Assigns
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All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VIII of the
Indenture and pursuant to which the successor or assignee agrees in writing to
perform the Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder, and any purported assignment other than in accordance
with this provision shall be void.
SECTION VIII.2. Amendments
Except with respect to any changes that do not adversely affect the rights
of the Holders in any material respect (in which case no consent of the Holders
will be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less than a Majority in Liquidation Amount of the
Capital Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.
SECTION VIII.3. Notices
(a) Any notice, request or other communication required or permitted to
be given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, by facsimile or first class mail as follows:
(ii) if given to the Guarantor, to the address or facsimile number set forth
below or such other address or facsimile number as the Guarantor may give notice
to the Guarantee Trustee and the Holders:
Centura Banks, Inc.
134 North Church Street
Rocky Mount, North Carolina 27892
Attention: Secretary
Facsimile: (919) 977-4800
(iii) if given to the Guarantee Trustee, at the address or facsimile number
set forth below or such other address or facsimile number as the Guarantee
Trustee may give notice to the Guarantor and the Holders:
State Street Bank and Trust Company
2 International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Division
Facsimile: (617) 664-5365
(iv) if given to any Holder, in the manner set forth in Section 10.8 of the
Trust
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Agreement.
(b) All notices hereunder shall be deemed to have been given when received
in person, by facsimile with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver, provided that any notice given
as provided in Section 8.3(a)(iii) shall be deemed to have been given at the
time specified in Section 10.8 of the Trust Agreement.
SECTION 8.4. Benefit
This Guarantee Agreement is solely for the benefit of the Holders and is
not separately transferable from the Capital Securities.
SECTION 8.5. Governing Law
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.6. Counterparts
This Guarantee Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed, and their respective corporate seals to be hereunto
affixed, all as of the day and year first above written.
CENTURA BANKS, INC.
[SEAL]
By: /s/ Frank L. Pattillo
Name: Frank L. Pattillo
Title: Group Executive Officer
Attest: /s/ Joseph A. Smith, Jr.
Name: Joseph A. Smith, Jr.
Title: Assistant Secretary
STATE STREET BANK AND TRUST COMPANY,
as Guarantee Trustee
[SEAL]
By: /s/ Paul D. Allen
Name: Paul D. Allen
Title: Vice President
Attest: /s/ James E. Shultz
Name: James E. Shultz
Title: Assistant Secretary
Exhibit 4.5
================================================================================
CENTURA BANKS, INC.
to
STATE STREET BANK AND TRUST COMPANY,
as Trustee
----------
JUNIOR SUBORDINATED INDENTURE
Dated as of June 2, 1997
----------
================================================================================
<PAGE>
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions ........................................................... 6
SECTION 1.2. Compliance Certificate and Opinions ................................... 10
SECTION 1.3. Forms of Documents Delivered to Trustee ............................... 11
SECTION 1.4. Acts of Holders ....................................................... 11
SECTION 1.5. Notices, Etc. to Trustee and Corporation .............................. 14
SECTION 1.6. Notice to Holders; Waiver ............................................. 14
SECTION 1.7. Conflict with Trust Indenture Act ..................................... 14
SECTION 1.8. Effect of Headings and Table of Contents .............................. 15
SECTION 1.9. Successors and Assigns ................................................ 15
SECTION 1.10. Separability Clause .................................................. 15
SECTION 1.11. Benefits of Indenture ................................................ 15
SECTION 1.12. Governing Law ........................................................ 15
SECTION 1.13. Non-Business Days .................................................... 15
ARTICLE II SECURITY FORMS
SECTION 2.1. Forms Generally ....................................................... 16
SECTION 2.2. Form of Face of Security .............................................. 16
SECTION 2.3. Form of Reverse of Security ........................................... 20
SECTION 2.4. Additional Provisions Required in Global Security ..................... 23
SECTION 2.5. Form of Trustee's Certificate of Authentication ....................... 24
ARTICLE III THE SECURITIES
SECTION 3.1. Title and Terms ....................................................... 24
SECTION 3.2. Denominations ......................................................... 27
SECTION 3.3. Execution, Authentication, Delivery and Dating ........................ 27
SECTION 3.4. Temporary Securities .................................................. 29
SECTION 3.5. Global Securities ..................................................... 29
SECTION 3.6. Registration, Transfer and Exchange Generally; Certain Transfers and
Exchanges; Securities Act Legends ......................................... 31
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities ...................... 34
SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved 35
SECTION 3.9. Persons Deemed Owners ................................................. 36
SECTION 3.10. Cancellation ......................................................... 37
SECTION 3.11. Computation of Interest .............................................. 37
SECTION 3.12. Deferrals of Interest Payment Dates .................................. 37
SECTION 3.13. Right of Set-Off ..................................................... 39
SECTION 3.14. Agreed Tax Treatment ................................................. 39
SECTION 3.15. Shortening of Stated Maturity ........................................ 39
SECTION 3.16. CUSIP Numbers ........................................................ 39
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ARTICLE IV SATISFACTION AND DISCHARGE
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SECTION 4.1. Satisfaction and Discharge of Indenture ............................... 40
SECTION 4.2. Application of Trust Money ............................................ 41
ARTICLE V REMEDIES
SECTION 5.1. Events of Default ..................................................... 41
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment .................... 42
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee ....... 44
SECTION 5.4. Trustee May File Proofs of Claim ...................................... 44
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities ............ 45
SECTION 5.6. Application of Money Collected ........................................ 45
SECTION 5.7. Limitation on Suits ................................................... 46
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest; Direct Action by Holders of Capital Securities .................. 47
SECTION 5.9. Restoration of Rights and Remedies .................................... 47
SECTION 5.10. Rights and Remedies Cumulative ....................................... 47
SECTION 5.11. Delay or Omission Not Waiver ......................................... 48
SECTION 5.12. Control by Holders ................................................... 48
SECTION 5.13. Waiver of Past Defaults .............................................. 48
SECTION 5.14. Undertaking for Costs ................................................ 49
SECTION 5.15. Waiver of Usury, Stay or Extension Laws .............................. 49
ARTICLE VI THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities ................................... 50
SECTION 6.2. Notice of Defaults .................................................... 51
SECTION 6.3. Certain Rights of Trustee ............................................. 51
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities ................ 52
SECTION 6.5. May Hold Securities ................................................... 52
SECTION 6.7. Compensation and Reimbursement ........................................ 53
SECTION 6.8. Disqualification; Conflicting Interests ............................... 53
SECTION 6.9. Corporate Trustee Required; Eligibility ............................... 53
SECTION 6.10. Resignation and Removal; Appointment of Successor .................... 54
SECTION 6.11. Acceptance of Appointment by Successor ............................... 56
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business .......... 57
SECTION 6.13. Preferential Collection of Claims Against Corporation ................ 57
SECTION 6.14. Appointment of Authenticating Agent .................................. 57
ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders ......... 59
SECTION 7.2. Preservation of Information, Communications to Holders ................ 59
SECTION 7.3. Reports by Trustee .................................................... 60
SECTION 7.4. Reports by Corporation ................................................ 60
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ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
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SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms ............. 61
SECTION 8.2. Successor Corporation Substituted .................................... 61
ARTICLE IX SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders ................... 62
SECTION 9.2. Supplemental Indentures with Consent of Holders ...................... 63
SECTION 9.3. Execution of Supplemental Indentures ................................. 65
SECTION 9.4. Effect of Supplemental Indentures .................................... 65
SECTION 9.5. Conformity with Trust Indenture Act .................................. 65
SECTION 9.6. Reference in Securities to Supplemental Indentures ................... 65
ARTICLE X COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest .......................... 66
SECTION 10.2. Maintenance of Office or Agency ..................................... 66
SECTION 10.3. Money for Security Payments to be Held in Trust ..................... 66
SECTION 10.4. Statement as to Compliance .......................................... 68
SECTION 10.5. Waiver of Certain Covenants ......................................... 68
SECTION 10.6. Additional Sums ..................................................... 68
SECTION 10.7. Additional Covenants ................................................ 69
SECTION 10.8. Original Issue Discount ............................................. 70
ARTICLE XI REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article ....................................... 70
SECTION 11.2. Election to Redeem; Notice to Trustee ............................... 71
SECTION 11.3. Selection of Securities to be Redeemed .............................. 71
SECTION 11.4. Notice of Redemption ................................................ 71
SECTION 11.5. Deposit of Redemption Price ......................................... 72
SECTION 11.6. Payment of Securities Called for Redemption ......................... 73
SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust 73
ARTICLE XII SINKING FUNDS
SECTION 12.1. Applicability of Article ............................................ 74
SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities ............... 74
SECTION 12.3. Redemption of Securities for Sinking Fund ........................... 74
ARTICLE XIII SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness ....................... 76
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment Over of
Proceeds Upon Dissolution, Etc ........................................... 76
SECTION 13.3. Payment Permitted If No Default ..................................... 78
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness ............. 78
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SECTION 13.5. Provisions Solely to Define Relative Rights ........................ 79
SECTION 13.6. Trustee to Effectuate Subordination ................................ 79
SECTION 13.7. No Waiver of Subordination Provisions .............................. 79
SECTION 13.8. Notice to Trustee .................................................. 80
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent ..... 80
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness .......... 81
SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights ........................................................ 81
SECTION 13.12. Article Applicable to Paying Agents ............................... 81
</TABLE>
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JUNIOR SUBORDINATED INDENTURE, dated as of June 2, 1997, between CENTURA
BANKS, INC., a North Carolina corporation (the "Corporation"), having its
principal office at 134 North Church Street, Rocky Mount, North Carolina 27802,
and State Street Bank and Trust Company, a Massachusetts trust company, as
Trustee (the "Trustee").
RECITALS OF THE CORPORATION
WHEREAS, the Corporation has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (the "Securities") of
substantially the tenor hereinafter provided, including Securities issued to
evidence loans made to the Corporation with the proceeds from the issuance from
time to time by one or more business trusts (each an "Issuer Trust") of
preferred undivided beneficial interests in the assets of such Issuer Trusts
(the "Capital Securities") and common undivided interests in the assets of such
Issuer Trusts (the "Common Securities"), and to provide the terms and conditions
upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement of
the Corporation, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
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(c) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation";
(d) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(e) Whenever the context may require, any gender shall be deemed to
include the others;
(f) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Indenture; and
(g) The words "hereby", "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date or that has been deferred during an
Extension Period, and that shall accrue at the rate per annum specified or
determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means any additional taxes, duties and other
governmental charges to which an Issuer Trust has become subject from time to
time as a result of a Tax Event.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, in each case to the extent
applicable to such transaction and as in effect from time to time.
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"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series. "Bankruptcy Code" means Title 11 of the United States Code
or any successor statute thereto, in each case as amended from time to time.
"Board of Directors" means the board of directors of the Corporation or the
Executive Committee of the board of directors of the Corporation (or any other
committee of the board of directors of the Corporation performing similar
functions) or a committee designated by the board of directors of the
Corporation (or such committee), comprised of two or more members of the board
of directors of the Corporation or officers of the Corporation, or both.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Corporation to have been duly adopted by the
Board of Directors, or officers of the Corporation to which authority to act on
behalf of the Board of Directors has been delegated, and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to Securities of a
series initially issued to an Issuer Trust for so long as such Securities are
held by such Issuer Trust, the Corporate Trust Office (as defined in the related
Trust Agreement) of the Property Trustee or the Delaware Trustee under the
related Trust Agreement, is closed for business.
"Capital Securities" has the meaning specified in the first recital of this
Indenture.
"Capital Treatment Event" means, in respect of any Issuer Trust, the
reasonable determination by the Corporation (as evidenced by an Officers'
Certificate delivered to the Trustee) that, as a result of the occurrence of any
amendment to, or change (including any announced prospective change) in, the
laws (or any rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or such pronouncement, action or decision is announced on or after the date of
the issuance of the Capital Securities of such Issuer Trust, there is more than
an insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the aggregate Liquidation Amount (as such term is defined in the
related Trust Agreement) of such Capital Securities as "Tier 1 Capital" (or the
then equivalent thereof) for purposes of the capital adequacy guidelines of the
Board of Governors of the Federal Reserve System, as then in effect and
applicable to the Corporation.
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"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Securities and Exchange Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of this
Indenture.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered.
"corporation" includes a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Corporation" means the Person named as the "Corporation" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor corporation.
"Corporation Request" and "Corporation Order" mean, respectively, a written
request or order signed in the name of the Corporation by its Chairman of the
Board of Directors, its Vice Chairman of the Board of Directors, its President
one of its Executive Vice Presidents, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent and without
duplication, (i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such Person;
(vi) all indebtedness of the Corporation, whether incurred on or prior to the
date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.8.
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"Delaware Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Delaware Trustee" in the related Trust Agreement, solely in
its capacity as Delaware Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Corporation pursuant to Section 3.1 with
respect to such series (or any successor thereto).
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Distributions", with respect to the Trust Securities issued by an Issuer
Trust, means amounts payable in respect of such Trust Securities as provided in
the related Trust Agreement and referred to therein as "Distributions".
"Dollar" or "$" means the currency of the United States of America that, as
at the time of payment, is legal tender for the payment of public and private
debts.
"Event of Default", unless otherwise specified with respect to a series of
Securities as contemplated by Section 3.1, has the meaning specified in Article
V.
"Exchange Act" means the Securities Exchange Act of 1934 or any successor
statute thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.12.
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of a series of Securities, issued to the Depositary for
such series or its nominee, and registered in the name of such Depositary or its
nominee.
"Guarantee Agreement" means, with respect to any Issuer Trust, the
Guarantee Agreement executed by the Corporation for the benefit of the Holders
of the Capital Securities issued by such Issuer Trust, as modified, amended or
supplemented from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
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"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.
"Institutional Accredited Investor" means an accredited investor within the
meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act.
"Interest Payment Date" means, as to each series of Securities, the Stated
Maturity of an installment of interest on such Securities.
"Issuer Trust" has the meaning specified in the first recital of this
Indenture.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security or any installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in Section
5.1(3).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or an Executive Vice
President, and by the Treasurer or the Secretary, of the Corporation and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for or an employee of the Corporation or any Affiliate of the Corporation.
"Original Issue Date" means the date of issuance specified as such in each
Security.
"Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust
for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or that have been paid
pursuant to Section 3.7, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in
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whose hands such Securities are valid, binding and legal obligations of the
Corporation;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Corporation or any other obligor upon the Securities or any Affiliate of
the Corporation or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that the Trustee knows to be so owned shall
be so disregarded. Securities so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Corporation or any other obligor upon the Securities or
any Affiliate of the Corporation or such other obligor. Upon the written request
of the Trustee, the Corporation shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Securities, if any, known by
the Corporation to be owned or held by or for the account of the Corporation or
any other obligor on the Securities, or any Affiliate of the Corporation or such
obligor, and subject to the provisions of Section 6.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination. Notwithstanding
anything herein to the contrary, Securities of any series initially issued to an
Issuer Trust that are owned by such Issuer Trust shall be deemed to be
Outstanding notwithstanding the ownership by the Corporation or an Affiliate of
any beneficial interest in such Issuer Trust.
"Paying Agent" means the Trustee or any Person authorized by the
Corporation to pay the principal of (or premium, if any) or interest on, or
other amounts in respect of, any Securities on behalf of the Corporation.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Place of Payment" means, with respect to the Securities of any series, the
place or places where the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities of such series are payable
pursuant to Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any security
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 13.2.
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"Property Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Property Trustee" in the related Trust Agreement, solely in
its capacity as Property Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor property trustee appointed as therein provided.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture or the
terms of such Security.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture or the
terms of such Security.
"Regular Record Date" for the interest payable on any Interest Payment Date
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of such series, the day that
is fifteen days next preceding such Interest Payment Date (whether or not a
Business Day).
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Exhibit A.
"Restricted Securities Legend" means a legend substantially in the form of
the legend required in the form of Security set forth in Section 2.2 to be
placed upon a Restricted Security.
"Restricted Security" means each Security required pursuant to Section
3.6(c) to bear the Restricted Securities Legend.
"Rights Plan" means a plan of the Corporation providing for the issuance by
the Corporation to all holders of its common stock of rights entitling the
holders thereof to subscribe for or purchase shares of any class or series of
capital stock of the Corporation, which rights are (i) deemed to be transferred
with such shares of such common stock and (ii) also issued in respect of future
issuances of such common stock, in each case until the occurrence of a specified
event or events.
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"Rule 144A Information" shall be such information with respect to the
Corporation as is specified pursuant to Rule 144A(d)(4) under the Securities Act
or any successor provision thereto, in each case as amended from time to time.
"Security" means any debt security authenticated and delivered under this
Indenture.
"Securities Act" means the Securities Act of 1933 or any successor statute
thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.6.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Corporation, whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities or
to other Debt that is pari passu with, or subordinated to, the Securities,
provided, however, that Senior Indebtedness shall not be deemed to include (a)
any Debt of the Corporation that, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to the Corporation, (b) any Debt of the Corporation to any of its
Subsidiaries, (c) any Debt of the Corporation to any Person who is an employee
of the Corporation in such Person's capacity as such, (d) any Securities, (e)
trade accounts payable of the Corporation, and (f) accrued liabilities arising
in the ordinary course of business of the Corporation.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.8.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof (or premium, if any) or interest (including any
Additional Interest) thereon, means the date specified pursuant to the terms of
such Security as the fixed date on which the principal of such Security or such
installment of principal (or premium, if any) or interest (including any
Additional Interest) is due and payable, as such date may be shortened as
provided pursuant to the terms of such Security and this Indenture, in the case
of the Stated Maturity of any Security, and subject to the deferral of any such
date during any Extension Period, in the case of any instalment of interest.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Corporation or by one or
more other Subsidiaries, or by the Corporation and one or more other
Subsidiaries. For purposes of this definition,
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"voting stock" means stock that ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
"Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Event" means the receipt by an Issuer Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Capital Securities of such Issuer Trust, there is more than an insubstantial
risk that (i) such Issuer Trust is, or within 90 days of the delivery of such
Opinion of Counsel will be, subject to United States federal income tax with
respect to income received or accrued on the corresponding series of Securities
issued by the Corporation to such Issuer Trust, (ii) interest payable by the
Corporation on such corresponding series of Securities is not, or within 90 days
of the delivery of such Opinion of Counsel will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax purposes,
or (iii) such Issuer Trust is, or within 90 days of the delivery of such Opinion
of Counsel will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Trust Agreement" means, with respect to any Issuer Trust, the trust
agreement or other governing instrument of such Issuer Trust.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument, solely in its capacity as such Trustee and not in its
individual capacity, until a successor Trustee shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee hereunder and, if at any time
there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that if
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means the Trust Indenture Act of 1939 as so amended.
"Trust Securities" means the Common Securities and the Capital Securities.
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"Vice President," when used with respect to the Corporation, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title Avice president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Corporation to the Trustee to take
any action under any provision of this Indenture, the Corporation shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitutes a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.4) shall include:
(1) a statement by each individual signing such certificate or opinion
that such individual has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions of such individual
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of such individual, such
condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons may certify or give an opinion as to other matters,
and any of such Persons may certify or give an opinion as to such matters
contained in one or several documents.
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Any certificate or opinion of an officer of the Corporation may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate, opinion or representations
with respect to matters upon which his or her certificate or opinion is based
are erroneous. Any such certificate or Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, one or more officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate, opinion or representations with respect to
matters upon which his or her certificate or opinion is based are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments is or are delivered to the
Trustee, and, where it is hereby expressly required, to the Corporation. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Corporation, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to such notary the execution thereof. Where such
execution is by a Person acting in other than such Persons's individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of such Person's authority.
(c) The fact and date of the execution by any Person of any such instrument
or writing, or the authority of the Person executing the same, may also be
proved in any other manner that the Trustee deems sufficient and in accordance
with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities Register.
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(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Corporation in reliance thereon,
whether or not notation of such action is made upon such Security.
(f) The Corporation may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Corporation may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next succeeding paragraph.
If any record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Corporation from setting a new record date for any action for which
a record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Corporation, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2), or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to
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render ineffective any action taken by Holders of the requisite principal amount
of Outstanding Securities of the relevant series on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Trustee, at the Corporation's expense, shall cause notice of such record date,
the proposed action by Holders and the applicable Expiration Date to be given to
the Corporation in writing and to each Holder of Securities of the relevant
series in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section 1.4, the party
hereto that sets such record date may designate any day as the "Expiration Date"
and from time to time may change the Expiration Date to any earlier or later
day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section
1.4, the party hereto that set such record date shall be deemed to have
initially designated the 180th day after such record date as the Expiration Date
with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 1.5. Notices, Etc. to Trustee and Corporation.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Capital Securities or the
Corporation shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or
(2) the Corporation by the Trustee, any Holder or any holder of
Capital Securities shall be sufficient for every purpose (except as
otherwise provided in Section 5.1) hereunder if in writing and mailed,
first-class postage prepaid, to the Corporation addressed to it at the
address of its principal office specified in the first paragraph of this
Indenture or at any other address previously furnished in writing to the
Trustee by the Corporation.
SECTION 1.6. Notice to Holders; Waiver.
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Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. If, by reason of the suspension
of or irregularities in regular mail service or for any other reason, it shall
be impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture or of
the relevant Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 1.7. Conflict with Trust Indenture Act.
Except as otherwise expressly provided herein, the Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this Indenture, the Corporation and the Trustee shall be deemed for all
purposes hereof to be subject to and governed by the Trust Indenture Act to the
same extent as would be the case if this Indenture were qualified under that Act
on the date hereof. Except as otherwise expressly provided herein, if and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in
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any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Securities and,
to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and
9.2 the holders of Capital Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or the Securities) payment of principal of (and premium, if any) or interest
(including any Additional Interest) or other amounts in respect of such Security
need not be made on such date, but may be made on the next succeeding Business
Day (and no interest shall accrue in respect of the amounts whose payment is so
delayed for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, until such next succeeding Business
Day) except that, if such Business Day falls in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day (in
each case with the same force and effect as if made on the Interest Payment Date
or Redemption Date or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by
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their execution of the Securities. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Corporation and delivered to the Trustee at or prior
to the delivery of the Corporation Order contemplated by Section 3.3 with
respect to the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
SECTION 2.2. Form of Face of Security.
CENTURA BANKS, INC.
[Title of Security]
[If the Security is a Restricted Security, insert "THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) BY ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, (1) TO A PERSON WHO
THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING
FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B)
BY ANY INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY ANY
SUBSEQUENT INVESTOR, (1) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, AND, IN EACH CASE (A) AND (B), IN COMPLIANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS. SECURITIES OWNED BY AN INITIAL INVESTOR THAT IS NOT A QUALIFIED
INSTITUTIONAL BUYER MAY NOT BE HELD IN BOOK-ENTRY FORM AND MAY NOT BE
TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW."
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No. _____________ $__________
CENTURA BANKS, INC., a North Carolina corporation (hereinafter called the
"Corporation", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_______________, or registered assigns, the principal sum of __________ Dollars
on _________, ____ [if the Security is a Global Security, then insert, if
applicable X, or such other principal amount represented hereby as may be set
forth in the records of the Securities Registrar hereinafter referred to in
accordance with the Indenture] [; provided that the Corporation may shorten the
Stated Maturity of the principal of this Security to a date not earlier than
__________, in the circumstances described on the reverse hereof]. The
Corporation further promises to pay interest on said principal sum from
___________, ____ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, [monthly][quarterly][semi-annually]
[if applicable, insert-(subject to deferral as set forth herein)] in arrears on
[insert applicable Interest Payment Dates] of each year, commencing ________,
____, at the rate of ___% per annum, [if applicable insert X together with
Additional Sums, if any, as provided in Section 10.6 of the Indenture] until the
principal hereof is paid or duly provided for or made available for payment [if
applicable, insert X; provided that any overdue principal, premium or Additional
Sums and any overdue installment of interest shall bear Additional Interest at
the rate of ___% per annum (to the extent that the payment of such interest
shall be legally enforceable), compounded [monthly][quarterly][semi-annually],
from the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. The amount of interest
payable for any period less than a full interest period shall be computed on the
basis of a 360-day year of twelve 30-day months and the actual days elapsed in a
partial month in such period. The amount of interest payable for any full
interest period shall be computed by dividing the applicable rate per annum by
[twelve/four/two]. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest installment [if applicable insert X, which shall be the [____________
or ____________] (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date]. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
[If applicable, insert X So long as no Event of Default has occurred and is
continuing, the Corporation shall have the right, at any time during the term of
this Security, from time to time to
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defer the payment of interest on this Security for up to ____ consecutive
[monthly][quarterly][semi-annual] interest payment periods with respect to each
deferral period (each an "Extension Period") [if applicable, insert X, during
which Extension Periods the Corporation shall have the right to make partial
payments of interest on any Interest Payment Date, and] at the end of which the
Corporation shall pay all interest then accrued and unpaid (including any
Additional Interest, as provided below); provided, however, that no Extension
Period shall extend beyond the Stated Maturity of the principal of this Security
[if Stated Maturity can be shortened or extended, insert X, as then in effect,]
and no such Extension Period may end on a date other than an Interest Payment
Date; and provided further, however, that during any such Extension Period, the
Corporation shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock, or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to this Security (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Corporation in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Corporation (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of an exchange or conversion of any
class or series of the Corporation's capital stock (or any capital stock of a
Subsidiary of the Corporation) for any class or series of the Corporation's
capital stock or of any class or series of the Corporation's indebtedness for
any class or series of the Corporation's capital stock, (c) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in connection
with any Rights Plan, or the issuance of rights, stock or other property under
any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or
(e) any dividend in the form of stock, warrants, options or other rights where
the dividend stock or the stock issuable upon exercise of such warrants, options
or other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
such Extension Period, the Corporation may further defer the payment of
interest, provided that no Extension Period shall exceed ____ consecutive
[monthly][quarterly][semi-annual] interest payment periods, extend beyond the
Stated Maturity of the principal of this Security or end on a date other than an
Interest Payment Date. Upon the termination of any such Extension Period and
upon the payment of all accrued and unpaid interest and any Additional Interest
then due on any Interest Payment Date, the Corporation may elect to begin a new
Extension Period, subject to the above conditions. No interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension shall bear Additional Interest (to the extent that the payment of
such interest shall be legally enforceable) at the rate of ____% per annum,
compounded [monthly][quarterly][semi-annually] and calculated as set forth in
the first paragraph of this Security, from the dates on which amounts would
otherwise have been due and
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payable until paid or made available for payment. The Corporation shall give the
Holder of this Security and the Trustee notice of its election to begin any
Extension Period at least one Business Day prior to the next succeeding Interest
Payment Date on which interest on this Security would be payable but for such
deferral [if applicable, insert X or so long as such Securities are held by
[insert name of applicable Issuer Trust], at least one Business Day prior to the
earlier of (i) the next succeeding date on which Distributions on the Capital
Securities of such Issuer Trust would be payable but for such deferral, and (ii)
the date on which the Property Trustee of such Issuer Trust is required to give
notice to holders of such Capital Securities of the record date or the date such
Distributions are payable].
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Corporation maintained for
that purpose in [insert Place of Payment], in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts [if applicable, insert X; provided, however, that at
the option of the Corporation payment of interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register].
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on such Holder's behalf to take such actions
as may be necessary or appropriate to effectuate the subordination so provided,
and (c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by such Holder's acceptance hereof, waives all
notice of the acceptance of the subordination provisions contained herein and in
the Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed under its corporate seal.
CENTURA BANKS, INC.
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By:
---------------------------
Name:
Title:
Attest:
- ----------------------------------
[Secretary or Assistant Secretary]
SECTION 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Corporation (herein called the "Securities"), issued and to be issued in one or
more series under the Junior Subordinated Indenture, dated as of June 2, 1997
(herein called the "Indenture"), between the Corporation and State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Corporation, the Trustee, the holders of Senior Indebtedness and the Holders
of the Securities, and of the terms upon which the Securities are, and are to
be, authenticated and delivered. This Security is one of the series designated
on the face hereof [if applicable, insert X, limited in aggregate principal
amount to $ ___________].
All terms used in this Security that are defined in the Indenture [if
applicable, insert X or in the Amended and Restated Trust Agreement, dated as of
June 2, 1997 (as modified, amended or supplemented from time to time, the "Trust
Agreement"), relating to [insert name of Issuer Trust] (the "Issuer Trust")
among the Corporation, as Depositor, the Trustees named therein and the Holders
from time to time of the Trust Securities issued pursuant thereto,] shall have
the meanings assigned to them in the Indenture [if applicable, insert X or the
Trust Agreement, as the case may be].
[If applicable, insert X The Corporation may at any time, at its option, on
or after _______, __ and subject to the terms and conditions of Article XI of
the Indenture, redeem this Security in whole at any time or in part from time to
time, at the following Redemption Prices (expressed as percentages of the
principal amount hereof): If redeemed during the 12-month period beginning
__________,
Year Redemption
---- Price
----------
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and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, together, in the case of any such redemption, with accrued interest [if
applicable, insert X (including any Additional Interest)] to but excluding the
date fixed for redemption.]
[If applicable, insert X In addition, upon the occurrence and during the
continuation of a Tax Event or a Capital Treatment Event in respect of the
Issuer Trust, the Corporation may, at its option, at any time within 90 days of
the occurrence and during the continuation of such Tax Event or Capital
Treatment Event, as the case may be, redeem this Security, in whole but not in
part, subject to the terms and conditions of Article XI of the Indenture, at a
Redemption Price equal to [insert formula].
[If the Security is subject to redemption of any kind, insert X In the
event of redemption of this Security in part only, a new Security or Securities
of this series for the unredeemed portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.]
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Corporation with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Corporation and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Corporation and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Corporation with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security. [If the Security is not a Discount Security, insert X As
provided in and subject to the provisions of the Indenture, if an Event of
Default with respect to the Securities of this series at the time Outstanding
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Outstanding Securities
of this series may declare the principal amount of all the Outstanding
Securities of this series to be due and payable immediately, by a notice in
writing to the Corporation (and to the Trustee if given by Holders) [if
applicable, insert X, provided that, if upon an Event of Default, the Trustee or
such Holders fail to declare the principal of all the Outstanding Securities of
this series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the
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Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee]; and upon
any such declaration the principal of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of such principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture.]
[If the Security is a Discount Security, insert X As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities of this
series may declare an amount of principal of the Outstanding Securities of this
series to be due and payable immediately, by a notice in writing to the
Corporation (and to the Trustee if given by Holders) [if applicable, insert X,
provided that, if upon an Event of Default, the Trustee or such Holders fail to
declare such principal amount of the Outstanding Securities of this series to be
immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the
Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee]. The
principal amount payable upon such acceleration shall be equal to [insert
formula for determining the amount]. Upon any such declaration, such amount of
the principal of and the accrued interest (including any Additional Interest) on
such Securities shall become immediately due and payable, provided that the
payment of such principal and interest (including any Additional Interest) on
such Securities shall remain subordinated to the extent provided in Article XIII
of the Indenture. Upon payment (i) of the amount of principal so declared due
and payable and (ii) of interest on any overdue principal, premium and interest
(in each case to the extent that the payment of such interest shall be legally
enforceable), all of the Corporation's obligations in respect of the payment of
the principal of and premium and interest, if any, on this Security shall
terminate.]
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest [if applicable, insert X (including any Additional Interest)] on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation maintained under Section 10.2 of the Indenture for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Corporation and the Securities Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Securities of this series, of like tenor,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
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The Securities of this series are issuable only in registered form without
coupons in denominations of $_______ and any integral multiple of $_____ in
excess thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Corporation, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SECTION 2.4. Additional Provisions Required in Global Security.
Unless otherwise specified as contemplated by Section 3.1, any Global
Security issued hereunder shall, in addition to the provisions contained in
Sections 2.2 and 2.3, bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
SECTION 2.5. Form of Trustee's Certificate of Authentication.
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The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:
--------------------------------
Authorized Officer
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth or determined in the manner provided in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 3.4, 3.5, 3.6, 3.7, 9.6 or
11.6 and except for any Securities that, pursuant to Section 3.3, are
deemed never to have been authenticated and delivered hereunder); provided,
however, that the authorized aggregate principal amount of such series may
be increased above such amount by a Board Resolution to such effect;
(c) the Person to whom any interest (including any Additional
Interest) on a Security of the series shall be payable, if other than the
Person in whose name that security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest;
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(d) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination
thereof, and any dates on which or circumstances under which, the
Corporation shall have the right to shorten such Stated Maturity or
Maturities;
(e) the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates at which and extent to which
Additional Interest, if any, shall be payable in respect of any Securities
of such series, the date or dates from which any such interest or
Additional Interest shall accrue, the Interest Payment Dates on which such
interest shall be payable, the right, pursuant to Section 3.12 or as
otherwise set forth therein, of the Corporation to defer or extend an
Interest Payment Date, and the Regular Record Date for the interest payable
on any Interest Payment Date or the method by which any of the foregoing
shall be determined;
(f) the place or places where the principal of (and premium, if any)
and interest (including any Additional Interest) on the Securities of such
series shall be payable, the place or places where the Securities of such
series may be presented for registration of transfer or exchange, any
restrictions that may be applicable to any such transfer or exchange in
addition to or in lieu of those set forth herein, and the place or places
where notices and demands to or upon the Corporation in respect of the
Securities of such series may be made;
(g) the period or periods within or the date or dates on which, the
price or prices at which and the terms and conditions upon which, if any,
the Securities of such series may be redeemed, in whole or in part, at the
option of the Corporation, and if other than by a Board Resolution, the
manner in which any election by the Corporation to redeem such Securities
shall be evidenced;
(h) the obligation or the right, if any, of the Corporation to redeem,
repay or purchase the Securities of such series pursuant to any sinking
fund, amortization or analogous provisions, or at the option of a Holder
thereof, and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in
which and the other terms and conditions upon which Securities of the
series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(i) the denominations in which any Securities of such series shall be
issuable, if other than denominations of $1,000 and any integral multiple
thereof;
(j) if other than Dollars, the currency or currencies (including any
currency unit or units) in which the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities of the
series shall be payable, or in which the
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Securities of the series shall be denominated and the manner of determining
the equivalent thereof in Dollars for purposes of the definition of
Outstanding;
(k) the additions, modifications or deletions, if any, in the
covenants of the Corporation set forth herein with respect to the
Securities of such series;
(l) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(m) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount that shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof that shall
be due and payable upon any Maturity other than the Stated Maturity or that
shall be deemed to be Outstanding as of any date prior to the Stated
Maturity (or, in any such case, the manner in which such amount deemed to
be the principal amount shall be determined);
(n) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or
facilitate the issuance of the Securities of such series in bearer form,
registrable or not registrable as to principal, and with or without
interest coupons;
(o) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the
manner in which such amounts will be determined;
(p) if applicable, that any Securities of the series shall be issuable
in whole or in part in the form of one or more Global Securities and, in
such case, the respective Depositories for such Global Securities, the form
of any legend or legends that shall be borne by any such Global Security in
addition to or in lieu of that set forth in Section 2.4 and any
circumstances in addition to or in lieu of those set forth in Section 3.5
in which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in whole or
in part may be registered, in the name or names of Persons other than the
Depositary for such Global Security or a nominee thereof;
(q) the appointment of any Paying Agent or Agents for the Securities
of such series;
(r) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Corporation, and the
additions or changes, if any, to this
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Indenture with respect to the Securities of such series to permit or
facilitate such conversion or exchange;
(s) if such Securities are to be issued to an Issuer Trust, the form
or forms of the Trust Agreement and Guarantee Agreement relating thereto;
(t) if other than as set forth herein, the relative degree, if any, to
which the Securities of the series shall be senior to or be subordinated to
other series of Securities in right of payment, whether such other series
of Securities are Outstanding or not;
(u) the additions, modifications or deletions, if any, in the Events
of Default that apply to any Securities of the series and any change in the
right of the Trustee or the requisite Holders of such Securities to declare
the principal amount thereof due and payable pursuant to Section 5.2 and
(v) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture, except as
permitted by Section 9.1(6)).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided herein or in or pursuant
to such Board Resolution and set forth, or determined in the manner provided, in
such Officers' Certificate or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Corporation and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.
SECTION 3.2. Denominations.
The Securities of each series shall be in registered form without coupons
and shall be issuable in denominations of $1,000 and any integral multiple
thereof, unless otherwise specified as contemplated by Section 3.1.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Corporation by its
Chairman of the Board, one of its Vice Chairman of the Board, its President or
one of its Executive Vice Presidents, under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
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manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities. At any time and from
time to time after the execution and delivery of this Indenture, the Corporation
may deliver Securities of any series executed by the Corporation to the Trustee
for authentication, together with a Corporation Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Corporation
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(1) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms
have been established in conformity with the provisions of this Indenture;
and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Corporation in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Corporation, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issuance of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner that
is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraphs, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Corporation Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraphs at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 3.10, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Corporation may execute, and upon Corporation Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Securities of such series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Corporation will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Corporation designated for that
purpose without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount, bearing such restrictive legends as may be required
by this Indenture and bearing a number not contemporaneously outstanding. Until
so exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
SECTION 3.5. Global Securities.
(a) Each Global Security issued under this Indenture shall be registered in
the name of the Depositary designated by the Corporation for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall constitute a
single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in
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whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Security or a nominee thereof unless (i) such
Depositary advises the Trustee in writing that such Depositary is no longer
willing or able to properly discharge its responsibilities as Depositary with
respect to such Global Security, and the Corporation is unable to locate a
qualified successor, (ii) the Corporation executes and delivers to the Trustee a
Corporation Order stating that the Corporation elects to terminate the
book-entry system through such Depositary or (iii) an Event of Default occurs
and is continuing. Upon the occurrence of any event specified in clause (i),
(ii) or (iii) above, the Securities Registrar shall notify the applicable
Depositary and instruct such Depositary to notify all beneficial owners of
Global Securities of the occurrence of such event and of the availability of the
definitive Securities to beneficial owners of such Securities requesting the
same; provided, however, that no Securities shall be issued in any denomination
less than the minimum authorized denomination therefor.
(c) If any Global Security is to be exchanged in whole for other Securities
or canceled in whole, it shall be surrendered by or on behalf of the applicable
Depositary or its nominee to the Securities Registrar for exchange or
cancellation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, then either (i) such Global Security shall be so surrendered for
exchange or cancellation as provided in this Article III or (ii) the principal
amount thereof shall be reduced, subject to Section 3.6(b)(v), or increased by
an amount equal to the portion thereof to be so exchanged or canceled, or equal
to the principal amount of such other Security to be so exchanged for a
beneficial interest therein, as the case may be, by means of an appropriate
adjustment made on the records of the Securities Registrar with notice to the
Trustee, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct such Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security by the Depositary, accompanied by registration
instructions, the Trustee shall, subject to Section 3.5(b) and as otherwise
provided in this Article III, authenticate and deliver any Securities issuable
in exchange for such Global Security (or any portion thereof) in accordance with
the instructions of the Depositary; provided, however, that no Securities shall
be issued in any denomination less than the minimum authorized denomination
therefor. Neither the Securities Registrar nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be fully protected in relying on, such instructions.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
(e) Securities distributed to holders of Book-Entry Capital Securities (as
defined in the applicable Trust Agreement) upon the dissolution of an Issuer
Trust shall be distributed in the form of one or more Global Securities
registered in the name of a Depositary or its nominee, and
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deposited with the Securities Registrar, as custodian for such Depositary, or
with such Depositary, for credit by the Depositary to the respective accounts of
the beneficial owners of the Securities represented thereby (or such other
accounts as they may direct). Securities distributed to holders of Capital
Securities other than Book-Entry Capital Securities upon the dissolution of an
Issuer Trust shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial interests in such
Securities.
(f) As provided in Section 3.9, the Depositary for a Global Security or its
nominee, as the registered owner of a Global Security, shall be the Holder of
such Global Security for all purposes under this Indenture and the Securities,
and owners of beneficial interests in a Global Security shall hold such
interests pursuant to the Applicable Procedures. The Securities Registrar and
the Trustee shall be entitled to deal with the Depositary for such Global
Security for all purposes of this Indenture relating to the Global Security
(including the payment of the principal amount of (and premium, if any) and
interest (including Additional Interest) on such Global Security and the giving
of instructions or directions by or to beneficial owners of the Securities
represented thereby) as the sole Holder of the Securities represented thereby
and shall have no obligation to such beneficial owners. Neither the Corporation,
the Trustee nor the Securities Registrar shall have any liability in respect of
any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Security shall
be exercised only through the Depositary for such Global Security and shall be
limited to those established by law, the Applicable Procedures and agreements
between such beneficial owners and the Depositary and/or its Agent Members.
SECTION 3.6. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends.
(a) The Corporation shall cause to be kept at the Corporate Trust Office of
the Trustee a register or registers (the "Securities Register") in which the
registrar and transfer agent with respect to the Securities (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Securities and of transfers and exchanges of
Securities as herein provided. The Trustee is hereby appointed Securities
Registrar for the purpose of registering Securities and transfers and exchanges
of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Corporation designated for that purpose, the Corporation shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of like tenor and aggregate principal
amount, bearing such restrictive legends as may be required by this Indenture
and bearing a number not contemporaneously outstanding.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount, bearing
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such restrictive legends as may be required by this Indenture and bearing a
number not contemporaneously outstanding, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Corporation shall execute, and the Trustee shall authenticate
and deliver, the Securities that the Holder making the exchange is entitled to
receive.
All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Corporation, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
Neither the Corporation, the Trustee nor the Securities Registrar shall be
required, pursuant to the provisions of this Section 3.6, (i) to issue, register
the transfer of or exchange any Security of any series during a period beginning
at the opening of business 15 days before the day of selection for redemption of
Securities of that series pursuant to Article XI and ending at the close of
business on the day of mailing of the notice of redemption, or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except, in the case of any such Security to be redeemed in part, any
portion thereof not to be redeemed.
Every Security presented or surrendered for registration of transfer or
exchange shall (if so required by the Corporation or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation and the Securities Registrar, duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities, but the Corporation may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Securities.
(b) Notwithstanding any other provision of this Indenture, transfers and
exchanges of Securities and beneficial interests in a Global Security shall be
made only in accordance with this Section 3.6(b).
(i) Non-Global Security to Global Security. If the Holder of a
Security (other than a Global Security) wishes at any time to transfer all
or any portion of such Security to a Person who wishes to take delivery
thereof in the form of a beneficial interest in a Global Security, such
transfer may be effected only in accordance with the provisions of this
Clause (b)(i) and subject to the Applicable Procedures. Upon receipt by the
Securities Registrar of (A) such Security as provided in Section 3.6(a) and
instructions satisfactory to the Securities Registrar directing that a
beneficial interest in the Global Security in a specified principal amount
not greater than the principal amount of such Security be credited to a
specified Agent Member's account and (B) if the Security to be transferred
in whole or in part is a Restricted Security, a Restricted Securities
Certificate duly executed by such Holder or such Holder's attorney duly
authorized in writing, then the
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Securities Registrar shall cancel such Security (and issue a new Security
in respect of any untransferred portion thereof) as provided in Section
3.6(a) and increase the aggregate principal amount of the Global Security
by the specified principal amount so transferred as provided as provided in
Section 3.5(c).
(ii) Non-Global Security to Non-Global Security. A Security that is
not a Global Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Security that is not a Global
Security as provided in Section 3.6(a), provided that if the Security to be
transferred in whole or in part is a Restricted Security, the Securities
Registrar shall have received a Restricted Securities Certificate duly
executed by the transferor Holder or such Holder's attorney duly authorized
in writing.
(iii) Global Security to Non-Global Security. A beneficial interest in
a Global Security may be exchanged for a Security that is not a Global
Security as provided in Section 3.5.
(iv) Certain Initial Transfers of Non-Global Securities. In the case
of Securities initially issued other than in global form, an initial
transfer or exchange of such Securities that does not involve any change in
beneficial ownership may be made to an Institutional Accredited Investor or
Investors as if such transfer or exchange were not an initial transfer or
exchange; provided that written certification shall be provided by the
transferee and transferor of such Securities to the Securities Registrar
that such transfer or exchange does not involve a change in beneficial
ownership.
(v) Limitations Relating to Principal Amount. Notwithstanding any
other provision of this Indenture, Securities or portions thereof may be
transferred or exchanged only in principal amounts of not less than the
minimum authorized denomination therefor, and only if, following such
transfer or exchange, each Holder would hold Securities with a principal
amount of not less than such minimum authorized denomination. Any transfer,
exchange or other disposition of Securities in contravention of this
Section 3.6(b)(v) shall be deemed to be void and of no legal effect
whatsoever, any such transferee shall be deemed not to be the Holder or
owner of any beneficial interest in such Securities for any purpose,
including but not limited to the receipt of interest (including any
Additional Interest) payable on such Securities, and such transferee shall
be deemed to have no interest whatsoever in such Securities.
(c) Except as set forth below, all Securities shall bear a Restricted
Securities Legend:
(i) subject to the following Clauses of this Section 3.6(c), a
Security or any portion thereof that is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Restricted Securities Legend;
(ii) subject to the following Clauses of this Section 3.6(c), a new
Security that is
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not a Global Security and is issued in exchange for another Security
(including a Global Security) or any portion thereof, upon transfer or
otherwise, shall bear a Restricted Securities Legend;
(iii) a new Security that does not bear a Restricted Securities Legend
may be issued in exchange for or in lieu of a Restricted Security or any
portion thereof that bears such a legend if, in the Corporation's sole
judgment, placing such a legend upon such new Security is not and will not
be necessary to ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the written direction of the
Corporation in the form of an Officers' Certificate, shall authenticate and
deliver such a new Security as provided in this Article III;
(iv) any Securities that are sold or otherwise disposed of pursuant to
an effective registration statement under the Securities Act such that such
Securities are freely transferable by the holders thereof shall not bear a
Restricted Securities Legend;
(v) notwithstanding the foregoing provisions of this Section 3.6(c), a
Successor Security of a Security that does not bear a Restricted Securities
Legend shall not bear such form of legend unless, in the Corporation's sole
judgement such Successor Security is a "restricted security" within the
meaning of Rule 144 under the Securities Act, in which case the Trustee, at
the written direction of the Corporation in the form of an Officers'
Certificate, shall authenticate and deliver a new Security bearing a
Restricted Securities Legend in exchange for such Successor Security as
provided in this Article III; and
(vi) Securities distributed to a holder of Capital Securities upon
dissolution of an Issuer Trust shall bear a Restricted Securities Legend if
the Capital Securities so held bear a similar legend.
The Corporation shall inform the Trustee in writing of the effective date
of any registration statement registering any Securities under the Securities
Act. The Trustee shall not be liable for any action taken or omitted to be taken
by it in good faith in accordance with the aforementioned registration
statement.
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Corporation or the Trustee to
save each of them harmless, the Corporation shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same series,
of like tenor and aggregate principal amount, bearing the same legends, and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Corporation and to the Trustee (i)
evidence to their
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satisfaction of the destruction, loss or theft of any Security, and (ii) such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Corporation or the Trustee that such
Security has been acquired by a bona fide purchaser, the Corporation shall
execute and upon its request the Trustee shall authenticate and deliver, in lieu
of any such destroyed, lost or stolen Security, a new Security of the same
series, of like tenor and aggregate principal amount, bearing the same legends
as such destroyed, lost or stolen Security, and bearing a number not
contemporaneously outstanding.
If any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Corporation in its discretion may, instead
of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.7, the
Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to the same benefits of this Indenture equally and proportionately with
any and all other Securities of the same series duly issued hereunder.
The provisions of this Section 3.7 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights
Preserved.
Interest (including any Additional Interest) on any Security of any series
that is payable, and is punctually paid or duly provided for, on any Interest
Payment Date, shall be paid to the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest in respect of Securities of such series,
except that, unless otherwise provided in the Securities of such series,
interest (including any Additional Interest) payable on the Stated Maturity of
the principal of a Security shall be paid to the Person to whom principal is
paid. The initial payment of interest on any Security of any series that is
issued between a Regular Record Date and the related Interest Payment Date shall
be payable as provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the related series of Securities.
Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be payable
to the registered Holder on the
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relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Corporation, at its election in each case,
as provided in Clause (1) or (2) below:
(1) The Corporation may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series in
respect of which interest is in default (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Corporation shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each Security
and the date of the proposed payment, and at the same time the Corporation
shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as
provided in this Clause (1). Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest, which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Corporation of such Special Record Date and, in the name and at the
expense of the Corporation, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of a Security of such series at
the address of such Holder as it appears in the Securities Register not
less than 10 days prior to such Special Record Date. The Trustee may, in
its discretion, in the name and at the expense of the Corporation, cause a
similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, but such
publication shall not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor
Securities) are registered on such Special Record Date and shall no longer
be payable pursuant to the following Clause (2).
(2) The Corporation may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of the series in respect of
which interest is in default may be listed and, upon such notice as may be
required by such exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Corporation to the Trustee of the
proposed payment pursuant to this Clause (2), such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.8, each Security
delivered under this
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Indenture upon transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to accrue, that were
carried by such other Security.
SECTION 3.9. Persons Deemed Owners.
The Corporation, the Trustee and any agent of the Corporation or the
Trustee shall treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
(subject to Section 3.8) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Corporation,
the Trustee and any agent of the Corporation or the Trustee as the owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Corporation, the Trustee or any agent of the
Corporation or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
SECTION 3.10. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Corporation
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Corporation may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section 3.10,
except as expressly permitted by this Indenture. All canceled Securities shall
be destroyed by the Trustee and the Trustee shall deliver to the Corporation a
certificate of such destruction.
SECTION 3.11. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series for any partial period
shall be computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in any partial month in such period, and interest
on the Securities of each series for a full period shall be computed by dividing
the rate per annum by the number of interest periods that together constitute a
full twelve months.
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SECTION 3.12. Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, the Corporation shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period"), during which
Extension Periods the Corporation shall, if so specified as contemplated by
Section 3.1, have the right to make partial payments of interest (including any
Additional Interest) on any Interest Payment Date. No Extension Period shall end
on a date other than an Interest Payment Date. At the end of any such Extension
Period the Corporation shall pay all interest then accrued and unpaid on the
Securities (together with Additional Interest thereon, if any, at the rate
specified for the Securities of such series, to the extent permitted by
applicable law); provided, however, that no Extension Period shall extend beyond
the Stated Maturity of the principal of the Securities of such series; and
provided further, however that during any such Extension Period, the Corporation
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Corporation's capital stock, or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Securities of such series (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Corporation
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of an exchange or conversion
of any class or series of the Corporation's capital stock (or any capital stock
of a Subsidiary of the Corporation) for any class or series of the Corporation's
capital stock or of any class or series of the Corporation's indebtedness for
any class or series of the Corporation's capital stock, (c) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in connection
with any Rights Plan, or the issuance of rights, stock or other property under
any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or
(e) any dividend in the form of stock, warrants, options or other rights where
the dividend stock or the stock issuable upon exercise of such warrants, options
or other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
such Extension Period, the Corporation may further defer the payment of
interest, provided that no Event of Default has occurred and is continuing, and
provided further that no Extension Period shall exceed the period or periods
specified in such Securities, extend beyond the Stated Maturity of the principal
of such Securities or end on a date other than an Interest Payment Date. Upon
the termination of any such Extension Period and upon the payment of all accrued
and unpaid interest (including any
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Additional Interest) then due on any Interest Payment Date, the Corporation may
elect to begin a new Extension Period, subject to the above conditions. No
interest (including any Additional Interest) shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Additional Interest as and to the extent as may be specified as
contemplated by Section 3.1. The Corporation shall give the Holders of the
Securities of such series and the Trustee notice of its election to begin any
such Extension Period at least one Business Day prior to the next succeeding
Interest Payment Date on which interest on Securities of such series would be
payable but for such deferral or, with respect to any Securities of a series
issued to an Issuer Trust, so long as any such Securities are held by such
Issuer Trust, at least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Capital Securities of such Issuer
Trust would be payable but for such deferral, and (ii) the date on which the
Property Trustee of such Issuer Trust is required to give notice to holders of
such Capital Securities of the record date or the date such Distributions are
payable.
The Trustee shall promptly give notice of the Corporation's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.
SECTION 3.13. Right of Set-Off.
With respect to the Securities of a series initially issued to an Issuer
Trust, notwithstanding anything to the contrary herein, the Corporation shall
have the right to set off any payment it is otherwise required to make in
respect of any such Security to the extent the Corporation has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement relating to such Security or to a holder of Capital
Securities pursuant to an action undertaken under Section 5.8 of this Indenture.
SECTION 3.14. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Corporation and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States federal, state and local tax purposes it is intended that such
Security constitutes indebtedness.
SECTION 3.15. Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, the Corporation shall have the right to
shorten the Stated Maturity of the principal of the Securities of such series at
any time to any date.
SECTION 3.16. CUSIP Numbers.
The Corporation in issuing the Securities may use "CUSIP" numbers (if then
generally
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in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption and other similar or related materials as a convenience to Holders;
provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Corporation Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 3.7 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Corporation and
thereafter repaid to the Corporation or discharged from such trust, as
provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year of the date of deposit, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Corporation,
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and the Corporation, in the case of subclause (B)(i), (ii) or (iii) above,
has deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which the
Securities of such series are payable sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest
(including any Additional Interest) to the date of such deposit (in the
case of Securities that have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Corporation has paid or caused to be paid all other sums
payable hereunder by the Corporation; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Corporation to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of Clause
(1) of this Section 4.1, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Corporation acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest (including any Additional Interest) for the payment of which
such money or obligations have been deposited with or received by the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
except as may be specified pursuant to Section 3.1:
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(1) default in the payment of any interest (including any Additional
Interest) upon any Security of that series when it becomes due and payable,
and continuance of such default for a period of 30 days (subject to the
deferral of any due date in respect of any interest (including Additional
Interest) in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) failure on the part of the Corporation duly to observe or perform
any other of the covenants or agreements on the part of the Corporation in
the Securities of that series or in this Indenture for a period of 90 days
after the date on which written notice of such failure, requiring the
Corporation to remedy the same, shall have been given to the Corporation by
the Trustee by registered or certified mail or to the Corporation and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series; or
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Corporation a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Corporation under the Bankruptcy Code or any other similar applicable
Federal or State law, which decree or order shall have continued
undischarged and unstayed for a period of 60 days; or the entry of a decree
or order of a court having jurisdiction in the premises for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Corporation or of its property, or for the winding up or
liquidation of its affairs, which decree or order shall have continued
undischarged and unstayed for a period of 60 days; or
(5) the commencement by the Corporation of voluntary proceedings to be
adjudicated a bankrupt, or the consent by the Corporation to the filing of
a bankruptcy proceeding against it, or the filing by the Corporation of a
petition or answer or consent seeking reorganization under the Bankruptcy
Code or any other similar Federal or State law, or the consent by the
Corporation to the filing of any such petition, or the consent by the
Corporation to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of its property, or the
making by the Corporation of an assignment for the benefit of creditors, or
the admission by the Corporation in writing of its inability to pay its
debts generally as they become due; or
(6) any other Event of Default provided with respect to Securities of
that series.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing,
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then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities of that series may
declare the principal amount (or, if the Securities of that series are Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Securities of that series to be due and payable
immediately, by a notice in writing to the Corporation (and to the Trustee if
given by Holders), provided that, in the case of the Securities of a series
issued to an Issuer Trust, if, upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of such series fail to declare the principal of all the Outstanding Securities
of such series (or specified portion thereof) to be immediately due and payable,
the holders of at least 25% in aggregate Liquidation Amount (as defined in the
related Trust Agreement) of the related series of Capital Securities issued by
such Issuer Trust then outstanding shall have the right to make such declaration
by a notice in writing to the Corporation and the Trustee; and upon any such
declaration such principal amount (or specified portion thereof) of and the
accrued interest (including any Additional Interest) on all the Securities of
such series shall become immediately due and payable. If an Event of Default
specified in Section 5.1(4) or 5.1(5) with respect to Securities of any series
at the time Outstanding occurs, the principal amount of all the Securities of
such series (or, if the Securities of such series are Discount Securities, such
portion of the principal amount of such Securities as may be specified by the
terms of that series) and the accrued interest (including any Additional
Interest) on all the Securities of such series shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable. Payment of principal (and premium, if any) and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII notwithstanding that such
amount shall become immediately due and payable as herein provided.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article V provided, the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series, by written notice to the Corporation
and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Corporation has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest on all Securities of
such series,
(B) any accrued Additional Interest on all Securities of such
series,
(C) the principal of (and premium, if any, on) any Securities of
such series that have become due otherwise than by such declaration of
acceleration, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
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(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
that has become due solely by such acceleration, have been cured or waived
as provided in Section 5.13.
In the case of Securities of a series initially issued to an Issuer Trust,
if the Holders of such Securities fail to annul such declaration and waive such
default, the holders of a Majority in Liquidation Amount of the Capital
Securities (as defined in the related Trust Agreement) issued by such Issuer
Trust shall also have the right to rescind and annul such declaration and its
consequences by written notice to the Corporation and the Trustee, subject to
the satisfaction of the conditions set forth in Clauses (1) and (2) above of
this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Corporation covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security of any series when such
interest becomes due and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Corporation will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any), including any sinking
fund payment or analogous obligations, and interest (including any Additional
Interest), and, in addition thereto, all amounts owing to the Trustee under
Section 6.7.
If the Corporation fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Corporation or any other obligor upon such Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Corporation or any other obligor upon the Securities,
wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall
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deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Corporation or any other obligor upon the Securities
or the property of the Corporation or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Corporation for the payment of overdue
principal (or premium, if any) or interest (including any Additional
Interest)) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(1) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest (including any Additional Interest)
owing and unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable and to take any
and all actions as are authorized under the Trust Indenture Act in
order to have the claims of the Holders and any predecessor to the
Trustee under Section 6.7 allowed in any such judicial proceedings;
and
(2) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any
such claims and to distribute the same in accordance with Section 5.6;
and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar
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committee.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, subject to
Article XIII and after provision for the payment of all the amounts owing the
Trustee and any predecessor Trustee under Section 6.7, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article V shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then
due and unpaid upon Securities of such series for principal (and premium,
if any) and interest (including any Additional Interest) in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such series of Securities for principal (and premium, if
any) and interest (including any Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities of any series shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture or for the appointment of a receiver, assignee, trustee,
liquidator or sequestrator (or other similar official) or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
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(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of that series shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium
and Interest; Direct Action by Holders of Capital Securities.
Notwithstanding any other provision in this Indenture, the Holder of any
Security of any series shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Sections 3.8 and 3.12) interest (including any Additional Interest)
on such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder. In the case of Securities of a series issued
to an Issuer Trust, any registered holder of the series of Capital Securities
issued by such Issuer Trust shall have the right, upon the occurrence of an
Event of Default described in Section 5.1(1) or 5.1(2), to institute a suit
directly against the Corporation for enforcement of payment to such holder of
principal of (premium, if any) and (subject to Sections 3.8 and 3.12) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount (as defined in the related Trust
Agreement) of such Capital Securities held by such holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Capital Securities issued by
any Issuer Trust has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely
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to the Trustee, such Holder or such holder of Capital Securities, then and in
every such case the Corporation, the Trustee, such Holders and such holder of
Capital Securities shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee, such Holder and such holder
of Capital Securities shall continue as though no such proceeding had been
instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.7, no right
or remedy herein conferred upon or reserved to the Trustee or the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Capital Security to exercise any right or remedy accruing upon any
Event of Default with respect to the Securities of the related series shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Capital
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Capital
Securities, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall,
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in good faith, determine that the proceeding so directed would be unjustly
prejudicial to the Holders not joining in any such direction or would
involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series affected thereby and, in the case of
any Securities of a series initially issued to an Issuer Trust, the holders of a
Majority in Liquidation Amount of the Capital Securities (as defined in the
related Trust Agreement) issued by such Issuer Trust may waive any past default
or Event of Default hereunder and its consequences with respect to such series
except a default:
(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series
(unless such default has been cured and the Corporation has paid to or
deposited with the Trustee a sum sufficient to pay all matured installments
of interest (including any Additional Interest) and all principal of (and
premium, if any, on) all Securities of that series due otherwise than by
acceleration), or
(2) in respect of a covenant or provision hereof that under Article IX
cannot be modified or amended without the consent of each Holder of any
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series or, in the case of a waiver by holders of Capital
Securities issued by such Issuer Trust, by the holders of all the Capital
Securities issued by such Issuer Trust.
Upon any such waiver, such default or Event of Default shall cease to
exist, and any default or Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security, by
its acceptance thereof, shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
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Trustee, to any suit instituted by any Holder or group of Holders holding in the
aggregate more than 10% in aggregate principal amount of the Outstanding
Securities of any series, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security on or after the respective
Stated Maturities expressed in such Security.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Corporation covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Corporation (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions that by any provisions hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
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(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section 6.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of Holders pursuant to Section 5.12 relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of a series.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.1.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided further,
however, that, in the case of any default of the character specified in Section
5.1(3), no such notice to Holders of Securities of such series shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section 6.2, the term "default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default with respect to
Securities of such series.
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SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Corporation mentioned herein shall be
sufficiently evidenced by a Corporation Request or Corporation Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in complying with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of
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authentication, shall be taken as the statements of the Corporation, and neither
the Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Corporation of the Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law (including the Trust Indenture
Act). The Trustee shall be under no liability for interest on any money received
by it hereunder except as otherwise agreed with the Corporation.
SECTION 6.7. Compensation and Reimbursement.
The Corporation agrees
(1) to pay to the Trustee from time to time such reasonable
compensation for all services rendered by it hereunder in such amounts as
the Corporation and the Trustee shall agree from time to time (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence, wilful misconduct or bad faith, arising out of or in connection
with the acceptance or administration of this trust or the performance of
its duties hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. This indemnification
shall survive the termination of this
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Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or 5.1(5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code.
SECTION 6.8. Disqualification; Conflicting Interests.
(a) The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 310(b).
(b) The Trust Agreement and the Guarantee Agreement with respect to each
Issuer Trust shall be deemed to be specifically described in this Indenture for
the purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory thereof or the
District of Columbia, authorized under such laws to exercise corporate
trust powers and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
in either case having at the time of appointment securities rated in one of the
three highest rating categories by a nationally recognized statistical rating
organization and a combined capital and surplus of at least $50,000,000. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9 and to the extent permitted by the Trust
Indenture Act, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article VI. Neither the Corporation nor any Person directly or indirectly
controlling, controlled
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by or under common control with the Corporation shall serve as Trustee for the
Securities of any series issued hereunder.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Corporation. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in aggregate principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Corporation.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Corporation or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Corporation or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Corporation, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to the Securities of all
series issued hereunder, or (ii) subject to Section 5.14, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
such Holder and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to the Securities of
all series issued hereunder and the appointment of a successor Trustee or
Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Corporation, by a Board Resolution,
shall promptly appoint a successor Trustee with
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respect to the Securities of that or those series. If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of such series delivered to the Corporation and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee with respect to the
Securities of such series and supersede the successor Trustee appointed by the
Corporation. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Corporation or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who has been
a bona fide Holder of a Security of such series for at least six months may,
subject to Section 5.14, on behalf of such Holder and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(f) The Corporation shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Corporation and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Corporation or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Corporation,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or
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those series as to which the retiring Trustee is not retiring shall continue to
be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Corporation or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article VI,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. If any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and if any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Corporation.
If and when the Trustee shall be or become a creditor of the Corporation
(or any other
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obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the
Corporation (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities, which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 3.7, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or to the Trustee's certificate of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent or the Authenticating Agent's certificate of authentication
set forth for this Section 6.14. Each Authenticating Agent shall be acceptable
to the Corporation and shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any State or
Territory thereof or the District of Columbia, authorized under such laws to act
as Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 6.14 and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section 6.14,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent, shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
qualified and eligible under this Section 6.14, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent, which shall be acceptable to the Corporation and shall
give notice of such appointment in the manner provided
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in Section 1.6 to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant to
this Section 6.14, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within mentioned Indenture.
Dated: ___________________
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:________________________________,
As Authenticating Agent
By:________________________________,
Authorized Officer
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders.
The Corporation will furnish or cause to be furnished to the Trustee:
(a) semi-annually, on or before June 30 and December 31 of each year,
a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of a date not more than 15 days prior to
the delivery thereof, and
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(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Corporation of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished,
in each case to the extent such information is in the possession or control of
the Corporation and has not otherwise been received by the Trustee in its
capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided in the Trust
Indenture Act.
(c) Every Holder of Securities, by its acceptance thereof, agrees with the
Corporation and the Trustee that neither the Corporation nor the Trustee nor any
agent of either of them shall be held accountable by reason of the disclosure of
information as to the names and addresses of the Holders made pursuant to the
Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than January 31 in each calendar
year, commencing with the first January 31 after the first issuance of
Securities under this Indenture.
(c) If this Indenture shall have been qualified under the Trust Indenture
Act, a copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed and also with the Commission. The Corporation will notify
the Trustee when any Securities are listed on any securities exchange.
SECTION 7.4. Reports by Corporation.
The Corporation shall file with the Trustee and with the Commission, and
transmit to the Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust
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Indenture Act; provided that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same is
required to be filed with the Commission. At any time when the Corporation is
not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a
Holder or beneficial owner of a Security, the Corporation shall promptly furnish
Rule 144A Information, or cause such information to be furnished, to such Holder
or beneficial owner or to a prospective purchaser of such Security designated by
such Holder or beneficial owner in order to permit compliance by such Holder or
beneficial owner with Rule 144A under the Securities Act in connection with the
resale of such Security by such Holder or beneficial owner; provided, however,
that the Corporation shall not be required to furnish such information at any
time to a prospective purchaser located outside the United States who is not a
"U.S. person" within the meaning of Regulation S under the Securities Act. The
Corporation also shall comply with the other provisions of Trust Indenture Act
Section 314(a), provided, however, that the Corporation shall be required,
pursuant to this Section 7.4, to provide any document, report or other
information to the Commission only if this Indenture shall have been qualified
under the Trust Indenture Act.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms.
The Corporation shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Corporation or convey, transfer or lease its properties and assets substantially
as an entirety to the Corporation, unless:
(1) if the Corporation shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the corporation formed by such consolidation
or into which the Corporation is merged or the Person that acquires by
conveyance or transfer, or that leases, the properties and assets of the
Corporation substantially as an entirety shall be a corporation,
partnership or trust organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on all the Securities of every series
and the performance of every covenant of this Indenture on the part of the
Corporation to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and
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no event that, after notice or lapse of time, or both, would constitute an
Event of Default, shall have occurred and be continuing; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture comply with this Article VIII and that all
conditions precedent herein provided for relating to such transaction have
been complied with; and the Trustee, subject to Section 6.1, may rely upon
such Officers' Certificate and Opinion of Counsel as conclusive evidence
that such transaction complies with this Section 8.1.
SECTION 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Corporation with or into any other
Person, or any conveyance, transfer or lease by the Corporation of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1, the successor corporation formed by such consolidation or into
which the Corporation is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Corporation under this Indenture with the same effect as if
such successor Person had been named as the Corporation herein; and in the event
of any such conveyance, transfer or lease, the Corporation shall be discharged
from all obligations and covenants under this Indenture and the Securities.
Such successor Person may cause to be executed, and may issue either in its
own name or in the name of the Corporation, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities that previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities that such successor Person
thereafter shall cause to be executed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture.
In case of any such consolidation, merger, conveyance, transfer or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
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SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Corporation, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Corporation,
and the assumption by any such successor of the covenants of the
Corporation contained herein and in the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon
the Corporation; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Corporation for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of the series
specified) or to surrender any right or power herein conferred upon the
Corporation; or
(5) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events
of Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of the series specified); or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall (a) become effective
only when there is no Security Outstanding of any series created prior to
the execution of such supplemental indenture that is entitled to the
benefit of such provision or (b) not apply to any Outstanding Securities;
or
(7) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
to this clause (7) shall not adversely affect the interest of the Holders
of Securities of any series in any material respect or, in the case of the
Securities of a series issued to an Issuer Trust and for so long as any of
the corresponding series of Capital Securities issued by such Issuer Trust
shall remain outstanding, the holders of such Capital Securities; or
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(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Corporation and
the Trustee, the Corporation, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Securities of such series under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security of each series affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest (including any Additional Interest) on, any Security, or reduce
the principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of principal of a
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2, or change the
place of payment where, or the coin or currency in which, any Security or
interest (including any Additional Interest) thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in aggregate principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section 9.2, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby;
provided further, however, that, in the case of Securities of a series issued to
an Issuer Trust, so long as any of the corresponding series of Capital
Securities issued by such Issuer Trust remains outstanding, (i) no such
amendment shall be made that adversely affects the holders of such
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Capital Securities in any material respect, and no termination of this Indenture
shall occur, and no waiver of any Event of Default or compliance with any
covenant under this Indenture shall be effective, without the prior consent of
the holders of at least a Majority in Liquidation Amount of such Capital
Securities (as defined in the related Trust Agreement) unless and until the
principal of (and premium, if any, on) the Securities of such series and all
accrued and (subject to Section 3.12) unpaid interest (including, subject to
Section 3.12, any Additional Interest) thereon have been paid in full, and (ii)
no amendment shall be made to Section 5.8 of this Indenture that would impair
the rights of the holders of Capital Securities issued by any Issuer Trust
provided therein without the prior consent of the holders of each such Capital
Security then outstanding unless and until the principal of (and premium, if
any, on) the Securities of such series and all accrued and (subject to Section
3.12) unpaid interest (including, subject to Section 3.12, any Additional
Interest) thereon have been paid in full.
A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities or any corresponding
series of Capital Securities of an Issuer Trust that holds the Securities of any
series, or that modifies the rights of the Holders of Securities of such series
or holders of such Capital Securities of such corresponding series with respect
to such covenant or other provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series or holders
of Capital Securities of any other series.
It shall not be necessary for any Act of Holders under this Section 9.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent herein provided for relating to such action have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
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Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required by
the Corporation, bear a notation in form approved by the Corporation as to any
matter provided for in such supplemental indenture. If the Corporation shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Corporation, to any such supplemental indenture may be prepared
and executed by the Corporation and authenticated and delivered by the Trustee
in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Corporation covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest (including any Additional Interest) on the Securities of
that series in accordance with the terms of such Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Corporation will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Corporation in respect of the Securities of that series and this
Indenture may be served. The Corporation initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The
Corporation will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Corporation shall fail
to maintain such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Corporation
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Corporation may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such
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designation or rescission shall in any manner relieve the Corporation of its
obligation to maintain an office or agency in each Place of Payment for
Securities of any series for such purposes. The Corporation will give prompt
written notice to the Trustee of any such designation and any change in the
location of any such office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
If the Corporation shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (or premium, if any) or interest (including any Additional
Interest) on any of the Securities of such series, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal (or premium, if any) or interest (including any Additional Interest)
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
Whenever the Corporation shall have one or more Paying Agents, it will,
prior to 10:00 a.m., New York City time, on each due date of the principal of
(or premium, if any) or interest (including any Additional Interest) on any
Securities, deposit with a Paying Agent a sum sufficient to pay the amount so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such amount, and (unless such Paying Agent is the Trustee) the
Corporation will promptly notify the Trustee of its failure so to act.
The Corporation will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities of a series in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided;
(2) give the Trustee notice of any default by the Corporation (or any
other obligor upon such Securities) in the making of any payment of
principal (or premium, if any) or interest (including any Additional
Interest) in respect of any Security of any series;
(3) at any time during the continuance of any default with respect to
a series of Securities, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying Agent with
respect to such series; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Corporation may at any time, for the purpose of obtaining the
satisfaction and
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discharge of this Indenture or for any other purpose, pay, or by Corporation
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Corporation or such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by the Corporation or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Corporation in trust for the payment of the principal of (or premium, if
any) or interest (including any Additional Interest) on any Security and
remaining unclaimed for two years after such principal (or premium, if any) or
interest (including any Additional Interest) has become due and payable shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Corporation Request to the
Corporation, or (if then held by the Corporation) shall (unless otherwise
required by mandatory provision of applicable escheat or abandoned or unclaimed
property law) be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Corporation
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Corporation as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Corporation cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Corporation.
SECTION 10.4. Statement as to Compliance.
The Corporation shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Corporation ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Corporation is in default
in the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Corporation shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. For the purpose of this Section
10.4, compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture.
SECTION 10.5. Waiver of Certain Covenants.
Subject to the rights of holders of Capital Securities specified in Section
9.2, if any, the Corporation may omit in any particular instance to comply with
any covenant or condition provided pursuant to Section 3.1, 9.1(3) or 9.1(4)
with respect to the Securities of any series, if
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before or after the time for such compliance the Holders of at least a majority
in aggregate principal amount of the Outstanding Securities of such series
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Corporation in respect of any such covenant or condition shall remain in
full force and effect.
SECTION 10.6. Additional Sums.
In the case of the Securities of a series initially issued to an Issuer
Trust, so long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) an
Issuer Trust is the Holder of all of the Outstanding Securities of such series,
and (ii) a Tax Event has occurred and is continuing in respect of such Issuer
Trust, the Corporation shall pay to such Issuer Trust (or its permitted
successor under the related Trust Agreement) for so long as such Issuer Trust
(or its permitted successor) is the registered holder of the Outstanding
Securities of such series, together with any payment of principal of (or
premium, if any) or interest (including any Additional Interest) on such
Securities, such additional sums as may be necessary in order that the amount of
Distributions (including any Additional Amounts (as defined in such Trust
Agreement)) then payable by such Issuer Trust in respect of the related Capital
Securities and Common Securities in accordance with the terms thereof shall not
be reduced as a result of any Additional Taxes arising from such Tax Event (the
"Additional Sums"). Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of (or premium, if any) or
interest (including any Additional Interest) on the Securities, such mention
shall be deemed to include mention of the payments of the Additional Sums
provided for in this paragraph to the extent that, in such context, Additional
Sums are, were or would be payable in respect thereof pursuant to the provisions
of this paragraph, and any express mention of the payment of Additional Sums (if
applicable) in any provision hereof shall not be construed as excluding
Additional Sums in those provisions hereof where such express mention is not
made; provided, however, that the deferral of the payment of interest pursuant
to Section 3.12 or the terms of the Securities shall not defer the payment of
any Additional Sums that may be due and payable.
SECTION 10.7. Additional Covenants.
The Corporation covenants and agrees with each Holder of Securities of each
series that it shall not, and it shall not permit any Subsidiary of the
Corporation to, (x) declare or pay any dividends or distributions on, or redeem
purchase, acquire or make a liquidation payment with respect to, any shares of
the Corporation's capital stock, or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Securities of such series (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Corporation
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or
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consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Corporation (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of an exchange or conversion of any
class or series of the Corporation's capital stock (or any capital stock of a
Subsidiary of the Corporation) for any class or series of the Corporation's
capital stock or of any class or series of the Corporation's indebtedness for
any class or series of the Corporation's capital stock, (c) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in connection
with any Rights Plan, or the issuance of rights, stock or other property under
any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or
(e) any dividend in the form of stock, warrants, options or other rights where
the dividend stock or the stock issuable upon exercise of such warrants, options
or other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock) if at such time (i) there shall
have occurred any event (A) of which the Corporation has actual knowledge that
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default with respect to the Securities of such series, and (B) which
the Corporation shall not have taken reasonable steps to cure, (ii) if the
Securities of such series are held by an Issuer Trust, the Corporation shall be
in default with respect to its payment of any obligations under the Guarantee
Agreement relating to the Capital Securities issued by such Issuer Trust, or
(iii) the Corporation shall have given notice of its election to begin an
Extension Period with respect to the Securities of such series as provided
herein and shall not have rescinded such notice, or such Extension Period, or
any extension thereof, shall be continuing.
The Corporation also covenants with each Holder of Securities of a series
issued to an Issuer Trust (i) to hold, directly or indirectly, 100% of the
Common Securities of such Issuer Trust, provided that any permitted successor of
the Corporation hereunder may succeed to the Corporation's ownership of such
Common Securities, (ii) as holder of such Common Securities, not to voluntarily
terminate, wind-up or liquidate such Issuer Trust, other than (a) in connection
with a distribution of the Securities of such series to the holders of the
related Capital Securities in liquidation of such Issuer Trust, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement, and (iii) to use its reasonable efforts, consistent
with the terms and provisions of such Trust Agreement, to cause such Issuer
Trust to continue to be classified as a grantor trust and not to be taxable as a
corporation for United States federal income tax purposes.
SECTION 10.8. Original Issue Discount.
For each year during which any Securities that were issued with original
issue discount are Outstanding, the Corporation shall furnish to each Paying
Agent in a timely fashion such information as may be reasonably requested by
each Paying Agent in order that such Paying Agent may prepare the information
that it is required to report for such year on Internal Revenue Service Forms
1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as
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amended. Such information shall include the amount of original issue discount
includable in income for each $1,000 of principal amount at Stated Maturity of
Securities Outstanding during such year.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities of any series (whether by operation of a sinking
fund or otherwise) as permitted or required by any form of Security issued
pursuant to this Indenture shall be made in accordance with such form of
Security and this Article XI; provided, however, that if any provision of any
such form of Security shall conflict with any provision of this Article XI, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of a series shall be
subject to partial redemption only in integral multiples of $1,000.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Corporation to redeem any Securities shall be evidenced
by or pursuant to a Board Resolution. In case of any redemption at the election
of the Corporation, the Corporation shall, not less than 45 nor more than 60
days prior to the Redemption Date (unless a shorter notice shall be satisfactory
to the Trustee), notify the Trustee and, in the case of Securities of a series
held by an Issuer Trust, the Property Trustee under the related Trust Agreement,
of such date and of the principal amount of Securities of the applicable series
to be redeemed and provide the additional information required to be included in
the notice or notices contemplated by Section 11.4; provided that in the case of
any series of Securities initially issued to an Issuer Trust, for so long as
such Securities are held by such Issuer Trust, such notice shall be given not
less than 45 nor more than 75 days prior to such Redemption Date (unless a
shorter notice shall be satisfactory to the Property Trustee under the related
Trust Agreement). In the case of any redemption of Securities prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities, the Corporation shall furnish the Trustee with an Officers'
Certificate and an Opinion of Counsel evidencing compliance with such
restriction.
SECTION 11.3. Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
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provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.
The Trustee shall promptly notify the Corporation in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed.
SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at the address of such Holder as it
appears in the Securities Register, provided that in the case of any series of
Securities initially issued to an Issuer Trust, for so long as such Securities
are held by such Issuer Trust, such notice shall be given not less than 45 nor
more than 75 days prior to such Redemption Date (unless a shorter notice shall
be satisfactory to the Property Trustee under the related Trust Agreement).
With respect to Securities of each series to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, an estimate
of the Redemption Price together with a statement that it is an estimate
and that the actual Redemption Price will be calculated on the third
Business Day prior to the Redemption Date (and, if such an estimate of the
Redemption Price is given, a subsequent notice shall be given as set forth
above on the date that such Redemption Price is calculated setting forth
the actual Redemption Price);
(c) if less than all Outstanding Securities of such particular series
are to be redeemed, the identification (and, in the case of partial
redemption, the respective principal amounts) of the particular Securities
to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
(including any Additional Interest) thereon, if any, shall cease to accrue
on and after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;
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(f) that the redemption is for a sinking fund, if such is the case;
(g) such other provisions as may be required in respect of the terms
of a particular series of Securities.
Notice of redemption of Securities to be redeemed at the election of the
Corporation shall be given by the Corporation or, at the Corporation's request,
by the Trustee in the name and at the expense of the Corporation and shall be
irrevocable. The notice if mailed in the manner provided above shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date specified
in the notice of redemption given as provided in Section 11.4, the Corporation
will deposit with the Trustee or with one or more Paying Agents (or, if the
Corporation is acting as its own Paying Agent, the Corporation will segregate
and hold in trust as provided in Section 10.3) an amount of money sufficient to
pay the Redemption Price of, and any accrued interest (including any Additional
Interest) on, all the Securities (or portions thereof) that are to be redeemed
on that date.
SECTION 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4, the
Securities or portion of Securities with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Corporation at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest (including any Additional
Interest) whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant record
dates according to their terms and the provisions of Section 3.8.
Upon presentation of any Security redeemed in part only, the Corporation
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Corporation, a new Security or Securities of the
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms.
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If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of (and premium, if any, on) such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in such Security.
SECTION 11.7. Right of Redemption of Securities Initially Issued to an
Issuer Trust.
In the case of Securities of a series initially issued to an Issuer Trust,
except as otherwise specified as contemplated by Section 3.1, the Corporation,
at its option, may redeem such Securities (i) on or after the date specified in
such Security, in whole at any time or in part from time to time, or (ii) upon
the occurrence and during the continuation of a Tax Event or a Capital Treatment
Event, in whole (but not in part) at any time within 90 days following the
occurrence and during the continuation of such Tax Event or Capital Treatment
Event, in each case at a Redemption Price specified in such Security, together
with accrued interest (including any Additional Interest) to but excluding the
Redemption Date.
If less than all the Securities of any such series are to be redeemed, the
aggregate principal amount of such Securities remaining Outstanding after giving
effect to such redemption shall be sufficient to satisfy any provisions of the
Trust Agreement related to the Issuer Trust to which such Securities were
issued, including any requirement in such Trust Agreement as to the minimum
Liquidation Amount (as defined in such Trust Agreement) of Capital Securities
that may be held by a holder of Capital Securities thereunder.
ARTICLE XII
SINKING FUNDS
SECTION 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount that is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment". If provided for by the terms
of any Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.2. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of such Securities.
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SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Corporation may at its
option, at any time no more than 16 months and no less than 45 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Corporation, except Securities of such series that have been redeemed through
the application of mandatory or optional sinking fund payments pursuant to the
terms of the Securities of such series, accompanied by a Corporation Order
instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Corporation by way of
bona fide sale or other negotiation for value; provided that the Securities to
be so credited have not been previously so credited. The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
Redemption Price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.
SECTION 12.3. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Corporation will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, that is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, that is to be satisfied by delivering and
crediting Securities pursuant to Section 12.2, and will also deliver to the
Trustee any Securities to be so delivered. Such Officers' Certificate shall be
irrevocable and upon its delivery the Corporation shall be obligated to make any
cash payment or payments referred to therein, on or before the succeeding
sinking fund payment date. If the Corporation fails to deliver such Officers'
Certificate (or, as required by this Indenture, the Securities and coupons, if
any, specified in such Officers' Certificate) by the due date therefor, the
sinking fund payment due on the succeeding sinking fund payment date for such
series shall be paid entirely in cash and shall be sufficient to redeem the
principal amount of the Securities of such series subject to a mandatory sinking
fund payment without the right to deliver or credit securities as provided in
Section 12.2 and without the right to make the optional sinking fund payment
with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Corporation, if the Corporation is acting as its own Paying
Agent) on the sinking fund payment date on which such payment is made (or, if
such payment is made before a sinking fund payment date, on the sinking fund
payment date immediately following the date of such payment) to the redemption
of Securities of such series at the Redemption Price specified in such
Securities with respect to the sinking fund.
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Any and all sinking fund moneys with respect to the Securities of any particular
series held by the Trustee (or, if the Corporation is acting as its own Paying
Agent, segregated and held in trust as provided in Section 10.3) on the last
sinking fund payment date with respect to Securities of such series and not held
for the payment or redemption of particular Securities of such series shall be
applied by the Trustee (or, by the Corporation, if the Corporation is acting as
its own Paying Agent), together with other moneys, if necessary, to be deposited
(or segregated) sufficient for the purpose, to the payment of the principal of
the Securities of such series at Maturity. The Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 11.3 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Corporation in the manner provided in
Section 11.4. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Section
11.6. On or before each sinking fund payment date, the Corporation shall pay to
the Trustee (or, if the Corporation is acting as its own Paying Agent, the
Corporation shall segregate and hold in trust as provided in Section 10.3) in
cash a sum in the currency in which Securities of such series are payable
(except as provided pursuant to Section 3.1) equal to the principal (and
premium, if any) and any interest (including any Additional Interest) accrued to
the Redemption Date for the Securities or portions thereof to be redeemed on
such sinking fund payment date pursuant to this Section 12.3.
Neither the Trustee nor the Corporation shall redeem any Securities of a
series with sinking fund monies or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest (including any Additional
Interest), if any, on any Securities of such series or of any Event of Default
(other than an Event of Default occurring as a consequence of this paragraph)
with respect to the Securities of such series, except that if the notice of
redemption shall have been provided in accordance with the provisions hereof,
the Trustee (or the Corporation, if the Corporation is acting as its own Paying
Agent) shall redeem such Securities if cash sufficient for that purpose shall be
deposited with the Trustee (or segregated by the Corporation) for that purpose
in accordance with the terms of this Article XII. Except as aforesaid, any
monies in the sinking fund for such series at the time when any such default or
Event of Default shall occur and any monies thereafter paid into such sinking
fund shall, during the continuance of such default or Event of Default, be held
as security for the payment of the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities of such series;
provided, however, that if such default or Event of Default shall have been
cured or waived as provided herein, such monies shall thereafter be applied on
the next sinking fund payment date for the Securities of such series on which
such monies may be applied pursuant to the provisions of this Section 12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
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SECTION 13.1. Securities Subordinate to Senior Indebtedness.
The Corporation covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities of each and every series are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment Over
of Proceeds Upon Dissolution, Etc.
If the Corporation shall default in the payment of any principal of (or
premium, if any) or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Corporation by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property or
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any) or interest (including any
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.
In the event of (a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceedings relating
to the Corporation, its creditors or its property, (b) any proceeding for the
liquidation, dissolution or other winding up of the Corporation, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
any assignment by the Corporation for the benefit of creditors or (d) any other
marshaling of the assets of the Corporation (each such event, if any, herein
sometimes referred to as a "Proceeding"), all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to any Holder of any of the
Securities on account thereof. Any payment or distribution, whether in cash,
securities or other property (other than securities of the Corporation or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the indebtedness evidenced by the
Securities, to the payment of all Senior Indebtedness at the time outstanding
and to any securities issued in respect thereof under any such plan of
reorganization or readjustment), that would otherwise (but for these
subordination provisions) be payable or deliverable in respect of the Securities
of any series shall be paid or delivered directly to the holders of Senior
Indebtedness in accordance with the priorities then existing among such holders
until all Senior Indebtedness (including any interest thereon accruing after the
commencement of any Proceeding) shall have been paid in full.
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In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holders of the Securities, together
with the holders of any obligations of the Corporation ranking on a parity with
the Securities, shall be entitled to be paid from the remaining assets of the
Corporation the amounts at the time due and owing on account of unpaid principal
of (and premium, if any) and interest (including any Additional Interest) on the
Securities and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account of any capital
stock or any obligations of the Corporation ranking junior to the Securities and
such other obligations.
If, notwithstanding the foregoing, any payment or distribution of any
character or any security, whether in cash, securities or other property (other
than securities of the Corporation or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in these subordination provisions with respect to
the indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), shall be
received by the Trustee or any Holder in contravention of any of the terms
hereof and before all Senior Indebtedness (including any interest thereon
accruing after the commencement of any Proceeding) shall have been paid in full,
such payment or distribution or security shall be received in trust for the
benefit of, and shall be paid over or delivered and transferred to, the holders
of the Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness (including any interest thereon accruing after the
commencement of any Proceeding) in full. If the Trustee or any Holder fails to
endorse or assign any such payment, distribution or security, each holder of
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
same.
The Trustee and the Holders shall take such action (including the delivery
of this Indenture to an agent for the holders of Senior Indebtedness or consent
to the filing of a financing statement with respect hereto) as may, in the
opinion of counsel designated by the holders of a majority in principal amount
of the Senior Indebtedness at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
The provisions of this Section 13.2 shall not impair any rights, interests,
remedies or powers of any secured creditor of the Corporation in respect of any
security interest the creation of which is not prohibited by the provisions of
this Indenture.
The securing of any obligations of the Corporation, otherwise ranking on a
parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 13.3. Payment Permitted If No Default.
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Nothing contained in this Article XIII or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Corporation, at any time, except
during the pendency of the conditions described in the first paragraph of
Section 13.2 or of any Proceeding referred to in Section 13.2, from making
payments at any time of principal of (and premium, if any) or interest
(including any Additional Interest) on the Securities, or (b) the application by
the Trustee of any moneys deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such payment would have been prohibited by the provisions of this
Article XIII.
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due or to become due on all
Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article XIII (equally and ratably with the
holders of all indebtedness of the Corporation that by its express terms is
subordinated to Senior Indebtedness of the Corporation to substantially the same
extent as the Securities are subordinated to the Senior Indebtedness and is
entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Indebtedness) to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article XIII, and no payments over pursuant to the provisions of this Article
XIII to the holders of Senior Indebtedness by Holders of the Securities or the
Trustee, shall, as among the Corporation, its creditors other than holders of
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment or distribution by the Corporation to or on account of such Senior
Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Corporation and
the Holders of the Securities, the obligations of the Corporation, which are
absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities as and when the same shall become due and payable in
accordance with their terms; (b) affect the relative rights against the
Corporation of the Holders of the Securities and creditors of the Corporation
other than their
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rights in relation to the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Security (or to the extent expressly provided
herein, the holder of any Capital Security) from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
including filing and voting claims in any Proceeding, subject to the rights, if
any, under this Article XIII of the holders of Senior Indebtedness to receive
cash, property and securities otherwise payable or deliverable to the Trustee or
such Holder.
SECTION 13.6. Trustee to Effectuate Subordination.
Each Holder of a Security, by its acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article XIII and appoints the Trustee such Holder's attorney-in-fact for
any and all such purposes.
SECTION 13.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Corporation or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Corporation with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the Securities
of any series, without incurring responsibility to such Holders and without
impairing or releasing the subordination as provided in this Article XIII or the
obligations hereunder of such Holders to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Corporation and any other Person.
SECTION 13.8. Notice to Trustee.
The Corporation shall give prompt written notice to the Trustee of any fact
known to the Corporation that would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the
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Trustee shall have received written notice thereof from the Corporation or a
holder of Senior Indebtedness or from any trustee, agent or representative
therefor; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 13.8 at least two Business Days prior to the
date upon which by the terms hereof any monies may become payable for any
purpose (including the payment of the principal of (and premium, if any, on) or
interest (including any Additional Interest) on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such monies and to apply the same to the purpose
for which they were received and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
or herself to be a holder of Senior Indebtedness (or a trustee or
attorney-in-fact therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee or attorney-in-fact therefor). If
the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XIII, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XIII, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Corporation referred to
in this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which any Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Corporation, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIII.
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Corporation or to any other
Person cash, property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article XIII or otherwise.
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SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XIII with respect to any Senior Indebtedness that may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
SECTION 13.12. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been
appointed by the Corporation and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee.
* * * *
This Indenture may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
CENTURA BANKS, INC.
[SEAL]
By: /s/ Frank L. Pattillo
----------------------------------
Name: Frank L. Pattillo
Title: Group Executive Officer
Attest:/s/ Joseph A. Smith, Jr.
-------------------------------
Name: Joseph A. Smith, Jr.
Title: Assistant Secretary
STATE STREET BANK AND TRUST COMPANY
as Trustee
[SEAL]
By: /s/ Paul D. Allen
------------------------------------
Name: Paul D. Allen
Title: Vice President
Attest: /s/ James E. Shultz
---------------------------------
Name: James E. Shultz
Title: Assistant Secretary
Exhibit 10.1
CENTURA BANKS, INC.
OMNIBUS EQUITY COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE APRIL 16, 1997
<PAGE>
CENTURA BANKS, INC.
OMNIBUS EQUITY COMPENSATION PLAN
TABLE OF CONTENTS
i
<PAGE>
CENTURA BANKS, INC.
OMNIBUS EQUITY COMPENSATION PLAN
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed for the benefit of the directors, executives and key
employees of the Corporation and its Subsidiaries; to attract and retain
for the Corporation and its Subsidiaries personnel of exceptional
ability; to motivate such personnel through added incentives to make a
maximum contribution to greater profitability; to develop and maintain a
highly competent management team; and to be competitive with other
companies with respect to executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of (i)
Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock
Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi)
Stock Awards; (vii) Performance Shares; (viii) Other Stock-Based Awards;
and (ix) other forms of equity-based compensation as may be provided and
are permissible under this Plan and the law.
1.3 The Plan shall be effective November 20, 1990 (the "Effective Date"), as
amended and restated effective April 21, 1993, and further amended and
restated effective April 16, 1997, subject to the approval of Section
3.16 of the Plan by a majority of the votes cast on the issue by the
holders of the Corporation's Common Stock at the first meeting of
stockholders at which directors are to be elected that occurs after
December 31, 1996.
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ARTICLE II - DEFINITIONS
DEFINITIONS. Except where the context otherwise indicates, the following
definitions apply:
2.1 "Acceleration Event" means the occurrence of an event defined in Article
XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. (All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.)
2.3 "Agreement" means the written agreement evidencing each Award granted to
a Participant under the Plan.
2.4 "Award" means an award granted to a Participant in accordance with the
provisions of the Plan, including, but not limited to, a Stock Option,
Stock Right, Restricted or Deferred Stock, Stock Award, Performance
Share, Other Stock-Based Award, or any combination of the foregoing.
2.5 "Board" means the Board of Directors of the Corporation.
2.6 "Board-Approved Change in Control" shall have the meaning set forth in
Section 13.3 of the Plan.
2.7 "Change in Control" shall have the meaning set forth in Section 13.2 of
the Plan.
2.8 "Change in Control Price" shall have the meaning set forth in Section
13.9 of the Plan.
2.9 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.)
2.10 "Committee" means the Compensation Committee or such other committee as
may be appointed by the Board to administer this Plan pursuant to Article
III. Committee members may also be appointed for such limited purposes as
may be provided by the Board.
2.11 "Corporation" means Centura Banks, Inc., a North Carolina corporation
structured as a registered bank holding company under the Bank Holding
Company Act of 1956, as now in effect or as hereafter amended, and its
successors and assigns. "Corporation" also means Centura Banks, Inc. and
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its Subsidiaries, unless the context clearly indicates otherwise.
2.12 "Deferral Period" means the period commencing on the date an Award of
Deferred Stock is granted and ending on such date as the Committee shall
determine.
2.13 "Deferred Stock" means the stock awarded under Article IX of the Plan.
2.14 "Disability" means disability as determined under procedures established
by the Committee or in any Award.
2.15 "Discount Stock Options" means the Nonqualified Stock Options which
provide for an exercise price of less than the Fair Market Value of the
Stock at the date of the Award.
2.16 "Early Retirement" means retirement from active employment with the
Corporation or any Subsidiary, with the express consent of the Committee,
pursuant to the early retirement provisions established by the Committee
or in any Award.
2.17 "Effective Date" shall have the meaning set forth in Section 1.3 of the
Plan.
2.18 "Elective Deferral Period" shall have the meaning set forth in Section
9.3 of the Plan.
2.19 "Eligible Participant" means any director, executive or key employee of
the Corporation or its Subsidiaries, as shall be determined by the
Committee, as well as any other person whose participation the Committee
determines is in the best interest of the Corporation, subject to
limitations as may be provided by the Code, the Act or the Committee. For
purposes of Article IV and Incentive Stock Options that may be granted
hereunder, the term "Eligible Participant" shall be limited to an
executive or other key employee meeting the qualifications for receipt of
an Incentive Stock Option under the provisions of Section 422 of the
Code.
2.20 "ERISA" means the Employee Retirement Income Security Act of 1974, as now
in effect or as hereafter amended.
2.21 "Fair Market Value" means, with respect to any given day, the closing
price of the Stock reported on the New York Stock Exchange for such day,
or if the Stock was not traded on the New York Stock Exchange on such
day, then on the next day on which the Stock was traded, all as reported
by such source as the Committee may select. The
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Committee may establish an alternative method of determining Fair Market
Value.
2.22 "Incentive Stock Option" means a Stock Option granted under Article IV of
the Plan, and as defined in Section 422 of the Code.
2.23 "Limited Stock Appreciation Rights" means a Stock Right which is
exercisable only in the event of a Change in Control and/or a Potential
Change in Control, as described in Section 6.8 of this Plan, which
provides for an amount payable solely in cash, equal to the excess of the
Stock Appreciation Right Fair Market Value of a share of Stock on the day
the Stock Right is surrendered over the price at which a Participant
could exercise a related Stock Option to purchase the share of Stock.
2.24 "Nonqualified Stock Option" means a Stock Option granted under Article V
of the Plan.
2.25 "Normal Retirement" means retirement from active employment with the
Corporation or any Subsidiary on or after age 65, or pursuant to such
other requirements as may be established by the Committee or in any
Award.
2.26 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee grants the Stock Option to the
Participant;
(b) the date the Participant receiving the Stock Option becomes an
employee of the Corporation or its Subsidiaries, to the extent
employment status is a condition of the grant or a requirement of
the Code or the Act; or
(c) such other date (other than the dates described in (i) and (ii)
above) as the Committee may designate.
2.27 "Other Stock-Based Award" means an Award under Article XII of the Plan
that is valued in whole or in part by reference to, or is otherwise based
on, Stock.
2.28 "Participant" means an Eligible Participant to whom an Award of
equity-based compensation has been granted and who has entered into an
Agreement evidencing the Award.
2.29 "Performance Share" means an Award under Article XI of the Plan of a unit
valued by reference to a designated number of shares of Stock, which
value may be paid to the
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Participant by delivery of such property as the Committee shall
determine, including, without limitation, cash, Stock, or any combination
thereof, upon achievement of such Performance Objectives during the
Performance Period as the Committee shall establish at the time of such
Award or thereafter.
2.30 "Performance Objectives" shall have the meaning set forth in Article XI
of the Plan.
2.31 "Performance Period" shall have the meaning set forth in Article XI of
the Plan.
2.32 "Potential Change in Control" shall have the meaning set forth in Section
13.4 of the Plan.
2.33 "Plan" means the Centura Banks, Inc. Omnibus Equity Compensation Plan, as
amended and restated effective April 16, 1997, and as further amended
from time to time.
2.34 "Restricted Stock" means an Award of Stock under Article VIII of the
Plan, which Stock is issued with the restriction that the holder may not
sell, transfer, pledge, or assign such Stock and with such other
restrictions as the Committee, in its sole discretion, may impose
(including, without limitation, any restriction on the right to vote such
Stock, and the right to receive any cash dividends), which restrictions
may lapse separately or in combination at such time or times, in
installments or otherwise, as the Committee may deem appropriate.
2.35 "Restriction Period" means the period commencing on the date an Award of
Restricted Stock is granted and ending on such date as the Committee
shall determine.
2.36 "Retirement" means Normal or Early Retirement.
2.37 "Stock" means shares of Common Stock of the Corporation, as may be
adjusted pursuant to the provisions of Section 3.11.
2.38 "Stock Appreciation Right" means a Stock Right, as described in Article
VI of this Plan, which provides for an amount payable in Stock and/or
cash, as determined by the Committee, equal to the excess of the Fair
Market Value of a share of Stock on the day the Stock Right is exercised
over the price at which the Participant could exercise a related Stock
Option to purchase the share of Stock.
2.39 "Stock Appreciation Right Fair Market Value" means a value established by
the Committee for the exercise of a Stock
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Appreciation Right or a Limited Stock Appreciation Right.
2.40 "Stock Award" means an Award of Stock granted in payment of compensation,
as provided in Article X of the Plan.
2.41 "Stock Option" means an Award under Article IV or V of the Plan of an
option to purchase Stock. A Stock Option may be either an Incentive Stock
Option or a Nonqualified Stock Option.
2.42 "Stock Right" means an Award under Article VI of the Plan. A Stock Right
may be either a Stock Appreciation Right or a Limited Stock Appreciation
Right.
2.43 "Subsidiary" or "Subsidiaries" means:
(a) for the purpose of an Incentive Stock Option, any corporation
(other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation if, at the time of the granting of
the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty
percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain;
and
(b) for the purposes of all other types of equity-based compensation
provided for under the Plan, any corporation (or partnership,
joint venture, limited liability company, or other enterprise) of
which the Corporation owns or controls, directly or indirectly,
fifty percent (50%) or more of the outstanding shares of stock
normally entitled to vote for the election of directors (or
comparable equity participation and voting power).
2.44 "Termination of Employment" means the discontinuance of employment of a
Participant with the Corporation or its Subsidiaries for any reason other
than a Transfer. The determination of whether a Participant has
discontinued employment shall be made by the Committee in its discretion.
In determining whether a Termination of Employment has occurred, the
Committee may provide that service as a consultant or service with a
business enterprise in which the Corporation has a significant ownership
interest shall be treated as employment with the Corporation. The
Committee shall have the discretion, exercisable either at the time the
Award is granted or at the time the Participant terminates employment, to
establish as a provision applicable to the exercise of one or more Awards
that during the limited period of
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exercisability following Termination of Employment, the Award may be
exercised not only with respect to the number of shares of Stock for
which it is exercisable at the time of the Termination of Employment but
also with respect to one or more subsequent installments for which the
Award would have become exercisable had the Termination of Employment not
occurred.
2.45 "Transfer" means a change of employment of a Participant within the group
consisting of the Corporation and its Subsidiaries.
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ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. Members of the
Committee may vote on any matters affecting the administration of the
Plan or the grant of Awards pursuant to the Plan, except that no such
member shall act upon the granting of an Award to himself or herself, but
any such member may be counted in determining the existence of a quorum
at any meeting of the Committee or Board during which action is taken
with respect to the granting of an Award to such member. The Committee,
in its discretion, may delegate to one or more of its members such of its
powers as it deems appropriate. The Committee also may limit the power of
any member to the extent necessary to comply with Rule 16b-3 under the
Act or any other law. Members of the Committee shall be appointed
originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the
terms of the Plan all Board members are otherwise eligible to serve on
the Committee.
3.2 The Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present
shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe and
administer the Plan, to select the persons who are eligible to receive an
Award, and to act in all matters pertaining to the granting of an Award
and the contents of the Agreement evidencing the Award, including,
without limitation, the determination of the number of Stock Options,
Stock Rights, shares of Stock or Performance Shares subject to an Award
and the form, terms, conditions and duration of each Award, and any
amendment thereof consistent with the provisions of the Plan. All acts,
determinations and decisions of the Committee made or taken pursuant to
grants of authority under the Plan or with respect to any questions
arising in connection with the administration and interpretation of the
Plan, including the severability of any and all of the provisions
thereof, shall be conclusive, final and binding upon all Participants,
Eligible Participants and their beneficiaries.
3.4 The Committee may adopt such rules, regulations and
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procedures of general application for the administration of this Plan, as
it deems appropriate.
3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to an
Award in the event of an Acceleration Event as defined in Article XIII.
Such action may include, but shall not be limited to, establishing,
amending or waiving the forms, terms, conditions and duration of an Award
and the Award Agreement, so as to provide for earlier, later, extended or
additional times for exercise or payments, differing methods for
calculating payments, alternate forms and amounts of payment, an
accelerated release of restrictions or other modifications. The Committee
may take such actions pursuant to this Section 3.5 by adopting rules and
regulations of general applicability to all Participants or to certain
categories of Participants, by including, amending or waiving terms and
conditions in an Award and the Award Agreement, or by taking action with
respect to individual Participants.
3.6 The aggregate number of shares of Stock which are subject to an Award
under the Plan shall be one million five hundred thousand (1,500,000)
shares, plus four percent (4%) of any increase, other than any increase
due to Awards under this Plan or any other similar plan of the
Corporation, in the number of authorized and issued shares of Stock above
the number of authorized and outstanding shares as of the Effective Date.
Such shares of Stock shall be made available from authorized and unissued
shares of the Corporation.
(a) If, for any reason, any shares of Stock or Performance Shares
awarded or subject to purchase under the Plan are not delivered or
purchased, or are reacquired by the Corporation, for reasons
including, but not limited to, a forfeiture of Restricted Stock or
termination, expiration or cancellation of a Stock Option, Stock
Right or Performance Share, or any other termination of an Award
without payment being made in the form of Stock (whether or not
Restricted Stock), such shares of Stock or Performance Shares
shall not be charged against the aggregate number of shares of
Stock available for Award under the Plan, and shall again be
available for Award under the Plan.
(b) For all purposes under the Plan, each Performance
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Share awarded shall be counted as one share of Stock subject to an
Award.
(c) To the extent a Stock Right granted in connection with a Stock
Option is exercised without payment being made in the form of
Stock (whether or not Restricted Stock), the shares of Stock which
otherwise would have been issued upon the exercise of such related
Stock Option shall not be charged against the aggregate number of
shares of Stock subject to an Award under the Plan, and shall
again be available for Award under the Plan.
3.7 Each Award granted under the Plan shall be evidenced by a written Award
Agreement. Each Award Agreement shall be subject to and incorporate (by
reference or otherwise) the applicable terms and conditions of the Plan,
and any other terms and conditions (not inconsistent with the Plan)
required by the Committee.
3.8 The Corporation shall not be required to issue or deliver any
certificates for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such shares
of Stock under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in
its discretion, determine to be necessary or advisable.
3.9 All certificates for shares of Stock delivered under the Plan shall also
be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed and any applicable federal
or state laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. In making such determination, the Committee may rely upon
an opinion of counsel for the Corporation.
3.10 Subject to the restrictions on Restricted Stock, as provided in Article
VIII of the Plan and in the Restricted Stock Award Agreement, each
Participant who receives an Award of Restricted Stock shall have all of
the rights of a stockholder with respect to such shares of Stock,
including the right to vote the shares to the extent, if any, such shares
possess voting rights and receive
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dividends and other distributions. Except as provided otherwise in the
Plan or in an Award Agreement, no Participant awarded a Stock Option,
Stock Right, Deferred Stock, Stock Award or Performance Share shall have
any right as a stockholder with respect to any shares of Stock covered by
his or her Stock Option, Stock Right, Deferred Stock, Stock Award or
Performance Share prior to the date of issuance to him or her of a
certificate or certificates for such shares of Stock.
3.11 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock, merger or
consolidation of the Corporation or its Subsidiaries or sale or other
disposition by the Corporation or its Subsidiaries of all or a portion of
its assets, any other change in the Corporation's or its Subsidiaries'
corporate structure, or any distribution to stockholders other than a
cash dividend results in the outstanding shares of Stock, or any
securities exchanged therefor or received in their place, being exchanged
for a different number or class of shares of Stock or other securities of
the Corporation, or for shares of Stock or other securities of any other
corporation; or new, different or additional shares or other securities
of the Corporation or of any other corporation being received by the
holders of outstanding shares of Stock, then equitable adjustments shall
be made by the Committee in:
(a) the limitation of the aggregate number of shares of Stock that may
be awarded as set forth in Sections 3.6, 3.16, and 4.1(e) (to the
extent permitted under Section 422 of the Code) of the Plan;
(b) the number and class of Stock that may be subject to an Award, and
which have not been issued or transferred under an outstanding
Award;
(c) the purchase price to be paid per share of Stock under outstanding
Stock Options and the number of shares of Stock to be transferred
in settlement of outstanding Stock Rights; and
(d) the terms, conditions or restrictions of any Award and Award
Agreement, including the price payable for the acquisition of
Stock; provided, however, that all adjustments made as the result
of the foregoing in respect of each Incentive Stock Option shall
be made so that such Stock Option shall continue to be an
Incentive Stock Option, as defined in Section 422 of the Code.
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3.12 In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Corporation against reasonable expenses,
including attorney's fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Corporation) or
paid by them in satisfaction of a judgment or settlement in any such
action, suit or proceeding, except as to matters as to which the
Committee member has been negligent or engaged in misconduct in the
performance of his duties; provided, that within sixty (60) days after
institution of any such action, suit or proceeding, a Committee member
shall in writing offer the Corporation the opportunity, at its own
expense, to handle and defend the same.
3.13 The Committee may require each person purchasing shares of Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree
with the Corporation in writing that he is acquiring the shares of Stock
without a view to distribution thereof. The certificates for such shares
of Stock may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
3.14 The Committee shall be authorized to make adjustments in a performance
based criteria or in the terms and conditions of other Awards in
recognition of unusual or nonrecurring events affecting the Corporation
(or any Subsidiary, if applicable) or its financial statements or changes
in applicable laws, regulations or accounting principles. The Committee
may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement in the manner and to the
extent it shall deem desirable to carry it into effect. In the event the
Corporation (or any Subsidiary, if applicable) shall assume outstanding
employee benefit awards or the right or obligation to make future such
awards in connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make such
adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
3.15 The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances, any Award shall be canceled
or suspended.
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In particular, but without limitation, all outstanding Awards to any
Participant shall be canceled if (a) the Participant, without the consent
of the Committee, while employed by the Corporation or any Subsidiary or
after termination of such employment, becomes associated with, employed
by, renders services to, or owns any interest in (other than any
nonsubstantial interest, as determined by the Committee), any business
that is in competition with the Corporation or with any business in which
the Corporation and/or its Subsidiaries have a substantial interest as
determined by the Committee; or (b) is terminated for cause as determined
by the Committee.
3.16 Subject to the limitations of Section 3.6, and pursuant to the
requirements of section 162(m) of the Code and the regulations
promulgated thereunder, and to the extent required thereunder, the
maximum number of shares of Stock with respect to which an Award or
Awards of Stock Options and/or Stock Rights under the Plan may be granted
during any calendar year to any employee shall be fifty thousand (50,000)
shares; provided, however, that if the number of shares of Stock with
respect to which an Award or Awards of Stock Options and/or Stock Rights
under the Plan are granted during a calendar year to any employee is less
than fifty thousand (50,000) shares, or if no Award of Stock Options
and/or Stock Rights under the Plan is granted during any calendar year to
such employee, then the amount of such shortfall shall be carried forward
and added to the maximum number of shares of Stock with respect to which
an Award or Awards of Stock Options and/or Stock Rights under the Plan
may be granted in a subsequent calendar year to such employee.
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ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock Option
granted hereunder shall be construed in accordance with the provisions of
Section 422 of the Code, and any provision hereof that cannot be so
construed shall be disregarded. Incentive Stock Options shall be granted
only to Eligible Participants, each of whom may be granted one or more
such Incentive Stock Options at such time or times determined by the
Committee following the Effective Date until November 20, 2000, subject
to the following conditions:
(a) The Incentive Stock Option price per share of Stock shall be set
in the Award Agreement, but shall not be less than one hundred
percent (100%) of the Fair Market Value of the Stock at the time
of the Option Grant Date.
(b) The Incentive Stock Option and its related Stock Right, if any,
may be exercised in full or in part from time to time within ten
(10) years from the Option Grant Date, or such shorter period as
may be specified by the Committee in the Award; provided, that in
any event, the Incentive Stock Option and related Stock Right
shall lapse and cease to be exercisable upon, or within such
period following, a Termination of Employment as shall have been
determined by the Committee and as specified in the Incentive
Stock Option Award Agreement or its related Stock Right Award
Agreement; provided, however, that such period following a
Termination of Employment shall not exceed three (3) months unless
employment shall have terminated:
(i) as a result of death or Disability, in which event, such
period shall not exceed one year after the date of death or
Disability; and
(ii) as a result of death, if death shall have occurred
following a Termination of Employment and while the
Incentive Stock Option or Stock Right was still
exercisable, in which event, such period shall not exceed
one year after the date of death;
provided, further, that such period following a Termination of
Employment shall in no event extend the original exercise period
of the Incentive Stock Option or any related Stock Right.
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(c) The aggregate Fair Market Value, determined as of the Option Grant
Date, of the shares of Stock with respect to which Incentive Stock
Options are first exercisable during any calendar year by any
Eligible Participant shall not exceed one hundred thousand dollars
($100,000); provided, however, to the extent permitted under
Section 422 of the Code:
(i) if a Participant's employment is terminated by reason of
death, Disability or Retirement and the portion of any
Incentive Stock Option that is otherwise exercisable during
the post-termination period applied without regard to the
one hundred thousand dollar ($100,000) limitation contained
in Section 422 of the Code is greater than the portion of
such option that is immediately exercisable as an Incentive
Stock Option during such post-termination period under
Section 422, such excess shall be treated as a Nonqualified
Stock Option; and
(ii) if the exercise of an Incentive Stock Option is accelerated
by reason of an Acceleration Event, any portion of such
Award that is not exercisable as an Incentive Stock Option
by reason of the one hundred thousand dollar ($100,000)
limitation contained in Section 422 of the Code shall be
treated as a Nonqualified Stock Option.
(d) Incentive Stock Options shall be granted only to an Eligible
Participant who, at the time of the Option Grant Date, does not
own stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation; provided,
however, the foregoing restriction shall not apply if at the time
of the Option Grant Date the option price is at least one hundred
ten percent (110%) of the Fair Market Value of the Stock subject
to the Incentive Stock Option and such Incentive Stock Option by
its terms is not exercisable after the expiration of five (5)
years from the Option Grant Date.
(e) Subject to the limitations of Section 3.6, the maximum number of
shares of Stock subject to Incentive Stock Option Awards shall be
one hundred thousand (100,000).
(f) The Committee may adopt any other terms and conditions which it
determines should be imposed for
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the Incentive Stock Option to qualify under Section 422 of the
Code, as well as any other terms and conditions not inconsistent
with this Article IV as determined by the Committee.
4.2 The Committee may at any time offer to buy out for a payment in cash,
Stock, Deferred Stock or Restricted Stock an Incentive Stock Option
previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the Participant at the time that such
offer is made.
4.3 If the Incentive Stock Option Award Agreement so provides, the Committee
may require that all or part of the shares of Stock to be issued upon the
exercise of an Incentive Stock Option shall take the form of Deferred or
Restricted Stock, which shall be valued on the date of exercise, as
determined by the Committee, on the basis of the Fair Market Value of
such Deferred Stock or Restricted Stock determined without regard to the
deferral limitations and/or forfeiture restrictions involved.
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ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock Options to
Eligible Participants to purchase shares of Stock at such time or times
determined by the Committee, following the Effective Date, subject to the
terms and conditions set forth in this Article V.
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Award Agreement and may be less than one hundred
percent (100%) of the Fair Market Value at the time of the grant, or at
such later date as the Committee shall determine.
5.3 The Nonqualified Stock Option and its related Stock Right, if any, may be
exercised in full or in part from time to time within such period as may
be specified by the Committee or in the Award Agreement; provided, that,
in any event, the Nonqualified Stock Option and the related Stock Right
shall lapse and cease to be exercisable upon, or within such period
following, Termination of Employment as shall have been determined by the
Committee and as specified in the Nonqualified Stock Option Award
Agreement or Stock Right Award Agreement; provided, however, that such
period following Termination of Employment shall not exceed three (3)
months unless employment shall have terminated:
(a) as a result of Retirement or Disability, in which event, such
period shall not exceed one year after the date of Retirement or
Disability, or within such longer period as the Committee may
specify; and
(b) as a result of death, or if death shall have occurred following a
Termination of Employment and while the Nonqualified Stock Option
or Stock Right was still exercisable, in which event, such period
may exceed one year after the date of death, as provided by the
Committee or in the Award Agreement.
5.4 The Nonqualified Stock Option Award Agreement may include any other terms
and conditions not inconsistent with this Article V or in Article VII, as
determined by the Committee.
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ARTICLE VI - STOCK APPRECIATION RIGHTS
6.1 A Stock Appreciation Right may be granted to an Eligible Participant in
connection with an Incentive Stock Option or a Nonqualified Stock Option
granted under Article IV or Article V of this Plan, or may be granted
independent of any related Stock Option.
6.2 A related Stock Appreciation Right shall entitle a holder of a Stock
Option, within the period specified for the exercise of the Stock Option,
to surrender the unexercised Stock Option (or a portion thereof) and to
receive in exchange therefor a payment in cash or shares of Stock having
an aggregate value equal to the amount by which the Fair Market Value of
each share of Stock exceeds the Stock Option price per share of Stock,
times the number of shares of Stock under the Stock Option, or portion
thereof, which is surrendered.
6.3 Each related Stock Appreciation Right granted hereunder shall be subject
to the same terms and conditions as the related Stock Option, including
limitations on transferability, if any, and shall be exercisable only to
the extent such Stock Option is exercisable and shall terminate or lapse
and cease to be exercisable when the related Stock Option terminates or
lapses. The grant of Stock Appreciation Rights related to Incentive Stock
Options must be concurrent with the grant of the Incentive Stock Options.
With respect to Nonqualified Stock Options, the grant either may be
concurrent with the grant of the Nonqualified Stock Options, or in
connection with Nonqualified Stock Options previously granted under
Article V, which are unexercised and have not terminated or lapsed.
6.4 The Committee shall have sole discretion to determine in each case
whether the payment with respect to the exercise of a Stock Appreciation
Right will be in the form of all cash, all Stock, or any combination
thereof. If payment is to be made in Stock, the number of shares of Stock
shall be determined based on the Fair Market Value of the Stock on the
date of exercise. If the Committee elects to make full payment in Stock,
no fractional shares of Stock shall be issued and cash payments shall be
made in lieu of fractional shares.
6.5 The Committee shall have sole discretion as to the timing of any payment
made in cash, Stock, or a combination thereof, upon exercise of Stock
Appreciation Rights. Payment may be made in a lump sum, in annual
installments
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or may be otherwise deferred; and the Committee shall have sole
discretion to determine whether any deferred payments may bear amounts
equivalent to interest or cash dividends.
6.6 Upon exercise of a Stock Appreciation Right, the number of shares of
Stock subject to exercise under any related Stock Option shall
automatically be reduced by the number of shares of Stock represented by
the Stock Option or portion thereof which is surrendered.
6.7 The Committee, in its sole discretion, may also provide that, in the
event of a Change in Control and/or a Potential Change in Control, the
amount to be paid upon the exercise of a Stock Appreciation Right or
Limited Stock Appreciation Right shall be based on the Change in Control
Price, subject to such terms and conditions as the Committee may specify
at grant.
6.8 In its sole discretion, the Committee may grant Limited Stock
Appreciation Rights under this Article VI. Limited Stock Appreciation
Rights become exercisable only in the event of a Change in Control and/or
a Potential Change in Control, subject to such terms and conditions as
the Committee, in its sole discretion, may specify at grant. Such Limited
Stock Appreciation Rights shall be settled solely in cash. A Limited
Stock Appreciation Right shall entitle the holder of the related Stock
Option to surrender such Stock Option, or any portion thereof, to the
extent unexercised in respect of the number of shares of Stock as to
which such Limited Stock Appreciation Right is exercised, and to receive
a cash payment equal to the difference between (a) the Stock Appreciation
Right Fair Market Value (at the date of surrender) of a share of Stock
for which the surrendered Stock Option or portion thereof is then
exercisable, and (b) the price at which a Participant could exercise a
related Stock Option to purchase the share of Stock. Such Stock Option
shall, to the extent so surrendered, thereupon cease to be exercisable. A
Limited Stock Appreciation Right shall be subject to such further terms
and conditions as the Committee shall, in its sole discretion, deem
appropriate.
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ARTICLE VII - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
7.1 Each Stock Option and Stock Right shall be granted subject to such terms
and conditions, if any, not inconsistent with this Plan, as shall be
determined by the Committee, including any provisions as to continued
employment as consideration for the grant or exercise of such Stock
Option or Stock Right and any provisions which may be advisable to comply
with applicable laws, regulations or rulings of any governmental
authority.
7.2 An Incentive Stock Option and its related Stock Right, if any, shall not
be transferable by the Participant other than by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of
the Participant only by him or by his guardian or legal representative. A
Nonqualified Stock Option and its related Stock Right, if any, shall be
subject to the transferability and exercisability restrictions of the
immediately preceding sentence unless otherwise determined by the
Committee, in its sole discretion, and set forth in the applicable Award
Agreement. Nonqualified Stock Options and their related Stock Rights, if
any, granted prior to the effectiveness of this Section may be amended to
provide for their transferability to the extent, if any, determined by
the Committee, in its sole discretion.
7.3 Shares of Stock purchased upon exercise of a Stock Option shall be paid
for in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the
Stock Option Award Agreement. Without limiting the foregoing, the
Committee may establish payment terms for the exercise of Stock Options
which permit the Participant to deliver shares of Stock (or other
evidence of ownership of Stock satisfactory to the Corporation) with a
Fair Market Value equal to the Stock Option price as payment.
7.4 No cash dividends shall be paid on shares of Stock subject to unexercised
Stock Options. The Committee may provide, however, that a Participant to
whom a Stock Option has been granted which is exercisable in whole or in
part at a future time for shares of Stock shall be entitled to receive an
amount per share equal in value to the cash dividends, if any, paid per
share on issued and outstanding Stock, as of the dividend record dates
occurring during the period between the date of the grant and the time
each such share of Stock is delivered pursuant to exercise of such Stock
Option or the related Stock Right. Such amounts (herein called "dividend
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equivalents") may, in the discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at the
time of the delivery of, such Stock, or upon expiration of the
Stock Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock (with respect
to which dividend equivalents may accrue) in such manner, at such
value, and deliverable at such time or times, as may be determined
by the Committee.
Such Stock (whether delivered or contingently credited) shall be charged
against the limitations set forth in Section 3.6.
7.5 The Committee, in its sole discretion, may authorize payment of interest
equivalents on dividend equivalents which are payable in cash at a future
time.
7.6 In the event of death or Disability, the Committee, with the consent of
the Participant or his legal representative, may authorize payment, in
cash or in Stock, or partly in cash and partly in Stock, as the Committee
may direct, of an amount equal to the difference at the time between the
Fair Market Value of the Stock subject to a Stock Option and the Option
price in consideration of the surrender of the Stock Option.
7.7 If a Participant is required to pay to the Corporation an amount with
respect to income and employment tax withholding obligations in
connection with exercise of a Nonqualified Stock Option, and/or with
respect to certain dispositions of Stock acquired upon the exercise of an
Incentive Stock Option, the Committee, in its discretion and subject to
such rules as it may adopt, may permit the Participant to satisfy the
obligation, in whole or in part, by making an irrevocable election that a
portion of the total Fair Market Value of the shares of Stock subject to
the Nonqualified Stock Option and/or with respect to certain dispositions
of Stock acquired upon the exercise of an Incentive Stock Option, be paid
in the form of cash in lieu of the issuance of Stock and that such cash
payment be applied to the satisfaction of the withholding obligations.
The amount to be withheld shall not exceed the statutory minimum Federal
and State income and employment tax liability arising from the Stock
Option exercise transaction.
7.8 The Committee may permit the voluntary surrender of all or
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a portion of any Stock Option granted under the Plan to be conditioned
upon the granting to the Participant of a new Stock Option for the same
or a different number of shares of Stock as the Stock Option surrendered,
or may require such voluntary surrender as a condition precedent to a
grant of a new Stock Option to such Participant. Subject to the
provisions of the Plan, such new Stock Option shall be exercisable at the
same price, during such period and on such other terms and conditions as
are specified by the Committee at the time the new Stock Option is
granted. Upon surrender, the Stock Options surrendered shall be canceled
and the shares of Stock previously subject to them shall be available for
the grant of other Stock Options.
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ARTICLE VIII - RESTRICTED STOCK
8.1 Restricted Stock Awards may be made to certain Participants as an
incentive for the performance of future services that will contribute
materially to the successful operation of the Corporation and its
Subsidiaries. Awards of Restricted Stock may be made either alone, in
addition to or in tandem with other Awards granted under the Plan and/or
cash payments made outside of the Plan.
8.2 With respect to Awards of Restricted Stock, the Committee shall:
(a) determine the purchase price, if any, to be paid for such
Restricted Stock, which may be equal to or less than par value and
may be zero, subject to such minimum consideration as may be
required by applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted Stock such
as service or performance, other than those set forth in this
Article VIII;
(d) determine if the restrictions shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to a
portion of the shares of Restricted Stock in installments during
the Restriction Period; and
(e) determine if dividends and other distributions on the Restricted
Stock are to be paid currently to the Participant or withheld by
the Corporation or its Subsidiaries for the account of the
Participant.
8.3 Awards of Restricted Stock must be accepted within a period of sixty (60)
days (or such shorter periods as the Committee may specify at grant)
after the Award date, by executing a Restricted Stock Award Agreement and
paying whatever price (if any) is required.
The prospective recipient of a Restricted Stock Award shall not have any
rights with respect to such Award, unless such recipient has executed a
Restricted Stock Award Agreement and has delivered a fully executed copy
thereof to the Committee, and has otherwise complied with the applicable
terms and conditions of such Award.
8.4 Except when the Committee determines otherwise, or as
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otherwise provided in the Restricted Stock Award Agreement, if a
Participant terminates employment with the Corporation or its
Subsidiaries for any reason before the expiration of the Restriction
Period, all shares of Restricted Stock still subject to restriction shall
be forfeited by the Participant and shall be reacquired by the
Corporation.
8.5 Except as otherwise provided in this Article VIII, no shares of
Restricted Stock received by a Participant shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period.
8.6 To the extent not otherwise provided in a Restricted Stock Award
Agreement, in cases of death, Disability or Retirement or in cases of
special circumstances, the Committee, if it finds that a waiver would be
appropriate, may elect to waive any or all remaining restrictions with
respect to such Participant's Restricted Stock.
8.7 In the event of hardship or other special circumstances of a Participant
whose employment with the Corporation or any Subsidiary is involuntarily
terminated (other than for cause), the Committee may waive in whole or in
part any or all remaining restrictions with respect to any or all of the
Participant's Restricted Stock, based on such factors and criteria as the
Committee may deem appropriate.
8.8 The certificates representing shares of Restricted Stock may either:
(a) be held in custody by the Corporation until the Restriction Period
expires or until restrictions thereon otherwise lapse, and the
Participant shall deliver to the Corporation a stock power
endorsed in blank relating to the Restricted Stock; and/or
(b) be issued to the Participant and registered in the name of the
Participant, and shall bear an appropriate restrictive legend and
shall be subject to appropriate stop-transfer orders.
8.9 Except as provided in this Article VIII, a Participant receiving a
Restricted Stock Award shall have, with respect to the shares of
Restricted Stock covered by any Award, all of the rights of a shareholder
of the Corporation, including the right to vote the shares, to the
extent, if any, such shares possess voting rights, and the right to
receive any dividends; provided, however, the Committee may require that
any dividends on such shares of Restricted Stock shall be automatically
deferred and
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reinvested in additional Restricted Stock subject to the same
restrictions as the underlying Award, or may require that dividends and
other distributions on Restricted Stock shall be withheld by the
Corporation or its Subsidiaries for the account of the Participant. The
Committee shall determine whether interest shall be paid on amounts
withheld, the rate of any such interest, and the other terms applicable
to such withheld amounts.
8.10 If and when the Restriction Period expires without a prior forfeiture of
the Restricted Stock subject to such Restriction Period, unrestricted
certificates for such shares shall be delivered to the Participant.
8.11 In order to better ensure that Award payments actually reflect the
performance of the Corporation and its Subsidiaries and the service of
the Participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other Award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted Stock
Award, subject to such performance, future service, deferral and other
terms and conditions as may be specified by the Committee.
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ARTICLE IX - DEFERRED STOCK
9.1 Shares of Deferred Stock (together with cash dividend equivalents, if so
determined by the Committee) may be issued either alone or in addition to
other Awards granted under the Plan in the discretion of the Committee.
The Committee shall determine the individuals to whom, and the time or
times at which, such Awards will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient of a Deferred
Stock Award, the time or times within which such Awards may be subject to
forfeiture, and all other conditions of the Awards. The Committee may
condition Awards of Deferred Stock upon the attainment of specified
performance goals or such other factors or criteria as the Committee may
determine.
9.2 Deferred Stock Awards shall be subject to the following terms and
conditions:
(a) Subject to the provisions of this Plan and the applicable Award
Agreement, Deferred Stock Awards may not be sold, transferred,
pledged, assigned or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective
Deferral Period defined in Section 9.3), share certificates shall
be delivered to the Participant, or his legal representative, in a
number equal to the number of shares of Stock covered by the
Deferred Stock Award.
Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee, however,
at or after grant, may accelerate the vesting of all or any part
of any Deferred Stock Award and/or waive the deferral limitations
for all or any part of such Award.
(b) Unless otherwise determined by the Committee, amounts equal to any
dividends that would have been payable during the Deferral Period
with respect to the number of shares of Stock covered by a
Deferred Stock Award if such shares of Stock had been outstanding
shall be automatically deferred and deemed to be reinvested in
additional Deferred Stock, subject to the same deferral
limitations as the underlying Award.
(c) Except to the extent otherwise provided in this Plan or in the
applicable Award Agreement, upon Termination of Employment during
the Deferral Period for a given Award, the Deferred Stock covered
by such
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Award shall be forfeited by the Participant; provided, however,
the Committee may provide for accelerated vesting in the event of
Termination of Employment due to death, Disability or Retirement,
or in the event of hardship or other special circumstances as the
Committee deems appropriate.
(d) The Committee may require that a designated percentage of the
total Fair Market Value of the shares of Deferred Stock held by
one or more Participants be paid in the form of cash in lieu of
the issuance of Stock and that such cash payment be applied to the
satisfaction of the federal and state income and employment tax
withholding obligations that arise at the time the Deferred Stock
becomes free of all restrictions. The designated percentage shall
be equal to the income and employment tax withholding rate in
effect at the time under federal and applicable state laws.
(e) The Committee may provide one or more Participants subject to the
mandatory cash payment with an election to receive an additional
percentage of the total value of the Deferred Stock in the form of
a cash payment in lieu of the issuance of Deferred Stock. The
additional percentage shall not exceed the difference between
fifty percent (50%) and the designated percentage cash payment.
(f) The Committee may impose such further terms and conditions on
partial cash payments with respect to Deferred Stock as it deems
appropriate.
9.3 A Participant may elect to further defer receipt of Deferred Stock for a
specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must generally be made at least
twelve (12) months prior to completion of the Deferral Period for the
Deferred Stock Award in question (or for the applicable installment of
such an Award).
9.4 Each Award shall be confirmed by, and subject to the terms of, a Deferred
Stock Award Agreement.
9.5 In order to better ensure that the Award actually reflects the
performance of the Corporation or its Subsidiaries and the service of the
Participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or
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other Award designed to guarantee a minimum value, payable in cash or
Stock to the recipient of a Deferred Stock Award, subject to such
performance, future service, deferral and other terms and conditions as
may be specified by the Committee.
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ARTICLE X - STOCK AWARDS
10.1 A Stock Award shall be granted only in payment of compensation that has
been earned or as compensation to be earned, including, without
limitation, compensation awarded concurrently with or prior to the grant
of the Stock Award.
10.2 For the purposes of this Plan, in determining the value of a Stock Award,
all shares of Stock subject to such Stock Award shall be valued at not
less than one hundred percent (100%) of the Fair Market Value of such
shares of Stock on the date such Stock Award is granted, regardless of
whether or when such shares of Stock are issued or transferred to the
Participant and whether or not such shares of Stock are subject to
restrictions which affect their value.
10.3 Shares of Stock subject to a Stock Award may be issued or transferred to
the Participant at the time the Stock Award is granted, or at any time
subsequent thereto, or in installments from time to time, as the
Committee shall determine. If any such issuance or transfer shall not be
made to the Participant at the time the Stock Award is granted, the
Committee may provide for payment to such Participant, either in cash or
shares of Stock, from time to time or at the time or times such shares of
Stock shall be issued or transferred to such Participant, of amounts not
exceeding the dividends which would have been payable to such Participant
in respect of such shares of Stock (as adjusted under Section 3.11) if
such shares of Stock had been issued or transferred to such Participant
at the time such Stock Award was granted. Any issuance payable in shares
of Stock under the terms of a Stock Award may, at the discretion of the
Committee, be paid in cash on each date on which delivery of shares of
Stock would otherwise have been made, in an amount equal to the Fair
Market Value on such date of the shares of Stock which would otherwise
have been delivered.
10.4 A Stock Award shall be subject to such terms and conditions, including,
without limitation, restrictions on the sale or other disposition of the
Stock Award or of the shares of Stock issued or transferred pursuant to
such Stock Award, as the Committee shall determine; provided, however,
that upon the issuance or transfer of shares pursuant to a Stock Award,
the Participant, with respect to such shares of Stock, shall be and
become a shareholder of the Corporation fully entitled to receive
dividends, to vote, to the extent, if any, such shares possess voting
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rights, and to exercise all other rights of a shareholder except to the
extent otherwise provided in the Stock Award. Each Stock Award shall be
evidenced by a written Award Agreement in such form as the Committee
shall determine.
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ARTICLE XI - PERFORMANCE SHARES
11.1 Awards of Performance Shares may be made to certain Participants as an
incentive for the performance of future services that will contribute
materially to the successful operation of the Corporation and its
Subsidiaries. Awards of Performance Shares may be made either alone, in
addition to or in tandem with other Awards granted under the Plan and/or
cash payments made outside of the Plan.
11.2 With respect to Awards of Performance Shares, which may be issued for no
consideration or such minimum consideration as is required by applicable
law, the Committee shall:
(a) determine and designate from time to time those Participants to
whom Awards of Performance Shares are to be made;
(b) determine the performance period (the "Performance Period") and/or
performance objectives (the "Performance Objectives") applicable
to such Awards;
(c) determine the form of settlement of a Performance Share; and
(d) generally determine the terms and conditions of each such Award.
At any date, each Performance Share shall have a value equal to
the Fair Market Value, determined as set forth in Section 2.15.
11.3 Performance Periods may overlap, and Participants may participate
simultaneously with respect to Performance Shares for which different
Performance Periods are prescribed.
11.4 The Committee shall determine the Performance Objectives of Awards of
Performance Shares. Performance Objectives may vary from Participant to
Participant and between Awards and shall be based upon such performance
criteria or combination of factors as the Committee may deem appropriate,
including for example, but not limited to, minimum earnings per share or
return on equity. If during the course of a Performance Period there
shall occur significant events which the Committee expects to have a
substantial effect on the applicable Performance Objectives during such
period, the Committee may revise such Performance Objectives.
11.5 The Committee shall determine for each Participant the number of
Performance Shares which shall be paid to the
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Participant if the applicable Performance Objectives are exceeded or met
in whole or in part.
11.6 If a Participant terminates service with the Corporation or its
Subsidiaries during a Performance Period because of death, Disability,
Retirement or under other circumstances in which the Committee in its
discretion finds that a waiver would be appropriate, that Participant, as
determined by the Committee, may be entitled to a payment of Performance
Shares at the end of the Performance Period based upon the extent to
which the Performance Objectives were satisfied at the end of such period
and pro rated for the portion of the Performance Period during which the
Participant was employed by the Corporation or any Subsidiary; provided,
however, the Committee may provide for an earlier payment in settlement
of such Performance Shares in such amount and under such terms and
conditions as the Committee deems appropriate or desirable. If a
Participant terminates service with the Corporation or its Subsidiaries
during a Performance Period for any other reason, then such Participant
shall not be entitled to any payment with respect to that Performance
Period unless the Committee shall otherwise determine.
11.7 Each Award of a Performance Share shall be paid in whole shares of Stock,
or cash, or a combination of Stock and cash as the Committee shall
determine, with payment to be made as soon as practicable after the end
of the relevant Performance Period.
11.8 The Committee shall have the authority to approve requests by
Participants to defer payment of Performance Shares on terms and
conditions approved by the Committee and set forth in a written Award
Agreement between the Participant and the Corporation or its Subsidiaries
entered into in advance of the time of receipt or constructive receipt of
payment by the Participant.
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ARTICLE XII - OTHER STOCK-BASED AWARDS
12.1 Other awards of Stock and other awards that are valued in whole or in
part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, convertible
preferred stock, convertible debentures, exchangeable securities, phantom
stock and Stock awards or options valued by reference to book value or
performance, may be granted either alone or in addition to or in tandem
with Stock Options, Stock Rights, Restricted Stock, Deferred Stock or
Stock Awards granted under the Plan and/or cash awards made outside of
the Plan.
Subject to the provisions of the Plan, the Committee shall have authority
to determine the Eligible Participants to whom and the time or times at
which such Awards shall be made, the number of shares of Stock subject to
such Awards, and all other conditions of the Awards. The Committee also
may provide for the grant of shares of Stock upon the completion of a
specified Performance Period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
12.2 Other Stock-Based Awards made pursuant to this Article XII shall be
subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Award Agreement,
shares of Stock subject to Awards made under this Article XII may
not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction,
performance or deferral period lapses.
(b) Subject to the provisions of this Plan and the Award Agreement and
unless otherwise determined by the Committee at the time of the
Award, the recipient of an Award under this Article XII shall be
entitled to receive, currently or on a deferred basis, interest or
dividends or interest or dividend equivalents with respect to the
number of shares covered by the Award, as determined at the time
of the Award by the Committee, in its sole discretion, and the
Committee may provide that such amounts (if any) shall be deemed
to have been reinvested in additional Stock or otherwise
reinvested.
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(c) Any Award under this Article XII and any Stock covered by any such
Award shall vest or be forfeited to the extent so provided in the
Award Agreement, as determined by the Committee, in its sole
discretion.
(d) Upon the Participant's Retirement, Disability or death, or in
cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining
limitations imposed hereunder (if any) with respect to any or all
of an Award under this Article XII.
(e) Each Award under this Article XII shall be confirmed by, and
subject to the terms of, an Award Agreement.
(f) Stock (including securities convertible into Stock) issued on a
bonus basis under this Article XII may be issued for no cash
consideration.
12.3 Other Stock-Based Awards may include a phantom stock Award, which is
subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who may
receive phantom stock Awards. The Eligible Participant shall be
awarded a phantom stock unit, which shall be the equivalent to a
share of Stock.
(b) Under an Award of phantom stock, payment shall be made on the
dates or dates as specified by the Committee or as stated in the
Award Agreement and phantom stock Awards may be settled in cash,
Stock, or some combination thereof.
(c) The Committee shall determine such other terms and conditions of
each Award as it deems necessary in its sole discretion.
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ARTICLE XIII - ACCELERATION EVENTS
13.1 For the purposes of the Plan, an Acceleration Event shall occur in the
event of a "Potential Change in Control," or "Change in Control" or a
"Board-Approved Change in Control", as those terms are defined below.
13.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act, including a
"group" (as that term is used in Sections 13(d)(3) and 14(d)(2) of
the Act), but excluding the Corporation and any Subsidiary and any
employee benefit plan sponsored or maintained by the Corporation
and any Subsidiary (including any trustee of such plan acting as
trustee) who:
(i) makes a tender or exchange offer for any shares of the
Corporation's Stock (as defined below) pursuant to which
any shares of the Corporation's Stock are purchased (an
"Offer"); or
(ii) together with its "affiliates" and "associates" (as those
terms are defined in Rule 12b-2 under the Act) becomes the
"Beneficial Owner" (within the meaning of Rule 13d-3 under
the Act) of at least twenty percent (20%) of the
Corporation's Stock (an "Acquisition");
(b) The stockholders of the Corporation approve a definitive agreement
or plan to merge or consolidate the Corporation with or into
another corporation, to sell or otherwise dispose of all or
substantially all of its assets, or to liquidate the Corporation
(individually, a "Transaction"); or
(c) When, during any period of twenty-four (24) consecutive months
during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to constitute at
least a majority thereof; provided, however, that a director who
was not a director at the beginning of such twenty-four (24) month
period shall be deemed to have satisfied such twenty-four (24)
month requirement (and be an Incumbent Director) if such director
was elected by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as
Incumbent Directors
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either actually (because they were directors at the beginning of such
twenty-four (24) month period) or by prior operation of this Section
13.2(c).
13.3 A "Board-Approved Change in Control" shall be deemed to have occurred if
the Offer, Acquisition or Transaction, as the case may be, is approved by
a majority of the Directors serving as members of the Board at the time
of the Potential Change in Control or Change in Control.
13.4 A "Potential Change in Control" means the happening of any one of the
following:
(a) The approval by stockholders of an agreement by the Corporation,
the consummation of which would result in a Change in Control of
the Corporation, as defined in Section 13.2; or
(b) The acquisition of Beneficial Ownership, directly or indirectly,
by any entity, person or group (other than the Corporation or any
Subsidiary or any Corporation or Subsidiary employee benefit plan
(including any trustee of such plan acting as such trustee)) of
securities of the Corporation representing five percent (5%) or
more of the combined voting power of the Corporation's outstanding
securities and the adoption by the Board of a resolution to the
effect that a Potential Change in Control of the Corporation has
occurred for the purposes of this Plan.
13.5 Upon the occurrence of an Acceleration Event, subject to the approval of
the Committee if the Acceleration Event results from a Board-Approved
Change in Control, all then outstanding Performance Shares with respect
to which the applicable Performance Period has not been completed shall
be paid as soon as practicable as follows:
(a) all Performance Objectives applicable to the Award of Performance
Shares shall be deemed to have been satisfied to the extent
necessary to result in payment of one hundred percent (100%) of
the Performance Shares covered by the Award; and
(b) the applicable Performance Period shall be deemed to have ended on
the date of the Acceleration Event;
(c) the payment to the Participant shall be the amount determined
either by the Committee, in its sole discretion, or in the manner
stated in the Award Agreement. This amount shall then be
multiplied by a
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fraction, the numerator of which is the number of full calendar
months of the applicable Performance Period that have elapsed
prior to the date of the Acceleration Event, and the denominator
of which is the total number of months in the original Performance
Period; and
(d) upon the making of any such payment, the Award Agreement as to
which it relates shall be deemed canceled and of no further force
and effect.
13.6 Upon the occurrence of an Acceleration Event, subject to the approval of
the Committee if the Acceleration Event results from a Board-Approved
Change in Control, the Committee in its discretion may declare any or all
then outstanding Stock Options not previously exercisable and vested as
immediately exercisable and fully vested, in whole or in part.
13.7 Upon the occurrence of an Acceleration Event, subject to the approval of
the Committee if the Acceleration Event results from a Board-Approved
Change in Control, the Committee in its discretion, may declare the
restrictions applicable to Awards of Restricted Stock, Deferred Stock or
Other Stock-Based Awards to have lapsed, in which case the Corporation
shall remove all restrictive legends and stop-transfer orders applicable
to the certificates for such shares of Stock, and deliver such
certificates to the Participants in whose names they are registered.
13.8 The value of all outstanding Stock Option, Stock Rights, Restricted
Stock, Deferred Stock, Performance Shares, Stock Awards and Other
Stock-Based Awards, in each case to the extent vested, shall, unless
otherwise determined by the Committee in its sole discretion at or after
grant but prior to any Change in Control, be cashed out on the basis of
the "Change in Control Price," as defined in Section 13.9 as of the date
such Change in Control or such Potential Change in Control is determined
to have occurred or such other date as the Committee may determine prior
to the Change in Control.
13.9 For purposes of Section 13.8, "Change in Control Price" means the highest
price per share of Stock paid in any transaction reported on the New York
Stock Exchange Composite Index, or paid or offered in any bona fide
transaction related to a Potential or actual Change in Control of the
Corporation at any time during the sixty (60) day period immediately
preceding the occurrence of the Change in Control (or, where applicable,
the occurrence of the Potential Change in Control event), in
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each case as determined by the Committee except that, in the case of
Incentive Stock Options and Stock Appreciation Rights (or Limited Stock
Appreciation Rights) relating to such Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the
optionee exercises such Stock Appreciation Rights (or Limited Stock
Appreciation Rights).
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ARTICLE XIV - AMENDMENT AND TERMINATION
14.1 The Board, upon recommendation of the Committee, or otherwise, at any
time and from time to time, may amend or terminate the Plan as may be
necessary or desirable to implement or discontinue this Plan or any
provision thereof. No amendment, without approval by the Corporation's
stockholders, shall:
(a) alter the group of persons eligible to participate in the Plan;
(b) except as provided in Sections 3.6 and 3.11, increase the maximum
number of shares of Stock or Stock Options or Stock Rights which
are available for Awards under the Plan or increase the maximum
number of shares with respect to which Stock Options or Stock
Rights may be granted to any employee under the Plan;
(c) extend the period during which Incentive Stock Option Awards may
be granted beyond November 20, 2000;
(d) limit or restrict the powers of the Committee with respect to the
administration of this Plan; or
(e) change any of the provisions of this Article XIV.
14.2 No amendment to or discontinuance of this Plan or any provision thereof
by the Board or the stockholders of the Corporation shall, without the
written consent of the Participant, adversely affect, as shall be
determined by the Committee, any Award theretofore granted to such
Participant under this Plan; provided, however, the Committee retains the
right and power to:
(a) annul any Award if the Participant competes against the
Corporation or any Subsidiary or is terminated for cause as
determined by the Committee;
(b) provide for the forfeiture of shares of Stock or other gain under
an Award as determined by the Committee for competing against the
Corporation or any Subsidiary; and
(c) convert any outstanding Incentive Stock Option to a Nonqualified
Stock Option.
14.3 If an Acceleration Event has occurred, no amendment or termination shall
impair the rights of any person with
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respect to an outstanding Award as provided in Article XIII.
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ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 Nothing in the Plan or any Award granted hereunder shall confer upon any
Participant any right to continue in the employ of the Corporation or its
Subsidiaries (or to serve as a director thereof) or interfere in any way
with the right of the Corporation or its Subsidiaries to terminate his or
her employment at any time. Unless specifically provided otherwise, no
Award granted under the Plan shall be deemed salary or compensation for
the purpose of computing benefits under any employee benefit plan or
other arrangement of the Corporation or its Subsidiaries for the benefit
of its employees unless the Corporation shall determine otherwise. No
Participant shall have any claim to an Award until it is actually granted
under the Plan. To the extent that any person acquires a right to receive
payments from the Corporation under the Plan, such right shall, except as
otherwise provided by the Committee, be no greater than the right of an
unsecured general creditor of the Corporation. All payments to be made
hereunder shall be paid from the general funds of the Corporation, and no
special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such amounts, except as
provided in Article VIII with respect to Restricted Stock and except as
otherwise provided by the Committee.
15.2 The Corporation may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes which the
Corporation or any Subsidiary is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Stock Option or the exercise
thereof, any Stock Right or the exercise thereof, or in connection with
any other type of equity-based compensation provided hereunder or the
exercise thereof, including, but not limited to, the withholding of
payment of all or any portion of such Award or another Award under this
Plan until the Participant reimburses the Corporation or its Subsidiaries
for the amount the Corporation or its Subsidiaries is required to
withhold with respect to such taxes, or canceling any portion of such
Award or another Award under this Plan in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or selling
any property contingently credited by the Corporation for the purpose of
paying such Award or another Award under this Plan, in order to withhold
or reimburse itself for the amount it is required to so withhold.
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15.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by
any government or regulatory agency as may be required. Any provision
herein relating to compliance with Rule 16b-3 under the Act shall not be
applicable with respect to participation in the Plan by Participants who
are not subject to Section 16(b) of the Act.
15.4 The terms of the Plan shall be binding upon the Corporation, its
Subsidiaries and their successors and assigns.
15.5 Neither a Stock Option, Stock Right, nor any other type of equity-based
compensation provided for hereunder, shall be transferable except as
provided for herein. If any Participant makes such a transfer in
violation hereof, any obligation of the Corporation shall forthwith
terminate.
15.6 This Plan and all actions taken hereunder shall be governed by the laws
of the State of North Carolina, except to the extent preempted by ERISA.
15.7 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Corporation, nothing contained herein shall give any
such Participant any rights that are greater than those of a general
creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver shares of Stock or payments
in lieu of or with respect to Awards hereunder; provided, however, that,
unless the Committee otherwise determines with the consent of the
affected Participant, the existence of such trusts or other arrangements
is consistent with the "unfunded" status of the Plan.
15.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such Participant
under Section 83(b) of the Code, or any similar provision thereof.
15.9 If any provision of this Plan or an Award Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award Agreement under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the
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Plan or the Award Agreement, it shall be stricken and the remainder of
the Plan or the Award Agreement shall remain in full force and effect.
CENTURA BANKS, INC.
ATTEST: By: /s/ Frank L. Pattillo
------------------------------
Frank L. Pattillo
Authorized Officer
(Corporate Seal)
/s/ Joseph A. Smith, Jr.
- ------------------------
Joseph, A. Smith, Jr.
Secretary
43
Exhibit 10.33
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
made effective this 1st day of November, 1996, between Dean E. Painter, Jr.
("Painter"), and CLG, Inc. ("CLG").
WHEREAS, Painter has been and is currently employed by CLG, a North
Carolina computer leasing corporation headquartered in Raleigh, North Carolina;
and
WHEREAS, Centura Banks, Inc., a North Carolina bank holding company
("Centura"), has acquired CLG (the "Acquisition") and will maintain CLG as a
wholly-owned subsidiary of Centura Bank, a North Carolina bank corporation
headquartered in Rocky Mount, North Carolina ("Bank"); and
WHEREAS, CLG desires to provide for Painter's continued employment with CLG
following the Acquisition; and
WHEREAS, CLG desires to enter into this Agreement with Painter to set forth
the terms of such employment; and
WHEREAS, Painter agrees that the terms of this Agreement will allow him to
be employed with and to devote his best efforts to CLG.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties agree as follows:
1. EMPLOYMENT.
CLG shall employ Painter as Chairman and Chief Executive Officer of CLG,
with the duties, responsibilities and powers of such office as assigned to him
and as customarily associated with such office. Painter shall faithfully and
diligently discharge his duties and responsibilities under this Agreement.
Nothing contained in this Section 1 or elsewhere in this Agreement, however,
will prevent or otherwise prohibit Painter from engaging in and pursuing
personal affairs not inconsistent with his duties and responsibilities under
this Agreement or prevent or prohibit Painter from managing and otherwise
tending to his personal investments, in each case so long as the same does not
interfere with the performance of his duties and responsibilities under this
Agreement.
2. TERM.
The Term of this Agreement shall be five (5) years, commencing on the date
hereof.
<PAGE>
3. COMPENSATION AND BENEFITS.
During the Term of this Agreement, CLG shall pay to Painter as compensation
for his services to CLG a base salary at the rate of $360,000 per year, payable
in equal monthly installments. The base salary payable hereunder shall be
increased from time to time over the Term of this Agreement in the discretion of
the Compensation Committee of the Board of Directors of Centura, which committee
shall consider in making such adjustments, among other pertinent factors,
industry standards and the profitability of CLG.
The above-stated compensation shall not be deemed inclusive nor prevent
Painter from receiving any other compensation provided by CLG, and he shall be
entitled in any event (either directly or through salary adjustment) to health
and hospitalization insurance (including major medical), long-term disability
insurance, and life insurance, all in accordance (except as otherwise expressly
provided herein) with CLG's insurance plans for officers and employees in
comparable positions as such plans may be modified from time to time. For so
long as Painter is an officer or employee of CLG, Painter shall be entitled to
participate in all current and future employee benefit plans and arrangements in
which officers and employees of CLG or Bank in comparable positions are
permitted to participate.
4. TERMINATION.
Painter's employment under this Agreement shall terminate:
(a) Death. Upon the death of Painter;
(b) Disability. Upon notice from CLG to Painter in the event Painter
becomes "permanently disabled." For purposes of this Agreement, Painter shall be
deemed "permanently disabled" six (6) months after the first date that he has
become disabled by bodily or mental illness, disease, or injury, to the extent
that he is prevented from performing his material and substantial duties of
employment, and such disability has continued uninterrupted for six (6) months.
If the parties or their representatives cannot agree as to whether Painter is
"permanently disabled," as defined herein, they shall choose a physician to
examine Painter for the purpose of determining or confirming the existence or
extent of any disability. If the parties or their representatives cannot agree
on the choice of a physician to make such examination, each party or its
representative shall select one physician to make such examination and the two
physicians selected shall select a third physician to make such examination and
the three examining physicians shall by majority vote determine or confirm the
existence or extent of any disability. Notwithstanding the foregoing, before
terminating Painter in the event of his permanent disability, CLG shall offer
Painter reasonable accommodation pursuant to the Americans with Disabilities
Act, in which case Painter's duties and compensation hereunder may be adjusted
in accordance with such accommodation. Painter shall have the right to decline
CLG's offer of accommodation and, in such case, Painter's employment under this
Agreement shall terminate as provided herein;
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(c) Cause. Upon notice from CLG to Painter for cause. For purposes of this
Agreement, "cause" shall be defined as (i) a willful and continued failure by
Painter to perform his duties in the capacities indicated above (other than due
to disability); or (ii) a material breach by Painter of his fiduciary duties of
loyalty or care to CLG, as established by the Board of Directors of Centura
(other than due to disability); or (iii) a willful violation by Painter of any
material provision of this Agreement; or (iv) a conviction of, or the entering
of a plea of nolo contendere by Painter for any felony or any crime involving
fraud or dishonesty; or (v) a willful violation of any material federal or state
laws or regulations applicable to CLG. In addition, if Painter shall terminate
his employment for a breach of this Agreement by CLG in accordance with Section
4(d) hereof, and it is ultimately determined that no reasonable basis existed
for Painter's termination on account of the alleged default of CLG, such event
shall be deemed cause for termination by CLG;
Any notice of termination of Painter's employment with CLG for cause shall
set forth in reasonable detail the facts and circumstances claimed to provide
the basis for termination of his employment under the provisions contained
herein and the date of termination (the "Termination Date"). If the cause
alleged by CLG shall be (i), (ii), or (iii) set forth above, Painter shall be
given the opportunity to cure the breach within a reasonable period of time upon
receipt of notice but in no event to exceed thirty (30) days, unless such breach
is not reasonably susceptible to being corrected within thirty (30) days, in
which case Painter shall have the opportunity to cure such breach, provided that
Painter has commenced corrective action within such thirty (30) day period and
diligently pursues such action to completion;
(d) Breach. Upon notice from Painter to CLG of CLG's failure to comply with
any material provision of this Agreement, provided that CLG shall have thirty
(30) days from the receipt of such notice to cure any default under this
Agreement. If such default shall be cured or if CLG shall have taken steps to
cure the default within the thirty (30) day period and diligently pursues such
action to completion, Painter shall have no right to terminate his employment
under the provisions of this Section 4(d);
(e) Expiration of Term. Upon the expiration of the Term of this Agreement
as set forth in Section 2 hereof; and
(f) No Monetary Damages. Notwithstanding any provision of this Agreement to
the contrary, and except to the extent provided otherwise in Section 6 hereof,
Painter shall not be liable to CLG for monetary damages in the event of a
violation or breach of any of the provisions or covenants of this Agreement,
except to the extent that any such violation or breach is of the covenants set
forth in Section 6 hereof.
5. COMPENSATION AND BENEFITS PAYABLE UPON TERMINATION.
(a) Upon Painter's death during the Term of this Agreement, CLG shall
provide such death or insurance benefits as are provided in accordance with the
regular policy of CLG to similarly positioned employees and pursuant to the
terms of any benefit plans or arrangements maintained by CLG which provide such
benefits.
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(b) In the event Painter becomes permanently disabled and is terminated as
set forth in Section 4(b) hereof, CLG shall pay to Painter or his estate or
beneficiaries for the balance of the Term of this Agreement, the then-existing
base salary set forth in Section 3 hereof, provided that such payment shall be
offset by any amounts received by Painter (i) under any long term disability
plan maintained for the employees of CLG, (ii) from any other collateral source
payable due to disability to the extent that such payments are derived from
insurance or direct payments furnished by CLG, and (iii) social security
benefits. Painter agrees to use reasonable efforts to obtain the benefit of any
disability plan or policy covering him as a result of his employment by CLG in
the circumstances contemplated by Section 4(b) and this Section 5(b).
(c) If Painter's employment shall be terminated by Painter pursuant to
Section 4(d) hereof, CLG shall continue to pay to Painter or his estate his full
base salary in effect at the Termination Date and all applicable benefits due
hereunder (provided that the terms of any employee benefit plan pursuant to
which such benefits are provided permit participation by similarly positioned
former employees of Bank or CLG, as applicable) for the balance of the Term of
this Agreement, provided that such payments shall not be made after the
expiration of the Term of this Agreement; and provided further that such
payments shall be offset by any amounts paid to Painter under any severance or
salary continuation policy or plan of Bank or CLG applicable to Painter.
(d) In the event termination is for cause as described in Section 4(c)
hereof or is due to the expiration of the Term of this Agreement, CLG shall pay
Painter the compensation and benefits described in Section 3 hereof through the
Termination Date and no other compensation or benefits shall be paid to Painter
hereunder; provided, however, that nothing herein shall be deemed to terminate
or limit the Painter's vested rights under any other benefit, retirement, or
pension plan of CLG applicable to Painter, and the terms of those plans,
programs, or arrangements shall govern.
6. CONFIDENTIALITY AND COVENANT NOT TO COMPETE.
Painter hereby acknowledges that, by virtue of his employment by CLG,
Painter has gained certain valuable knowledge and has developed certain
expertise with respect to the business of computer leasing, generally, and the
business of CLG, specifically, including certain confidential information and
trade secrets relating to such business and information relating to certain
customers and potential customers of CLG. In connection with and in view of the
foregoing, Painter hereby agrees as follows:
(a) Painter agrees that, during the term of his employment pursuant to this
Agreement and for a period of three (3) years thereafter, Painter will not,
directly or indirectly, engage in, or participate in the promotion, financing,
ownership or management of, or otherwise provide services to, any firm,
corporation, or business (whether as an employee, officer, director, agent,
owner, partner, shareholder, consultant, or otherwise), the purpose or result of
which, in whole or in part, is to assist such firm, corporation, or business in
the buying, leasing, servicing, and selling of computer and technology equipment
in competition with CLG within 100 miles of any office of CLG or the principal
office of Centura.
(b) Painter agrees that, during the term of his employment pursuant to this
Agreement and for a period of three (3) years thereafter, Painter will not,
directly or indirectly, call upon, solicit, sell to, attempt to sell to, or
otherwise in any way engage in or attempt to engage in the business of buying,
leasing, servicing and selling computer and technology equipment in competition
with CLG to any firm, corporation, person or business that is a customer of CLG,
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Centura or Centura Bank at the time of such activity or was a customer of CLG,
Centura or Centura Bank at any time during the term of his employment pursuant
to this Agreement.
(c) Painter agrees that, during the term of his employment pursuant to this
Agreement and for a period of three (3) years thereafter, Painter will hold in a
fiduciary capacity for the benefit of CLG, and shall not directly or indirectly
use or disclose, except as required in Painter's judgment in connection with the
performance of his duties, as required by law or judicial or regulatory
proceedings or as authorized by CLG, any "Company Information" (as defined
below) that Painter may have or acquire (whether or not developed or compiled by
Painter) during the Term of this Agreement. The term "Company Information" as
used in this Agreement shall mean confidential or proprietary information,
including technical and financial information and customer or client lists,
relating to CLG or its programs or procedures, including without limitation,
information received by CLG from third parties under confidential conditions.
The term "Company Information" shall also include, without limitation, CLG's
computer data-base, forms and form letters, form contracts, information
regarding specific transactions, financial information and estimates and
long-term planning and goals. The term "Company Information" shall not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right of
CLG.
(d) In addition to the foregoing and not in limitation thereof, Painter
agrees that, during the term of his employment pursuant to this Agreement and
for a period of three (3) years thereafter, Painter will hold in a fiduciary
capacity for the benefit of CLG and shall not directly or indirectly use or
disclose, except as required in Painter's judgment in connection with the
performance of his duties, as required by law or judicial or regulatory
proceedings or as authorized by CLG, any "Customer Information" (as defined
below) that Painter may have or acquire (whether or not developed or compiled by
Painter and whether or not Painter has been authorized to have access to such
Customer Information) during the Term of this Agreement. The term "Customer
Information" as used in this Agreement shall mean confidential or proprietary
information, including technical and financial information and customer lists
received by CLG or Painter from any customer or potential customer of CLG, and
shall include any information subject to the provisions of the federal Right to
Financial Privacy Act. The term "Customer Information" shall not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right of
the customer to which such information pertains.
(e) Painter agrees and acknowledges that, if a violation of any covenant
contained in this Section 6 occurs or is threatened, such violation or
threatened violation will cause irreparable injury to CLG, that the remedy at
law for any such violation or threatened violation will be inadequate and that
CLG shall be entitled to appropriate equitable relief.
(f) The covenants contained in this Section 6 shall inure to the benefit of
CLG, any successor of it, and every subsidiary of it.
(g) The restrictions contained in this Section 6 are considered by the
parties hereto to be fair and reasonable and necessary for the protection of the
legitimate business interests of CLG.
(h) In the event of a termination of this Agreement by Painter pursuant to
Section 4(d) hereof, the restrictions contained in this Section 6 shall no
longer apply to Painter from and after the Termination Date.
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7. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of CLG, and CLG shall require
any such successor to expressly assume and agree to perform this Agreement. As
used in this Agreement, "CLG" shall mean CLG as hereinbefore defined and any
successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable by
Painter's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Painter should die
while any amount would still be payable hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Painter's estate.
8. MISCELLANEOUS.
(a) All notices required or permitted hereunder shall be given in writing
by actual delivery or by registered or certified mail (postage prepaid) at the
following addresses or at such other places as shall be designated in writing:
Painter: 1211 Briar Patch Lane
Raleigh, North Carolina 27615
CLG: CLG, Inc.
3001 Spring Forest Road
Raleigh, North Carolina 27604
Attention: President
With a copy to: Centura Banks, Inc.
Post Office Box 1220
134 North Church Street
Rocky Mount, North Carolina 27804
Attn: President
(b) References in this Agreement to "similarly positioned" or "similarly
situated" employees shall mean those employees of CLG of comparable rank and
level of responsibility and with comparable duties. The existence or
non-existence of a contract of employment with CLG shall not be relevant for the
purpose of identifying those employees (or, if appropriate, former employees) of
CLG who are "similarly positioned" or "similarly situated."
(c) If any provision of this Agreement shall be determined to be void by
any court of competent jurisdiction, then such determination shall not affect
any other provision of this Agreement, all of which shall remain in full force
and effect.
(d) The failure of the parties to complain of any act or omission on the
part of either party, no matter how long the same may continue, shall not be
deemed to be a waiver of any of its rights hereunder.
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(e) This Agreement contains the entire agreement of the parties. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument. It may be changed or terminated only by a writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
discharge or termination is sought.
(f) This Agreement shall be construed and enforced in accordance with the
laws of the State of North Carolina, except as preempted by the Employee
Retirement Income Security Act of 1974, as amended.
IN WITNESS WHEREOF, Painter has executed this Agreement under seal by
adopting the word "SEAL" beside his name and CLG has executed this Agreement
under seal through its duly authorized officers as of the day and year first
above written.
/s/ Dean E. Painter, Jr. (SEAL)
Dean E. Painter, Jr.
CLG, INC.
By: /s/ Edwin J. Lee
Edwin J. Lee
President and Chief
Operating Officer
ATTEST:
/s/ Joseph A. Smith, Jr.
Joseph A. Smith, Jr.
Secretary
(Corporate Seal)
7
Exhibit 10.34
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
made effective this 3rd day of November, between Thomas A. Betts, Jr. ("Betts"),
and Centura Insurance Services, Inc. ("CIS"), a wholly-owned subsidiary of
Centura Banks, Inc. ("Centura"), a North Carolina bank holding corporation.
WHEREAS, Betts has been and is currently associated with Betts & Company, a
general partnership engaged in all facets of the insurance business with its
principal offices in Rocky Mount, North Carolina; and
WHEREAS, Centura Banks, Inc. has acquired Betts & Company (the
"Acquisition") and combined, or intends to combine, Betts' insurance activities
with those of CIS; and
WHEREAS, CIS desires to provide for Betts' continued employment with CIS
following the Acquisition; and
WHEREAS, CIS desires to enter into this Agreement with Betts to set forth
the terms of such employment; and
WHEREAS, Betts agrees that the terms of this Agreement will allow him to be
employed with and to devote his best efforts to CIS.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties agree as follows:
1. EMPLOYMENT.
CIS shall employ Betts as an insurance agent of CIS, with the duties,
responsibilities and powers as assigned to him from time to time by the Board of
Directors of CIS and as customarily associated with such position. Betts shall
faithfully and diligently discharge his duties and responsibilities under this
Agreement. Nothing contained in this Section 1 or elsewhere in this Agreement,
however, will prevent or otherwise prohibit Betts from engaging in and pursuing
personal affairs not inconsistent with his duties and responsibilities under
this Agreement or prevent or prohibit Betts from managing and otherwise tending
to his personal investments, in each case so long as the same does not interfere
with the performance of his duties and responsibilities under this Agreement.
2. TERM.
The initial term of this Agreement shall be five (5) years, commencing on
the date hereof (the "Initial Term"). Upon the expiration of the Initial Term,
this Agreement may be renewed for successive periods of one (1) year upon the
mutual agreement of Betts and CIS (the "Renewal Terms").
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3. COMPENSATION AND BENEFITS.
(a) Base Salary. During the Initial Term of this Agreement, CIS shall pay
to Betts as compensation for his services to CIS, a base salary of $240,000 per
year, payable in equal monthly installments. In the event this Agreement is
renewed pursuant to Section 2 hereof, the base salary payable hereunder for each
Renewal Term may be increased from time to time in the discretion of the Board
of Directors of CIS, which Board, in making such adjustments, shall consider,
among other pertinent factors, industry standards, similarly situated employees,
and the profitability of Centura "East" Insurance Group.
(b) Commissions. In addition to the base salary, for the Initial Term of
this Agreement, Betts shall be entitled to receive additional compensation equal
to:
(i) thirty-five percent (35%) of the commissions earned by the Centura
"East" Insurance Group on new commercial and personal lines property and
casualty, group life, and health insurance policies sold by Betts; and
(ii) thirty percent (30%) of the commissions earned by the Centura
"East" Insurance Group on renewal policies for new commercial and personal
lines property and casualty, group life, and health insurance sold by Betts
after the date hereof.
The additional compensation described in this Section 3(b) shall be subject
to change in the event this Agreement is renewed by Betts and CIS; provided,
however, in no event will future commissions paid to Betts be less favorable
than those paid under the standard compensation package available to other
similarly situated employees of CIS.
(c) Separate Consideration. In addition to the base salary and commissions
described in this Section 3, Betts shall receive the sum of $5,000.00 upon
execution of this Agreement, as separate consideration for the covenants set
forth in Section 6 hereof.
(d) Other Benefits. The above-stated compensation shall not be deemed
inclusive nor prevent Betts from receiving any other compensation provided by
CIS, and he shall be entitled, in any event (either directly or through salary
adjustment), to health and hospitalization insurance (including major medical),
long-term disability insurance, and life insurance, all in accordance (except as
otherwise expressly provided herein) with CIS's insurance plans for officers and
employees in comparable positions as such plans may be modified from time to
time. For so long as Betts is an employee of CIS, Betts shall be entitled to
participate in all current and future employee benefit plans and arrangements in
which employees of CIS in comparable positions are permitted to participate.
4. TERMINATION.
Betts' employment under this Agreement shall terminate:
(a) Death. Upon the death of Betts.
2
<PAGE>
(b) Disability. Upon notice from CIS to Betts in the event Betts becomes
"permanently disabled." For purposes of this Agreement, Betts shall be deemed
"permanently disabled" six (6) months after the first date that he has become
disabled by bodily or mental illness, disease, or injury, to the extent that he
is prevented from performing his material and substantial duties of employment,
and such disability has continued uninterrupted for six (6) months. If the
parties or their representatives cannot agree as to whether Betts is
"permanently disabled," as defined herein, they shall choose a physician to
examine Betts for the purpose of determining or confirming the existence or
extent of any disability. If the parties or their representatives cannot agree
on the choice of a physician to make such examination, each party or its
representative shall select one physician to make such examination and the two
physicians selected shall select a third physician to make such examination and
the three examining physicians shall by majority vote determine or confirm the
existence or extent of any disability. Notwithstanding the foregoing, before
terminating Betts in the event of his permanent disability, CIS shall offer
Betts reasonable accommodation pursuant to the Americans with Disabilities Act,
in which case Betts' duties and compensation hereunder may be adjusted in
accordance with such accommodation. Betts shall have the right to decline CIS's
offer of accommodation and, in such case, Betts' employment under this Agreement
shall terminate as provided herein.
(c) Cause. Upon notice from CIS to Betts for cause. For purposes of this
Agreement, "cause" shall be defined as (i) a willful and continued failure by
Betts to perform his duties in the capacities indicated above (other than due to
disability); or (ii) a material breach by Betts of his fiduciary duties of
loyalty or care to CIS or Centura, as established by the Board of Directors of
Centura (other than due to disability); or (iii) a willful violation by Betts of
any material provision of this Agreement; or (iv) a conviction of, or the
entering of a plea of nolo contendere by Betts for any felony or any crime
involving fraud or dishonesty; or (v) a willful violation of any material
federal or state laws or regulations applicable to CIS or Centura. In addition,
if Betts shall terminate his employment for a breach of this Agreement by CIS in
accordance with Section 4(d) hereof, and it is ultimately determined that no
reasonable basis existed for Betts' termination on account of the alleged
default of CIS, such event shall be deemed cause for termination by CIS.
Any notice of termination of Betts' employment with CIS for cause shall set
forth in reasonable detail the facts and circumstances claimed to provide the
basis for termination of his employment under the provisions contained herein
and the date of termination (the "Termination Date"). If the cause alleged by
CIS shall be (i), (ii), or (iii) set forth above, Betts shall be given the
opportunity to cure the breach within a reasonable period of time upon receipt
of notice but in no event to exceed thirty (30) days, unless such breach is not
reasonably susceptible to being corrected within thirty (30) days, in which case
Betts shall have the opportunity to cure such breach, provided that Betts has
commenced corrective action within such thirty (30) day period and diligently
pursues such action to completion.
(d) Breach. Upon notice from Betts to CIS of CIS's failure to comply with
any material provision of this Agreement, provided that CIS shall have thirty
(30) days from the receipt of such notice to cure any default under this
Agreement. If such default shall be cured or if CIS shall have taken steps to
cure the default within the thirty (30) day period and diligently pursues such
action to completion, Betts shall have no right to terminate his employment
under the provisions of this Section 4(d).
(e) Expiration of Term. Upon the expiration of the Initial Term of this
Agreement, if not renewed by the parties as set forth in Section 2 hereof.
3
<PAGE>
5. COMPENSATION AND BENEFITS PAYABLE UPON TERMINATION.
(a) Upon Betts' death during the Initial Term or any Renewal Term of this
Agreement, CIS shall provide such death or insurance benefits as are provided in
accordance with the regular policy of CIS to similarly positioned employees and
pursuant to the terms of any benefit plans or arrangements maintained by CIS
which provide such benefits.
(b) In the event Betts becomes permanently disabled and is terminated as
set forth in Section 4(b) hereof, CIS shall pay to Betts or his estate or
beneficiaries for the balance of the then current term of this Agreement, the
then existing base salary set forth in Section 3 hereof, provided that such
payment shall be offset by any amounts received by Betts (i) under any long term
disability plan maintained for the employees of CIS, (ii) from any other
collateral source payable due to disability to the extent that such payments are
derived from insurance or direct payments furnished by CIS, and (iii) social
security benefits. Betts agrees to use reasonable efforts to obtain the benefit
of any disability plan or policy covering him as a result of his employment by
CIS in the circumstances contemplated by Section 4(b) and this Section 5(b).
(c) If Betts' employment shall be terminated by Betts pursuant to Section
4(d) hereof, CIS shall continue to pay to Betts or his estate his full base
salary in effect at the Termination Date and all applicable benefits due
hereunder (provided that the terms of any employee benefit plan pursuant to
which such benefits are provided permit participation by similarly positioned
former employees of CIS, as applicable) for the balance of the then current term
of this Agreement, provided that such payments shall not be made after the
expiration of the then current term of this Agreement; and provided further that
such payments shall be offset by any amounts paid to Betts under any severance
or salary continuation policy or plan of CIS applicable to Betts.
(d) In the event termination is for cause as described in Section 4(c)
hereof or is due to the expiration of the Initial Term or any Renewal Term of
this Agreement, CIS shall pay Betts the compensation and benefits described in
Section 3 hereof through the Termination Date and no other compensation or
benefits shall be paid to Betts hereunder; provided, however, that nothing
herein shall be deemed to terminate or limit the Betts' vested rights under any
other benefit, retirement, or pension plan of CIS applicable to Betts, and the
terms of those plans, programs, or arrangements shall govern.
6. CONFIDENTIALITY AND COVENANT NOT TO COMPETE.
(a) Covenants. Betts hereby acknowledges that, by virtue of his employment
by CIS, Betts will be in possession of and gain certain valuable knowledge and
develop certain expertise with respect to the business of insurance, generally,
and the business of CIS and Centura, specifically, including certain
confidential information and trade secrets relating to such business and
information relating to certain customers and potential customers of CIS and
Centura. In connection with, and in view of the foregoing, Betts hereby agrees
that, during the term of his employment pursuant to this Agreement:
(i) he will not, directly or indirectly, engage in, or participate in
the promotion, financing, ownership or management of, or otherwise provide
services to, any firm, corporation, or business (whether as an employee,
officer, director, agent, owner, partner, shareholder, consultant, or
otherwise), the purpose or result of which, in whole or in part, is to
assist
4
<PAGE>
such firm, corporation, or business in the buying or selling of insurance
in competition with CIS or Centura within 100 miles of any office of CIS,
Centura or Centura Bank, a wholly-owned subsidiary of Centura, including
the principal office of any of them;
(ii) he will not, directly or indirectly in competition with CIS or
Centura, call upon, solicit, sell to, attempt to sell to, or otherwise
engage in or attempt to engage in the business of buying and selling
insurance with, any firm, corporation, person or business that is a
customer of CIS, Centura or Centura Bank at the time of such activity, or
was a customer of CIS, Centura or Centura Bank at any time during the term
of his employment pursuant to this Agreement;
(iii) he will hold in a fiduciary capacity for the benefit of CIS and
Centura, and will not directly or indirectly use or disclose, except as
required in Betts' judgment in connection with the performance of his
duties, as required by law or judicial or regulatory proceedings or as
authorized by CIS or Centura, any "Company Information" (as defined below)
that Betts may have or acquire (whether or not developed or compiled by
Betts) during the Initial Term and any Renewal Term of this Agreement. The
term "Company Information" as used in this Agreement shall mean
confidential or proprietary information, including technical and financial
information and customer or client lists, relating to CIS or Centura or its
programs or procedures, including without limitation, information received
by CIS or Centura from third parties under confidential conditions. The
term "Company Information" shall also include, without limitation,
Centura's computer data-base, forms and form letters, form contracts,
information regarding specific transactions, financial information and
estimates and long-term planning and goals. The term "Company Information"
shall not include information that has become generally available to the
public by the act of one who has the right to disclose such information
without violating any right of CIS or Centura; and
(iv) he will hold in a fiduciary capacity for the benefit of CIS and
Centura and will not directly or indirectly use or disclose, except as
required in Betts' judgment in connection with the performance of his
duties, as required by law or judicial or regulatory proceedings or as
authorized by CIS or Centura, any "Customer Information" (as defined below)
that Betts may have or acquire (whether or not developed or compiled by
Betts and whether or not Betts has been authorized to have access to such
Customer Information) during the Initial Term and any Renewal Term of this
Agreement. The term "Customer Information" as used in this Agreement shall
mean confidential or proprietary information, including technical and
financial information and customer lists received by CIS, Centura or Betts
from any customer or potential customer of CIS or Centura, and shall
include any information subject to the provisions of the federal Right to
Financial Privacy Act. The term "Customer Information" shall not include
information that has become generally available to the public by the act of
one who has the right to disclose such information without violating any
right of the customer to which such information pertains.
(b) Post Termination Covenants. Betts hereby agrees to honor the covenants
expressed in Section 6(a) hereof for a period of three (3) years following
termination of this Agreement in the event such termination is for "cause"
pursuant to Section 4(c) hereof, or in the event CIS fails to offer to renew
this Agreement or Betts elects not to renew this Agreement following the
expiration of the Initial Term and any Renewal Term hereof, unless such election
results from an offer by CIS to renew this Agreement on terms and conditions
that are not substantially the same as, or at least equal or comparable to,
those contained in this Agreement, including salary, benefits, and duties.
5
<PAGE>
(c) Betts agrees and acknowledges that, if a violation of any covenant
contained in this Section 6 occurs or is threatened, such violation or
threatened violation will cause irreparable injury to CIS and Centura, that the
remedy at law for any such violation or threatened violation will be inadequate
and that CIS and Centura shall be entitled to appropriate equitable relief.
(d) The covenants contained in this Section 6 shall inure to the benefit of
CIS and Centura, any successor or subsidiary of either of them.
(e) The restrictions contained in this Section 6 are considered by the
parties hereto to be fair and reasonable and necessary for the protection of the
legitimate business interests of CIS and Centura.
(f) In the event of a termination of this Agreement by Betts pursuant to
Section 4(d) hereof, the restrictions contained in this Section 6 shall no
longer apply to Betts from and after the Termination Date.
(g) In the event CIS fails to offer to renew this Agreement after the
Initial Term or any Renewal Term, the restrictions contained in this Section 6
shall no longer apply to Betts.
7. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of CIS or Centura, and CIS and
Centura shall require any such successor to expressly assume and agree to
perform this Agreement. As used in this Agreement, "Centura" shall mean Centura
as hereinbefore defined and any successor to its business and/or assets as
aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable by
Betts' personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Betts should die while any amount
would still be payable hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to Betts'
estate.
8. MONETARY DAMAGES.
Notwithstanding any provision of this Agreement to the contrary, Betts
shall not be liable to CIS for monetary damages in the event of a violation or
breach of any of the provisions or covenants of this Agreement, except to the
extent that any such violation or breach is of the covenants set forth in
Section 6 hereof.
9. MISCELLANEOUS.
(a) All notices required or permitted hereunder shall be given in writing
by actual delivery or by registered or certified mail (postage prepaid) at the
following addresses or at such other places as shall be designated in writing:
Betts: Thomas A. Betts, Jr.
1516 Lafayette Avenue
Rocky Mount, North Carolina 27804
6
<PAGE>
CIS: Centura Insurance Services, Inc.
Post Office Box 1220
134 North Church Street
Rocky Mount, North Carolina 27804
Attention: Reid Rhodes
With a copy to: Centura Banks, Inc.
Post Office Box 1220
134 North Church Street
Rocky Mount, North Carolina 27804
Attention: H. Kel Landis, III
(b) References in this Agreement to "similarly positioned" or "similarly
situated" employees shall mean those employees of CIS of comparable rank and
level of responsibility and with comparable duties. The existence or
non-existence of a contract of employment with CIS shall not be relevant for the
purpose of identifying those employees (or, if appropriate, former employees) of
CIS who are "similarly positioned" or "similarly situated."
(c) If any provision of this Agreement shall be determined to be void by
any court of competent jurisdiction, then such determination shall not affect
any other provision of this Agreement, all of which shall remain in full force
and effect.
(d) The failure of the parties to complain of any act or omission on the
part of either party, no matter how long the same may continue, shall not be
deemed to be a waiver of any of its rights hereunder.
(e) This Agreement contains the entire agreement of the parties. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument. It may be changed or terminated only by a writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
discharge or termination is sought.
(f) This Agreement shall be construed and enforced in accordance with the
laws of the state of North Carolina, except as preempted by the Employee
Retirement Income Security Act of 1974, as amended.
IN WITNESS WHEREOF, Betts has executed this Agreement under seal by
adopting the word "SEAL" beside his name and CIS has executed this Agreement
under seal through its duly authorized officers as of the day and year first
above written.
/s/ Thomas A. Betts, Jr. (SEAL)
Thomas A. Betts, Jr.
7
<PAGE>
CENTURA INSURANCE SERVICES, INC.
By: /s/ Reid J. Rhodes
Reid J. Rhodes
Title: President
ATTEST:
/s/ Joseph A. Smith, Jr.
Joseph A. Smith, Jr.
Secretary
(Corporate Seal)
8
Exhibit 21
CENTURA BANKS, INC.
SUBSIDIARIES OF CENTURA BANKS, INC.
Subsidiary Name Location Percent Ownership
- --------------------------------------------------------------------------------
Centura Bank North Carolina 100%
Centura Capital Trust I Delaware 100%
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Centura Banks, Inc.:
We consent to incorporation by reference in the Registration Statements on
Forms S-8 (Nos. 33-33773, 33-52160, 33-51470, 33-55926, 33-63496, 33-71198,
33-71244, 33-74706, 33-90568, 33-93404, 33-80989, 333-04949, 333-12357 and
333-08503) and on Forms S-3 (Nos. 33-33773 and 333-23873) of our report dated
January 7, 1998, relating to the consolidated balance sheets of Centura Banks,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1997, which report
appears in the December 31, 1997 Annual Report on Form 10-K of Centura Banks,
Inc.
KPMG Peat Marwick LLP
Raleigh, North Carolina
March 11, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 268,248
<INT-BEARING-DEPOSITS> 13,873
<FED-FUNDS-SOLD> 29,552
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,639,500
<INVESTMENTS-CARRYING> 188,556
<INVESTMENTS-MARKET> 191,689
<LOANS> 4,586,582
<ALLOWANCE> 64,279
<TOTAL-ASSETS> 7,125,430
<DEPOSITS> 5,364,925
<SHORT-TERM> 733,192
<LIABILITIES-OTHER> 106,848
<LONG-TERM> 382,129
0
0
<COMMON> 187,435
<OTHER-SE> 350,901
<TOTAL-LIABILITIES-AND-EQUITY> 7,125,430
<INTEREST-LOAN> 406,078
<INTEREST-INVEST> 107,369
<INTEREST-OTHER> 1,642
<INTEREST-TOTAL> 515,089
<INTEREST-DEPOSIT> 183,941
<INTEREST-EXPENSE> 247,184
<INTEREST-INCOME-NET> 267,905
<LOAN-LOSSES> 13,418
<SECURITIES-GAINS> 136
<EXPENSE-OTHER> 246,230
<INCOME-PRETAX> 125,478
<INCOME-PRE-EXTRAORDINARY> 125,478
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,058
<EPS-PRIMARY> 3.22
<EPS-DILUTED> 3.15
<YIELD-ACTUAL> 4.56
<LOANS-NON> 6,985
<LOANS-PAST> 23,722
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,500
<ALLOWANCE-OPEN> 58,715
<CHARGE-OFFS> 14,425
<RECOVERIES> 3,438
<ALLOWANCE-CLOSE> 64,279
<ALLOWANCE-DOMESTIC> 64,279
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,941
</TABLE>
