<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1997
REGISTRATION NOS. 333-
333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STERLING FINANCIAL CORPORATION
STERLING CAPITAL TRUST I
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
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WASHINGTON 91-1572822
DELAWARE TO BE APPLIED FOR
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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111 NORTH WALL STREET
SPOKANE, WASHINGTON 99201
(509) 358-6160
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
NED M. BARNES, SECRETARY
STERLING FINANCIAL CORPORATION
111 NORTH WALL STREET
SPOKANE, WASHINGTON 99201
(509) 358-6160
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
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DONALD J. LUKES, ESQ. STEVEN KAPLAN, ESQ.
WITHERSPOON, KELLEY, DAVENPORT & TOOLE, P.S. ARNOLD & PORTER
422 WEST RIVERSIDE AVENUE 555 12TH STREET, N.W.
SPOKANE, WASHINGTON 99201 WASHINGTON, D.C. 20044
(509) 624-5265 (202) 942-5998
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------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
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PROPOSED MAXIMUM AGGREGATE PROCEEDS TO ISSUER
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
% Cumulative Capital Securities of Sterling Capital Trust I...... $40,000,000 $12,122
- -------------------------------------------------------------------------------------------------------------------
% Junior Subordinated Debentures of Sterling Financial (2) --
Corporation....................................................
- -------------------------------------------------------------------------------------------------------------------
Guarantee of Sterling Financial Corporation of certain obligations -- --
under the Cumulative Capital Securities(3).......................
- -------------------------------------------------------------------------------------------------------------------
Total Registration Fee............................................. -- $12,122
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
(2) The Junior Subordinated Debentures will be purchased by Sterling Capital
Trust I with the proceeds of the sale of the Cumulative Capital Securities.
Such securities may later be distributed for no additional consideration to
the holders of the Cumulative Capital Securities upon the dissolution of the
Trust and the distribution of its assets.
(3) This Registration Statement is deemed to cover the Guarantee. Pursuant to
Rule 457(n) under the Securities Act, no separate registration fee is
payable for the Guarantee.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
The prospectus contained in this Registration Statement will be used in
connection with the offering of the following securities: (1) % Cumulative
Capital Securities of Sterling Capital Trust I; (2) % Junior Subordinated
Debentures of Sterling Financial Corporation; and (3) a Guarantee of Sterling
Financial Corporation of certain obligations under the Cumulative Capital
Securities.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 13, 1997
1,600,000 CAPITAL SECURITIES
STERLING CAPITAL TRUST I
% CUMULATIVE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
STERLING
------------------------------------
FINANCIAL CORPORATION
The % Cumulative Capital Securities (the "Capital Securities") offered
hereby represent preferred undivided beneficial interests in the assets of
Sterling Capital Trust I, a statutory business trust created under the laws of
the State of Delaware ("Sterling Capital"). Sterling Financial Corporation (the
"Company") will be the owner of all of the beneficial interests represented by
common securities of Sterling Capital (the "Common Securities" and, together
with the Capital Securities, the "Trust Securities"). Sterling Capital exists
for the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in % Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures," and together with the Trust Securities, the
"Securities") to be issued by the Company. The Junior Subordinated Debentures
will mature on , 2027, which date may be shortened (such date, as it
may be shortened, the "Stated Maturity") to a date not earlier than ,
2002 if certain conditions are met (including the Company having received prior
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") to do so if then required under applicable capital guidelines or
policies of the Federal Reserve). See
(Continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, BY ANY OTHER GOVERNMENTAL AGENCY, OR
OTHERWISE.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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- -----------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING STERLING
PUBLIC COMMISSION(1) CAPITAL(2)(3)
- -----------------------------------------------------------------------------------------------------
Per Capital Security............... $25.00 (3) $25.00
- -----------------------------------------------------------------------------------------------------
Total.............................. $40,000,000 (3) $40,000,000
=====================================================================================================
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(1) The Company and Sterling Capital have each agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $ .
(3) In view of the fact that the proceeds of the sale of the Capital Securities
will be used to purchase the Junior Subordinated Debentures, the Company has
agreed to pay to the Underwriters, as compensation for their arranging the
investment therein of such proceeds, $ per Capital Security, or
$ in the aggregate. See "Underwriting."
------------------------
The Capital Securities are being offered by the Underwriters named herein
subject to prior sale and when, as and if delivered to and accepted by the
Underwriters. It is expected that the Capital Securities will be ready for
delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about , 1997 against payment therefor in
immediately available funds.
DAIN BOSWORTH PIPER JAFFRAY INC.
Incorporated
The date of this Prospectus is , 1997
<PAGE> 4
(cover page continued)
"Description of Junior Subordinated Debentures -- General." Although the
Company, as a savings and loan holding company, is not subject to the Federal
Reserve capital requirements for bank holding companies, it is possible that in
the future it could become subject to such requirements as a result of the
acquisition of a bank, a change in applicable regulations or the Company
otherwise becoming subject to Federal Reserve capital requirements. The Capital
Securities will have a preference under certain circumstances over the Common
Securities with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise. See "Description of Capital
Securities -- Subordination of Common Securities."
Holders of the Capital Securities will be entitled to receive preferential
cumulative cash distributions accumulating from the date of original issuance
and payable quarterly in arrears on September 30, December 31, March 31 and June
30 of each year, commencing September 30, 1997, at the annual rate of % of
the Liquidation Amount of $25 per Capital Security ("Distributions"). The amount
of each Distribution due with respect to the Capital Securities will include
amounts accrued through the date the distribution payment is due. The Company
has the right to defer payment of interest on the Junior Subordinated Debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. No interest shall be due and
payable during any Extension Period, except at the end thereof. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Junior Subordinated
Debentures are so deferred, Distributions on the Capital Securities will also be
deferred and the Company will not be permitted, subject to certain exceptions
described herein, to declare or pay any cash distributions with respect to the
Company's capital stock or with respect to debt securities of the Company that
rank pari passu in all respects with or junior to the Junior Subordinated
Debentures. During an Extension Period, interest on the Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate) at the rate
of % per annum, compounded quarterly, and holders of Capital Securities will
be required to accrue income for United States federal income tax purposes. See
"Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences -- US
Holders -- Interest Income and Original Issue Discount."
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated Indenture (each as defined
herein), taken together, fully, irrevocably and unconditionally guaranteed all
Sterling Capital's obligations under the Capital Securities as described below.
See "Relationship Among the Capital Securities, the Junior Subordinated
Debentures and the Guarantee -- Full and Unconditional Guarantee." Under the
Guarantee, the Company guarantees the payment of Distributions and payments on
liquidation or redemption of the Capital Securities, but only in each case to
the extent of funds held by Sterling Capital, as described herein. See
"Description of Guarantee." If the Company does not make payments on the Junior
Subordinated Debentures held by Sterling Capital, Sterling Capital may have
insufficient funds to pay Distributions on the Capital Securities. The Guarantee
does not cover payment of Distributions when Sterling Capital does not have
sufficient funds to pay such Distributions. In such event, a holder of Capital
Securities may institute a legal proceeding directly against the Company to
enforce payment of such Distributions to such holder. See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Capital
Securities." The obligations of the Company under the Guarantee and the Capital
Securities are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of Junior Subordinated
Debentures -- Subordination") of the Company.
The Capital Securities are subject to mandatory redemption (i) in whole,
but not in part, upon repayment of the Junior Subordinated Debentures at Stated
Maturity or their earlier optional redemption in whole upon the occurrence of a
Tax Event, an Investment Company Event or a Capital Treatment Event (each as
defined herein) and (ii) in whole or in part at any time on or after
, 2002 contemporaneously with the optional redemption by the Company of the
Junior Subordinated Debentures in whole or in part. The Junior
(continued on next page)
2
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(cover page continued)
Subordinated Debentures are redeemable prior to maturity at the option of the
Company (i) on or after , 2002, in whole at any time or in part from
time to time, or (ii) in whole, but not in part, at any time within 90 days
following the occurrence and continuation of a Tax Event, Investment Company
Event or Capital Treatment Event, in each case at a redemption price equal to
the accrued and unpaid interest on the Junior Subordinated Debentures so
redeemed to but excluding the date fixed for redemption plus 100% of the
principal amount thereof. See "Description of Junior Subordinated
Debentures -- Redemption."
The holders of the outstanding Common Securities will have the right at any
time to dissolve Sterling Capital and, after satisfaction of liabilities to
creditors of Sterling Capital as provided by applicable law, to cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of Sterling Capital. The ability
of the Company to dissolve Sterling Capital may be subject to prior regulatory
approval of the Federal Reserve. See "Description of Capital Securities --
Liquidation Distribution Upon Dissolution."
In the event of the dissolution of Sterling Capital, after satisfaction of
liabilities to creditors of Sterling Capital as provided by applicable law, the
holders of the Capital Securities will be entitled to receive a Liquidation
Amount of $25 per Capital Security plus accumulated and unpaid Distributions
thereon to the date of payment, subject to certain exceptions, which may be in
the form of a distribution of such amount in Junior Subordinated Debentures. See
"Description of Capital Securities -- Liquidation Distribution Upon
Dissolution."
The Junior Subordinated Debentures are unsecured and subordinated to all
Senior Indebtedness of the Company. As of March 31, 1997, the Company had
approximately $32.2 million of Senior Indebtedness outstanding. See "Description
of Junior Subordinated Debentures -- Subordination."
An application has been made to include the Capital Securities for listing
on the Nasdaq National Market. Although each of the Underwriters has indicated
an intention to make a market in the Capital Securities, the Underwriters are
not obligated to do so, and any market making may be discontinued at any time at
the sole discretion of such Underwriters. There can be no assurance that a
market will develop for the Capital Securities. See "Risk Factors -- Absence of
Existing Public Market; Market Prices" and "Underwriting."
The Capital Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Capital Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described herein, the Capital Securities in
certificate form will not be issued in exchange for global certificates. See
"Description of Capital Securities -- Book-Entry, Delivery and Form."
Prospective purchasers must carefully consider the information set forth in
"Certain ERISA Considerations."
THE JUNIOR SUBORDINATED DEBENTURES ARE DIRECT AND UNSECURED OBLIGATIONS OF
THE COMPANY, DO NOT EVIDENCE DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER INSURER OR GOVERNMENTAL AGENCY.
As used herein, (i) the "Junior Subordinated Indenture" means the Junior
Subordinated Indenture, as amended and supplemented from time to time, between
the Company and Bankers Trust Company, as trustee (the "Debenture Trustee"),
pursuant to which the Junior Subordinated Debentures are issued, (ii) the "Trust
Agreement" means the Amended and Restated Trust Agreement relating to Sterling
Capital, as amended and supplemented from time to time, among the Company, as
Depositor, Bankers Trust Company, as Property Trustee (the "Property Trustee")
and Bankers Trust (Delaware), as Delaware Trustee (the "Delaware Trustee")
(collectively, the "Sterling Capital Trustees") and (iii) the "Guarantee" means
the Guarantee Agreement relating to the Capital Securities, as amended and
supplemented from time to time, between the Company and Bankers Trust Company,
as Guarantee Trustee.
3
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite
1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material also may be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov.
This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto, which the Company has filed with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act") and to which reference is hereby made. In addition, such reports, proxy
statements and other information may be inspected at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington D.C. 20006.
No separate financial statements of Sterling Capital have been included or
incorporated by reference herein. The Company and Sterling Capital do not
consider that such financial statements would be material to holders of the
Capital Securities because Sterling Capital is a newly formed special purpose
entity, has no operating history or independent operations and is not engaged in
and does not propose to engage in any activity other than holding as trust
assets the Junior Subordinated Debentures and issuing the Trust Securities. See
"Prospectus Summary -- Sterling Capital Trust I," "Description of Capital
Securities," "Description of Junior Subordinated Debentures" and "Description of
Guarantee." In addition, the Company does not expect that Sterling Capital will
be filing separate reports under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for the six months ended December 31, 1996,
and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, previously filed by the Company with the Commission pursuant to Section 13
of the Exchange Act.
In addition, all reports and definitive proxy or information statements
filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of any
offering of securities made by this Prospectus shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of filing
of such documents. Any statement contained herein, or in any document all or a
portion of which is incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded for purposes of the
Registration Statement and this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than certain exhibits to such
documents). Written requests should be directed to the Chief Financial Officer,
Sterling Financial Corporation, 111 North Wall Street, Spokane, Washington
99201. Telephone requests may be directed to (509) 358-6160.
------------------------
The Company furnishes its security holders with an Annual Report containing
Consolidated Financial Statements audited by its independent certified public
accountants.
------------------------
4
<PAGE> 7
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CAPITAL
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTTING SHARES OF THE CAPITAL
SECURITIES AND BIDDING FOR AND PURCHASING SUCH SHARES AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
5
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus or in the documents incorporated into this Prospectus by
reference. Unless the context clearly suggests otherwise, references to the
Company include the Company and its subsidiaries.
STERLING FINANCIAL CORPORATION
The Company is a unitary savings and loan holding company, the significant
operating subsidiary of which is Sterling Savings Association ("Sterling
Savings"). The principal operating subsidiaries of Sterling Savings are Action
Mortgage Company ("Action Mortgage"), INTERVEST-Mortgage Investment Company
("INTERVEST") and Harbor Financial Services, Inc. ("Harbor Financial"). Sterling
Savings commenced operations in 1983 as a State of Washington-chartered,
federally-insured stock savings and loan association headquartered in Spokane,
Washington. Since 1983, Sterling has made a number of acquisitions to expand its
retail branch delivery system, to add deposits and earning assets and to
geographically diversify its loan portfolio. Sterling Savings attracts Federal
Deposit Insurance Corporation ("FDIC") insured deposits through 41 retail
branches located primarily in rural and suburban communities in Washington and
Oregon. The Company originates loans through its branch offices as well as 10
Action Mortgage residential loan production offices in the Spokane and Seattle,
Washington; Portland, Oregon and Boise, Idaho metropolitan areas and three
INTERVEST commercial real estate lending offices located in the metropolitan
areas of Seattle, Spokane and Portland. The Company also markets tax-deferred
annuities, mutual funds and other financial products through Harbor Financial.
Sterling Savings' revenues are derived primarily from interest earned on
loans and mortgage-backed securities, from fees and service charges and from
mortgage banking operations. The Company provides personalized, quality
financial services to its customers as exemplified by its "Hometown Helpful"
philosophy. The Company believes this dedication to personalized service has
enabled it to maintain a stable and relatively low-cost retail deposit base in
rural areas, while generating a substantial volume of lending activity primarily
in the metropolitan areas of the Pacific Northwest. In recent years, Sterling
Savings has focused its efforts on becoming more like a community retail bank by
increasing its construction, business banking and consumer lending while placing
an increased emphasis on attracting greater volumes of retail deposits. The
Company maintains its principal executive offices at 111 North Wall Street,
Spokane, Washington 99201, telephone number (509) 358-6160.
STERLING CAPITAL TRUST I
Sterling Capital is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on May 5, 1997. Sterling Capital will be governed by an Amended and
Restated Trust Agreement among the Company, as Depositor, Bankers Trust
(Delaware), as Delaware Trustee, and Bankers Trust Company, as Property Trustee.
Two individuals will be selected by the holders of the Common Securities to act
as administrators with respect to Sterling Capital (the "Administrators"). The
Company, while holder of the Common Securities, intends to select two
individuals who are employees or officers of or affiliated with the Company to
serve as the Administrators. See "Description of Capital
Securities -- Miscellaneous." Sterling Capital exists for the exclusive purposes
of (i) issuing and selling the Trust Securities, (ii) using the proceeds from
the sale of the Trust Securities to acquire the Junior Subordinated Debentures
and (iii) engaging in only those other activities necessary, convenient or
incidental thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures will be the sole assets of
Sterling Capital, and payments under the Junior Subordinated Debentures will be
the sole source of revenue of Sterling Capital.
All the Common Securities will initially be owned by the Company. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and during
the continuation of a Debenture Event of Default arising as a result of any
failure by
6
<PAGE> 9
the Company to pay any amounts in respect of the Junior Subordinated Debentures
when due, the rights of the holders of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption or otherwise
will be subordinated to the rights of the holders of the Capital Securities. See
"Description of Capital Securities -- Subordination of Common Securities." The
Company will acquire Common Securities in an aggregate liquidation amount equal
to 3% of the total capital of Sterling Capital. Sterling Capital has a term of
31 years, but may terminate earlier as provided in the Trust Agreement. The
address of Sterling Capital is 111 North Wall Street, Spokane, Washington 99201,
telephone number (509) 358-6160.
THE OFFERING
Capital Securities Issuer.... Sterling Capital.
Securities Offered........... 1,600,000 Capital Securities. The Capital
Securities represent undivided beneficial
interests in Sterling Capital's assets, which
will consist solely of Junior Subordinated
Debentures and payments thereunder.
Distributions................ The Distributions payable on each Capital
Security will be fixed at a rate per annum
of % of the Liquidation Amount of $25 per
Capital Security, will be cumulative, will accrue
from the date of issuance of the Capital
Securities, and will be payable quarterly in
arrears on the last day of September, December,
March and June of each year, commencing on
September 30, 1997 (subject to possible deferral
as described below). The amount of each
distribution due with respect to the Capital
Securities will include amounts accrued through
the date the distribution payment is due. See
"Description of Capital
Securities -- Distributions."
Extension Periods............ So long as no Debenture Event of Default (as
defined herein) has occurred and is continuing,
the Company will have the right, at any time, to
defer payments of interest on the Junior
Subordinated Debentures by extending the interest
payment period thereon for a period not exceeding
20 consecutive quarters with respect to each
deferral period (each an "Extension Period"),
provided that no Extension Period may extend
beyond the Stated Maturity of the Junior
Subordinated Debentures. If interest payments are
so deferred, Distributions on the Capital
Securities will also be deferred and the Company
will not be permitted, subject to certain
exceptions described herein, to declare or pay
any cash distributions with respect to the
Company's capital stock or debt securities that
rank pari passu with or junior to the Junior
Subordinated Debentures. During an Extension
Period, Distributions will continue to accrue
with income thereon compounded quarterly. Because
interest will continue to accrue and compound on
the Junior Subordinated Debentures, to the extent
permitted by applicable law, holders of the
Capital Securities will be required to accrue
income for United States federal income tax
purposes. See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment
Period" and "Certain Federal Income Tax
Consequences -- US Holders -- Interest Income and
Original Issue Discount."
Maturity..................... The Junior Subordinated Debentures will mature on
, 2027, which date may be shortened
(such date, as it may be shortened, the "Stated
Maturity") to a date not earlier than
7
<PAGE> 10
, 2002 if certain conditions are met (including
the Company having received prior approval of the
Federal Reserve to do so if then required under
applicable capital guidelines or policies of the
Federal Reserve).
Redemption................... The Capital Securities are subject to mandatory
redemption upon repayment of the Junior
Subordinated Debentures at maturity or their
earlier redemption in an amount equal to the
amount of Junior Subordinated Debentures maturing
or being redeemed at a redemption price equal to
the aggregate Liquidation Amount of the Capital
Securities, plus accumulated and unpaid
Distributions thereon to the date of redemption.
Subject to Federal Reserve approval, if then
required under applicable capital guidelines or
policies of the Federal Reserve, the Junior
Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or
after , 2002, in whole at any time or
in part from time to time, or (ii) at any time,
in whole (but not in part), upon the occurrence
and during the continuance of a Tax Event, an
Investment Company Event or a Capital Treatment
Event, in each case at a redemption price equal
to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed, together
with any accrued but unpaid interest to the date
fixed for redemption. See "Description of Capital
Securities -- Redemption" and "Description of
Junior Subordinated Debentures -- Redemption."
Distribution of Junior
Subordinated Debentures.... The Company has the right at any time to dissolve
Sterling Capital and cause the Junior
Subordinated Debentures to be distributed to
holders of Capital Securities in liquidation of
Sterling Capital, subject to the Company having
received prior approval of the Federal Reserve to
do so if then required under applicable capital
guidelines or policies of the Federal Reserve.
See "Description of the Capital Securities --
Liquidation Distribution upon Dissolution."
Guarantee.................... Taken together, the Company's obligations under
various documents described herein, including the
Guarantee, provide a full guarantee on a
subordinated basis of payments by Sterling
Capital of Distributions and other amounts due on
the Capital Securities. Under the Guarantee, the
Company guarantees the payment of Distributions
by Sterling Capital and payments on liquidation
of or redemption of the Capital Securities
(subordinate to the right to payment of Senior
Indebtedness of the Company, as defined herein)
to the extent of funds held by Sterling Capital.
If Sterling Capital has insufficient funds to pay
Distributions on the Capital Securities (i.e., if
the Company has failed to make required payments
under the Junior Subordinated Debentures), a
holder of the Capital Securities would have the
right to institute a legal proceeding directly
against the Company to enforce payment of such
Distributions to such holder. See "Description of
Junior Subordinated Debentures -- Debenture
Events of Default," "Description of Junior
Subordinated Debentures -- Enforcement of Certain
Rights by Holders of Capital Securities" and
"Description of Guarantee."
Ranking...................... The Capital Securities will rank pari passu, and
payments thereon will be made pro rata, with the
Common Securities of Sterling Capital
8
<PAGE> 11
held by the Company, except as described under
"Description of the Capital
Securities -- Subordination of Common
Securities." The obligations of the Company under
the Guarantee, the Junior Subordinated Debentures
and other documents described herein are
unsecured and rank subordinate and junior in
right of payment to all current and future Senior
Indebtedness, the amount of which is unlimited.
At March 31, 1997 the aggregate outstanding
Senior Indebtedness of the Company was
approximately $32.2 million. In addition, because
the Company is a savings and loan holding
company, all obligations of the Company relating
to the securities described herein will be
effectively subordinated to all existing and
future liabilities of the Company's subsidiaries,
including Sterling Savings. The Company may cause
additional capital securities to be issued by
trusts similar to Sterling Capital in the future,
and there is no limit on the amount of such
securities that may be issued. In this event, the
Company's obligations under the junior
subordinated debentures to be issued to such
other trusts and the Company's guarantees of the
payments by such trusts will rank pari passu with
the Company's obligations under the Junior
Subordinated Debentures and the Guarantee,
respectively.
Voting Rights................ The holders of the Capital Securities will
generally have limited voting rights relating
only to the modification of the Capital
Securities, the dissolution, winding-up or
termination of Sterling Capital and certain other
matters described herein. See "Description of
Capital Securities -- Voting Rights; Amendment of
Trust Agreement."
ERISA Considerations......... Prospective purchasers must carefully consider
the information set forth under "Certain ERISA
Considerations."
Proposed Nasdaq National
Market Symbol................ STSAO
Use of Proceeds.............. The proceeds to Sterling Capital from the sale of
the Capital Securities will be invested by
Sterling Capital in the Junior Subordinated
Debentures. The Company intends to contribute
approximately $25.0 million of the net proceeds
of this offering to Sterling Savings to enhance
Sterling Savings' regulatory capital ratios. The
remaining net proceeds to be received by the
Company from the sale of the Junior Subordinated
Debentures will be used for general corporate
purposes, which may include the repayment of
indebtedness of the Company, investments in or
extensions of credit to its subsidiaries, the
possible redemption of the Company's Cumulative
Convertible Preferred Stock and the financing of
possible acquisitions. See "Use of Proceeds."
For additional information regarding the Capital Securities, see
"Description of Capital Securities," "Description of Junior Subordinated
Debentures," "Description of Guarantee," "Relationship Among the Capital
Securities, the Junior Subordinated Debentures and the Guarantee" and "Certain
Federal Income Tax Consequences."
RISK FACTORS
Prospective investors should carefully consider the matters set forth under
"Risk Factors," beginning on page 13.
9
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL DATA
Presented below is summary consolidated financial data for the Company for
the periods specified. The Company changed its fiscal year end from June 30 to
December 31, effective December 31, 1996. The following summary consolidated
financial data of the Company for each of the periods have been derived from the
Company's Consolidated Financial Statements. Such Consolidated Financial
Statements for the six months ended December 31, 1996 and for each of the four
fiscal years in the period ended June 30, 1996 have been audited by Coopers &
Lybrand L.L.P. The Consolidated Financial Statements for the three months ended
March 31, 1997 and 1996, and for the six months ended December 31, 1995 are
unaudited and reflect the adjustments, all of which are of a normal and
recurring nature, which in the opinion of management, are considered necessary
for a fair presentation of the financial position and results of operations for
such periods. The consolidated financial information is not necessarily
indicative of the results for any future period and is qualified in its entirety
by the detailed information incorporated herein by reference in the Company's
reports as described under "Available Information."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SIX MONTHS ENDED
MARCH 31, DECEMBER 31, FISCAL YEARS ENDED JUNE 30,
------------------- ------------------- -----------------------------------------
1997 1996 1996(1) 1995 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income....................... $ 29,648 $ 27,980 $ 57,614 $ 57,518 $113,081 $107,256 $ 76,599 $ 57,793
Interest expense...................... (18,596) (18,783) (37,411) (40,486) (77,611) (71,864) (44,610) (32,292)
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income................... 11,052 9,197 20,203 17,032 35,470 35,392 31,989 25,501
Provision for loan losses............. (550) (400) (1,100) (800) (1,600) (1,600) (1,600) (1,500)
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses..................... 10,502 8,797 19,103 16,232 33,870 33,792 30,389 24,001
Other income.......................... 2,054 2,274 4,648 4,334 8,670 11,387 8,485 9,446
Operating expenses.................... (8,888) (8,124) (24,742) (15,515) (31,684) (31,272) (25,788) (21,146)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item.................. 3,668 2,947 (991) 5,051 10,856 13,907 13,086 12,301
Income tax provision.................. (1,394) (1,076) (112) (1,845) (4,064) (4,619) (4,560) (4,638)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item................................ 2,274 1,871 (1,103) 3,206 6,792 9,288 8,526 7,663
Extraordinary item (2)................ -- -- -- -- -- -- -- (425)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... 2,274 1,871 (1,103) 3,206 6,792 9,288 8,526 7,238
Preferred stock dividends declared.... (471) (471) (942) (942) (1,885) (1,885) (272) --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
shares.............................. $ 1,803 $ 1,400 $ (2,045) $ 2,264 $ 4,907 $ 7,403 $ 8,254 $ 7,238
======== ======== ======== ======== ======== ======== ======== ========
Income (loss) per common share
assuming full dilution.............. $ 0.30 $ 0.25 $ (0.37) $ 0.42 $ 0.90 $ 1.27 $ 1.60 $ 1.49
======== ======== ======== ======== ======== ======== ======== ========
RATIOS:
Return on average assets
(annualized)........................ 0.60% 0.50% (0.14)% 0.41% 0.45% 0.48% 0.72% 0.92%
Return on average common shareholders'
equity (annualized)................. 11.14 8.24 (6.57) 6.80 7.43 13.09 16.11 17.36
Shareholders' equity to assets at end
of period........................... 5.58 5.83 5.81 6.10 5.80 5.84 5.57 4.65
Net interest margin (annualized)...... 3.05 2.60 2.80 2.31 2.46 2.44 2.90 3.43
Nonperforming assets to total assets
at end of period.................... 0.43 0.63 0.42 0.59 0.57 0.58 0.71 1.19
Nonperforming loans to total loans at
end of period....................... 0.25 0.47 0.25 0.45 0.34 0.31 0.27 0.84
Loan loss allowance to total loans at
end of period....................... 0.74 0.77 0.74 0.82 0.76 0.64 0.64 0.72
Ratio of earnings to combined fixed
charges and preferred stock
dividends (3):
Excluding interest on deposits...... 1.41x 1.34x (4) 1.26x 1.30x 1.39x 1.62x 2.27x
Including interest on deposits...... 1.19 1.15 (4) 1.12 1.13 1.19 1.29 1.38
</TABLE>
10
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
JUNE 30,
MARCH 31, DECEMBER 31, -------------------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ------------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION DATA:
Total assets....................... $1,557,216 $ 1,536,344 $1,477,698 $1,540,784 $1,374,118 $1,038,962
Loans receivable................... 966,948 934,340 886,667 1,055,111 844,520 593,669
Mortgage-backed securities......... 352,231 376,940 399,893 280,776 360,789 325,969
Investments........................ 119,655 104,721 72,047 76,576 77,565 43,531
Deposits........................... 935,590 902,278 898,394 890,041 810,970 579,785
FHLB advances...................... 279,736 259,626 259,410 352,073 364,985 295,996
Securities sold subject to
repurchase agreements and federal
funds purchased.................. 195,884 229,797 195,785 159,880 81,849 80,162
Other long-term debt............... 32,240 32,240 17,240 17,240 17,250 17,250
Shareholders' equity............... 86,835 89,220 85,745 89,907 76,529 48,272
</TABLE>
- ---------------
(1) During the six months ended December 31, 1996, the Company recorded a
pre-tax charge to earnings of $5.8 million as a result of a non-recurring
assessment to fund the Savings Association Insurance Fund ("SAIF").
(2) The extraordinary item is the loss associated with the early extinguishment
of Federal Home Loan Bank advances, net of income taxes.
(3) The consolidated ratio of earnings to combined fixed charges and preferred
stock dividends has been computed by dividing income before income taxes and
fixed charges by fixed charges and preferred stock dividends. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits), amortization of notes and debenture expense
and the portion of net rental expense which is deemed to be equivalent to
interest on debt. Preferred stock dividends associated with outstanding
preferred stock are increased to an amount representing the pre-tax earnings
which would be required to cover such dividend requirements. Interest
expense (other than on deposits) includes interest on notes and debentures,
federal funds purchased and securities sold under agreements to repurchase,
mortgages, commercial paper and other funds borrowed.
(4) Earnings were insufficient to cover combined fixed charges and preferred
stock dividend requirements by $991,000. This was due to a net loss recorded
during the period, which was primarily due to the non-recurring SAIF
assessment of $5.8 million.
11
<PAGE> 14
[MAP DEPICTS WASHINGTON, OREGON AND IDAHO AND SPECIFIES THE LOCATIONS OF
THE OFFICES OF STERLING SAVINGS, ACTIOIN MORTGAGE AND INTERVEST-- MORTGAGE
INVESTMENT COMPANY.]
12
<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Capital Securities offered by this Prospectus. Certain statements in this
Prospectus and documents incorporated herein by reference are forward-looking
and are identified by the use of forward-looking words or phrases such as,
without limitation, "intended," "will be positioned," "expects," is or are
"expected," "anticipates," and "anticipated." These forward-looking statements
are based on the Company's current expectations. To the extent any of the
information contained or incorporated by reference in this Prospectus
constitutes a "forward-looking statement" as defined in Section 27A(i)(1) of the
Securities Act, the risk factors set forth below are cautionary statements
identifying important factors that could cause actual results to differ
materially from those in the forward-looking statement.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Capital Securities and under the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
Senior Indebtedness. At March 31, 1997, the Senior Indebtedness of the Company
aggregated approximately $32.2 million. None of the Junior Subordinated
Indenture, the Guarantee or the Trust Agreement places any limitation on the
amount of secured or unsecured debt, including Senior Indebtedness, that may be
incurred by the Company. See "Description of Junior Subordinated Debentures --
Subordination" and "Description of Guarantee -- Status of the Guarantee."
Further, there is no limitation of the Company's ability to issue additional
junior subordinated debentures in connection with any future offerings of
capital securities, and any such additional debentures would rank pari passu
with the Junior Subordinated Debentures.
The ability of Sterling Capital to pay amounts due on the Capital
Securities is solely dependent upon the Company's making payments on the Junior
Subordinated Debentures as and when required.
DIVIDEND PAYMENT SOURCES AND RESTRICTIONS
The principal source of funds for payments by the Company (and
consequently, interest on the Junior Subordinated Debentures, Sterling Capital's
ability to pay Distributions on the Capital Securities and the Company's ability
to pay its obligations under the Guarantee) will be dividends from the Company's
principal subsidiary, Sterling Savings. Applicable rules and regulations of the
Office of Thrift Supervision (the "OTS") impose limitations on capital
distributions by savings institutions. Savings institutions, such as Sterling
Savings, which have capital in excess of all capital requirements before and
after the proposed capital distribution are permitted, after giving prior notice
to the OTS, to make capital distributions during a calendar year up to the
greater of (i) 100% of net income to date during the calendar year, plus the
amount that would reduce by one-half its "surplus capital" (its excess capital
over its regulatory capital requirements) at the beginning of the calendar year
or (ii) 75% of its net income over the most recent four quarter period. However,
such capital distribution may not reduce surplus capital below the regulatory
capital requirement at the date of the capital distribution. Institutions with
less capital are more restricted in payment of dividends and no institution can
pay dividends if such would cause the institution to no longer satisfy its
capital requirements.
STATUS OF THE COMPANY AS A SAVINGS AND LOAN HOLDING COMPANY
The Company, as a savings and loan holding company, and Sterling Savings,
as a state-chartered savings and loan association with deposits insured by the
FDIC, are subject to significant supervision and regulation by the OTS, the FDIC
and the State of Washington Department of Financial Institutions (the
"Washington Supervisor"). This supervision and regulation is intended to protect
depositors, rather than holders of the Company's securities. The OTS and the
FDIC have adopted and proposed numerous regulations and undertaken other
regulatory initiatives in an effort to increase the safety and soundness of the
savings and loan industry. In addition, legislation has been enacted that
provides for regulatory seizure of insured institutions in the event of certain
declines in capital levels, requires risk-based deposit insurance premiums and
imposes
13
<PAGE> 16
liability on holding companies for regulatory capital deficiencies of insured
institution subsidiaries under certain circumstances, among other significant
effects.
The Company is a legal entity separate and distinct from Sterling Savings,
although the principal source of the Company's cash is dividends from Sterling
Savings. The right of the Company to participate in the assets of any subsidiary
upon the latter's liquidation, reorganization or otherwise (and thus the ability
of the holders of Capital Securities to benefit indirectly from any such
distribution) will be subject to the claims of the subsidiaries' creditors,
which will take priority except to the extent that the Company may itself be a
creditor with a recognized claim.
Sterling Savings is also subject to restrictions under federal law which
limit the transfer of funds to the Company or to other affiliates, whether in
the form of loans, extensions of credit, investments, asset purchases or
otherwise. Such transfers by Sterling Savings to the Company or any other
affiliate are limited in amount to 10% of Sterling Savings' capital and surplus
and, with respect to the Company and all such other affiliates, to an aggregate
of 20% of Sterling Savings' capital and surplus. Furthermore, such loans and
extensions of credit are required to be collateralized.
CERTAIN REGULATORY MATTERS
Sterling Savings is a State of Washington-chartered institution and is
subject to regulation by the Washington Supervisor, which conducts regular
examinations to ensure that Sterling Savings' operations and policies conform
with sound industry practice. Sterling Savings is currently subject to a
supervisory directive from the Washington Supervisor. The directive requires
Sterling Savings to provide monthly reports, maintain its current "well
capitalized" status, obtain prior approval for significant transactions and take
certain other corrective actions. The Company is in the process of completing
such corrective actions. Sterling Savings operates three branches within the
State of Oregon and is therefore also subject to the supervision of the Oregon
Department of Consumer and Business Services.
The Company, as a savings and loan holding company, is not subject to
consolidated capital requirements. However, if certain legislation pending in
Congress is enacted, Sterling Savings may be required to convert its charter to
either a national bank charter, a state depository institution charter, or a
newly designed charter, in which case the Company may be required to register as
a bank holding company and become regulated at the holding company level by the
Federal Reserve rather than by the OTS. Regulation by the Federal Reserve could
subject the Company to capital requirements that are not currently applicable to
the Company as a savings and loan holding company under OTS regulation and may
result in statutory limitations on the type of business activities in which the
Company may engage at the holding company level, which business activities
currently are not restricted. At this time, the Company is unable to predict
whether a charter change will be required and, if it is, whether the charter
change will significantly impact Sterling Savings' operations.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Event of Default (as defined in the Junior Subordinated
Indenture) has occurred and is continuing with respect to the Junior
Subordinated Debentures (a "Debenture Event of Default"), the Company has the
right under the Junior Subordinated Indenture to defer the payment of interest
on the Junior Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarterly periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Debenture Events of Default." As a consequence of any
such deferral, quarterly Distributions on the Capital Securities by Sterling
Capital will be deferred during any such Extension Period. Distributions to
which holders of the Capital Securities are entitled will accumulate additional
Distributions thereon during any Extension Period at the rate of % per
annum, compounded quarterly from the relevant payment date for such
Distributions, 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. Additional
Distributions payable for each full Distribution period will be computed by
dividing the rate per annum by four. The term "Distribution" as used herein
shall include
14
<PAGE> 17
any such additional Distributions. During any such Extension Period, the Company
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu in all respects with or junior in interest to the
Junior Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of 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 Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension Period may exceed 20 consecutive quarterly periods or extend beyond
the Stated Maturity of the Junior Subordinated Debentures. Upon the termination
of any Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded
quarterly, to the extent permitted by applicable law), the Company 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. The
Company must give the Sterling Capital Trustees notice of its election to begin
an Extension Period at least one Business Day prior to the earlier of (i) the
date the Distributions on the Capital Securities would have been payable but for
the election to begin such Extension Period and (ii) the date the Property
Trustee is required to give notice to holders of the Capital Securities of the
record date or the date such Distributions are payable, but in any event not
less than one Business Day prior to such record date. The Property Trustee will
give notice of the Company's election to begin a new Extension Period to the
holders of the Capital Securities. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of Capital Securities -- Distributions" and
"Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
Should an Extension Period occur, a holder of Capital Securities will
continue to accrue income (in the form of original issue discount) in respect of
its pro rata share of the Junior Subordinated Debentures held by Sterling
Capital for United States federal income tax purposes. As a result, a holder of
Capital Securities will include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash, and will not
receive the cash related to such income from Sterling Capital if the holder
disposes of the Capital Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Consequences -- US
Holders -- Interest Income and Original Issue Discount" and "Certain Federal
Income Tax Consequences -- US Holders -- Sales of Capital Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Capital Securities is likely to be
affected. A holder that disposes of the Capital Securities during an Extension
Period, therefore, might not receive the same return on the investment as a
holder that continues to hold its Capital Securities. In addition, as a result
of the existence of the Company's right to defer interest payments, the market
price of the Capital Securities (which represent preferred undivided beneficial
interests in the assets of Sterling Capital) may be more volatile than the
market prices of other securities on which original issue discount or interest
accrues that are not subject to such deferrals.
15
<PAGE> 18
TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event, Investment
Company Event or Capital Treatment Event, the Company has the right to redeem
the Junior Subordinated Debentures in whole, but not in part, at any time within
90 days following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event and thereby cause a mandatory redemption of the Capital
Securities. Any such redemption shall be at a price equal to the liquidation
amount of the Capital Securities, together with accumulated Distributions to but
excluding the date fixed for redemption. The ability of the Company to exercise
its rights to redeem the Junior Subordinated Debentures prior to the Stated
Maturity may be subject to prior regulatory approval by the Federal Reserve, if
then required under applicable Federal Reserve capital guidelines or policies.
See "Description of Capital Securities -- Liquidation Distribution Upon
Dissolution" and "Description of Junior Subordinated Debentures -- Redemption."
A "Tax Event" means the receipt by Sterling Capital of an opinion of
counsel to the Company experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official or administrative pronouncement or action 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, there is more than an insubstantial risk
that (i) Sterling Capital is, or will be within 90 days of the delivery of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Company on the Junior Subordinated Debentures is not, or within 90 days
of the delivery of such opinion will not be, deductible by the Company, in whole
or in part, for United States federal income tax purposes or (iii) Sterling
Capital is, or will be within 90 days of the delivery of the opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
See "Certain Federal Income Tax Consequences -- US Holders -- Proposed Tax
Law Changes" for a discussion of certain legislative proposals that, if adopted,
could give rise to a Tax Event, which may permit the Company to cause a
redemption of the Capital Securities prior to , 2002.
"Investment Company Event" means the receipt by Sterling Capital of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
Sterling Capital is or will be considered an "investment company" that is
required to be registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date of
the issuance of the Capital Securities.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (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
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the Capital
Securities, there is more than an insubstantial risk that the Company will not
be entitled to treat an amount equal to the Liquidation Amount of the Capital
Securities as Tier 1 Capital (or the then equivalent thereof) for purposes of
the risk-based capital adequacy guidelines of the Federal Reserve, as then in
effect, provided, however, that it shall not be deemed to be a Capital Treatment
Event if the Company is not entitled to treat the aggregate amount of the
Liquidation Amount of such Capital Securities as Tier 1 Capital due to the
restriction imposed by the Federal Reserve that no more than 25% of Tier 1
Capital can consist of perpetual preferred stock.
16
<PAGE> 19
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the tax proposals therein (the "Tax Proposal") would
generally deny corporate issuers a deduction for interest on certain debt
obligations that have a maximum term in excess of 15 years and are not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. As currently
drafted, the Tax Proposal would be effective generally for instruments issued on
or after the date of first Congressional committee action. Although it is not
clear from the President's proposals as to what constitutes Congressional
"committee action" with respect to the Tax Proposal, it appears that, as
drafted, the Tax Proposal would not apply retroactively to the Junior
Subordinated Debentures. However, if the Tax Proposal (or similar legislation)
is enacted with retroactive effect with respect to the Junior Subordinated
Debentures, the Company may not be entitled to an interest deduction with
respect to the Junior Subordinated Debentures. There can be no assurances that
the Tax Proposal, if enacted, will not apply retroactively to the Junior
Subordinated Debentures or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of the Company to deduct the
interest payable on the Junior Subordinated Debentures. Accordingly, there can
be no assurance that a Tax Event will not occur. See "Description of Capital
Securities -- Redemption" and "Description of Junior Subordinated
Debentures -- Redemption." See also "Certain Federal Income Tax
Consequences -- US Holders -- Proposed Tax Law Changes."
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES IN EXCHANGE FOR CAPITAL
SECURITIES
The holders of all the outstanding Common Securities will have the right at
any time to dissolve Sterling Capital and, after satisfaction of liabilities to
creditors of Sterling Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of Sterling Capital. The ability
of the Company to dissolve Sterling Capital may be subject to prior regulatory
approval of the Federal Reserve, if then required under applicable Federal
Reserve capital guidelines or policies. See "Description of Capital
Securities -- Liquidation Distribution Upon Dissolution."
Under current United States federal income tax law and interpretations and
assuming, as expected, that Sterling Capital will not be taxable as a
corporation, a distribution of the Junior Subordinated Debentures upon a
liquidation of Sterling Capital will not be a taxable event to holders of the
Capital Securities. However, if a Tax Event were to occur that would cause
Sterling Capital to be subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, a
distribution of the Junior Subordinated Debentures by Sterling Capital would be
a taxable event to Sterling Capital and the holders of the Capital Securities.
See "Certain Federal Income Tax Consequences -- US Holders -- Receipt of Junior
Subordinated Debentures or Cash upon Liquidation of Sterling Capital."
RIGHTS UNDER THE GUARANTEE
Bankers Trust Company will act as the trustee under the Guarantee and will
hold the Guarantee for the benefit of the holders of the Capital Securities.
Bankers Trust Company will also act as Debenture Trustee for the Junior
Subordinated Debentures and as Property Trustee under the Trust Agreement.
Bankers Trust (Delaware) will act as Delaware Trustee under the Trust Agreement.
Under the Guarantee, the Company guarantees the holders of the Capital
Securities the following payments, to the extent not paid by or on behalf of
Sterling Capital: (i) any accumulated and unpaid Distributions required to be
paid on the Capital Securities, to the extent that Sterling Capital has funds on
hand available therefor at the payment date, (ii) the Redemption Price with
respect to any Capital Securities called for redemption, to the extent that
Sterling Capital has funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding up or liquidation of
Sterling Capital (unless the Junior Subordinated Debentures are distributed to
holders of the Capital Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that Sterling Capital has funds on hand available
therefor at such time, and (b) the amount of assets of Sterling Capital
remaining
17
<PAGE> 20
available for distribution to holders of the Capital Securities on liquidation
of Sterling Capital. The Guarantee is subordinated as described under
"-- Ranking of Subordinated Obligations Under the Guarantee and the Junior
Subordinated Debentures" and "Description of Guarantee -- Status of the
Guarantee." The holders of not less than a majority in aggregate Liquidation
Amount of the outstanding Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder
of the Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against Sterling Capital, the Guarantee Trustee or any other
person or entity.
If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, Sterling Capital would lack funds for
the payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and, in such event, holders of the Capital Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, if a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay any amounts payable
in respect of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Capital Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of any amounts payable in respect of such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities of such holder (a "Direct Action").
In connection with such Direct Action, the Company will have a right of set-off
under the Junior Subordinated Indenture to the extent of any payment made by the
Company to such holder of Capital Securities in the Direct Action. Except as
described herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debentures or assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Debenture Events of Default," "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Capital Securities"
and "Description of Guarantee." The Trust Agreement provides that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Junior Subordinated Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights relating
generally to the modification of the Capital Securities and the Guarantee and
the exercise of Sterling Capital's rights as holder of Junior Subordinated
Debentures. Holders of Capital Securities will not be entitled to appoint,
remove or replace the Property Trustee or the Delaware Trustee except upon the
occurrence of certain events specified in the Trust Agreement. The Property
Trustee and the holders of all the Common Securities may, subject to certain
conditions, amend the Trust Agreement without the consent of holders of Capital
Securities to cure any ambiguity or make other provisions not inconsistent with
the Trust Agreement or to ensure that Sterling Capital (i) will not be taxable
as a corporation for United States federal income tax purposes, or (ii) will not
be required to register as an "investment company" under the Investment Company
Act. See "Description of Capital Securities -- Removal of Sterling Capital
Trustees; Appointment of Successors" and "Description of Capital
Securities -- Voting Rights; Amendment of Trust Agreement."
ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES
There is no existing market for the Capital Securities. An application has
been made to include the Capital Securities for listing on the Nasdaq National
Market. There can be no assurance that an active and liquid trading market for
the Capital Securities will develop or that a listing of the Capital Securities
will be available on the Nasdaq National Market. Although each Underwriter has
informed Sterling Capital and the Company that such Underwriter intends to make
a market in the Capital Securities offered hereby, the Underwriters are not
obligated to do so and any such market making activity may be terminated at any
time without notice to the holders of the Capital Securities. Future trading
prices of the Capital Securities will depend on many factors including, among
other things, prevailing interest rates, the operating results and financial
condition of the Company, and the market for similar securities. There can be no
assurance as to the
18
<PAGE> 21
market prices for the Capital Securities or the Junior Subordinated Debentures
that may be distributed in exchange for the Capital Securities if the holders of
all the Common Securities exercise their right to dissolve Sterling Capital.
Accordingly, the Capital Securities that an investor may purchase, or the Junior
Subordinated Debentures that a holder of the Capital Securities may receive in
liquidation of Sterling Capital, may decline in value from the price that the
investor paid to purchase the Capital Securities offered hereby.
FOCUS ON COMMUNITY BANKING
In recent years, the Company has focused its efforts on becoming more like
a community retail bank. The Company is increasing its business banking,
consumer and construction lending while placing an increased emphasis on
attracting greater volumes of retail deposits. Business banking, consumer and
construction loans generally produce higher yields than residential mortgage
loans. Such loans, however, generally involve a higher degree of risk than the
financing of residential real estate, primarily because the collateral may be
difficult to obtain or liquidate in the event of default. Construction lending
is subject to risks such as construction delays, cost overruns, insufficient
collateral and the inability to obtain permanent financing in a timely manner.
Business banking and construction loans are more expensive to originate than
residential mortgage loans. As a result, the Company's operating expenses are
likely to increase as the Company increases its lending in these areas.
Additionally, the Company is likely to experience higher levels of loan losses
than it would on residential mortgage loans. There can be no assurance that the
Company's emphasis on community banking will be successful or that any increase
in the yields on business banking, consumer and construction loans will offset
higher levels of expense and losses on such loans.
LOAN PORTFOLIO CONCENTRATION IN CONSTRUCTION LOANS
At March 31, 1997, approximately 16% of Sterling Savings' total loan
portfolio consisted of one- to four-family residential construction loans,
approximately 72% of which were for properties that were not custom built or
pre-sold. Further, approximately 80% of Sterling Savings' one- to four-family
residential construction loan portfolio was concentrated in the Portland, Oregon
market which is served by one loan production office. A reduction in the demand
for residential housing could have a negative impact on Sterling Savings and
therefore on the Company. In addition, at March 31, 1997, another 9% of Sterling
Savings' loan portfolio consisted of multifamily residential construction and
commercial property construction loans.
ALLOWANCE FOR LOAN LOSSES
Inability of borrowers to repay loans can erode earnings and capital of
financial institutions. Like all financial institutions, Sterling Savings
maintains an allowance for loan losses to provide for loan defaults and
nonperformance. The allowance is based on prior experience with loan losses, as
well as an evaluation of the risks in the current portfolio, and is maintained
at a level considered adequate by management to absorb anticipated losses. The
amount of future losses is susceptible to changes in economic, operating and
other conditions, including changes in interest rates, that may be beyond
management's control, and such losses may exceed current estimates. At March 31,
1997, Sterling Savings had nonperforming loans of $2.7 million and an allowance
for loan losses of $8.0 million or 0.74% of total loans and 297% of
nonperforming loans. There can be no assurance that Sterling Savings' allowance
for loan losses will be adequate to cover actual losses. Future provisions for
loan losses could materially and adversely affect results of operations of the
Company.
ECONOMIC CONDITIONS AND IMPACT OF INTEREST RATES
Results of operations for financial institutions, including the Company,
may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate values, rapid changes in interest
rates and the monetary and fiscal policies of the federal government. The
profitability of the Company is in part a function of the spread between the
interest rates earned on assets and the interest rates paid on deposits and
other interest-bearing liabilities, including advances from the Federal Home
Loan Bank of Seattle ("FHLB"). A decrease in interest rate spreads would have a
negative effect on the net interest income and profitability of the Company, and
there can be no assurance that this spread will not decrease. Although economic
conditions in the market area of the Company have been generally stronger than
those in many other regions of the country, there can be no assurance that such
conditions will continue to prevail.
19
<PAGE> 22
Moreover, substantially all of the loans of the Company are to individuals and
businesses in the Pacific Northwest, and any decline in the economy of this
market area could have an adverse impact on the Company.
Currently, the Company's interest-bearing liabilities, consisting primarily
of savings deposits, FHLB advances and other borrowings, mature or reprice more
rapidly, or on different terms, than do its interest-earning assets. The fact
that liabilities mature or reprice more frequently on average than assets may be
beneficial in times of declining interest rates; however, such an
asset/liability structure may result in declining net interest income during
periods of rising interest rates. Additionally, the extent to which borrowers
prepay loans is affected by prevailing interest rates. When interest rates
increase, borrowers are less likely to prepay loans; whereas when interest rates
decrease, borrowers are more likely to prepay loans. Prepayments may affect the
levels of loans retained in an institution's portfolio, as well as its net
interest income.
GROWTH AND ACQUISITION STRATEGIES
The Company has pursued and intends to continue to pursue an internal
growth strategy, the success of which will depend primarily on generating an
increasing level of loans and deposits at acceptable risk levels and terms
without proportionate increases in non-interest expenses. There can be no
assurance that the Company will be successful in implementing its internal
growth strategy. In addition, the Company has grown and may seek to grow by
acquiring other financial institutions. Any acquisitions will be subject to
regulatory approval, and there can be no assurance that the Company will be able
to obtain such approvals. The Company may not be successful in identifying
further acquisition candidates, integrating acquired institutions or preventing
deposit erosion or loan quality deterioration at acquired institutions.
Competition for acquisitions in the Company's market area is highly competitive,
and the Company may not be able to acquire other institutions on attractive
terms. Furthermore, the success of the growth strategy of the Company will
depend on maintaining sufficient regulatory capital levels and on continued
favorable economic conditions in the Pacific Northwest.
NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend in part on its ability to address the needs of its
customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in
Sterling Savings' operations. Many of Sterling Savings' competitors have
substantially greater resources to invest in technological improvements. There
can be no assurance that the Company will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to its customers.
COMPETITIVE BANKING ENVIRONMENT
The banking business in the Pacific Northwest is highly competitive. The
Company competes for loans and deposits with local, regional and national
commercial banks, savings banks, savings and loan associations, finance
companies, money market funds, brokerage houses, credit unions and nonfinancial
institutions, many of which have substantially greater financial resources than
the Company. Interstate banking is permitted in Washington. After a phase-in
period ending July 1, 1997, full state-wide branch banking will be permitted. As
a result, management believes that the Company may experience greater
competition in its market area.
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<PAGE> 23
USE OF PROCEEDS
All the proceeds to Sterling Capital from the sale of the Capital
Securities will be invested by Sterling Capital in the Junior Subordinated
Debentures. The net proceeds to the Company from the sale of Junior Subordinated
Debentures are estimated to be $ million. The Company initially intends to
contribute approximately $25.0 million of the net proceeds of the offering to
Sterling Savings to enhance Sterling Savings' regulatory capital ratios. The
remaining net proceeds to be received by the Company from the sale of the Junior
Subordinated Debentures will be used for general corporate purposes, which may
include the repayment of indebtedness of the Company, investments in or
extensions of credit to subsidiaries, the possible redemption of the Company's
outstanding $1.8125 Series A Cumulative Convertible Preferred Stock and the
financing of possible acquisitions. The decision to call such Cumulative
Convertible Preferred Stock for redemption will depend on several factors
including the market price of the Company's Common Stock and the likelihood that
holders of the Cumulative Convertible Preferred Stock will exercise their option
to convert their interest into shares of the Company's Common Stock rather than
accept cash redemption. Pending such uses, the net proceeds may be temporarily
invested in short- and intermediate-term investment-grade obligations or
deposited in interest-bearing accounts with Sterling Savings or other
institutions. The precise amounts and timing of the application of proceeds will
depend upon the funding requirements of the Company and its subsidiaries and the
availability of other funds.
Although the Company, as a savings and loan holding company, is not subject
to the Federal Reserve capital requirements for bank holding companies, it is
possible that in the future it could become subject to such requirements as a
result of the acquisition of a bank, a change in applicable regulations or the
Company otherwise becoming subject to Federal Reserve capital requirements. On
October 21, 1996, the Federal Reserve announced that certain qualifying amounts
of cumulative preferred securities having the characteristics of the Capital
Securities could be included as Tier 1 capital for bank holding companies. Such
Tier 1 capital treatment, together with the Company's ability to deduct, for
income tax purposes, interest payable on the Junior Subordinated Debentures
provides the Company with a more cost-effective means of obtaining capital for
regulatory purposes than if the Company were to issue preferred stock.
ACCOUNTING TREATMENT
For financial reporting purposes, Sterling Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of Sterling Capital
will be included in the consolidated financial statements of the Company. The
Capital Securities will be included in the consolidated balance sheets of the
Company under the caption "Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely Junior Subordinated Debentures"
and appropriate disclosures about the Capital Securities, the Guarantee and the
Junior Subordinated Debentures will be included in the Notes to the Consolidated
Financial Statements of the Company. For financial reporting purposes,
Distributions on the Capital Securities will be recorded as interest expense in
the consolidated statements of income of the Company.
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<PAGE> 24
CAPITALIZATION
The following table sets forth the capitalization (including deposits) of
the Company at March 31, 1997 and as adjusted to give effect to the issuance of
the Capital Securities by Sterling Capital in this offering and the application
of the net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deposits.............................................................. $935,590 $ 935,590
======== ========
Borrowings:
Advances from FHLB.................................................. $279,736 $ 279,736
Securities sold subject to repurchase agreements and Federal Funds
purchased........................................................ 195,884 195,884
Notes payable....................................................... 15,000 15,000
Subordinated notes payable.......................................... 17,240 17,240
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Junior Subordinated
Debentures(1).................................................... 0 40,000
-------- --------
Total borrowings............................................ $507,860 $ 547,860
======== ========
Shareholders' equity:
Preferred Stock, $1 par value; 10,000,000 shares authorized;
1,040,000 shares issued and outstanding.......................... $ 1,040 $ 1,040
Common Stock, $1 par value; 20,000,000 shares authorized; 5,543,007
shares issued and outstanding.................................... 5,543 5,543
Additional paid-in capital.......................................... 70,474 70,474
Unrealized loss on investments and mortgage-backed securities
available-for-sale (net of deferred income tax benefits)......... (10,224) (10,224)
Retained earnings................................................... 20,002 20,002
-------- --------
Total shareholders' equity.................................. $ 86,835 $ 86,835
======== ========
Regulatory capital ratios of Sterling Savings(2):
Tangible capital.................................................... 6.71% 8.19%
Core capital........................................................ 6.71 8.19
Risk-based capital.................................................. 11.59 13.84
</TABLE>
- ---------------
(1) The subsidiary trust is Sterling Capital, a wholly owned subsidiary of the
Company that will hold approximately $41.2 million principal amount of
Junior Subordinated Debentures issued by the Company to Sterling Capital as
its sole asset. The Capital Securities are issued by Sterling Capital. See
"Description of Junior Subordinated Debentures." The Company owns all of the
Common Securities of Sterling Capital.
(2) Although the Company, as a savings and loan holding company, is not subject
to the Federal Reserve capital requirements for bank holding companies, the
Capital Securities have been structured to qualify as Tier 1 capital,
subject to certain limitations if the Company were to become regulated as a
bank holding company. At March 31, 1997, approximately $29.0 million of the
Capital Securities would have qualified as Tier 1 Capital, if the Company's
outstanding Cumulative Convertible Preferred Stock had been converted into
Common Stock of the Company at that date. There can be no assurance that the
Company's Cumulative Convertible Preferred Stock will be converted into
Common Stock and, if it is not so converted, the amount of the Capital
Securities that would qualify as Tier 1 Capital would be significantly less
than $29 million. The "as adjusted" ratios are based upon initial
contribution by the Company of approximately $25.0 million of the net
proceeds of this offering to Sterling Savings and assume the investment of
such amount of net proceeds in assets with 100% risk weighting under the
risk-based capital rules of the OTS. See "Use of Proceeds."
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<PAGE> 25
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------- --- -------------------------------------------------
<S> <C> <C>
Harold B. Gilkey 57 Chairman of the Board, Chief Executive Officer
and Director
William W. Zuppe 55 President, Chief Operating Officer and Director
Ned. M. Barnes 60 Secretary and Director
Rodney W. Barnett 53 Director
James P. Fugate 63 Director
Robert D. Larrabee 61 Director
Robert E. Meyers 71 Director
David O. Wallace 59 Director
David P. Bobbitt 49 Senior Vice President-Community Banking of
Sterling Savings
Daniel G. Byrne 43 Senior Vice President-Finance and Chief Financial
Officer
Stephen L. Page 48 Senior Vice President-Credit Management of
Sterling Savings
Heidi B. Stanley 40 Senior Vice President-Corporate Administration of
Sterling Savings
John M. Harlow 54 Vice President of Sterling Savings
Stanton C. Parrish 46 Vice President of Sterling Savings
Thomas F. Sackmann 45 Vice President of Sterling Savings
</TABLE>
Harold B. Gilkey, 57, has served as Chairman of the Board and Chief
Executive Officer of the Company since its inception and as Chairman of the
Board and Chief Executive Officer of Sterling Savings since 1981. Mr. Gilkey
co-founded Sterling Savings in 1981. Additionally, he is Chairman of the Board
of INTERVEST, Action Mortgage and Harbor Financial, subsidiaries of Sterling
Savings. Mr. Gilkey brought to the Company over 19 years of commercial and
mortgage banking experience. He served as President of Bancshares Mortgage
Company of Spokane, Washington, an institution servicing $500 million in
mortgage loans, and as Senior Vice President of Old National Bank of Spokane,
Washington, a $1.6 billion commercial bank. Prior to this, Mr. Gilkey was
employed by Bank of America for twelve years, holding various management
positions with responsibilities for equipment finance and leasing, personnel and
training, and branch operations. Mr. Gilkey is a past Director of the Washington
Savings League and a member of the Savings Association Insurance Fund Industry
Advisory Committee, an advisory committee of the FDIC. Mr. Gilkey received his
degree in Business Administration from the University of Montana in 1962 and his
Master of Business Administration degree from the University of Southern
California in 1970. His term expires in 1999.
William W. Zuppe, 55, has served as Director, President and Chief Operating
Officer of the Company since its inception and as Director, President and Chief
Operating Officer of Sterling Savings since 1981. Mr. Zuppe co-founded Sterling
Savings in 1981. Mr. Zuppe is also Vice President and serves as a Director of
INTERVEST, Action Mortgage and Harbor Financial. Mr. Zuppe brought to the
Company 18 years of mortgage banking experience as Vice President of Bancshares
Mortgage Company and Manager of Loan Administration of Sherwood & Roberts, Inc.
of Walla Walla, Washington, a mortgage-banking company which serviced in excess
of $500 million in mortgage loans. Mr. Zuppe is a member of the Washington
Savings League Board of Directors and its Legislative/Regulatory Committee. His
term expires in the year 2000.
Ned M. Barnes, 60, has served as Secretary and a Director of the Company
since its inception and as Secretary of Sterling Savings since 1981 and a
Director since 1983. Mr. Barnes is also Secretary and serves as a Director of
INTERVEST and Action Mortgage and serves as a Director of Harbor Financial. Mr.
Barnes is
23
<PAGE> 26
a Principal in the law firm of Witherspoon, Kelley, Davenport & Toole, P.S. of
Spokane, Washington, which he joined in 1965. Mr. Barnes' law practice
emphasizes the areas of real estate and corporate law. Mr. Barnes graduated from
the University of Minnesota in 1958, earning a degree in Business
Administration. He received his Juris Doctorate degree from the University of
Washington in 1961. His term expires in 1998.
Rodney W. Barnett, 53, has served as a Director of the Company since its
inception and as a Director of Sterling Savings since 1981. He is a Principal
and General Manager of Carr Sales Company, an electrical supply firm in Spokane,
Washington. Mr. Barnett is also a past Director of the National Association of
Electrical Distributors and is a past Chairman of the Inland Empire Chapter of
that Association. His term expires in the year 2000.
James P. Fugate, 63, has served as a Director of the Company since its
inception and as a Director of Sterling Savings since 1989. He is the
Superintendent of Auburn School District No. 408 and a member of the Auburn
Economic Development Council. Mr. Fugate is a former Director of Central
Evergreen Savings & Loan Association. His term expires in 1998.
Robert D. Larrabee, 61, has served as a Director of the Company since its
inception and as a Director of the Company since 1983. Mr. Larrabee is the
former owner of Merchant Funeral Home in Clarkston, Washington. He is also a
former Director of Laurentian Capital Corporation, a former Director of Lewis
and Clark Savings & Loan Association and a past President of the Board of
Regents of the University of Washington. His term expires in 1998.
Robert E. Meyers, 71, has served as a Director of the Company since its
inception and as a Director of Sterling Savings since 1983. He is a retired
dentist from Clarkston, Washington. Dr. Meyers is a former Director of Lewis and
Clark Savings & Loan Association. His term expires in 1999.
David O. Wallace, 59, has served as a Director of the Company since its
inception and as a Director of Sterling Savings since 1981. He is the owner of
Startup Business Planning. Mr. Wallace is a Past Chairman of the Citizens
Advisory Council for School District No. 81 in Spokane, Washington. His term
expires in the year 2000.
David P. Bobbitt, 49, serves as Senior Vice President-Community Banking of
Sterling Savings. He joined Sterling Savings in March of 1996. Before joining
Sterling Savings, Mr. Bobbitt was with West One Bank for 26 years and held
various management positions. Most recently, he was in charge of retail banking
for West One Bank's Idaho Division. He is Past President of the Idaho Bankers
Association, and serves as a Director of the Pacific Coast Banking School and of
the Idaho Association of Commerce and Industry. He is an Advisory Director of
the College of Business & Economics at the University of Idaho. He is a member
of the Idaho Bankers Association Executive Council and the American Bankers
Association Government Relations Council. Mr. Bobbitt is a graduate of North
Idaho College, the Pacific Coast Banking School and Harvard University's
Advanced Management Program.
Daniel G. Byrne, 43, has served as Senior Vice President-Finance, Chief
Financial Officer, Treasurer and Assistant Secretary of the Company since its
inception and joined Sterling Savings in 1983. Mr. Byrne is also the Assistant
Secretary and Treasurer of INTERVEST and Action Mortgage and the Secretary and
Treasurer of Harbor Financial. Before joining the Company, Mr. Byrne was on the
staff of the accounting firm of Coopers & Lybrand in Spokane, Washington. Mr.
Byrne is a certified public accountant and graduated from Gonzaga University in
1977.
Stephen L. Page, 48, serves as Senior Vice President-Credit Management of
Sterling Savings. He joined Sterling Savings in 1983. Prior to 1983, Mr. Page
was employed by Kiemle and Hagood Company of Spokane, Washington as a Property
Management Leasing Officer. Mr. Page graduated from the University of Utah in
1970 and received a Master of Business Administration degree from the University
of New Mexico in 1973.
Heidi B. Stanley, 40, serves as Senior Vice President-Corporate
Administration of Sterling Savings. She joined Sterling Savings in 1985. Ms.
Stanley was formerly employed as a national college recruiter by IBM in San
Francisco, California, and Tucson, Arizona. Ms. Stanley graduated from
Washington State University in 1979 with a degree in Business Administration.
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<PAGE> 27
John M. Harlow, 54, serves as Vice President of Sterling Savings and
President and Director of INTERVEST. He joined Sterling Savings in 1987. Mr.
Harlow was formerly the President of the Mortgage Banking Division of Moore
Financial Services of Portland, Oregon, a mortgage-banking subsidiary of West
One Bancorp, and Senior Vice President of Income Property Lending for Bancshares
Mortgage Company of Spokane, Washington. Mr. Harlow was also a Vice
President/Regional Manager for I.D.S. Mortgage Company in Northern California.
He graduated from the University of Illinois in 1965 and is a Certified Mortgage
Banker.
Stanton C. Parrish, 46, serves as Vice President of Sterling Savings and
President and Director of Harbor Financial. He joined Sterling Savings in 1983.
Prior to 1983, Mr. Parrish was employed by Western Savings Association of
Portland, Oregon. Mr. Parrish is a 1972 graduate of Washington State University.
Thomas F. Sackmann, 45, serves as Vice President of Sterling Savings and
President and Director of Action Mortgage. He joined Sterling Savings in 1988.
Mr. Sackmann was formerly Executive Vice President and Chief Operating Officer
of Moore Financial Services of Boise, Idaho, a mortgage-banking subsidiary of
West One Bancorp, and was responsible for residential lending. Mr. Sackmann is a
1973 graduate of Linfield College and a 1976 graduate of the University of
Washington School of Law.
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement for Sterling Capital, the
Sterling Capital Trustees on behalf of Sterling Capital will issue the Capital
Securities and the Common Securities. The Capital Securities will represent
preferred undivided beneficial interests in the assets of Sterling Capital and
the holders thereof will be entitled to a preference in certain circumstances
with respect to Distributions and amounts payable on redemption or liquidation
over the Common Securities, as well as other benefits as described in the Trust
Agreement. This summary of certain provisions of the Capital Securities and the
Trust Agreement does not purport to be complete and is subject to, and qualified
in its entirety by reference to, all the provisions of the Trust Agreement,
including the definitions therein of certain terms. Wherever particular defined
terms of the Trust Agreement are referred to herein, such defined terms are
incorporated herein by reference. A copy of the form of the Trust Agreement is
available upon request from the Sterling Capital Trustees.
GENERAL
The Capital Securities will be limited to $40,000,000 aggregate Liquidation
Amount outstanding. The Capital Securities will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities except as described
under "-- Subordination of Common Securities." The Junior Subordinated
Debentures will be registered in the name of Sterling Capital and held by the
Property Trustee in trust for the benefit of the holders of the Capital
Securities and Common Securities. The Guarantee will be a guarantee on a
subordinated basis with respect to the Capital Securities but will not guarantee
payment of Distributions or amounts payable on redemption or liquidation of such
Capital Securities when Sterling Capital does not have funds on hand available
to make such payments. See "Description of Guarantee."
DISTRIBUTIONS
Payment of Distributions. The Capital Securities represent preferred
undivided beneficial interests in the assets of Sterling Capital, and
Distributions on each Capital Security will be payable at the annual rate
of % of the stated Liquidation Amount of $25, payable quarterly in arrears
on September 30, December 31, March 31 and June 30 of each year (each a
"Distribution Date"), to the holders of the Capital Securities at the close of
business on September 15, December 15, March 15 and June 15 (whether or not a
Business Day (as defined below)) next preceding the relevant Distribution Date.
The amount of each Distribution due with respect to the Capital Securities will
include amounts accrued through the date the Distribution is due. Distributions
on the Capital Securities will be cumulative. Distributions will accumulate from
the date of original issuance. The first Distribution Date for the Capital
Securities will be September 30, 1997. The amount of Distributions payable for
any period less than a full Distribution period will 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
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period. Distributions payable for each full Distribution period will be computed
by dividing the rate per annum by four. If any date on which Distributions are
payable on the Capital Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (without any additional Distributions or other payment in
respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable.
The funds of Sterling Capital available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which Sterling Capital will invest the proceeds from the issuance
and sale of the Capital Securities. See "Description of Junior Subordinated
Debentures." If the Company does not make payments on the Junior Subordinated
Debentures, Sterling Capital may not have funds available to pay Distributions
or other amounts payable on the Capital Securities. The payment of Distributions
and other amounts payable on the Capital Securities (if and to the extent
Sterling Capital has funds legally available for and cash sufficient to make
such payments) is guaranteed by the Company on a limited basis as set forth
herein under "Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred and
is continuing, the Company has the right under the Junior Subordinated Indenture
to defer the payment of interest on the Junior Subordinated Debentures at any
time or from time to time for a period not exceeding 20 consecutive quarterly
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity of the Junior Subordinated Debentures. As
a consequence of any such deferral, quarterly Distributions on the Capital
Securities by Sterling Capital will be deferred during any such Extension
Period. Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of % per annum,
compounded quarterly from the relevant payment date for such Distributions,
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. Additional Distributions payable
for each full Distribution period will be computed by dividing the rate per
annum by four. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Company may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
that rank pari passu in all respects with or junior in interest to the Junior
Subordinated Debentures (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of 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 Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension period may exceed 20 consecutive quarterly periods or extend beyond
the Stated Maturity of the Junior Subordinated Debentures. Upon the termination
of any such Extension Period and the payment of all amounts then due, the
Company may elect to begin a new Extension Period. No interest shall be due and
payable during an Extension Period, except at the end thereof. The Company must
give the Sterling Capital Trustees notice of its election of such Extension
Period at least one Business Day prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable but for the
election to begin such Extension Period and (ii) the date the Property Trustee
is required to give notice to holders of the Capital Securities of the record
date or the date
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such Distributions are payable, but in any event not less than one Business Day
prior to such record date. The Property Trustee will give notice of the
Company's election to begin a new Extension Period to the holders of the Capital
Securities. Subject to the foregoing, there is no limitation on the number of
times that the Company may elect to begin an Extension Period. See "Description
of Junior Subordinated Debentures -- Option To Extend Interest Payment Period"
and "Certain Federal Income Tax Consequences -- US Holders -- Interest Income
and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
REDEMPTION
Mandatory Redemption of Capital Securities. Upon the repayment or
redemption, in whole or in part, of the Junior Subordinated Debentures, whether
at maturity or upon earlier redemption as provided in the Junior Subordinated
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Capital
Securities, upon not less than 30 nor more than 60 days notice, at a redemption
price (the "Redemption Price") equal to the aggregate Liquidation Amount of such
Capital Securities plus accumulated but unpaid Distributions thereon to but
excluding the date of redemption (the "Redemption Date"). See "Description of
Junior Subordinated Debentures -- Redemption." If less than all the Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the Capital Securities and the Common Securities.
Optional Redemption of Junior Subordinated Debentures. The Company has the
right to redeem the Junior Subordinated Debentures (i) on or after ,
2002, in whole at any time or in part from time to time, or (ii) in whole, but
not in part, at any time within 90 days following the occurrence and during the
continuation of a Tax Event, Investment Company Event or Capital Treatment Event
(each as defined below), in each case subject to possible regulatory approval.
See "-- Liquidation Distribution Upon Dissolution." A redemption of the Junior
Subordinated Debentures would cause a mandatory redemption of a Like Amount of
the Capital Securities and Common Securities at the Redemption Price.
Payment of Additional Sums. If a Tax Event described in clause (i) or (iii)
of the definition of Tax Event above has occurred and is continuing and Sterling
Capital is the holder of all the Junior Subordinated Debentures, the Company
will pay Additional Sums (as defined below), if any, on the Junior Subordinated
Debentures.
DEFINITIONS
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by Sterling Capital on the
outstanding Capital Securities and Common Securities of Sterling Capital will
not be reduced as a result of any additional taxes, duties and other
governmental charges to which Sterling Capital has become subject as a result of
a Tax Event.
"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 or the City of Spokane 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 Treatment Event" means the reasonable determination by the Company
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (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 or regulations,
which amendment or change is effective or such pronouncement, action or decision
is announced on or after the date of issuance of the Capital Securities, there
is more than an insubstantial risk that the Company will not be entitled to
treat an amount equal to the Liquidation Amount of the Capital Securities as
Tier 1 Capital (or the then equivalent thereof) for purposes of the risk-based
capital adequacy
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guidelines of the Board of Governors of the Federal Reserve System, as then in
effect, provided, however, that it shall not be deemed to be a Capital Treatment
Event if the Company is not entitled to treat the aggregate amount of the
Liquidation Amount of such Capital Securities as Tier 1 Capital due to the
restriction imposed by the Federal Reserve that no more than 25% of Tier 1
Capital can consist of perpetual preferred stock.
"Investment Company Event" means the receipt by Sterling Capital of an
opinion of counsel to the Company experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
Sterling Capital is or will be considered an "investment company" that is
required to be registered under the Investment Company Act, which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the issuance of the Capital Securities.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Junior Subordinated Indenture,
allocated to the Common Securities and to the Capital Securities based upon the
relative Liquidation Amounts of such classes and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of Sterling Capital, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Tax Event" means the receipt by Sterling Capital of an opinion of counsel
to the Company experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action 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, there is more than an insubstantial risk
that (i) Sterling Capital is, or will be within 90 days of the delivery of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (ii) interest payable
by the Company on the Junior Subordinated Debentures is not, or within 90 days
of the delivery of such opinion, will not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes or (iii)
Sterling Capital is, or will be within 90 days of the delivery of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
REDEMPTION PROCEDURES
Capital Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Capital
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that Sterling Capital has funds on hand
available for the payment of such Redemption Price. See also "-- Subordination
of Common Securities."
If Sterling Capital gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, in the case of Capital Securities held in
book-entry form, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Capital Securities. With respect to Capital Securities not held in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the paying agent for the Capital Securities funds sufficient to pay
the applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon
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surrender of their certificates evidencing the Capital Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Capital Securities called for redemption shall be
payable to the holders of the Capital Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit all
rights of the holders of such Capital Securities so called for redemption will
cease, except the right of the holders of such Capital Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Capital Securities will cease to be outstanding. If any date fixed for
redemption of Capital Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which 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 the
event that payment of the Redemption Price in respect of Capital Securities
called for redemption is improperly withheld or refused and not paid either by
Sterling Capital or by the Company pursuant to the Guarantee as described under
"Description of Guarantee," Distributions on such Capital Securities will
continue to accumulate at the then applicable rate, from the Redemption Date
originally established by Sterling Capital for such Capital 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.
Subject to applicable law (including, without limitation, United States
federal securities laws), the Company or its affiliates may at any time and from
time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement, and may resell such securities.
If less than all the Capital Securities and Common Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Capital Securities and Common Securities to be redeemed shall be allocated pro
rata to the Capital Securities and the Common 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 not more than 60 days prior to
the Redemption Date by the Property Trustee from the outstanding Capital
Securities not previously called for redemption, or if the Capital Securities
are then held in the form of a Global Preferred Security (as defined below), in
accordance with DTC's customary procedures. The Property Trustee shall promptly
notify the securities registrar for the Trust Securities 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 the 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
which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each registered holder of Capital
Securities to be redeemed at its address appearing on the securities register
for the Trust Securities. Unless the Company defaults in payment of the
Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on the Junior Subordinated
Debentures or portions thereof (and, unless payment of the Redemption Price in
respect of the Capital Securities is withheld or refused and not paid either by
Sterling Capital or the Company pursuant to the Guarantee, Distributions will
cease to accumulate on the Capital Securities or portions thereof) called for
redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, and the
Liquidation Distribution in respect of, the Capital Securities and Common
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of such Capital Securities and Common Securities. However, if on any
Distribution Date or Redemption Date a Debenture Event of Default has occurred
and is continuing as a result of any failure by the Company to pay any amounts
in respect of the Junior Subordinated Debentures when due, no payment of any
Distribution on, or Redemption Price of, or Liquidation Distribution in respect
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
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on all the 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 the outstanding Capital
Securities then called for redemption, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or Redemption Price of, the
Capital Securities then due and payable.
In the case of any Event of Default (as defined below) resulting from a
Debenture Event of Default, the holders of the Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
the Trust Agreement until the effects of all such Events of Default with respect
to such Capital Securities have been cured, waived or otherwise eliminated. See
"-- Events of Default; Notice" and "Description of Junior Subordinated
Debentures -- Debenture Events of Default." Until all such Events of Default
under the Trust Agreement with respect to the Capital Securities have been so
cured, waived or otherwise eliminated, the Property Trustee will act solely on
behalf of the holders of the Capital Securities and not on behalf of the holders
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.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The amount payable on the Capital Securities in the event of any
liquidation of Sterling Capital is $25 per Capital Security plus accumulated and
unpaid Distributions, subject to certain exceptions, which may be in the form of
a distribution of such amount in Junior Subordinated Debentures.
The holders of all the outstanding Common Securities will have the right at
any time to dissolve Sterling Capital and, after satisfaction of liabilities to
creditors of Sterling Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of Sterling Capital.
The Federal Reserve's risk-based capital guidelines currently provide that
redemptions of permanent equity or other capital instruments before stated
maturity could have a significant impact on a bank holding company's overall
capital structure and that any organization considering such a redemption should
consult with the Federal Reserve before redeeming any equity or capital
instrument prior to maturity if such redemption could have a material effect on
the level or composition of the organization's capital base (unless the equity
or capital instrument were redeemed with the proceeds of, or replaced by, a like
amount of a similar or higher quality capital instrument and the Federal Reserve
considers the organization's capital position to be fully adequate after the
redemption).
In the event the Company, while a holder of Common Securities, dissolves
Sterling Capital prior to the Stated Maturity of the Capital Securities and the
dissolution of Sterling Capital is deemed to constitute the redemption of
capital instruments by the Federal Reserve under its risk-based capital
guidelines or policies, the dissolution of Sterling Capital by the Company may
be subject to the prior approval of the Federal Reserve. Moreover, any changes
in applicable law or changes in the Federal Reserve's risk-based capital
guidelines or policies could impose a requirement on the Company that it obtain
the prior approval of the Federal Reserve to dissolve Sterling Capital.
Pursuant to the Trust Agreement, Sterling Capital will automatically
dissolve upon expiration of its term or, if earlier, will dissolve on the first
to occur of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company or the holder of the Common Securities, (ii) the distribution of a Like
Amount of the Junior Subordinated Debentures to the holders of the Trust
Securities, if the holders of Common Securities have given written direction to
the Property Trustee to dissolve Sterling Capital (which direction, subject to
the foregoing restrictions, is optional and wholly within the discretion of the
holders of Common Securities), (iii) the repayment of all the Capital Securities
in connection with the redemption of all the Trust Securities as described under
"-- Redemption" and (iv) the entry of an order for the dissolution of Sterling
Capital by a court of competent jurisdiction.
If dissolution of Sterling Capital occurs as described in clause (i), (ii)
or (iv) above, Sterling Capital will be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be possible by
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distributing, after satisfaction of liabilities to creditors of Sterling Capital
as provided by applicable law, to the holders of such Trust Securities a Like
Amount of the Junior Subordinated Debentures, unless such distribution is not
practical, in which event such holders will be entitled to receive out of the
assets of Sterling Capital available for distribution to holders, after
satisfaction of liabilities to creditors of Sterling Capital as provided by
applicable law, an amount equal to, in the case of holders of Capital
Securities, the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because Sterling Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by
Sterling Capital on the Capital Securities shall be paid on a pro rata basis.
The holders of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Capital Securities,
except that if a Debenture Event of Default has occurred and is continuing as a
result of any failure by the Company to pay any amounts in respect of the Junior
Subordinated Debentures when due, the Capital Securities shall have a priority
over the Common Securities. See "-- Subordination of Common Securities."
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures (i) the Capital Securities will no longer be deemed to
be outstanding, (ii) DTC or its nominee, as the registered holder of Capital
Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution with respect to Capital Securities held by DTC or its nominee and
(iii) any certificates representing the Capital Securities not held by DTC or
its nominee will be deemed to represent the Junior Subordinated Debentures
having a principal amount equal to the stated Liquidation Amount of the Capital
Securities and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on the Capital Securities until such
certificates are presented to the security registrar for the Trust Securities
for transfer or reissuance.
If the Company does not redeem the Junior Subordinated Debentures prior to
maturity and Sterling Capital is not liquidated and the Junior Subordinated
Debentures are not distributed to holders of the Capital Securities, the Capital
Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures and the distribution of the Liquidation Distribution to
the holders of the Capital Securities.
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution and liquidation of Sterling
Capital were to occur. Accordingly, the Capital Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of Sterling Capital, may trade at a discount to the
price that the investor paid to purchase the Capital Securities offered hereby.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (an "Event of Default") with respect to the Capital Securities
(whatever the reason for such Event of Default and whether it is 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):
(i) the occurrence of a Debenture Event of Default (see "Description
of Junior Subordinated Debentures -- Debenture Events of Default"); or
(ii) default by Sterling Capital in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by Sterling Capital in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Sterling Capital Trustees in the Trust
Agreement (other than a covenant or warranty a default in the performance
of which or the breach of which is dealt with in clause (ii) or (iii)
above), and continuation of such default or breach for a period of 60 days
after there has been given, by registered or certified mail,
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to the Sterling Capital Trustees and the Company 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" under the
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not
been appointed within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of Trust Securities and the
Administrators, unless such Event of Default has been cured or waived. The
Company, as Depositor, and the Administrators are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under the Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing as a result
of any failure by the Company to pay any amounts in respect of the Junior
Subordinated Debentures when due, the Capital Securities will have a preference
over the Common Securities with respect to payments of any amounts in respect of
the Capital Securities as described above. See "-- Subordination of Common
Securities," "-- Liquidation Distribution Upon Dissolution" and "Description of
Junior Subordinated Debentures -- Debenture Events of Default."
REMOVAL OF STERLING CAPITAL TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of at least a majority in aggregate Liquidation Amount of the
outstanding Capital Securities may remove a Sterling Capital Trustee for cause
or, if a Debenture Event of Default has occurred and is continuing, with or
without cause. If a Sterling Capital Trustee is removed by the holders of the
outstanding Capital Securities, the successor may be appointed by the holders of
at least 25% in Liquidation Amount of Capital Securities. If a Sterling Capital
Trustee resigns, such Trustee will appoint its successor. If a Sterling Capital
Trustee fails to appoint a successor, the holders of at least 25% in Liquidation
Amount of the outstanding Capital Securities may appoint a successor. If a
successor has not been appointed by the holders, any holder of Capital
Securities or Common Securities or the other Sterling Capital Trustee may
petition a court in the State of Delaware to appoint a successor. Any Delaware
Trustee must meet the applicable requirements of Delaware law. Any Property
Trustee must be a national or state-chartered bank, and at the time of
appointment have securities rated in one of the three highest rating categories
by a nationally recognized statistical rating organization and have capital and
surplus of at least $50.0 million. No resignation or removal of a Sterling
Capital Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the Trust Agreement.
MERGER OR CONSOLIDATION OF STERLING CAPITAL TRUSTEES
Any entity into which the Property Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which such Sterling
Capital Trustee is a party, or any entity succeeding to all or substantially all
the corporate trust business of such Sterling Capital Trustee, will be the
successor of such Sterling Capital Trustee under the Trust Agreement, provided
such entity is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF STERLING CAPITAL
Sterling Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the Trust Agreement. Sterling Capital may, at the request
of the holders of the Common Securities and with the consent of the holders of
at least a majority in aggregate Liquidation Amount of the outstanding Capital
Securities, 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, so long as (i) such
successor entity either (a) expressly assumes all the obligations of Sterling
Capital with respect to the Capital Securities or (b) substitutes for the
Capital
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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 Junior Subordinated 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, if then
rated, (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 Sterling Capital, (vi) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
Sterling Capital has received an opinion from independent counsel experienced in
such matters 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
Sterling Capital nor such successor entity will be required to register as an
investment company under the Investment Company Act, and (vii) the Company or
any permitted successor or assignee owns all 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.
Notwithstanding the foregoing, Sterling Capital may not, except with the consent
of holders of 100% in aggregate Liquidation Amount 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 Sterling Capital or the successor
entity to be taxable as a corporation for United States federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "-- Removal of Sterling Capital
Trustees; Appointment of Successors" and "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the holders of a
majority of the Common Securities and the Property Trustee, without the consent
of the holders of the Capital Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, provided that any such amendment
does not adversely affect in any material respect the interests of any holder of
Trust Securities, or (ii) to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as may be necessary to ensure that Sterling
Capital will not be taxable as a corporation for United States federal income
tax purposes at any time that any Trust Securities are outstanding or to ensure
that Sterling Capital will not be required to register as an "investment
company" under the Investment Company Act, and any amendments of the Trust
Agreement will become effective when notice of such amendment is given to the
holders of Trust Securities. The Trust Agreement may be amended by the holders
of a majority of the Common Securities and the Property Trustee with (i) the
consent of holders representing not less than a majority in aggregate
Liquidation Amount of the outstanding Capital Securities and (ii) receipt by the
Sterling Capital Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Sterling Capital Trustees
in accordance with such amendment will not affect Sterling Capital's not being
taxable as a corporation for United States federal income tax purposes or
Sterling Capital's exemption from status as an "investment company" under the
Investment Company Act, except that, without the consent of each holder of Trust
Securities affected thereby, the 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 of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
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So long as any Junior Subordinated Debentures are held by Sterling Capital,
the Property Trustee will 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
Junior Subordinated Debentures, (ii) waive any past default that is waivable
under Section 5.13 of the Junior Subordinated Indenture, (iii) exercise any
right to rescind or annul a declaration that the Junior Subordinated Debentures
shall be due and payable or (iv) consent to any amendment, modification or
termination of the Junior Subordinated Indenture or the Junior Subordinated
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of at least a majority in aggregate
Liquidation Amount of the outstanding Capital Securities, except that, if a
consent under the Junior Subordinated Indenture would require the consent of
each holder of Junior Subordinated Debentures affected thereby, no such consent
will be given by the Property Trustee without the prior consent of each holder
of the Capital Securities. The Property Trustee may not revoke any action
previously authorized or approved by a vote of the holders of the Capital
Securities except by subsequent vote of the holders of the Capital Securities.
The Property Trustee will notify each holder of Capital Securities of any notice
of default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Capital Securities,
before taking any of the foregoing actions, the Property Trustee will obtain an
opinion of counsel experienced in such matters to the effect that Sterling
Capital will not be taxable as a corporation for United States federal income
tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a
meeting of holders of Capital Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each registered holder of Capital Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Capital Securities will be required to
redeem and cancel Capital Securities in accordance with the Trust Agreement.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company, the Sterling Capital Trustees or any
affiliate of the Company or any Sterling Capital Trustees, will, for purposes of
such vote or consent, be treated as if they were not outstanding.
EXPENSES AND TAXES
In the Junior Subordinated Indenture, the Company, as borrower, has agreed
to pay all debts and other obligations (other than with respect to the Capital
Securities) and all costs and expenses of Sterling Capital (including costs and
expenses relating to the organization of Sterling Capital, the fees and expenses
of the Trustees and the costs and expenses relating to the operation of Sterling
Capital) and to pay any and all taxes and all costs and expenses with respect
thereto (other than United States withholding taxes) to which Sterling Capital
might become subject. The foregoing obligations of the Company under the Junior
Subordinated Indenture are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company directly against the
Company, and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against Sterling Capital or any other
person before proceeding against the Company. The Company has also agreed in the
Junior Subordinated Indenture to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
BOOK ENTRY, DELIVERY AND FORM
The Capital Securities will be issued in the form of one or more fully
registered global securities which will be deposited with, or on behalf of, DTC
and registered in the name of DTC's nominee. Unless and until it is exchangeable
in whole or in part for the Capital Securities in definitive form, a global
security may not be transferred except as a whole by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another
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nominee of DTC or by DTC or any such nominee to a successor of such Depository
or a nominee of such successor.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC or its nominee ("Participants") or persons
that may hold interests through Participants. The Company expects that, upon the
issuance of a global security, DTC will credit, on its book-entry registration
and transfer system, the Participants' accounts with their respective principal
amounts of the Capital Securities represented by such global security. Ownership
of beneficial interests in such global security will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to interests of Participants) and on the records
of Participants (with respect to interests of persons held through
Participants). Beneficial owners will not receive written confirmation from DTC
of their purchase, but are expected to receive written confirmations from the
Participants through which the beneficial owner entered into the transaction.
Transfers of ownership interests will be accomplished by entries on the books of
Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Capital Securities represented by such global security
for all purposes under the Junior Subordinated Indenture. Except as provided
below, owners of beneficial interests in a global security will not be entitled
to receive physical delivery of the Capital Securities in definitive form and
will not be considered the owners or holders thereof under the Junior
Subordinated Indenture. Accordingly, each person owning a beneficial interest in
such a global security must rely on the procedures of DTC and, if such person is
not a Participant, on the procedures of the Participant through which such
person owns its interest, to exercise any rights of a holder of Capital
Securities under the Junior Subordinated Indenture. The Company understands
that, under DTC's existing practices, in the event that the Company requests any
action of holders, or an owner of a beneficial interest in such a global
security desires to take any action which a holder is entitled to take under the
Junior Subordinated Indenture, DTC would authorize the Participants holding the
relevant beneficial interests to take such action, and such Participants would
authorize beneficial owners owning through such Participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them. Redemption notices will also be sent to DTC. If less than all of the
Capital Securities are being redeemed, the Company understands that it is DTC's
existing practice to determine by lot the amount of the respective holdings of
each Participant to be redeemed.
Distributions on the Capital Securities registered in the name of DTC or
its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the global security representing such Capital Securities.
None of the Company, the Trustees, the Administrators, any Paying Agent or any
other agent of the Company or the Trustees will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global security for such Capital
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. Disbursements of Distributions to
Participants shall be the responsibility of DTC. DTC's practice is to credit
Participants' accounts on a payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to beneficial
owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC, the Company, the Trustees, the Paying Agent or any other agent
of the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time.
DTC may discontinue providing its services as securities depository with
respect to the Capital Securities at any time by giving reasonable notice to the
Company or the Trustees. If DTC notifies the Company that it is unwilling to
continue as such, or if it is unable to continue or ceases to be a clearing
agency registered under the Exchange Act and a successor depository is not
appointed by the Company within ninety days after receiving such notice or
becoming aware that DTC is no longer so registered, the Company will issue the
Capital Securities in definitive form upon registration of transfer of, or in
exchange for, such global security. In addition, the Company may at any time and
in its sole discretion determine not to have the Capital Securities
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represented by one or more global securities and, in such event, will issue
Capital Securities in definitive form in exchange for all of the global
securities representing such Capital Securities.
DTC has advised the Company and Sterling Capital as follows: DTC is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers (such as the Underwriters), banks, trust companies and clearing
corporations and may include certain other organizations. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities will be made to DTC, which
will credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Capital Securities are not held by DTC, such payments will be made by
check mailed to the address of the holder entitled thereto as such address
appears on the securities register for the Trust Securities. The paying agent
(the "Paying Agent") will initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrators. The
Paying Agent will be permitted to resign as Paying Agent upon 30 days written
notice to the Property Trustee and the Administrators. If the Property Trustee
is no longer the Paying Agent, the Property Trustee will appoint a successor
(which must be a bank or trust company reasonably acceptable to the
Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Capital Securities. Registration of transfers of Capital Securities will be
effected without charge by or on behalf of Sterling Capital, but upon payment of
any tax or other governmental charges that may be imposed in connection with any
transfer or exchange. Sterling Capital will not be required to register or cause
to be registered the transfer of the Capital Securities after the Capital
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. For information concerning the relationships between
Bankers Trust Company, the Property Trustee, and the Company, see "Description
of Junior Subordinated Debentures -- Information Concerning the Debenture
Trustee."
MISCELLANEOUS
The Administrators and the Property Trustee are authorized and directed to
conduct the affairs of and to operate Sterling Capital in such a way that
Sterling Capital will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxable as a corporation for
United States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Property Trustee and the
holders of Common Securities are authorized to take any action, not inconsistent
with
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applicable law, the certificate of trust of Sterling Capital or the Trust
Agreement, that the Property Trustee and the holders of Common Securities
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect the interests of the
holders of the Capital Securities. Holders of the Capital Securities have no
preemptive or similar rights.
Sterling Capital may not borrow money, issue debt or mortgage or pledge any
of its assets.
GOVERNING LAW
The Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under the Junior
Subordinated Indenture dated as of , 1997, under which Bankers Trust
Company is acting as Debenture Trustee. This summary of certain terms and
provisions of the Junior Subordinated Debentures and the Junior Subordinated
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Junior Subordinated
Indenture, including the definitions therein of certain terms. Whenever
particular defined terms of the Junior Subordinated Indenture (as amended or
supplemented from time to time) are referred to herein, such defined terms are
incorporated herein by reference. A copy of the form of Junior Subordinated
Indenture is available from the Debenture Trustee upon request.
GENERAL
Concurrently with the issuance of the Capital Securities, Sterling Capital
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Junior Subordinated Debentures issued
by the Company. The Junior Subordinated Debentures will bear interest, accruing
from the date of original issuance, at the annual rate of % of the
principal amount thereof, payable quarterly in arrears on September 30, December
31, March 31 and June 30 of each year (each, an "Interest Payment Date"),
commencing September 30, 1997, to the person in whose name each Junior
Subordinated Debenture is registered at the close of business on September 15,
December 15, March 15 and June 15 (whether or not a Business Day) next preceding
such Interest Payment Date. It is anticipated that, until the liquidation, if
any, of Sterling Capital, each Junior Subordinated Debenture will be registered
in the name of Sterling Capital and held by the Property Trustee in trust for
the benefit of the holders of the Trust Securities. The amount of interest
payable for any period less than a full interest period will 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 will be computed by dividing the rate per annum by four. If any
date on which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest 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), with the same force and effect as if made
on the date such payment was originally payable. Accrued interest that is not
paid on the applicable Interest Payment Date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of
%, compounded quarterly and 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 additional interest payable for any full interest period
will be computed by dividing the rate per annum by four. The term "interest" as
used herein includes quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2027, which
date may be shortened (such date, as it may be shortened, the "Stated Maturity")
to a date not earlier than , 2002, if certain conditions are met,
including the Company having received prior approval of the Federal Reserve to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve. In the event that the Company elects to shorten the Stated
Maturity of the Junior Subordinated Debentures, it will give notice to the
registered holders of the Junior Subordinated Debentures, the Property Trustee
and the Indenture Trustee
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of such shortening no less than 90 days prior to the effectiveness thereof. The
Property Trustee must give notice to the holders of the Trust Securities of the
shortening of the Stated Maturity.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Indebtedness of the
Company. The Junior Subordinated Debentures will not be subject to a sinking
fund. The Junior Subordinated Indenture does not limit the incurrence or
issuance of other secured or unsecured debt by the Company, including Senior
Indebtedness, whether under the Junior Subordinated Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise. See
"-- Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right at any time during the term of the Junior Subordinated
Debentures to defer the payment of interest at any time or from time to time for
a period not exceeding 20 consecutive quarterly periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. During any such Extension Period
the Company shall have the right to make partial payments of interest on any
interest payment date. At the end of such Extension Period, the Company must pay
all interest then accrued and unpaid (together with interest thereon at the
annual rate of %, compounded quarterly and 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, to the extent permitted by applicable law). The amount of
additional interest payable for any full interest period will be computed by
dividing the rate per annum by four. During an Extension Period, interest will
continue to accrue and holders of Junior Subordinated Debentures (or holders of
Capital Securities while outstanding) will be required to accrue income for
United States federal income tax purposes. See "Certain Federal Income Tax
Consequences -- US Holders -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Junior Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of 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 Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholders 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 Company
may further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarterly periods or extend beyond the Stated Maturity of
the Junior Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all amounts then due, the Company 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. The Company
must give the Sterling Capital Trustees notice of its election of such Extension
Period at least one Business Day prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable but for the
election to begin such Extension
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Period and (ii) the date the Property Trustee is required to give notice to
holders of the Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day prior
to such record date. The Property Trustee will give notice of the Company's
election to begin a new Extension Period to the holders of the Capital
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) on or after , 2002, in whole at any time or
in part from time to time, or (ii) in whole, but not in part, at any time within
90 days following the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event (each as defined under
"Description of Capital Securities -- Redemption"), in each case at the
Redemption Price. The proceeds of any such redemption will be used by Sterling
Capital to redeem the Capital Securities.
The Federal Reserve's risk-based capital guidelines, which are subject to
change, currently provide that redemptions of permanent equity or other capital
instruments before Stated Maturity could have a significant impact on a bank
holding company's overall capital structure and that any organization
considering such a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if such redemption
could have a material effect on the level or composition of the organization's
capital base (unless the equity or capital instrument were redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
The redemption of the Junior Subordinated Debentures by the Company prior
to their Stated Maturity would constitute the redemption of capital instruments
under the Federal Reserve's current risk-based capital guidelines and may be
subject to the prior approval of the Federal Reserve. The redemption of the
Junior Subordinated Debentures also could be subject to the additional prior
approval of the Federal Reserve under its current risk-based capital guidelines.
The Redemption Price for Junior Subordinated Debentures is the outstanding
principal amount of the Junior Subordinated Debentures plus accrued interest
(including any Additional Interest or Additional Sums) thereon to but excluding
the date fixed for redemption.
ADDITIONAL SUMS
The Company has covenanted in the Junior Subordinated Indenture that, if
and for so long as (i) Sterling Capital is the holder of all Junior Subordinated
Debentures and (ii) Sterling Capital is required to pay any additional taxes,
duties or other governmental charges as a result of a Tax Event, the Company
will pay as additional sums on the Junior Subordinated Debentures such amounts
as may be required so that the Distributions payable by Sterling Capital will
not be reduced as a result of any such additional taxes, duties or other
governmental charges. See "Description of Capital Securities -- Redemption."
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered in the name
of Sterling Capital. If the Junior Subordinated Debentures are distributed to
holders of Capital Securities, it is anticipated that the depositary
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Capital Securities. See "Description of
Capital Securities -- Book Entry, Delivery and Form."
Although DTC has agreed to the procedures described above, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in definitive
form.
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Payments on Junior Subordinated Debentures represented by a global security
will be made to Cede & Co., the nominee for DTC, as the registered holder of the
Junior Subordinated Debentures, as described under "Description of the Capital
Securities -- Book Entry, Delivery and Form." If Junior Subordinated Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Junior Subordinated Debentures will be registrable, and Junior
Subordinated Debentures will be exchangeable for Junior Subordinated Debentures
of other authorized denominations of a like aggregate principal amount, at the
corporate trust office of the Debenture Trustee in New York, New York or at the
offices of any Paying Agent or transfer agent appointed by the Company, provided
that payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto. However, a holder of $1.0
million or more in aggregate principal amount of Junior Subordinated Debentures
may receive payments of interest (other than interest payable at the Stated
Maturity) by wire transfer of immediately available funds upon written request
to the Debenture Trustee not later than 15 calendar days prior to the date on
which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations, and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar appointed under the
Junior Subordinated Debenture or at the office of any transfer agent designated
by the Company for such purpose without service charge and upon payment of any
taxes and other governmental charges as described in the Junior Subordinated
Indenture. The Company will appoint the Debenture Trustee as securities
registrar under the Junior Subordinated Indenture. The Company may at any time
designate additional transfer agents with respect to the Junior Subordinated
Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Any monies deposited with the Debenture Trustee or any paying agent, or
then held by the Company in trust, for the payment of the principal of or
interest on any Junior Subordinated Debenture and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at the
request of the Company, be repaid to the Company and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS; CERTAIN COVENANTS OF THE COMPANY
The Company has covenanted that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all respects with or
junior in interest to the Junior Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of 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 Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period or other event referred to below, (b) as a
result of an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or
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exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock), if at
such time (i) there has occurred any event (a) of which the Company has actual
knowledge that with the giving of notice or the lapse of time, or both, would
constitute a Debenture Event of Default and (b) that the Company has not taken
reasonable steps to cure, (ii) if the Junior Subordinated Debentures are held by
Sterling Capital, the Company is in default with respect to its payment of any
obligations under the Guarantee or (iii) the Company has given notice of its
election of an Extension Period as provided in the Junior Subordinated Indenture
and has not rescinded such notice, or such Extension Period, or any extension
thereof, is continuing.
The Company has covenanted in the Junior Subordinated Indenture (i) to
continue to hold, directly or indirectly, 100% of the Common Securities,
provided that certain successors that are permitted pursuant to the Junior
Subordinated Indenture may succeed to the Company's ownership of the Common
Securities, (ii) as holder of the Common Securities, not to voluntarily
terminate, windup or liquidate Sterling Capital, other than (a) in connection
with a distribution of Junior Subordinated Debentures to the holders of the
Capital Securities in liquidation of Sterling Capital or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement, to cause Sterling Capital to continue not to
be taxable as a corporation for United States federal income tax purposes.
MODIFICATION OF JUNIOR SUBORDINATED INDENTURE
From time to time, the Company and the Debenture Trustee may, without the
consent of any of the holders of the outstanding Junior Subordinated Debentures,
amend, waive or supplement the provisions of the Junior Subordinated Indenture
to: (1) evidence succession of another corporation or association to the Company
and the assumption by such person of the obligations of the Company under the
Junior Subordinated Debentures, (2) add further covenants, restrictions or
conditions for the protection of holders of the Junior Subordinated Debentures,
(3) cure ambiguities or correct the Junior Subordinated Debentures in the case
of defects or inconsistencies in the provisions thereof, so long as any such
cure or correction does not adversely affect the interest of the holders of the
Junior Subordinated Debentures in any material respect, (4) change the terms of
the Junior Subordinated Debentures to facilitate the issuance of the Junior
Subordinated Debentures in certificated or other definitive form, (5) evidence
or provide for the appointment of a successor Debenture Trustee, or (6) qualify,
or maintain the qualification of, the Junior Subordinated Indentures under the
Trust Indenture Act. The Junior Subordinated Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the Junior
Subordinated Debentures, to modify the Junior Subordinated Indenture in a manner
affecting the rights of the holders of the Junior Subordinated Debentures,
except that no such modification may, without the consent of the holder of each
outstanding Junior Subordinated Debenture so affected, (i) change the Stated
Maturity of the Junior Subordinated Debentures (except as described under
"-- General"), or reduce the principal amount thereof, the rate of interest
thereon, or change the place of payment where, or the currency in which, any
such amount is payable or impair the right to institute suit for the enforcement
of any Junior Subordinated Debenture or (ii) reduce the percentage of principal
amount of Junior Subordinated Debentures, the holders of which are required to
consent to any such modification of the Junior Subordinated Indenture.
Furthermore, so long as any of the Capital Securities remain outstanding, no
such modification may be made that adversely affects the holders of such Capital
Securities in any material respect, and no termination of the Junior
Subordinated Indenture may occur, and no waiver of any Debenture Event of
Default or compliance with any covenant under the Junior Subordinated Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate Liquidation Amount of the outstanding Capital
Securities unless and until the principal of the Junior Subordinated Debentures
and all accrued and unpaid interest thereon have been paid in full and certain
other conditions are satisfied.
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DEBENTURE EVENTS OF DEFAULT
The Junior Subordinated Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Debentures
that has occurred and is continuing constitutes an "Event of Default" with
respect to the Junior Subordinated Debentures:
(i) failure to pay any interest on the Junior Subordinated Debentures
when due (subject to the deferral of any due date in the case of an
Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due whether at maturity, upon redemption, by declaration of
acceleration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Junior Subordinated Indenture for 90 days
after written notice to the Company from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of the
outstanding Junior Subordinated Debentures; or
(iv) the Company consents to the appointment of a receiver or other
similar official in any liquidation, insolvency or similar proceeding with
respect to the Company or all or substantially all its property.
For purposes of the Trust Agreement and this Prospectus, each such Event of
Default under the Junior Subordinated Debenture is referred to as a "Debenture
Event of Default." As described in "Description of Capital Securities -- Events
of Default; Notice," the occurrence of a Debenture Event of Default will also
constitute an Event of Default in respect of the Trust Securities.
The holders of at least a majority in aggregate principal amount of
outstanding Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of outstanding Junior Subordinated Debentures may
declare the principal due and payable immediately upon a Debenture Event of
Default, and, should the Debenture Trustee or such holders of Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate Liquidation Amount of the outstanding Capital Securities shall
have such right. The holders of a majority in aggregate principal amount of
outstanding Junior Subordinated Debentures may annul such declaration and waive
the default if all defaults (other than the non-payment of the principal of
Junior Subordinated Debentures which has become due solely by such acceleration)
have 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. Should the holders of Junior Subordinated Debentures fail to
annul such declaration and waive such default, the holders of a majority in
aggregate Liquidation Amount of the outstanding Capital Securities shall have
such right.
The holders of at least a majority in aggregate principal amount of the
outstanding Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Junior Subordinated Indenture cannot be modified or amended without
the consent of the holder of each outstanding Junior Subordinated Debenture
affected thereby. See "-- Modification of Junior Subordinated Indenture." The
Company is required to file annually with the Debenture Trustee a certificate as
to whether or not the Company is in compliance with all the conditions and
covenants applicable to it under the Junior Subordinated Indenture.
If a Debenture Event of Default occurs and is continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
Junior Subordinated Debentures, and any other amounts payable under the Junior
Subordinated Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to the Junior Subordinated Debentures.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay any amounts payable
in respect of the Junior Subordinated Debentures on the date such amounts are
otherwise payable, a registered holder of Capital Securities may institute a
Direct Action against the Company for enforcement of payment to such holder of
an amount equal to the amount payable in respect of Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Capital Securities held by such holder. The Company may not amend the
Junior Subordinated Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all the Capital
Securities. The Company will have the right under the Junior Subordinated
Indenture to set-off any payment made to such holder of Capital Securities by
the Company in connection with a Direct Action.
The holders of the Capital Securities are not able to exercise directly any
remedies available to the holders of the Junior Subordinated Debentures except
under the circumstances described in the preceding paragraph. See "Description
of Capital Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Junior Subordinated Indenture provides that the Company may 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
may consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i) if
the Company consolidates with or merges into another person or conveys or
transfers its properties and assets substantially as an entirety to any person,
the successor person is organized under the laws of the United States or any
state or the District of Columbia, and such successor person expressly assumes
the Company's obligations in respect of the Junior Subordinated Debentures; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would constitute a Debenture
Event of Default, has occurred and is continuing; and (iii) certain other
conditions as prescribed in the Junior Subordinated Indenture are satisfied.
The provisions of the Junior Subordinated Indenture do not afford holders
of the Junior Subordinated Debentures protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Junior Subordinated Indenture provides that when, among other things,
all Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation (i) have become due and payable, (ii) will become due
and payable at the Stated Maturity within one year, or (iii) are to be called
for redemption within one year under arrangements satisfactory to the Debenture
Trustee for the giving of notice of redemption, and, in each case, the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity, as the case may be, then the
Junior Subordinated Indenture will cease to be of further effect (except as to
the Company's obligations to pay all other sums due pursuant to the Junior
Subordinated Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Company will be deemed to have satisfied and
discharged the Junior Subordinated Indenture.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate and junior in right
of payment, to the extent set forth in the Junior Subordinated Indenture, to all
Senior Indebtedness (as defined below) of the Company. If the Company defaults
in the payment of any principal, or interest, if any, or any other amount
payable on any Senior Indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for redemption or by declaration of
acceleration or otherwise, then, unless and until such default has been cured
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or waived or has ceased to exist or all Senior Indebtedness has been paid, no
direct or indirect payment (in cash, property, securities, by setoff or
otherwise) may be made or agreed to be made on the Junior Subordinated
Debentures, or in respect of any redemption, repayment, retirement, purchase or
other acquisition of any of the Junior Subordinated Debentures.
As used herein, "Senior Indebtedness" means, whether recourse is to all or
a portion of the assets of the Company and whether or not contingent, (i) every
obligation of the Company for money borrowed, (ii) every obligation of the
Company 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 the Company with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Company, (iv) every obligation of the Company 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 the Company, (vi) every
obligation of the Company for claims (as defined in Section 101(4) of the United
States Bankruptcy Code of 1978, as amended) in respect of derivative products
such as interest and foreign exchange rate contracts, commodity contracts 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, the Company has guaranteed or is
responsible or liable for, directly or indirectly, as obligor or otherwise,
including, without limitation, the Company's 8.75% Subordinated Notes Due
January 31, 2000 in the aggregate principal amount of $17.2 million and a $15.0
million Term Note Due September 30, 2002; provided that "Senior Indebtedness"
shall not include (i) any obligations which, by their terms, are expressly
stated to rank pari passu in right of payment with, or to not be superior in
right of payment to, the Junior Subordinated Debentures, (ii) any Senior
Indebtedness of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (iii) any Indebtedness of the
Company to any of its subsidiaries, (iv) Indebtedness to any executive officer
or director of the Company, or (v) any indebtedness in respect of debt
securities issued to any trust, or a trustee of such trust, partnership or other
entity affiliated with the Company that is a financing entity of the Company in
connection with the issuance of such financing entity of securities that are
similar to the Capital Securities.
In the event of (i) certain events of bankruptcy, dissolution or
liquidation of the Company or the holder of the Common Securities, (ii) any
proceeding for the liquidation, dissolution or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (iii) any assignment by the Company for the benefit of creditors or
(iv) any other marshalling of the assets of the Company, 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 on account of the
Junior Subordinated Debentures. In such event, any payment or distribution on
account of the Junior Subordinated Debentures, whether in cash, securities or
other property, that would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Junior Subordinated Debentures will 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 such proceedings) has been paid in full.
In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the holders of Junior Subordinated
Debentures, together with the holders of any obligations of the Company ranking
on a parity with the Junior Subordinated Debentures, will be entitled to be paid
from the remaining assets of the Company the amounts at the time due and owing
on the Junior Subordinated Debentures and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, will be
made on account of any capital stock or obligations of the Company ranking
junior to the Junior Subordinated Debentures and such other obligations. If any
payment or distribution on account of the Junior Subordinated Debentures of any
character or any security, whether in cash, securities or other property is
received by any holder of any Junior Subordinated Debentures in contravention of
any of the terms hereof and before all the Senior Indebtedness has been paid in
full, such payment or distribution or security will be received in trust for the
benefit of, and must be paid over or delivered and transferred to, the holders
of the
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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 in full. By reason of such subordination, in the event of the
insolvency of the Company, holders of Senior Indebtedness may receive more,
ratably, and holders of the Junior Subordinated Debentures may receive less,
ratably, than the other creditors of the Company. Such subordination will not
prevent the occurrence of any Event of Default in respect of the Junior
Subordinated Debentures.
The Junior Subordinated Indenture places no limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The Company
expects from time to time to incur additional indebtedness constituting Senior
Indebtedness.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee, other than during the occurrence and continuance of
a default by the Company in performance of its obligations under the Junior
Subordinated Debenture, is under no obligation to exercise any of the powers
vested in it by the Junior Subordinated Indenture at the request of any holder
of Junior Subordinated Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities that might be incurred
thereby. The Debenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
Bankers Trust Company, the Debenture Trustee, may serve from time to time
as trustee under other indentures or trust agreements with the Company or its
subsidiaries relating to other issues of their securities. In addition, the
Company and certain of its affiliates may have other banking relationships with
Bankers Trust Company and its affiliates.
GOVERNING LAW
The Junior Subordinated Indenture and the Junior Subordinated Debentures
will be governed by and construed in accordance with the laws of the State of
New York.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Company concurrently
with the issuance of Capital Securities by Sterling Capital for the benefit of
the holders from time to time of the Capital Securities. Bankers Trust Company
will act as Guarantee Trustee under the Guarantee. This summary of certain
provisions of the Guarantee does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all the provisions of the
Guarantee, including the definitions therein of certain terms. A copy of the
form of Guarantee is available upon request from the Guarantee Trustee. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Capital Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Capital Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that Sterling Capital may have or assert other
than the defense of payment. The following payments with respect to the Capital
Securities, to the extent not paid by or on behalf of Sterling Capital (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and
unpaid Distributions required to be paid on such Capital Securities, to the
extent that Sterling Capital has funds on hand available therefor at such time,
(ii) the Redemption Price with respect to any Capital Securities called for
redemption, to the extent that Sterling Capital has funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary dissolution, of
Sterling Capital (unless the Junior Subordinated Debentures are distributed to
holders of the Capital Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that Sterling Capital has funds on hand available
therefor at such time, and (b) the amount of
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assets of Sterling Capital remaining available for distribution to holders of
the Capital Securities on liquidation of Sterling Capital. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of the Capital Securities or by
causing Sterling Capital to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
Sterling Capital's obligations under the Capital Securities, but will apply only
to the extent that Sterling Capital has funds sufficient to make such payments,
and is not a guarantee of collection.
If the Company does not make payments on the Junior Subordinated Debentures
held by Sterling Capital, Sterling Capital will not be able to pay any amounts
payable in respect of the Capital Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right of
payment to all Senior Indebtedness of the Company. See "-- Status of the
Guarantee." The Guarantee does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Indebtedness, whether
under the Junior Subordinated Indenture, any other indenture that the Company
may enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Junior Subordinated Indenture, taken together,
fully, irrevocably and unconditionally guaranteed all Sterling Capital's
obligations under the Capital Securities on a subordinated basis. No single
document standing alone or operating in conjunction with fewer than all the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of Sterling Capital's obligations in respect of the
Capital Securities. See "Relationship Among the Capital Securities, the Junior
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Indebtedness
of the Company in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the Capital Securities. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by Sterling
Capital or distribution to the holders of the Capital Securities of the Junior
Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Capital Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of the
outstanding Capital Securities. The manner of obtaining any such approval will
be as set forth under "Description of Capital Securities -- Voting Rights;
Amendment of Trust Agreement." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder, or to
perform any non-payment obligation if such non-payment default remains
unremedied for 30 days. The holders of not less than a majority in aggregate
Liquidation Amount of the outstanding Capital Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
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Any registered holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against Sterling Capital,
the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after the
occurrence of an event of default with respect to the Guarantee, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of the Capital Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
For information concerning the relationship between Bankers Trust Company,
the Guarantee Trustee, and the Company, see "Description of Junior Subordinated
Debentures -- Information Concerning the Debenture Trustee."
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Capital Securities, upon full
payment of the amounts payable with respect to the Capital Securities upon
liquidation of Sterling Capital or upon distribution of Junior Subordinated
Debentures to the holders of the Capital Securities. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of the Capital Securities must restore payment of any sums paid under the
Capital Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Capital Securities
(to the extent Sterling Capital has funds available for such payment) are
irrevocably guaranteed, on a subordinated basis, by the Company as and to the
extent set forth under "Description of Guarantee." Taken together, the Company's
obligations under the Junior Subordinated Debentures, the Junior Subordinated
Indenture, the Trust Agreement and the Guarantee provide, in the aggregate, a
full, irrevocable and unconditional guarantee of payments of Distributions and
other amounts due on the Capital Securities. No single document standing alone
or operating in conjunction with fewer than all the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of
Sterling Capital's obligations in respect of the Capital Securities. If and to
the extent that the Company does not make payments on the Junior Subordinated
Debentures, Sterling Capital will not have sufficient funds to pay Distributions
or other amounts due on the Capital Securities. The Guarantee does not cover
payment of amounts payable with respect to the Capital Securities when Sterling
Capital does not have sufficient funds to pay such amounts. In such event, the
remedy of a holder of the Capital Securities is to institute a legal proceeding
directly against the Company for enforcement of payment
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of the Company's obligations under Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Capital Securities held
by such holder.
The obligations of the Company under the Junior Subordinated Debentures and
the Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments are made when due on the Junior Subordinated
Debentures, such payments will be sufficient to cover Distributions and other
payments distributable on the Capital Securities, primarily because (i) the
aggregate principal amount of the Junior Subordinated Debentures will be equal
to the sum of the aggregate stated Liquidation Amount of the Capital Securities
and Common Securities; (ii) the interest rate and interest and other payment
dates on the Junior Subordinated Debentures will match the Distribution rate,
Distribution Dates and other payment dates for the Capital Securities; (iii) the
Company will pay for any and all costs, expenses and liabilities of Sterling
Capital except Sterling Capital's obligations to holders of the Trust
Securities; and (iv) the Trust Agreement further provides that Sterling Capital
will not engage in any activity that is not consistent with the limited purposes
of Sterling Capital.
Notwithstanding anything to the contrary in the Junior Subordinated
Indenture, the Company has the right to set-off any payment it is otherwise
required to make thereunder against and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, Sterling Capital
or any other person or entity. See "Description of Guarantee."
A default or event of default under any Senior Indebtedness of the Company
would not constitute a default or Event of Default in respect of the Capital
Securities. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness of the Company, the subordination provisions of the Junior
Subordinated Indenture provide that no payments may be made in respect of the
Junior Subordinated Debentures until such Senior Indebtedness has been paid in
full or any payment default thereunder has been cured or waived. See
"Description of Junior Subordinated Debentures -- Subordination."
LIMITED PURPOSE OF STERLING CAPITAL
The Capital Securities represent preferred undivided beneficial interests
in the assets of Sterling Capital, and Sterling Capital exists for the sole
purpose of issuing its Capital Securities and Common Securities and investing
the proceeds thereof in Junior Subordinated Debentures. A principal difference
between the rights of a holder of a Capital Security and a holder of a Junior
Subordinated Debenture is that a holder of a Junior Subordinated Debenture is
entitled to receive from the Company payments on Junior Subordinated Debentures
held, while a holder of Capital Securities is entitled to receive Distributions
or other amounts distributable with respect to the Capital Securities from
Sterling Capital (or from the Company under the Guarantee) only if and to the
extent Sterling Capital has funds available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of Sterling Capital, other
than any such dissolution involving the distribution of the Junior Subordinated
Debentures, after satisfaction of liabilities to creditors of Sterling Capital
as required by applicable law, the holders of the Capital Securities will be
entitled to receive, out of assets held by Sterling Capital, the Liquidation
Distribution in cash. See "Description of Capital Securities -- Liquidation
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation or
bankruptcy of the Company, Sterling Capital, as registered holder of the Junior
Subordinated Debentures,
48
<PAGE> 51
would be a subordinated creditor of the Company, subordinated and junior in
right of payment to all Senior Indebtedness as set forth in the Junior
Subordinated Indenture, but entitled to receive payment in full of all amounts
payable with respect to the Junior Subordinated Debentures before any
stockholders of the Company receive payments or distributions. Since the Company
is the guarantor under the Guarantee and has agreed under the Junior
Subordinated Indenture to pay for all costs, expenses and liabilities of
Sterling Capital (other than Sterling Capital's obligations to the holders of
the Trust Securities), the positions of a holder of the Capital Securities and a
holder of such Junior Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Witherspoon, Kelley, Davenport & Toole, P.S., counsel to the Company ("Tax
Counsel"), has advised the Company that the following summary accurately
describes the material United States federal income tax consequences that may be
relevant to the purchase, ownership and disposition of the Capital Securities.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations thereunder, and administrative and judicial
interpretations thereof, each as of the date of hereof, all of which are subject
to change, possibly on a retroactive basis. The authorities on which this
summary is based are subject to various interpretations, and the opinions of Tax
Counsel are not binding on the Internal Revenue Service (the "IRS") or the
courts; either of which could take a contrary position. Moreover, no rulings
have been or will be sought from the IRS with respect to the transactions
described herein. Accordingly, there can be no assurance that the IRS will not
challenge the opinions expressed herein or that a court would not sustain such a
challenge.
Except as otherwise stated, this summary deals only with the Capital
Securities held as a capital asset by a holder who or which (i) purchased the
Capital Securities upon original issuance (an "Initial Holder") at their
original offering price and (ii) is a US Holder (as defined below). This summary
does not address all the tax consequences that may be relevant to a US Holder,
nor does it address the tax consequences, except as stated below, to holders
that are not US Holders ("Non-US Holders") or to holders that may be subject to
special tax treatment (such as banks, savings and loan institutions, real estate
investments trusts, regulated investment companies, insurance companies, brokers
and dealers in securities or currencies, other financial institutions,
tax-exempt organizations, persons holding the Capital Securities as a position
in a "straddle," as part of a "synthetic security," "hedging," "conversion" or
other integrated investment, persons having a functional currency other than the
U.S. Dollar and certain United States expatriates). Further, this summary does
not address (a) the income tax consequences to shareholders in, or partners or
beneficiaries of, a holder of the Capital Securities, (b) the United States
federal alternative minimum tax consequences of the purchase, ownership or
disposition of the Capital Securities, or (c) any state, local or foreign tax
consequences of the purchase, ownership and disposition of Capital Securities.
A "US Holder" is a holder of the Capital Securities who or which is (i) a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for income tax purposes, (ii) a corporation or
partnership created or organized (or treated as created or organized for income
tax purposes) in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is includible in its
gross income for United States federal income tax purposes without regard to its
source, or (iv) a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one or
more United States trustees have the authority to control all substantial
decisions of the trust.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
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<PAGE> 52
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
US HOLDERS
Characterization of Sterling Capital. In connection with the issuance of
the Capital Securities, Tax Counsel will render its opinion generally to the
effect that, under then current law and based on the representations, facts and
assumptions set forth in this Prospectus, and assuming full compliance with the
terms of the Trust Agreement (and other relevant documents), and based on
certain assumptions and qualifications referenced in the opinion, Sterling
Capital will be characterized for United States federal income tax purposes as a
grantor trust and will not be characterized as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
holder of the Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures owned by Sterling
Capital, and each US Holder will be required to include all income or gain
recognized for United States federal income tax purposes with respect to its
allocable share of the Junior Subordinated Debentures on its own income tax
return.
Characterization of the Junior Subordinated Debentures. The Company and
Sterling Capital will agree to treat the Junior Subordinated Debentures as
indebtedness for all United States federal income tax purposes. In connection
with the issuance of the Junior Subordinated Debentures, Tax Counsel will render
its opinion generally to the effect that, under then current law and based on
the representations, facts and assumptions set forth in this Prospectus, and
assuming full compliance with the terms of the Junior Subordinated Indenture
(and other relevant documents), and based on certain assumptions and
qualifications referenced in the opinion, the Junior Subordinated Debentures
will be characterized for United States federal income tax purposes as debt of
the Company.
Interest Income and Original Issue Discount. Under the terms of the Junior
Subordinated Debentures, the Company has the ability to defer payments of
interest from time to time by extending the interest payment period not
exceeding 20 consecutive quarterly periods, but not beyond the maturity of the
Junior Subordinated Debentures. Recently issued Treasury regulations under
Section 1273 of the Code provide that debt instruments like the Junior
Subordinated Debentures will not be considered issued with original issue
discount ("OID") by reason of the Company's ability to defer payments of
interest if the likelihood of such deferral is "remote."
The Company has concluded, and this discussion assumes, that, as of the
date of this Prospectus, the likelihood of deferring payments of interest under
the terms of the Junior Subordinated Debentures is "remote" within the meaning
of the applicable Treasury regulations, in part because exercising that option
would prevent the Company from declaring dividends on its capital stock and
would prevent the Company from making any payments with respect to debt
securities that rank pari passu with or junior to the Junior Subordinated
Debentures. Therefore, the Junior Subordinated Debentures should not be treated
as issued with OID by reason of the Company's deferral option. Rather, stated
interest on the Junior Subordinated Debentures will generally be taxable to a US
Holder as ordinary income when paid or accrued in accordance with that holder's
method of accounting for income tax purposes. It should be noted, however, that
these Treasury regulations have not yet been interpreted in any rulings or any
other published authorities of the IRS. Accordingly, it is possible that the IRS
could take a position contrary to the interpretation described herein.
In the event the Company exercises its option to defer payments of
interest, the Junior Subordinated Debentures would be treated as redeemed and
reissued for OID purposes and the sum of the remaining interest payments (and
any de minimis OID) on the Junior Subordinated Debentures would thereafter be
treated as OID, which would accrue, and be includible in a US Holder's taxable
income, on an economic accrual basis (regardless of the US Holder's method of
accounting for income tax purposes) over the remaining term of the Junior
Subordinated Debentures (including any period of interest deferral), without
regard to the timing of payments under the Junior Subordinated Debentures.
(Subsequent distributions of interest on the Junior Subordinated Debentures
generally would not be taxable.) The amount of OID that would accrue in any
period would generally equal the amount of interest that accrued on the Junior
50
<PAGE> 53
Subordinated Debentures in that period at the stated interest rate.
Consequently, during any period of interest deferral, US Holders will include
OID in gross income in advance of the receipt of cash, and a US Holder which
disposes of a Capital Security prior to the record date for payment of
distributions on the Junior Subordinated Debentures following that period will
be subject to income tax on OID accrued through the date of disposition (and not
previously included in income), but will not receive cash from Sterling Capital
with respect to the OID.
If the possibility of the Company's exercise of its option to defer payment
of interest is not treated as remote, the Junior Subordinated Debentures would
be treated as initially issued with OID in an amount equal to the aggregate
stated interest (plus any de minimis OID) over the term of the Junior
Subordinated Debentures. That OID would generally be includible in a US Holder's
taxable income, over the term of the Junior Subordinated Debentures, on an
economic accrual basis.
Characterization of Income. Because the income underlying the Capital
Securities will not be characterized as dividends for income tax purposes,
corporate holders of the Capital Securities will not be entitled to a dividends
received deduction for any income recognized with respect to the Capital
Securities.
Market Discount and Bond Premium. Holders of the Capital Securities other
than Initial Holders may be considered to have acquired their undivided
interests in the Junior Subordinated Debentures with market discount or
acquisition premium (as each phrase is defined for United States federal income
tax purposes).
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of
Sterling Capital. Under certain circumstances described herein (See "Description
of Capital Securities -- Liquidation Distribution Upon Dissolution"), Sterling
Capital may distribute the Junior Subordinated Debentures to holders in exchange
for the Capital Securities and in liquidation of Sterling Capital. Except as
discussed below, such a distribution would not be a taxable event for United
States federal income tax purposes, and each US Holder would have an aggregate
adjusted basis in its Junior Subordinated Debentures for United States federal
income tax purposes equal to such holder's aggregate adjusted basis in its
Capital Securities. For United States federal income tax purposes, a US Holder's
holding period in the Junior Subordinated Debentures received in such a
liquidation of Sterling Capital would include the period during which Capital
Securities were held by the holder. If, however, the relevant event is a Tax
Event which results in Sterling Capital being treated as an association taxable
as a corporation, the distribution would likely constitute a taxable event to US
Holders of the Capital Securities for United States federal income tax purposes.
Under certain circumstances described herein (see "Description of Capital
Securities"), the Junior Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Capital Securities. Such a redemption would be taxable for United States federal
income tax purposes, and a US Holder would recognize gain or loss as if it had
sold the Capital Securities for cash. See "-- Sales of Capital Securities"
below.
Sales of Capital Securities. A US Holder that sells Capital Securities will
recognize gain or loss equal to the difference between its adjusted basis in the
Capital Securities and the amount realized on the sale of such Capital
Securities. A US Holder's adjusted basis in the Capital Securities generally
will be its initial purchase price, increased by OID previously included (or
currently includible) in such holder's gross income to the date of disposition,
and decreased by payments received on the Capital Securities (other than any
interest received with respect to the period prior to the effective date of the
Company's first exercise of its option to defer payment of interest). Any such
gain or loss generally will be capital gain or loss, and generally will be a
long-term capital gain or loss if the Capital Securities have been held for more
than one year prior to the date of disposition.
A holder who disposes of his Capital Securities between record dates for
payments of distributions thereon will be required to include accrued but unpaid
interest (or OID) on the Junior Subordinated Debentures through the date of
disposition in its taxable income for United States federal income tax purposes
(notwithstanding that the holder may receive a separate payment from the
purchaser with respect to accrued interest), and to deduct that amount from the
sale proceeds received (including the separate payment, if any, with respect to
accrued interest) for the Capital Securities (or as to OID only, to add such
amount to such
51
<PAGE> 54
holder's adjusted tax basis in its Capital Securities). To the extent the
selling price is less than the holder's adjusted tax basis (which will include
accrued but unpaid OID, if any), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
Proposed Tax Law Changes. On February 6, 1997, President Clinton released
his budget proposals for fiscal year 1998. One of the tax proposals therein (the
"Tax Proposal") would generally deny corporate issuers a deduction for interest
on certain debt obligations that have a maximum term in excess of 15 years and
are not shown as indebtedness on the separate balance sheet of the issuer or,
where the instrument is issued to a related party (other than a corporation),
where the holder or some other related party issues a related instrument that is
not shown as indebtedness on the issuer's consolidated balance sheet. As
currently drafted, the Tax Proposal would be effective generally for instruments
issued on or after the date of first Congressional committee action. Although it
is not clear from the President's proposals as to what constitutes Congressional
"committee action" with respect to the Tax Proposal, it appears that, as
drafted, the Tax Proposal would not apply retroactively to the Junior
Subordinated Debentures. However, if the Tax Proposal (or similar legislation)
is enacted with retroactive effect with respect to the Junior Subordinated
Debentures, the Company may not be entitled to an interest deduction with
respect to the Junior Subordinated Debentures. There can be no assurances that
the Tax Proposal, if enacted, will not apply retroactively to the Junior
Subordinated Debentures or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of the Company to deduct the
interest payable on the Junior Subordinated Debentures. Accordingly, there can
be no assurance that a Tax Event will not occur. See "Description of Capital
Securities -- Redemption."
NON-US HOLDERS
The following discussion applies to a Non-US Holder.
Payments to a holder of a Capital Security which is a Non-US Holder will
generally not be subject to withholding of income tax, provided that (a) the
beneficial owner of the Capital Security does not (directly or indirectly,
actually or constructively) own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, (b) the beneficial
owner of the Capital Security is not a controlled foreign corporation that is
related to the Company through stock ownership, and (c) either (i) the
beneficial owner of the Capital Securities certifies to Sterling Capital or its
agent, under penalties of perjury, that it is a Non-US Holder and provides its
name and address, or (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to Sterling Capital or its agent, under
penalties of perjury, that such a statement has been received from the
beneficial owner by it or by another Financial Institution between it and the
beneficial owner in the chain of ownership, and furnishes Sterling Capital or
its agent with a copy thereof.
As discussed above, changes in legislation affecting the income tax
consequences of the Junior Subordinated Debentures are possible, and could
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debentures. See "-- US Holders -- Proposed Tax Law
Changes." Moreover, any such legislation could adversely affect Non-US Holders
by characterizing income derived from the Junior Subordinated Debentures as
dividends, generally subject to a 30% income tax (on a withholding basis) when
paid to a Non-US Holder, rather than as interest which, as discussed above, is
generally exempt from income tax in the hands of a Non-US Holder.
A Non-US Holder of a Capital Security will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of a Capital Security.
A Non-US Holder which holds the Capital Securities in connection with the
active conduct of a United States trade or business will be subject to income
tax on all income and gains recognized with respect to its proportionate share
of the Junior Subordinated Debentures.
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<PAGE> 55
INFORMATION REPORTING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the Capital Securities held by a
non-corporate US Holder within the United States. In addition, payments made on,
and payments of the proceeds from the sale of, the Capital Securities to or
through the United States office of a broker are subject to information
reporting unless the holder thereof certifies as to its Non-United States status
or otherwise establishes an exemption from information reporting and backup
withholding. See "-- Backup Withholding." Taxable income on the Capital
Securities for a calendar year should be reported to US Holders on the
applicable forms by the following January 31st.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification or exemption requirements. Any amounts so withheld will
be allowed as a credit against the holder's income tax liability, or refunded,
provided the required information is provided to the IRS.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND DOES NOT ADDRESS THE
CONSEQUENCES TO A PARTICULAR HOLDER OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE CAPITAL SECURITIES. POTENTIAL HOLDERS OF THE CAPITAL SECURITIES ARE URGED
TO CONTACT THEIR OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES.
CERTAIN ERISA CONSIDERATIONS
The Company and certain affiliates of the Company may each be considered a
"party in interest" within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or a "disqualified person" within the
meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") with respect to many employee benefit plans ("Plans") that are subject
to ERISA. The purchase of the Capital Securities by a Plan that is subject to
the fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975(e)(1) of the Code and with respect to which the
Company, or any affiliate of the Company is a service provider (or otherwise is
a party in interest or a disqualified person) may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless the
Capital Securities are acquired pursuant to and in accordance with an applicable
exemption. Any pension or other employee benefit plan proposing to acquire any
Capital Securities should consult with its counsel.
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<PAGE> 56
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below have severally agreed to purchase from Sterling Capital
an aggregate of the 1,600,000 Capital Securities in the amounts set forth below
opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
------------------------------------------------------------- ------------------
<S> <C>
Dain Bosworth Incorporated...................................
Piper Jaffray Inc. ..........................................
---------
Total.............................................. 1,600,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to conditions precedent and that the Underwriters are committed to
purchase all of the Capital Securities offered hereby if the Underwriters
purchase any Capital Securities.
The Underwriters have advised the Company and Sterling Capital that they
propose to offer the Capital Securities to the public at the Price to Public set
forth on the cover page of this Prospectus and to selected dealers at such price
less a concession not in excess of $ per Capital Security. The Underwriters
may allow and such dealers may reallow a discount not in excess of $ per
Capital Security to certain other brokers and dealers. After the offering, the
Price to Public, concession, discount, and other selling terms may be changed by
the Underwriters.
In connection with the offering of the Capital Securities, the Underwriters
and any selling group members and their respective affiliates may engage in
transactions effected in accordance with Rule 104 of the Commission's Regulation
M that are intended to stabilize, maintain or otherwise affect the market price
of the Capital Securities. Such transactions may include over-allotment
transactions in which the Underwriters create a short position for their own
account by selling more Capital Securities than they are committed to purchase
from Sterling Capital. In such a case, to cover all or part of the short
position, the Underwriters may purchase Capital Securities in the open market
following completion of the initial offering of the Capital Securities. The
Underwriters also may engage in stabilizing transactions in which they bid for,
and purchase, shares of the Capital Securities at a level above that which might
otherwise prevail in the open market for the purpose of preventing or retarding
a decline in the market price of the Capital Securities. Any of the foregoing
transactions may result in the maintenance of a price for the Capital Securities
at a level above that which might otherwise prevail in the open market. Neither
the Company nor any of the Underwriters makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the Capital Securities. The Underwriters are not
required to engage in any of the foregoing transactions and, if commenced, such
transactions may be discontinued at any time without notice.
In view of the fact that all of the proceeds from the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures, the
Underwriting Agreement provides that the Company will pay the Underwriters as
compensation for arranging the investment therein of such proceeds, $ per
Capital Security.
Each of the Company and Sterling Capital has agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters have advised Sterling Capital that they do not intend to
confirm any sales of Capital Securities to any discretionary accounts. In
connection with the offer and sale of the Capital Securities, the Underwriters
will comply with Rule 2810 under the NASD Conduct Rules.
From time to time, the Underwriters have provided, and expect to provide in
the future, investment banking services to the Company for which the
Underwriters have received, and will receive, customary fees and commissions.
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<PAGE> 57
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Trust Agreement and the creation of
Sterling Capital will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Company and Sterling Capital. The validity of the
Guarantee and the Junior Subordinated Debentures will be passed upon for the
Company by Witherspoon, Kelley, Davenport & Toole, P.S., Spokane, Washington,
counsel to the Company, and for the Underwriters by Arnold & Porter, Washington,
D.C. and New York, New York.
EXPERTS
The consolidated balance sheets of the Company and subsidiaries as of
December 31, 1996 and June 30, 1996 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for the six months
ended December 31, 1996 and the fiscal years ended June 30, 1996 and 1995
incorporated by reference in this Prospectus, have been incorporated herein in
reliance upon the report, which includes an explanatory paragraph describing
changes in the Company's methods of accounting for mortgage servicing rights and
impairment of long-lived assets as of July 1, 1996 and impaired loans as of July
1, 1995, of Coopers & Lybrand L.L.P., given upon the authority of that firm as
experts in auditing and accounting.
55
<PAGE> 58
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents by
Reference........................... 4
Prospectus Summary.................... 6
Summary Consolidated Financial Data... 10
Risk Factors.......................... 13
Use of Proceeds....................... 21
Accounting Treatment.................. 21
Capitalization........................ 22
Management............................ 23
Description of Capital Securities..... 25
Description of Junior Subordinated
Debentures.......................... 37
Description of Guarantee.............. 45
Relationship Among the Capital
Securities, the Junior Subordinated
Debentures and the Guarantee........ 47
Certain Federal Income Tax
Consequences........................ 49
Certain ERISA Considerations.......... 53
Underwriting.......................... 54
Validity of Securities................ 55
Experts............................... 55
</TABLE>
======================================================
======================================================
1,600,000 CAPITAL SECURITIES
STERLING CAPITAL TRUST I
% CUMULATIVE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
STERLING
------------------------------------
FINANCIAL CORPORATION
------------------------
PROSPECTUS
------------------------
DAIN BOSWORTH
Incorporated
PIPER JAFFRAY INC.
, 1997
======================================================
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Except for the registration fee, the following are estimates of the
expenses which will be incurred in connection with the issuance and distribution
of the Securities being registered, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission................................ $12,122
National Association of Securities Dealers, Inc. filing fee.......
Nasdaq National Market Application fees...........................
Legal fees and expenses........................................... 90,000
Printing and engraving............................................ 65,000
Accounting fees and expenses...................................... 50,000
Trustee fees and expenses......................................... 20,000
Blue Sky fees and expenses........................................ 12,000
Miscellaneous.....................................................
---------
Total................................................... $
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Washington law permits and the Restated Articles of Incorporation and the
Bylaws of the Registrant provide that to the fullest extent allowed by
applicable laws existing from time to time, any person may, and directors and
officers shall, be indemnified or reimbursed by the Registrant for reasonable
expenses (including attorneys' fees) actually incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative to which he or she shall be made a
party or threatened to be made a party by reason of his or her being or having
been a director, officer, employee or agent of the Registrant or of any firm,
corporation, employee benefit plan or other organization which he or she served
in any such capacity at the request of the Registrant; provided, however, that
no person shall be so indemnified or reimbursed (1) in relation to any matter in
such action, suit or proceeding as to which he or she shall finally be adjudged
to have been guilty or liable for gross negligence, willful misconduct or
criminal acts in the performance of his or her duties to the Registrant; or (2)
in relation to any matter in such action, suit or proceeding which has been made
the subject of a compromise settlement except with the approval of (a) a court
of competent jurisdiction, (b) the holders of record of a majority of the
outstanding shares of the Registrant or (c) the Board of Directors, acting by
vote of a majority of directors not parties to the same or substantially the
same action, suit or proceeding, whether or not such majority constitutes a
quorum. The foregoing right of indemnification or reimbursement shall not be
exclusive of other rights to which such person, his or her heirs, executors or
administrators may be entitled as a matter of law. Those persons indemnified
hereunder shall be deemed to include the heirs, legal representatives, executors
and administrators of such person.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the Registrant in advance
of the final disposition of such action, suit or proceeding. The director,
officer, employee or agent must repay such amount, however, if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Registrant.
The Registrant's Restated Articles of Incorporation also provide that a
director of the Registrant shall not be personally liable to the Registrant or
its shareholders for monetary damages for conduct as a director, except for
liability of the director for (i) acts or omissions that involve intentional
misconduct or a knowing violation of law by the director, (ii) conduct which
violates RCW 23B.08.310 of the Washington Business Corporation Act pertaining to
unpermitted distributions to shareholders or loans to directors or (iii) any
transaction from which the director will personally receive a benefit in money,
property or services to which
II-1
<PAGE> 60
the director is not legally entitled. If the Washington Business Corporation Act
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Registrant shall be eliminated or limited to the fullest extent permitted by the
Washington Business Corporation Act, as so amended. Any repeal or modification
of the foregoing paragraph by the shareholders of the Registrant shall not
adversely affect any right or protection of a director of the Registrant
existing at the time of such repeal or modification.
ITEM 16. EXHIBITS
The exhibits listed on the Exhibit Index on page II-5 of this Registration
Statement are filed herewith, incorporated by reference or will be filed by
amendment.
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes:
(a) The undersigned Registrant hereby undertakes that, for the
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to section 13 (a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the issuer in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each posteffective amendment that contains a
form of prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Spokane, State of Washington, on this 12th day of
May, 1997.
STERLING FINANCIAL CORPORATION
By: /s/ WILLIAM W. ZUPPE
------------------------------------
William W. Zuppe, President,
Chief Operating Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby grants a power of attorney to Daniel G. Byrne, Donald J. Lukes and
Kelly A. Nolen, or either of them, with full power of substitution and
resubstitution, for him and his name, stead and place, in any and all capacities
(including his capacity as a director or officer of Sterling Financial
Corporation) to sign for such person, and in such person's name and capacity
indicated below, any and all amendments to the Registration Statement of
Sterling Financial Corporation and Sterling Capital Trust I, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that Daniel G. Byrne, Donald J. Lukes, and Kelly A. Nolen may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------------ -------------
<S> <C> <C>
/s/ HAROLD B. GILKEY Chairman of the Board and May 12, 1997
- ----------------------------------------------- Chief Executive Officer
Harold B. Gilkey
/s/ WILLIAM W. ZUPPE President, Chief Operating May 12, 1997
- ----------------------------------------------- Officer and Director
William W. Zuppe
/s/ DANIEL G. BYRNE Chief Financial Officer and May 12, 1997
- ----------------------------------------------- Principal Accounting Manager
Daniel G. Byrne
/s/ NED M. BARNES Secretary and Director May 12, 1997
- -----------------------------------------------
Ned M. Barnes
/s/ RODNEY W. BARNETT Director May 12, 1997
- -----------------------------------------------
Rodney W. Barnett
/s/ JAMES P. FUGATE Director May 12, 1997
- -----------------------------------------------
James P. Fugate
/s/ ROBERT D. LARRABEE Director May 12, 1997
- -----------------------------------------------
Robert D. Larrabee
</TABLE>
II-3
<PAGE> 62
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------------ -------------
<S> <C> <C>
/s/ ROBERT E. MEYERS Director May 12, 1997
- -----------------------------------------------
Robert E. Meyers
/s/ DAVID O. WALLACE Director May 12, 1997
- -----------------------------------------------
David O. Wallace
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the Trust has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State of
Washington on May 12, 1997.
STERLING CAPITAL TRUST I
By STERLING FINANCIAL CORPORATION
as Depositor
By: /s/ DANIEL G. BYRNE
------------------------------------
Daniel G. Byrne
Senior Vice President-Finance
II-4
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement, to be filed by amendment.
4.1 Form of Junior Subordinated Indenture, filed herewith.
4.2 Form of Trust Agreement, filed herewith.
4.3 Form of Amended and Restated Trust Agreement, filed herewith.
4.4 Form of Guarantee Agreement, filed herewith.
5.1 Opinion of Richards, Layton & Finger, to be filed by amendment.
5.2 Opinion of Witherspoon, Kelley, Davenport & Toole, P.S., to be filed by
amendment.
8.1 Tax opinion of Witherspoon, Kelley, Davenport & Toole, P.S., to be filed by
amendment.
12.1 Statement regarding computation of ratios, filed herewith.
23.1 Consent of Coopers & Lybrand L.L.P., filed herewith.
23.2 Consent of Richards, Layton & Finger, included in Exhibit 5.1, to be filed by
amendment.
23.3 Consent of Witherspoon, Kelley, Davenport & Toole, P.S., included in Exhibit
5.2, to be filed by amendment.
24.1 Power of Attorney of certain directors and officers of Registrant (included on
the signature page of this Registration Statement)
24.2 Certified Resolution of Registrant's Board of Directors authorizing execution
by Power of attorney, filed herewith.
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
Bankers Trust Company as trustee under the Junior Subordinated Indenture, the
Trust Agreement and the Guarantee Agreement relating to Sterling Capital Trust
1, filed herewith.
</TABLE>
II-5
<PAGE> 1
JUNIOR SUBORDINATED INDENTURE
Between
STERLING FINANCIAL CORPORATION
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
May __, 1997
<PAGE> 2
STERLING CAPITAL TRUST I
Certain Sections of this Junior Subordinated Indenture relating
to Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Junior Subordinated
Act Section Indenture Section
--------------- -------------------
<S> <C>
Section 310(a)(1).......................... 6.9
(a)(2).......................... 6.9
(a)(3).......................... Not Applicable
(a)(4).......................... Not Applicable
(a)(5).......................... 6.9
(b)............................. 6.8, 6.10
Section 311(a)............................. 6.13
(b)............................. 6.13
(b)(2).......................... 7.3(a)
Section 312(a)............................. 7.1, 7.2(a)
(b)............................. 7.2(b)
(c)............................. 7.2(c)
Section 313(a)............................. 7.3(a)
(a)(4).......................... 7.3(a)
(b)............................. 7.3(b)
(c)............................. 7.3(a)
(d)............................. 7.3(c)
Section 314(a)............................. 7.4
(b)............................. 7.4
(c)(1).......................... 1.2
(c)(2).......................... 1.2
(c)(3).......................... Not Applicable
(e)............................. 1.2
Section 315(a)............................. 6.1(a)
(b)............................. 6.2, 7.3
(c)............................. 6.1(b)
(d)............................. 6.1(c)
(e)............................. 5.14
Section 316(a)............................. 5.12
(a)(1)(A)....................... 5.12
(a)(1)(B)....................... 5.13
(a)(2).......................... Not Applicable
(b)............................. 5.8
(c)............................. 1.4(f)
Section 317(a)(1).......................... 5.3
(a)(2).......................... 5.4
(b)............................. 10.3
Section 318(a)............................. 1.7
</TABLE>
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION....................... 2
SECTION 1.1. Definitions............................... 2
SECTION 1.2. Compliance Certificate and Opinions....... 13
SECTION 1.3. Forms of Documents Delivered to Trustee... 14
SECTION 1.4. Acts of Holders........................... 14
SECTION 1.5. Notices, Etc. to Trustee and Company...... 17
SECTION 1.6. Notice to Holders; Waiver................. 17
SECTION 1.7. Conflict with Trust Indenture Act......... 18
SECTION 1.8. Effect of Headings and Table of Contents.. 18
SECTION 1.9. Successors and Assigns.................... 18
SECTION 1.10. Separability Clause....................... 18
SECTION 1.11. Benefits of Indenture..................... 18
SECTION 1.12. Governing Law............................. 19
SECTION 1.13. Non-Business Days......................... 19
ARTICLE II. SECURITY FORMS............................ 19
SECTION 2.1. Forms Generally........................... 19
SECTION 2.2. Form of Face of Security.................. 20
SECTION 2.3. Form of Reverse of Security............... 25
SECTION 2.4. Additional Provisions Required in Global
Security.................................. 29
SECTION 2.5. Form of Trustee's Certificate
of Authentication......................... 29
ARTICLE III. THE SECURITIES
SECTION 3.1. Title and Terms........................... 29
SECTION 3.2. Denominations............................. 33
SECTION 3.3. Execution, Authentication, Delivery
and Dating................................ 33
SECTION 3.4. Temporary Securities...................... 35
SECTION 3.5. Global Securities......................... 36
SECTION 3.6. Registration, Transfer and Exchange
Generally; Certain Transfers and
Exchanges; Securities Act Legends......... 37
SECTION 3.7. Mutilated, Lost and Stolen Securities..... 40
SECTION 3.8. Payment of Interest and Additional
Interest; Interest Rights Preserved....... 41
SECTION 3.9. Persons Deemed Owners..................... 43
SECTION 3.10. Cancellation.............................. 43
SECTION 3.11. Computation of Interest................... 44
SECTION 3.12. Deferrals of Interest Payment Dates....... 44
SECTION 3.13. Right of Set-Off.......................... 46
SECTION 3.14. Agreed Tax Treatment...................... 46
</TABLE>
- i -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.15. Shortening or Extension of Stated
Maturity.................................. 46
SECTION 1.16. CUSIP Numbers............................. 46
ARTICLE IV. SATISFACTION AND DISCHARGE................ 47
SECTION 4.1. Satisfaction and Discharge of Indenture... 47
SECTION 4.2. Application of Trust Money................ 48
ARTICLE V. REMEDIES.................................. 48
SECTION 5.1. Events of Default......................... 48
SECTION 5.2. Acceleration of Maturity; Rescission
and Annulment............................. 49
SECTION 5.3. Collection of Indebtedness and Suits
for Enforcement by Trustee................ 51
SECTION 5.4. Trustee May File Proofs of Claim.......... 52
SECTION 5.5. Trustee May Enforce Claim Without
Possession of Securities.................. 53
SECTION 5.6. Application of Money Collected............ 53
SECTION 5.7. Limitation on Suits....................... 54
SECTION 5.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest; Direct Action by Holders
of Capital Securities..................... 55
SECTION 5.9. Restoration of Rights and Remedies........ 55
SECTION 5.10. Rights and Remedies Cumulative............ 55
SECTION 5.11. Delay or Omission Not Waiver.............. 56
SECTION 5.12. Control by Holders........................ 56
SECTION 5.13. Waiver of Past Defaults................... 57
SECTION 5.14. Undertaking for Costs..................... 57
SECTION 5.15. Waiver of Usury, Stay or Extension Laws... 58
ARTICLE VI. THE TRUSTEE............................... 58
SECTION 6.1. Certain Duties and Responsibilities....... 58
SECTION 6.2. Notice of Defaults........................ 59
SECTION 6.3. Certain Rights of Trustee................. 60
SECTION 6.4. Not Responsible for Recitals or
Issuance of Securities.................... 61
SECTION 6.5. May Hold Securities....................... 61
SECTION 6.6. Money Held in Trust....................... 61
SECTION 6.7. Compensation and Reimbursements........... 61
SECTION 6.8. Disqualification; Conflicting
Interests................................. 63
SECTION 6.9. Corporate Trustee Required;
Eligibility............................... 63
SECTION 6.10. Resignation and Removal; Appointment
of Successor.............................. 64
SECTION 6.11. Acceptance of Appointment by
Successor................................. 65
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.................... 67
</TABLE>
- ii -
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.13. Preferential Collection of Claims Against
Company................................... 67
SECTION 6.14. Appointment of Authenticating Agent....... 67
ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY.................. 69
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders...................... 69
SECTION 7.2. Preservation of Information,
Communications to Holders ................ 70
SECTION 7.3. Reports by Trustee and Paying Agent....... 70
SECTION 7.4. Reports by Company........................ 71
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE......................... 71
SECTION 8.1. Company May Consolidate, Etc., Only
on Certain Terms.......................... 71
SECTION 8.2. Successor Company Substituted............. 72
ARTICLE IX. SUPPLEMENTAL INDENTURES................... 73
SECTION 9.1. Supplemental Indentures Without Consent
of Holders................................ 73
SECTION 9.2. Supplemental Indentures With Consent of
Holders................................... 74
SECTION 9.3. Execution of Supplemental Indentures...... 76
SECTION 9.4. Effect of Supplemental Indentures......... 76
SECTION 9.5. Conformity with Trust Indenture Act....... 76
SECTION 9.6. Reference in Securities to Supplemental
Indentures................................ 76
ARTICLE X. COVENANTS................................. 77
SECTION 10.1. Payment of Principal, Premium
and Interest.............................. 77
SECTION 10.2. Maintenance of Office or Agency........... 77
SECTION 10.3. Money for Security Payments to be Held in
Trust..................................... 77
SECTION 10.4. Statement as to Compliance................ 79
SECTION 10.5. Waiver of Certain Covenants............... 79
SECTION 10.6. Additional Sums........................... 80
SECTION 10.7. Additional Covenants...................... 81
SECTION 10.8. Original Issue Discount................... 82
ARTICLE XI. REDEMPTION OF SECURITIES.................. 82
SECTION 11.1. Applicability of This Article............. 82
SECTION 11.2. Election to Redeem; Notice of Trustee..... 82
SECTION 11.3. Selection of Securities to be Redeemed.... 83
SECTION 11.4. Notice of Redemption...................... 83
SECTION 11.5. Deposit of Redemption Price............... 84
</TABLE>
- iii -
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.6. Payment of Securities Called for
Redemption................................ 85
SECTION 11.7. Right of Redemption of Securities
Initially Issued to an Issuer Trust....... 85
ARTICLE XII. SINKING FUNDS............................. 86
ARTICLE XIII. SUBORDINATION OF SECURITIES............... 86
SECTION 13.1. Securities Subordinate to Senior
Indebtedness.............................. 86
SECTION 13.2. No Payment When Senior Indebtedness
in Default; Payment Over of Proceeds
Upon Dissolution, Etc..................... 86
SECTION 13.3. Payment Permitted if no Default........... 88
SECTION 13.4. Subrogation to Rights of Holders of
Senior Indebtedness....................... 89
SECTION 13.5. Provisions Solely to Define Relative
Rights.................................... 89
SECTION 13.6. Trustee to Effectuate Subordination....... 90
SECTION 13.7. No Waiver of Subordination Provisions..... 90
SECTION 13.8. Notice to Trustee......................... 91
SECTION 13.9. Reliance on Judicial Order or
Certificate of Liquidating Agent.......... 91
SECTION 13.10. Trustee Not Fiduciary for Holders of
Senior Indebtedness....................... 92
SECTION 13.11. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights.................................... 92
SECTION 13.12. Article Applicable to Paying Agents....... 92
SECTION 13.13. Certain Conversions or Exchanges
Deemed Payment............................ 93
ANNEX A FORM OF RESTRICTED SECURITIES CERTIFICATE
</TABLE>
- iv -
<PAGE> 7
JUNIOR SUBORDINATED INDENTURE
THIS JUNIOR SUBORDINATED INDENTURE, dated as of May __, 1997, between
STERLING FINANCIAL CORPORATION, a Washington Corporation (the "Company"), having
its principal office at 111 North Wall Street, Spokane, Washington 99201, and
BANKERS TRUST COMPANY, as Trustee, having its principal office at Four Albany
Street, 4th Floor, New York, New York 10006 (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (hereinafter called the
"Securities") of substantially the tenor hereinafter provided, including
Securities issued to evidence loans made to the Company from the proceeds from
the issuance from time to time by one or more business trusts (each an "Issuer
Trust") of undivided preferred 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, collectively with the
Capital Securities, the "Trust Securities"), and to provide the terms and
conditions upon which the Securities are to be authenticated, issued and
delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as such term is defined in Section 1.1 hereof)
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities or of any series thereof, and intending
to be legally bound hereby, as follows:
<PAGE> 8
- 2 -
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:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(3) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation";
(4) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect at the time of computation;
(5) Whenever the context may require, any gender shall be deemed to
include the other;
(6) 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
(7) 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 and which 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.
<PAGE> 9
- 3 -
"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.
"Administrator" means, in respect of any Issuer Trust, each
Person appointed in accordance with the related Trust Agreement, solely
in such Person's capacity as Administrator of such Issuer Trust and not
in such Person's individual capacity, or any successor Administrator
appointed as therein 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.
"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 Global Security, in
each case to the extent applicable to such transaction and as in effect
from time to time.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 6.14 to act on behalf of the Trustee to
authenticate Securities of one or more series.
"Board of Directors" means the board of directors of the Company
or the Executive Committee of the board of directors of the Company (or
any other committee of the board of directors of the Company performing
similar functions) or, for purposes of this Indenture, a committee
designated by the board of directors of the Company (or such
committee), comprised of two or more members of the board of directors
of the Company or officers of the Company, or both.
"Board Resolution" means a copy of a resolution certified by the
Secretary or any Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, or such committee of the Board of
Directors or officers of the Company to which authority to act on
behalf of the Board of Directors has been delegated, and to be in full
force and effect on the date of such certification, and delivered to
the Trustee.
<PAGE> 10
- 4 -
"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 or the City of Spokane are authorized or required by law or
executive order to remain closed, or (iii) day on which the Corporate
Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to an 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 Treatment Event" means, in respect of any Issuer Trust,
the reasonable determination by the Company that, as a result of the
occurrence of any amendment to, or change (including any announced
prospective change) in, the laws (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 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 Company will not be
entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities or any substantial portion thereof as "Tier 1
Capital" (or the then equivalent thereof) for purposes of the
risk-based capital adequacy guidelines of the Board of Governors of the
Federal Reserve System, as then in effect, provided, however, that it
shall not be deemed to be a Capital Treatment Event if the Company is
not entitled to treat the aggregate amount of the Liquidation Amount of
such Capital Securities as "Tier 1 Capital" due to the restriction
imposed by the Federal Reserve that no more than 25% of Tier 1 Capital
can consist of perpetual preferred stock.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if
at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the
Trust Indenture Act, then the body performing such duties on such date.
"Common Securities" has the meaning specified in the first
recital of this Indenture.
"Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor entity shall have become
such pursuant to the applicable provisions of this
<PAGE> 11
- 5 -
Indenture, and thereafter "Company" shall mean such successor entity.
"Company Request" and "Company Order" mean, respectively, the
written request or order signed in the name of the Company by any
Chairman of the Board of Directors, any Vice Chairman of the Board of
Directors, its President or a Vice President, and by its Chief
Financial Officer, its Treasurer, its Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business
shall be administered.
"Creditor" has the meaning specified in Section 6.7.
"Defaulted Interest" has the meaning specified in
Section 3.8.
"Delaware Trustee" means, with respect to any Issuer Trust, the
Person identified as the "Delaware Trustee" in the related Trust
Agreement, solely in its capacity as Delaware Trustee of such Issuer
Trust under such Trust Agreement and not in its individual capacity, or
its successor in interest in such capacity, or any successor Delaware
trustee appointed as therein provided.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more
Global Securities, the Person designated as Depositary by the Company
pursuant to Section 3.1 with respect to such series (or any successor
thereto).
"Discount Security" means any security that provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 5.2.
"Dollar" or "$" 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.
The term "entity" includes a bank, corporation, association,
company, limited liability company, joint-stock company or business
trust.
"Event of Default," unless otherwise specified in the
supplemental indenture creating a series of Securities, has the meaning
specified in Article V.
<PAGE> 12
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"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor 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 or its nominee for such series, and registered in the
name of such Depositary or its nominee.
"Guarantee" means, with respect to any Issuer Trust, the
Guarantee Agreement executed by the Company 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.
"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 institutional
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.
"Investment Company Act" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended from
time to time.
"Investment Company Event" means the receipt by an Issuer Trust
of an Opinion of Counsel (as defined in the relevant Trust Agreement)
experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change
(including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court,
governmental agency or regulatory authority, there is more than an
insubstantial risk that such Issuer Trust is or will be considered an
"investment company" that is required to be registered under the
Investment Company Act,
<PAGE> 13
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which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of
the Capital Securities of such Issuer Trust.
"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 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 and Chief Executive Officer, President or a Vice
President, and by the Chief Financial Officer, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the
Depositor, and delivered to the party provided herein. 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 each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for or an employee of the Company or any Affiliate of the
Company.
"Original Issue Date" means the date of issuance specified as
such in each Security.
<PAGE> 14
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"Outstanding" means, when used in reference to any Securities,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which
other Securities have been authenticated and delivered or that
have been paid pursuant to Section 3.6, unless proof
satisfactory to the Trustee is presented that any such
Securities are held by Holders in whose hands such Securities
are valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of
the requisite principal amount of Outstanding Securities have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or
any other obligor upon the Securities or any Affiliate of the
Company or such other obligor (other than, for the avoidance of
doubt, the Issuer Trust to which Securities of the applicable
series were initially issued) 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 Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor
(other than, for the avoidance of doubt, such Issuer Trust).
Upon the written request of the Trustee, the Company shall
furnish to the Trustee promptly an Officers' Certificate listing
and identifying all Securities, if any, known by the Company to
be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company
or such obligor (other than, for the avoidance of doubt, such
Issuer Trust), 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
<PAGE> 15
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therein set forth and of the fact that all Securities not listed
therein are Outstanding for the purpose of any such
determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of (or premium, if any) or interest on, or
other amounts in respect of any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency
or political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any
series, the place or places where the principal of (and premium, if
any) and interest on the Securities of such series are payable pursuant
to 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 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.
"Capital Securities" has the meaning specified in the first
recital of this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"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.
"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 close of business on
<PAGE> 16
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March 15, June 15, September 15 or December 15 next preceding such
Interest Payment Date (whether or not a Business Day).
"Responsible Officer", when used with respect to the Property
Trustee means any officer assigned to the Corporate Trust Office,
including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other
officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and having
direct responsibility for the administration of this Indenture, and
also, 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 Security" means each Security required pursuant to
Section 3.6(c) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate
substantially in the form set forth in Annex 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.
"Rights Plan" means any plan of the Company providing for the
issuance by the Company to all holders of its Common Stock, par value
$1.00 per share, of rights entitling the holders thereof to subscribe
for or purchase shares of any class or series of capital stock of the
Company which rights (i) are deemed to be transferred with such shares
of such Common Stock, (ii) are not exercisable, and (iii) are also
issued in respect of future issuances of such Common Stock, in each
case until the occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt
security, as the case may be, authenticated and delivered under this
Indenture.
"Securities Act" means the Securities Act of 1933, as modified,
amended or supplemented from time to time.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 3.6.
"Senior Indebtedness" means, whether recourse is to all or a
portion of the assets of the Company and whether or not contingent, (i)
every obligation of the Company for money borrowed; (ii) every
obligation of the Company evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of
<PAGE> 17
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property, assets or businesses; (iii) every reimbursement obligation of
the Company with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of the Company; (iv) every
obligation of the Company 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 the Company; (vi) every obligation of
the Company for claims (as defined in Section 101(4) of the United
States Bankruptcy Code of 1978, as amended) in respect of derivative
products such as interest and foreign exchange rate contracts,
commodity contracts 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, the Company has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise, including,
without limitation, the Depositor's 8.75% subordinated notes due
January 31, 2000 in the aggregate principal amount of $17.2 million and
a $15 million Term Note due September 30, 2002; provided that "Senior
Indebtedness" shall not include (i) any obligations which, by their
terms, are expressly stated to rank pari passu in right of payment
with, or to not be superior in right of payment to, the Junior
Subordinated Debentures, (ii) any Senior Indebtedness of the Company
which when incurred and without respect to any election under Section
1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Company, (iii) any Senior Indebtedness of the
Company to any of its subsidiaries, (iv) Senior Indebtedness to any
executive officer or director of the Company, or (v) any indebtedness
in respect of debt securities issued to any trust, or a trustee of such
trust, partnership or other entity affiliated with the Company that is
a financing entity of the Company in connection with the issuance of
such financing entity of securities that are similar to the Capital
Securities.
"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 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 interest is due and payable, as such date may, in the case of such
principal, be shortened or extended as provided pursuant to the terms
of such Security and this Indenture.
"Subsidiary" means an entity more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company
or by one or more other Subsidiaries,
<PAGE> 18
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or by the Company and one or more other Subsidiaries. For purposes of
this definition, "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; and, 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 (as defined in the relevant Trust Agreement) experienced in
such matters to the effect that, as a result of any amendment to, or
change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of
any official or administrative pronouncement or action 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 will be within 90 days of the delivery of such
Opinion of Counsel, subject to United States Federal income tax with
respect to income received or accrued on the corresponding series of
Securities issued by the Company to such Issuer Trust, (ii) interest
payable by the Company 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 Company, in whole or in part, for United
States Federal income tax purposes, or (iii) such Issuer Trust is, or
will be within 90 days of the delivery of such Opinion of Counsel,
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 Indenture, solely in its capacity as such 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
<PAGE> 19
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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
modified, amended or supplemented from time to time, except as provided
in Section 9.5.
"Trust Securities" has the meaning specified in the first
recital of this Indenture.
"Vice President," when used with respect to the Company, means
any duly appointed vice president, whether or not designated by a
number or a word or words added before or after the title "vice
president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent (including covenants compliance with which
constitutes a condition precedent), if any, provided for in this
Indenture relating to the proposed action have been complied with and
an Opinion of Counsel stating that, in the opinion of such counsel, 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
<PAGE> 20
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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 as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows,
or in the exercise of reasonable care should know, that the certificate
or opinion or 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, an
officer or officers of the Company stating that the information with
respect to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions, or other instruments under this Indenture, they may, but need
not, be consolidated and form one instrument.
SECTION 1.4. 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 Company. Such instrument
or instruments (and the action embodied therein and evidenced thereby)
are herein
<PAGE> 21
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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 Company, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of
such execution or by the certificate of any notary public or other
officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing such instrument or writing acknowledged to
him or her the execution thereof. Where such execution is by a Person
acting in other than his or her individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his or her
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 provided 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.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall
bind every future Holder of the same Security and the Holder of every
Security issued upon the transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.
(f) The Company may 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 Company 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 (as defined below) by
Holders of
<PAGE> 22
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the requisite principal amount of Outstanding Securities of such series
on such record date. Nothing in this paragraph shall be construed to
prevent the Company 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 cancelled 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
Company, 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 cancelled 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
Trustee, at the Company's expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date
to be given to the Company 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,
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
<PAGE> 23
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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, 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 Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Capital
Securities or the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, or
(2) the Company 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 Company
addressed to it at the address of its principal office specified
in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the
Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first class postage
prepaid, to each Holder affected by such event, at the address of such
Holder as it appears in the Securities Register, not later than the
latest date, and not earlier than the earliest
<PAGE> 24
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date, prescribed for the giving of such notice. If, by reason of the
suspension of or irregularities in regular mail services 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.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to
be a part of and govern this Indenture, the provision of the Trust
Indenture Act shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case
may be.
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 Company
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 any way be
affected or impaired thereby.
<PAGE> 25
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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
of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of
interest or principal (and premium, if any) 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 is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day
(in each case with the same force and effect as if made on the Interest
Payment Date or Redemption Date or at the Stated Maturity).
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 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
<PAGE> 26
- 20 -
of an appropriate record of such action shall be certified by the
Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated
by Section 3.3 with respect to the authentication and delivery of such
Securities.
The Trustee's certificates of authentication shall be
substantially in the form set forth in this Article.
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.
Securities distributed to holders of Global 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
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
Global 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.
SECTION 2.2. Form of Face of Security.
STERLING FINANCIAL CORPORATION
[Title of Security]
[If the Security is a Restricted Security, insert -- THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (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, (I) TO A PERSON WHO THE
TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE PROVISIONS OF
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
<PAGE> 27
- 21 -
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (B)
BY AN INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY
ANY SUBSEQUENT INVESTOR, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO
AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER
JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES
THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECURITIES OWNED
BY AN INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY
NOT BE HELD IN GLOBAL FORM AND MAY NOT BE TRANSFERRED WITHOUT
CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. NO
REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALES OF THE SECURITIES.]
No. $
STERLING FINANCIAL CORPORATION, a Washington corporation
(hereinafter called the "Company", 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--, 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 Company may (i)
shorten the Stated Maturity of the principal of this Security to a date
not earlier than ___________, and (ii) extend the Stated Maturity of
the principal of this Security at any time on one or more occasions,
subject to certain conditions specified in Section 3.15 of the
Indenture, but in no event to a date later than _________]. The Company
further promises to pay interest on said principal 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--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--;
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
<PAGE> 28
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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--, 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--So long as no Event of Default has
occurred and is continuing, the Company shall have the right, at any
time during the term of this Security, from time to time to defer 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--, during which Extension Periods the Company shall
have the right to make partial payments of interest on any Interest
Payment Date, and] at the end of which the Company shall pay all
interest then accrued and unpaid including 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--, 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 Company 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 Company's capital
stock, or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the
Company 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 Company in connection
with any employment
<PAGE> 29
- 23 -
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 Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered
into prior to the applicable Extension Period, (b) as a result of an
exchange or conversion of any class or series of the Company's capital
stock (or any capital stock of a Subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or
series of the Company's indebtedness for any class or series of the
Company's capital stock, (c) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection
with any 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 Company 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 Company 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 Period 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 date on which such amounts would otherwise have
been due and payable until paid or made available for payment. The
Company 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--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
<PAGE> 30
- 24 -
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, but in any event not less than one Business Day prior to such
record date.]
Payment of the principal of (and premium, if any) and interest
on this Security will be made at the office or agency of the Company
maintained for that purpose in the United States, in such coin or
currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts [if applicable,
insert--; provided, however that at the option of the Company payment
of 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) if to a Holder of $1,000,000 or more in aggregate
principal amount of this Security, by wire transfer in immediately
available funds upon written request to the Trustee not later than 15
calendar days prior to the date on which the interest is payable].
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payments
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 his or her 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 his or her 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.
<PAGE> 31
- 25 -
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
STERLING FINANCIAL CORPORATION
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 Company (herein called the "Securities"), issued and to be issued
in one or more series under the Junior Subordinated Indenture, dated as
of May __, 1997 (herein called the "Indenture"), between the Company
and Bankers 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 Company, 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--, limited in
aggregate principal amount to $ _______].
All terms used in this Security that are defined in the
Indenture [if applicable, insert-- or in [insert name of trust
agreement], dated as of _________ (as modified, amended or supplemented
from time to time the "Trust Agreement"), relating to [insert name of
Issuer Trust] [the ("Issuer Trust") among the Company, 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--or the Trust
Agreement, as the case may be].
[If applicable, insert--The Company has the right to redeem this
Security (i) on or after _________, in whole at any time or in part
from time to time, or (ii) in whole (but not in part), at
<PAGE> 32
- 26 -
any time within 90 days following the occurrence and during the
continuation of a Tax Event, Investment Company Event, or Capital
Treatment Event, in each case at the Redemption Price described below,
and subject to possible regulatory approval. The Redemption Price shall
equal 100% of the principal amount hereof being redeemed, together with
accrued interest to but excluding the date fixed for redemption.]
[If the Security is subject to redemption of any kind,
insert--In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation
hereof.]
[If applicable, insert--The Indenture contains provisions for
defeasance at any time [of the entire indebtedness of this Security]
[or] [certain restrictive covenants and Events of Default with respect
to this Security] [, in each case] upon compliance by the Company with
certain conditions set forth in the Indenture.]
The Indenture permits, with certain exceptions as therein
provided, the Company and the Trustee at any time to enter into a
supplemental indenture or indentures for the purpose of modifying in
any manner the rights and obligations of the Company and of the Holders
of the Securities, with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities of each
series to be affected by such supplemental indenture. The Indenture
also contains provisions permitting Holders of specified percentages in
principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon
this Security.
[If the Security is not a Discount Security, insert--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 Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders) [if applicable, insert--, provided that,
if upon an Event of
<PAGE> 33
- 27 -
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 Capital Securities then outstanding shall have the right to make
such declaration by a notice in writing to the Company and the
Trustee]; and upon any such declaration the principal amount of and the
accrued interest (including any Additional Interest) on all the
Securities of this series shall become immediately due and payable,
provided that the payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to
the extent provided in Article XIII of the Indenture.]
[If the Security is a Discount Security, insert--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 Securities of this series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders) [if applicable, insert--, 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
Company 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 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 all the Securities of this series 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 Company'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 Company, which is absolute and unconditional, to pay the principal
of (and premium, if any) and interest (including Additional Interest)
on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
<PAGE> 34
- 28 -
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration
of transfer at the office or agency of the Company maintained 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 Company 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.
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 Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee 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 Company, the Trustee nor any such agent shall
be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a
beneficial interest therein, the Holder of, and any Person that
acquires a beneficial interest in, this Security agrees 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.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE
COMPANY, DOES NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR GOVERNMENT
AGENCY.
<PAGE> 35
- 29 -
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.
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: --------------------- BANKERS TRUST COMPANY,
as Trustee
By: -------------------------
Authorized Signatory
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
<PAGE> 36
- 30 -
more indentures supplemental hereto, prior to the issuance of
Securities as 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, 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 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;
(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
Company shall have the right to extend or 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 and extent to
which Additional Interest, if any, shall be payable with respect to 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 Company to defer
or extend an Interest Payment Date, and the Regular Record Date for the
interest payable on any Interest Payment Date or the method by which
any of the foregoing shall be determined;
(f) the place or places where the principal of (and premium, if
any) and interest or 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
<PAGE> 37
- 31 -
notices and demands to or upon the Company in respect of the
Securities of such series may be made;
(g) the period or periods within or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon
which the Securities of such series may be redeemed, in whole or in
part, at the option of the Company, and if other than by a Board
Resolution, the manner in which any election by the Company to redeem
such Securities shall be evidenced;
(h) the obligation or the right, if any, of the Company to
redeem, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of
a Holder thereof, and the period or periods within which, the 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;
(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 and Additional Interest, if any, on the Securities of
the series shall be payable, or in which the Securities of the series
shall be denominated and the manner of determining the equivalent
thereof in Dollars for purposes of the definition of Outstanding;
(k) the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Company set forth herein with
respect to the Securities of such series;
(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 which 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 which shall be due and payable upon any Maturity other
than the Stated Maturity or which 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);
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(n) if applicable, that the Securities of the series, in whole
or in any specified part, shall be defeasible and, if other than by a
Board Resolution, the manner in which any election by the Company to
defease such Securities shall be evidenced;
(o) 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;
(p) 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;
(q) 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 Depositaries 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;
(r) the appointment of any Paying Agent or agents for the
Securities of such series;
(s) the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Company, and
the additions or changes, if any, to this Indenture with respect to the
Securities of such series to permit or facilitate such conversion or
exchange;
(t) if such Securities are to be issued to an Issuer Trust,
the form or forms of the Trust Agreement and Guarantee relating
thereto;
(u) if, other than as set forth herein, the relative degree, if
any, to which the Securities or 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;
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(v) any addition to or change in the Events of Default which
applies 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;
(w) any addition to or change in the covenants set forth
in Article X which applies to Securities of the series; and
(x) 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 Company 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 specified as
contemplated by Section 3.1(i).
SECTION 3.3. Execution, Authentication, Delivery and
Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or
one of its Vice Presidents, under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company
shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of
such Securities. At any time and
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from time to time after the execution and delivery of this Indenture,
the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company
Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company 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 Company in the manner and
subject to any conditions specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the
Company enforceable in accordance with their 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.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue 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 the preceding
paragraph, 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 Company
Order and Opinion of Counsel otherwise required pursuant to such
preceding paragraph 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.
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Each Security shall be dated the date of its authentication.
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
Company, and the Company 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 Company may execute, and upon receipt of a Company 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 Company
will cause definitive Securities of such series to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities
upon surrender of the temporary Securities at the office or agency of
the Company designated for that purpose without charge to the Holder.
Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive
securities of the same series, of any authorized denominations having
the same Original Issue Date and Stated Maturity and having the same
terms as such temporary Securities. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such series.
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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 Company for
such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or custodian therefor, and each such
Global Security shall constitute a single Security for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof unless (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 Company is
unable to locate a qualified successor, (ii) the Company executes and
delivers to the Trustee a Company Order stating that the Company elects
to terminate the book-entry system through the Depositary, or (iii)
there shall have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other
Securities or cancelled in whole, it shall be surrendered by or on
behalf of the Depositary or its nominee to the Securities Registrar for
exchange or cancellation as provided in this Article III. If any Global
Security is to be exchanged for other Securities or cancelled 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 cancelled, or equal
to the principal amount of such other Security to be so exchanged for a
beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Securities Registrar,
whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make
a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Security by the Depositary, accompanied by
registration instructions, the Trustee shall, subject to Section 3.6(b)
and as otherwise provided in this Article III, authenticate and deliver
any Securities issuable in exchange for such Global Security (or any
portion thereof) in accordance with the instructions of the Depositary.
The Trustee shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected
in relying on, such instructions.
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(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) The Depositary 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. Accordingly, any such owner's
beneficial interest in a Global Security shall be shown only on, and
the transfer of such interest shall be effected only through, records
maintained by the Depositary or its nominee or agent. Neither the
Trustee nor the Securities Registrar shall have any liability in
respect of any transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global
Security shall be exercised only through the Depositary and shall be
limited to those established by law and agreements between such owners
and the Depositary and/or its Agent Members.
SECTION 3.6. Registration, Transfer and Exchange
Generally; Certain Transfers and Exchanges;
Securities Act Legends.
(a) The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the
registration of Securities and transfers of Securities. Such register
is herein sometimes referred to as the "Securities Register." The
Trustee is hereby appointed "Securities Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
the offices or agencies of the Company designated for that purpose, the
Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more
new Securities of the same series of any authorized denominations of
like tenor and aggregate principal amount and bearing such restrictive
legends as may be required by this Indenture.
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 and
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bearing such restrictive legends as may be required by this Indenture,
upon surrender of the Securities to be exchanged at such office or
agency. Whenever any securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver,
the Securities 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 Company, evidencing
the same debt, and entitled to the same benefits under this Indenture,
as the Securities surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange
shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar, duly executed
by the Holder thereof or such Holder's attorney duly authorized in
writing.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Securities.
Neither the Company nor the Trustee shall be required, pursuant
to the provisions of this Section, (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.
(b) Certain Transfers and Exchanges. 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) Restricted Non-Global Security to Global Security. If
the Holder of a Restricted 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
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Securities Registrar directing that a beneficial interest in the Global
Security in a specified principal amount not greater than the principal
amount of such Security be credited to a specified Agent Member's
account and (B) a Restricted Securities Certificate duly executed by
such Holder or such Holder's attorney duly authorized in writing, then
the Securities Registrar shall cancel such Security (and issue a new
Security in respect of 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 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) Exchanges Between Global Security and Non-
Global Security. A beneficial interest in a Global Security
may be exchanged for a Security that is not a Global Security
as provided in Section 3.5.
(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.
(c) Restricted Securities Legend. 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 while
represented thereby;
(ii) subject to the following clauses of this Section
3.6(c), a new Security which is not a Global Security and is
issued in exchange for another Security
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(including a Global Security) or any portion thereof, upon
transfer or otherwise, shall, if such new Security is required
pursuant to Section 3.6(b)(ii) or (iii) to be issued in the form
of a Restricted Security, bear a Restricted Securities Legend;
(iii) a new Security (other than a Global Security) that
does not bear a Restricted Securities Legend may be issued in
exchange for or in lieu of a Restricted Security or any portion
thereof that bears such a legend if, in the Company's judgment,
placing such a legend upon such new Security is not necessary to
ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the written direction of the
Company in the form of an Officers' Certificate, shall
authenticate and deliver such a new Security as provided in this
Article III;
(iv) 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 the Company has reasonable cause to believe that
such Successor Security is a "restricted security" within the
meaning of Rule 144, in which case the Trustee, at the written
direction of the Company 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
(v) 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.
SECTION 3.7. Mutilated, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together
with such security or indemnity as may be required by the Company or
the Trustee to save each of them harmless, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same 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 Company and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of
any Security, and (ii) such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company
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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 and 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 Company 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 Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities of such
series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen
Securities.
SECTION 3.8. Payment of Interest and Additional Interest;
Interest Rights Preserved.
Interest and 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 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
<PAGE> 48
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Date for Securities of such series (herein called "Defaulted
Interest"), shall forthwith cease to be payable to the registered
Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such
series in respect of which interest is in default (or their
respective Predecessor Securities) are registered at the close
of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and which shall
be fixed at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon, the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest, which shall 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 Company of such Special Record
Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first class,
postage prepaid, to each Holder of a Security of such series at
the address of such Holder as it appears in the Securities
Register not less than 10 days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the
expense of the Company, cause a similar notice to be published
at least once in a newspaper, customarily published in the
English language on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, but such
publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor
Securities) are registered on such Special Record Date and
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shall no longer be payable pursuant to the following clause
(2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
of the series in respect of which interest is in default may be
listed and, upon such notice as may be required by such exchange
(or by the Trustee if the Securities are not listed), if, after
notice given by the Company to the Trustee of the proposed
payment pursuant to this clause 2, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon transfer of or in
exchange for or in lieu of any other Security shall carry the
rights to interest accrued and unpaid, and to accrue interest,
that were carried by such other Security.
SECTION 3.9. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company 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 Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held
on its behalf by a Depositary shall have any rights under this
Indenture with respect to such Global Security, and such Depositary may
be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company 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
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any such purpose shall be promptly canceled by it. The Company may at
any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Company may
have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities shall be destroyed by the Trustee
and the Trustee shall deliver to the Company a certificate of such
destruction.
SECTION 3.11. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for
any period shall be computed on the basis of a 360-day year of twelve
30-day months and 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.
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 Company 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 (each an "Extension Period") not to exceed the number of
consecutive quarterly, semi-annual or other periods that equal five
years with respect to each Extension Period, during which Extension
Periods the Company shall, if so specified as contemplated by Section
3.1, have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a date other
than an Interest Payment Date. At the end of any such Extension Period,
the Company shall pay all interest then accrued and unpaid on the
Securities (together with Additional Interest thereon, if any, at the
rate specified for the Securities of such series to the extent
permitted by applicable law); provided, however, that no Extension
Period 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 Company 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 Company's capital
stock, or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu in all respects with or junior in interest
to the Securities of such series (other than (a) repurchases,
redemptions
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or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of 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 Company (or securities convertible
into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension
Period, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a
Subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness
for any class or series of the Company's capital stock, (c) the
purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration
of a dividend in connection with any 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 that termination of any such Extension Period, the
Company 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 and any Additional Interest
then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period, subject to the above conditions. No interest or
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 Company 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
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give notice to holders of such Capital Securities of the record date or
the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date.
The Trustee shall promptly give notice of the Company'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
Company 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
Company has theretofore made, or is concurrently on the date of such
payment making, a payment under the Guarantee 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 Company
and, by its acceptance of a Security or a beneficial interest therein,
the Holder of, and any Person that acquires a beneficial interest in,
such Security agree that for United States Federal, state and local tax
purposes it is intended that such Security constitutes indebtedness.
SECTION 3.15. Shortening or Extension 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 Company shall
have the right to (i) shorten the Stated Maturity of the principal of
the Securities of such series at any time to any date and (ii) extend
the Stated Maturity of the principal of the Securities of such series
at any time at its election for one or more periods, provided that, if
the Company elects to exercise its right to extend the Stated Maturity
of the principal of the Securities of such series pursuant to clause
(ii) above, at the time such election is made and at the time of
extension, such conditions as may be specified in such Securities shall
have been satisfied.
SECTION 3.16 CUSIP Numbers.
The Company, in issuing the Securities, may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP"
numbers in notice 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
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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 Company 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 Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities 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 Company and
thereafter repaid to the Company 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 Company,
and the Company, in the case of subclause (B)(i), (ii) or
(iii) above, has deposited or caused to be deposited with
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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 the 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 Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 6.7, the obligations of the Company 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, 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 Company acting as
its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest
and 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
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it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any
Security of that series, including any Additional Interest in
respect thereof, when it becomes due and payable, and
continuance of such default for a period of 30 days (subject to
the deferral of any due date in the case of an Extension
Period); or
(2) default in the payment of the principal of (or
premium, if any, on) any Security of that series at its
Maturity; or
(3) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of
the Company 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 Company to remedy
the same, shall have been given to the Company by the Trustee by
registered or certified mail or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of
the Outstanding Securities of that series; or
(4) the occurrence of the appointment of a receiver or
other similar official in any liquidation, insolvency or similar
proceeding with respect to the Company or all or substantially
all of its property; or a court or other governmental agency
shall enter a decree or order appointing a receiver or similar
official and such decree or order shall remain unstayed and
undischarged for a period of 60 days; or
(5) 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)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then, and in every such case, the
Trustee or the Holders of not less than 25% in 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
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immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of 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 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
Company 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) 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) 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 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 provided, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that
series, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay:
(A) all overdue installments of interest 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 interest and Additional
Interest thereon at the rate borne by the Securities; and
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(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
(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
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 also have the right to rescind and
annul such declaration and its consequences by written notice to the
Company 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 Company 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 (and premium, if any, on) any Security at the Maturity
thereof,
the Company will, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Securities, the
whole amount then due and payable on such Securities for
principal (and premium, if any) and interest (including any
Additional Interest), and, in addition thereto,all amounts owing
the Trustee under Section 6.7.
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If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid, and may prosecute such proceeding to judgment
or final decree, and may enforce the same against the Company or any
other obligor upon such Securities and collect the monies adjudged or
decreed to be payable in the manner provided by law out of the property
of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of
Securities of such series by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such
rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial or administrative proceeding relative to the Company or
any other obligor upon the Securities or the property of the Company or
of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company for the payment
of overdue principal (and premium, if any) or interest (including any
Additional Interest)) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may be
necessary or advisable and to take any and all actions as are
authorized under the Trust Indenture Act in order to have the
claims of the Holders and any predecessor to the Trustee under
Section 6.7 allowed in any such judicial or administrative
proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.6; and
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(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator, conservator (or other similar official) in any such
judicial or administrative 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 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 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 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
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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, sequestrator (or other similar
official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25% in 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,
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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 Preferred
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 Company 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 to the Trustee, such Holder or such holder of Capital
Securities, then, and in every such case, the Company, 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
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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
with respect to the Securities of the related series 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 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, 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.
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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 aggregate Liquidation Amount
(as defined in the related Trust Agreement) of the Capital Securities
issued by such Issuer Trust may waive any past default hereunder and
its consequences with respect to such series except a default:
(1) in the payment of the principal of (or premium, if any)
or interest (including any Additional Interest) on any Security
of such series (unless such default has been cured and the
Company has paid to or deposited with the Trustee a sum
sufficient to pay all matured installments of interest
(including 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 waiver by
holders of Capital Securities issued by such Issuer Trust, by all
holders of Capital Securities issued by such Issuer Trust.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture, but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that
any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may, in its discretion,
assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant, but
the provisions of this Section shall not apply to any suit instituted
by the
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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 Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury, stay
or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any
power herein granted to 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) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would
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exercise or use under the circumstances in the conduct of his or
her own affairs.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct except that
(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(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.
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
<PAGE> 66
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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, 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, 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.
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 Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(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 compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
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request, direction, consent, order, bond, indenture, Security or other
paper or document, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; 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 with due care by it 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 authentication, shall be taken as the
statements of the Company, 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 Company 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 Company, 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 Company 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. The
Trustee shall be under no liability for interest on any money received
by it hereunder except as otherwise agreed with the Company.
SECTION 6.7. Compensation and Reimbursement.
(a) The Company agrees to pay to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder in
such amounts as the Company and the Trustee shall agree from time to
time (which compensation shall not be limited
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by any provision of law in regard to the compensation of a trustee
of an express trust).
(b) The Company agrees 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.
(c) Since the Issuer Trust is being formed solely to facilitate
an investment in the Capital Securities, the Company, as Holder of the
Common Securities, hereby covenants to pay all debts and obligations
(other than with respect to the Capital Securities and the Common
Securities) and all reasonable costs and expenses of the Issuer Trust
(including without limitation all costs and expenses relating to the
organization of the Issuer Trust, the fees and expenses of the trustees
and all reasonable costs and expenses relating to the operation of the
Issuer Trust) and to pay any and all taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes)
imposed on the Issuer Trust by the United States, or any taxing
authority, so that the net amounts received and retained by the Issuer
Trust and the Property Trustee after paying such expenses will be equal
to the amounts the Issuer Trust and the Property Trustee would have
received had no such costs or expenses been incurred by or imposed on
the Issuer Trust. The foregoing obligations of the Company are for the
benefit of, and shall be enforceable by, any person to whom any such
debts, obligations, costs, expenses and taxes are owed (each, a
"Creditor") whether or not such Creditor has received notice thereof.
Any such Creditor may enforce such obligations directly against the
Company, and the Company irrevocably waives any right or remedy to
require that any such Creditor take any action against the Issuer Trust
or any other person before proceeding against the Company. The Company
shall execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
(d) The Company shall indemnify the Trustee for, and 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 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
reasonable 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 Indenture or the resignation or removal of the
Trustee.
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When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 5.1(4) occurs, the expenses and
the compensation for the services are intended to constitute expenses
of administration under the Bankruptcy Reform Act of 1978 or any
successor statute.
SECTION 6.8. Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder
shall be subject to the provisions of Section 310(b) of the Trust
Indenture Act. Nothing herein shall prevent the Trustee from filing
with the Commission the application referred to in the second to last
paragraph of said Section 310(b).
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) an entity organized and doing business under the laws of the
United States of America or of any state or territory thereof or of 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) an entity 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 a combined capital and surplus of at least
$50,000,000, subject to supervision or examination by Federal or state
authority. If such entity 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, the combined capital and surplus of such entity shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. Neither the Company nor any
Person directly or indirectly controlling, controlled by or under
common control with the Company shall serve as Trustee for the
Securities of any series issued hereunder.
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SECTION 6.10. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee under
Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(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 Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months,
or
(2) the Trustee shall cease to be eligible under Section
6.9 and shall fail to resign after written request therefor by
the Company 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 Company, 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.
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(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause with respect to the Securities of one or more series, the
Company, by a Board Resolution, shall promptly appoint a successor
Trustee with respect to the Securities of that or those series. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor Trustee with respect to the
Securities of such series and supersede the successor Trustee appointed
by the Company. If no successor Trustee with respect to the Securities
of any series shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided,
any Holder who has been a bona fide Holder of a Security 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 Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee with respect to the Securities
of any series by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of Securities of such series as
their names and addresses appear in the Securities Register. Each
notice shall include the name of the successor Trustee with respect to
the Securities of such series and the address of its Corporate Trust
Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to
the retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee shall
become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring
to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder.
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(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
Company, 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 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 or 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 removal of the retiring Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company or any
successor Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that
or those series to which the appointment of such successor Trustee
relates.
(c) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all rights, powers
and trusts referred to in paragraph (a) or (b) of this Section, as the
case may be.
(d) No successor Trustee shall accept its appointment unless, at
the time of such acceptance, such successor Trustee shall be qualified
and eligible under this Article.
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SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.
Any entity into which the Trustee may be merged or converted or
with which it may be consolidated, or any entity resulting from any
merger, conversion or consolidation to which the Trustee shall be a
party, or any entity succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such entity 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. In
case any Securities shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case
any Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any
predecessor Trustee or in the name of such successor Trustee, and in
all cases the certificate of authentication shall have the full force
which it is provided anywhere in the Securities or in this Indenture
that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall
be subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents 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 3.6, 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 the Trustee's certificate of authentication, such reference
shall be deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be an entity organized
and doing business under the laws of the United States of America, or
of any state or territory thereof or of the
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District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by Federal
or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of
said supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this
Section.
Any entity into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any entity resulting
from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any entity succeeding to all
or substantially all of the corporate trust business of an
Authenticating Agent shall be the successor Authenticating Agent
hereunder, provided such entity shall be otherwise eligible under this
Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving
written notice thereof to such Authenticating Agent and to the Company.
Upon receiving such a notice of resignation or upon such a termination,
or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee
may appoint a successor Authenticating Agent, which shall be acceptable
to the Company and shall give notice of such appointment in the manner
provided in Section 1.6 to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance hereunder shall become vested with
all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless eligible under
the provision of this Section.
The Company agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services under this Section,
and the Trustee shall be entitled to be reimbursed for such payment,
subject to the provisions of Section 6.7.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may
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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 referred to in the within
mentioned Indenture.
Dated: BANKERS TRUST COMPANY,
---------------------- as Trustee
By:
--------------------------------
As Authenticating Agent
Name:
Title:
By:
--------------------------------
Authorized Signatory
Name:
Title:
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee:
(a) quarterly, not more than 15 days after March 15, June 15,
September 15, and December 15 in each year, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the
Holders as of such dates, excluding from any such list names and
addresses received by the Trustee in its capacity as Securities
Registrar, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished, excluding from any such list
names and addresses received by the Trustee in its capacity as
Securities Registrar.
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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 receiving and holding the
same, agrees with the Company and the Trustee that neither the Company
nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of information as to the names
and addresses of the Holders made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee and Paying Agent.
(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) 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 Company will notify the Trustee when any Securities are
listed on any securities exchange.
(d) The Paying Agent shall comply with all withholding, backup
withholding, tax and information reporting requirements under the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
issued thereunder with respect to payments on, or with respect to, the
Securities.
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SECTION 7.4. Reports by Company.
The Company shall file or cause to be filed with the Trustee and
with the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the
manner provided in the Trust Indenture Act. In the case of information,
documents or reports required to be filed with the Commission pursuant
to Section 13(a) or Section 15(d) of the Exchange Act, the Company
shall file or cause the filing of such information documents or reports
with the Trustee within 15 days after the same is required to be filed
with the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on
Certain Terms.
The Company 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 Company or convey, transfer or lease
its properties and assets substantially as an entirety to the Company,
unless:
(1) If the Company 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 entity
formed by such consolidation or into which the Company is merged
or the Person that acquires by conveyance or transfer, or that
leases, the properties and assets of the Company substantially
as an entirety shall be an entity 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 Company to be performed or
observed;
(2) immediately after giving effect to such
transaction, no Event of Default, and no event that, after
notice or lapse of time, or both, would constitute an Event of
Default, shall have occurred and be continuing; and
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(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease
and any such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to
such transaction have been complied with and, in the case of a
transaction subject to this Section 8.1 but not requiring a
supplemental indenture under paragraph (1) of this Section 8.1,
an Officer's Certificate or Opinion of Counsel to the effect
that the surviving, resulting or successor entity is legally
bound by the Indenture and the Securities; and the Trustee,
subject to Section 6.1, may rely upon such Officers'
Certificates and Opinions of Counsel as conclusive evidence that
such transaction complies with this Section 8.1.
SECTION 8.2. Successor Company Substituted.
Upon any consolidation or merger by the Company with or into any
other Person, or any conveyance, transfer or lease by the Company of
its properties and assets substantially as an entirety to any Person in
accordance with Section 8.1, the successor entity formed by such
consolidation or into which the Company 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 Company
under this Indenture with the same effect as if such successor Person
had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities.
Such successor Person may cause to be executed, and may issue
either in its own name or in the name of the Company, any or all of the
Securities issuable hereunder that theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order
of such successor Person instead of the Company and subject to all the
terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver any Securities that
previously shall have been signed and delivered by the officers of the
Company to the Trustee for authentication pursuant to such provisions
and any Securities 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, sale, conveyance or
lease, such changes in phraseology and form may be made in the
Securities thereafter to be issued as may be appropriate.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to
time, may amend or waive any provision of this Indenture or 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 Company,
and the assumption by any such successor of the covenants of the
Company 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 Company; 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 facilitate the issuance of Securities of any series
in certificated or other definitive form; or
(5) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of the series specified) or to surrender any right or power
herein conferred upon the Company; or
(6) 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 Defaults 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
(7) 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
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(8) 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 (8) 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
(9) 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
(10) 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 Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders
of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security 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 thereon is payable, or impair
the right to institute suit for the enforcement of any such
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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, 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, that, in the case of the 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 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 of the
aggregate Liquidation Amount (as defined in the related Trust
Agreement) of such Capital Securities 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 3.8) unpaid interest (including 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 an 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 3.8) unpaid
interest (including any Additional Interest) thereon have been
paid in full.
A supplemental indenture that changes or eliminates any covenant
or other provision of this Indenture that has expressly been included
solely for the benefit of one or more particular series of Securities
or 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
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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 such corresponding series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Section 6.1) 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, 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.
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 may, and shall if
required by the Company, bear a notation in form approved by the
Company as to any matter provided for in such supplemental indenture.
If the Company shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Company, to any such
supplemental indenture may be prepared and
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executed by the Company 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 Company covenants and agrees for the benefit of each series
of Securities that it will duly and punctually pay the principal of
(and premium, if any) and interest (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 Company 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 Company in respect of the
Securities of that series and this Indenture may be served. The Company
initially appoints the Trustee, acting through its Corporate Trust
Office, as its agent for said purposes. The Company will give prompt
written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or
surrendered for any or all of such purposes, and may from time to time
rescind such designations; provided, however, that no such designation
or rescission shall in any manner relieve the Company of its obligation
to maintain an office or agency in each Place of Payment for Securities
of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation and any change in the
location of any such office or agency.
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SECTION 10.3. Money for Security Payments to be Held in
Trust.
If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before each
due date of the principal of (and premium, if any) or interest
(including 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 (and premium, if
any) or interest (including 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 Company shall have one or more Paying Agents, it
will, prior to 10:00 a.m., New York City time, on each due date of the
principal of (or premium, if any) or interest, including Additional
Interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest,
including Additional Interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal (and
premium, if any) or interest, including Additional Interest, and
(unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any, or interest (including 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 Company (or
any other obligor upon such Securities) in the making of any payment of
principal (and premium, if any) or interest (or 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
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(4) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent.
The Company may, at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
pay, or by Company Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Company or such Paying Agent, such sums
to be held by the Trustee upon the same trusts as those upon which such
sums were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company in trust for the payment of the principal of
(and premium, if any) or interest (including Additional Interest) on
any Security and remaining unclaimed for two years after such principal
(and premium, if any) or interest (including 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 Company Request to the Company, or (if then held by the
Company) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation
in the Borough of Manhattan, the City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 10.4. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company 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 of
the Company is in default in the performance, observance or fulfillment
of or compliance with any of the terms, provisions, covenants and
conditions of this Indenture, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof of which
they may have knowledge. For the purpose of this Section 10.4,
compliance shall be determined
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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 Company 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
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 Company 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 described
in clause (i) or (iii) of the definition of "Tax Event" in Section 1.1
hereof has occurred and is continuing in respect of such Issuer Trust,
the Company shall pay to such Issuer Trust (and its permitted
successors or assigns under the related Trust Agreement) for so long as
such Issuer Trust (or its permitted successor or assignee) is the
registered holder of the Outstanding Securities of such series, 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 due and payable by such Issuer Trust on the
related Capital Securities and Common Securities that at any time
remain outstanding in accordance with the terms thereof shall not be
reduced as a result of such Additional Taxes (the "Additional Sums").
Whenever in this Indenture or the Securities there is a reference in
any context to the payment of principal of or 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 express mention of the payment of Additional Sums (if applicable)
in any provisions 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
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interest pursuant to Section 3.12 or the Securities shall not defer the
payment of any Additional Sums that may be due and payable.
SECTION 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of Securities
of each series that it shall not (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 Company'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 Company 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 Company 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 Company (or securities convertible
into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension
Period or other event referred to below, (b) as a result of an exchange
or conversion of any class or series of the Company's capital stock (or
any capital stock of a Subsidiary of the Company) for any class or
series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
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 Company 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 Company shall not have taken reasonable steps to cure, (ii)
if the Securities of such series are held by an Issuer Trust, the
Company shall be in default with respect to its payment of any
obligations under the Guarantee relating to the Capital Securities
issued by such Issuer Trust, or (iii) the Company 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
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rescinded such notice, or such Extension Period, or any extension
thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a
series issued to 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 Company as provided under Section 8.2 may
succeed to the Company's ownership of such Common Securities, (ii) as
holder of such Common Securities, not to voluntarily terminate, windup
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 not to be
taxable as a corporation for United States Federal income tax purposes.
SECTION 10.8. Original Issue Discount.
On or before December 15 of each year during which any
Securities are outstanding, the Company shall furnish to each Paying
Agent such information as may be reasonably requested by each Paying
Agent in order that each Paying Agent may prepare the information which
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 amended. Such information shall include the amount of
original issue discount includible in income for each authorized
minimum denomination of principal amount at Stated Maturity of
outstanding Securities during such year.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities of any series as permitted or required
by any form of Security issued pursuant to this Indenture shall be made
in accordance with such form of Security and this Article; provided,
however, that, if any provision of any such form of Security shall
conflict with any provision of this Article, the provision of such form
of Security shall govern.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, not
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less than 30 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 Company 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,
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 Company in writing of the
Securities selected for partial redemption and the principal amount
thereof to be redeemed. For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the redemption
of Securities shall relate, in the case of any Security redeemed or to
be redeemed only in part, to the portion of the principal amount of
such Security 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 later than the thirtieth day, and not earlier than
the sixtieth day, 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.
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With respect to Securities of such 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, the
estimate of the Redemption Price provided pursuant to 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 (if such an estimate of the Redemption Price is
given, a subsequent notice shall be given as set forth above setting
forth the Redemption Price promptly following the calculation thereof);
(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 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;
(f) such other provisions as may be required in respect of
the terms of a particular series of Securities; and
(g) that the redemption is for a sinking fund, if such is
the case.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the
Company and shall 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 Company will deposit with the Trustee or with one or more
Paying Agents (or if the Company is acting as its own
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Paying Agent, the Company 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 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 Company 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 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
Company shall execute and the Trustee shall authenticate and deliver to
the Holder thereof, at the expense of the Company, a new Security or
Securities of 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.
If any Security called for redemption shall not be so paid under
surrender thereof for redemption, the principal of and premium, if any,
on such Security shall, until paid, bear interest from the Redemption
Date at the rate prescribed therefor in the Security.
SECTION 11.7. Right of Redemption of Securities Initially
Issued to an Issuer Trust.
In the case of the Securities of a series initially issued to an
Issuer Trust, except as otherwise specified as contemplated by Section
3.1, the Company, 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, an Investment Company Event or a Capital
Treatment Event, at any time
<PAGE> 92
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within 90 days following the occurrence and during the continuation of
such Tax Event, Investment Company Event or Capital Treatment Event, in
whole (but not in part), in each case at a Redemption Price specified
in such Security, together with accrued interest (including Additional
Interest) to 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.
ARTICLE XII
SINKING FUNDS
Except as may be provided in any supplemental or amended
indenture, no sinking fund shall be established or maintained for the
retirement of Securities of any series.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior
Indebtedness.
The Company covenants and agrees, and each Holder of a Security,
by its acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article, the
payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on each and all of the Securities
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 Company 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 Company 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, securities, by
set-off or otherwise) shall be made or agreed to be made on account of
the
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principal of (or premium, if any) or interest (including 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 (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to the Company, its creditors or its property, (ii)
any proceeding for the liquidation, dissolution or other winding up of
the Company, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings, (iii) any assignment by the
Company for the benefit of creditors or (iv) any other marshalling of
the assets of the Company (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 Company or any other entity 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), which 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.
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 Company
ranking on a parity with the Securities, shall be entitled to be paid
from the remaining assets of the Company the amounts at the time due
and owing on account of unpaid principal of (and premium, if any) and
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
Company 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 Company or any other entity
provided for by a plan of reorganization or readjustment the payment of
which is subordinate, at least to the extent provided
<PAGE> 94
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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 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 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 in full. In
the event of the failure of the Trustee or any Holder 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,
without limitation, 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 Company 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 Company, 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.
Nothing contained in this Article or elsewhere in this Indenture
or in any of the Securities shall prevent (a) the Company, at any time,
except during the pendency of 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 Additional Interest) on the Securities, or
(b) the application by the Trustee of any monies 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,
<PAGE> 95
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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.
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 (equally and ratably with the holders of all indebtedness of
the Company that by its express terms is subordinated to Senior
Indebtedness of the Company 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 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,
and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Securities or the
Trustee, shall, as among the Company, its creditors other than holders
of Senior Indebtedness, and the Holders of the Securities, be deemed to
be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the
Securities on the one hand and the holders of Senior Indebtedness on
the other hand. Nothing contained in this Article or elsewhere in this
Indenture or in the Securities is intended to or shall (a) impair, as
between the Company and the Holders of the Securities, the obligations
of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of (and premium, if any) and
interest (including any Additional Interest) on the Securities as and
when the same shall become due and payable in accordance with their
terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than their
<PAGE> 96
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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 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 his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate
the subordination provided in this Article and appoints the Trustee his
or her attorney-in-fact for any and all such purposes.
SECTION 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 Company or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company with
the terms, provisions and covenants of this Indenture, regardless of
any knowledge thereof that any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the immediately
preceding paragraph, the holders of Senior Indebtedness may, at any
time and from time to time, without the consent of or notice to the
Trustee or the Holders of the Securities of any series, without
incurring responsibility to such Holders of the Securities and without
impairing or releasing the subordination provided in this Article or
the obligations hereunder of such Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extent 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 Company and any other Person.
<PAGE> 97
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SECTION 13.8. Notice to Trustee.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would
prohibit the making of any payment 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 Trustee shall have received written
notice thereof from the Company 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 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). In the event that the Trustee determines
in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate
in any payment or distribution pursuant to this Article, 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, 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 Company
referred to in this Article, 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
<PAGE> 98
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of competent jurisdiction in which such Proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, conservator,
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 Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article.
SECTION 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 Company or to any other Person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue
of this Article or otherwise.
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 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.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder,
the term "Trustee" as used in this Article shall in such case (unless
the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee.
SECTION 13.13. Certain Conversions or Exchanges Deemed
Payment.
For purposes of this Article only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities of any
series shall not be deemed to constitute a
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payment or distribution on account of the principal of (or premium, if
any, on) or interest (including any Additional Interest) on such
Securities or on account of the purchase or other acquisition of such
Securities, and (b) the payment, issuance or delivery of cash, property
or securities (other than junior securities) upon conversion or
exchange of a Security of any series shall be deemed to constitute
payment on account of the principal of such security. For the purposes
of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company, and (ii) securities of the Company
that are subordinated in right of payment to all Senior Indebtedness
that may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article.
<PAGE> 100
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* * * *
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all
such counterparts shall together constitute but one and the same
instrument.
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.
Attest: STERLING FINANCIAL CORPORATION
--------------------
By:
------------------------------
Name:
Title:
Attest: BANKERS TRUST COMPANY, as
-------------------- Trustee
By:
------------------------------
Name:
Title:
<PAGE> 101
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ANNEX A
FORM OF RESTRICTED SECURITIES CERTIFICATE
RESTRICTED SECURITIES CERTIFICATE
(FOR TRANSFERS PURSUANT TO SECTION 3.6(b) OF
THE INDENTURE REFERRED TO BELOW)
[ ],
as Securities Registrar
[address]
Re: [Title of Securities] of Sterling Financial
Corporation (the "Securities")
Reference is made to the Junior Subordinated Indenture, dated as
of May __, 1997 (the "Indenture"), between Sterling Financial
Corporation, a Washington corporation, and Bankers Trust Company, as
Trustee. Terms used herein and defined in the Indenture or in
Regulation S, Rule 144A or Rule 144 under the U.S. Securities Act of
1933 (the "Securities Act") are used here as so defined.
This certificate relates to $ aggregate principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s).
CERTIFICATE No(s).
CURRENTLY IN GLOBAL FORM: Yes _____ No _____(check one)
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole
beneficial owner of the Specified Securities or (ii) it is acting on
behalf of all the beneficial owners of the Specified Securities and is
duly authorized by them to do so. Such beneficial owner or owners are
referred to herein collectively as the "Owner". If the Specified
Securities are represented by a Global Security, they are held through
a Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented
by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
<PAGE> 102
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The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in
the form of a Restricted Security. In connection with such transfer,
the Owner hereby certifies that, unless such transfer is being effected
pursuant to an effective registration statement under the Securities
Act, it is being effected in accordance with Rule 144A, Rule 904 of
Regulation S or Rule 144 under the Securities Act and all applicable
securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies that
(1) Rule 144A Transfers. If the transfer is being
effected in accordance with Rule 144A:
(A) the Specified Securities are being transferred to
a person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have
taken reasonable steps to ensure that the Transferee is aware
that the Owner may be relying on Rule 144A in connection with
the transfer; and
(2) Rule 904 Transfers. If the transfer is being
effected in accordance with Rule 904:
(A) the Owner is not a distributor of the Securities,
an affiliate of the Company or any such distributor or a person
acting in behalf of any of the foregoing;
(B) the offer of the Specified Securities was
not made to a person in the United States;
(C) either;
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and
any person acting on its behalf reasonably believed that
the Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated
by the Association of International Bond Dealers, or
another designated offshore securities market and neither
the Owner nor any person acting on
<PAGE> 103
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its behalf know that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts within the meaning of
Rule 902 of Regulation S have been made in the United
States by or on behalf of the Owner or any affiliate
thereof; and
(E) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
(3) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least two years (computed in accordance with paragraph (d) of
Rule 144) has elapsed since the date the Specified Securities
were acquired from the Company or from an affiliate (as such
term is defined in Rule 144), or such shorter period as Rule 144
may hereinafter require, of the Company, whichever is later, and
is being effected in accordance with the applicable amount,
manner of sale and notice requirements of paragraphs (e), (f)
and (h) of Rule 144;
(B) the transfer is occurring after a holding period by the
Owner of at least three years has elapsed since the date the
Specified Securities were acquired from the Company or from an
affiliate (as such term is defined in Rule 144) of the Company,
whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the
Company; or
(C) the Owner is a Qualified Institutional Buyer under Rule
144A or has acquired the Securities otherwise in accordance with
Sections (1), (2) or (3) hereof and is transferring the
Securities to an institutional accredited investor in a
transaction exempt from the requirements of the Securities Act.
This certificate and the statements contained herein are
made for your benefit and the benefit of the Company and the
Initial Purchasers (as defined in the Trust Agreement relating
to the Issuer Trust to which the Securities were initially
issued).
<PAGE> 104
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(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
Dated: ________________ By: ____________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person
signing on behalf of the Undersigned
must be stated.)
<PAGE> 1
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of May __, 1997 (this "Trust
Agreement"), among (i) STERLING FINANCIAL CORPORATION, a Washington corporation
(the "Depositor"), and (ii) BANKERS TRUST (DELAWARE), a Delaware banking
corporation (the "Trustee"). The Depositor and the Trustee hereby agree as
follows:
1. The trust created hereby (the "Trust") shall be known as "Sterling
Capital Trust I" in which name the Trustee, or the Depositor to the extent
provided herein, may engage in the transactions contemplated hereby, make and
execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers conveys and sets over to the
Trustee the sum of $10. The Trustee hereby acknowledges receipt of such amount
in trust from the Depositor, which amount shall constitute the initial trust
estate. The Trustee hereby declares that it will hold the trust estate in trust
for the Depositor. It is the intention of the parties hereto that the Trust
created hereby constitute a business trust under Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"), and
that this document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in accordance with the provisions of
the Business Trust Act.
3. The Depositor and the Trustee will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustee shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery of any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustee hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Preferred Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with the New York Stock Exchange or any other national
stock exchange or The Nasdaq National Market (each, an "Exchange") and execute
on behalf of the Trust one or more listing applications and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause the Preferred Securities to be listed
on any of the Exchanges; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the securities
or blue sky laws
<PAGE> 2
of such jurisdictions as the Depositor, on behalf of the Trust, may deem
necessary or desirable and (iv) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the Preferred Securities, among the Trust,
the Depositor and the several Underwriters named therein, substantially in the
form included as an exhibit to the 1933 Act Registration Statement. In
connection with the filings referred to above, the Depositor hereby constitutes
and appoints Harold B. Gilkey and Daniel G. Byrne, and each of them, as its true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or in the Depositor's name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to the 1933 Act Registration Statement and the 1934
Act Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, the Exchange and
administrators of state securities or blue sky laws, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as the Depositor might or could to in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their respective substitute or substitutes, shall do
or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be one (1) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Depositor which may increase or decrease the
number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon thirty (30) days' prior notice to the
Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.
STERLING FINANCIAL CORPORATION
as Depositor
By: ________________________________
Name:
Title:
BANKERS TRUST (DELAWARE),
as Trustee
By: ________________________________
Name:
Title:
3
<PAGE> 1
5/9/97
AMENDED AND RESTATED
TRUST AGREEMENT
among
STERLING FINANCIAL CORPORATION, as Depositor,
BANKERS TRUST COMPANY
as Property Trustee,
and
BANKERS TRUST (DELAWARE),
as Delaware Trustee
Dated as of May __, 1997
STERLING CAPITAL TRUST I
<PAGE> 2
STERLING CAPITAL TRUST I
Certain Sections of this Trust Agreement relating, to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement Act Section
Section
--------------- ---------------------------
<S> <C>
Section 310(a)(1).................. 8.7
(a)(2).................. 8.7
(a)(3).................. 8.9
(a)(4).................. 2.7(a)(ii)
(b)..................... 8.8, 10.10(b)
Section 311(a)..................... 8.13, 10.10(b)
(b)..................... 8.13, 10.10(b)
Section 312(a)..................... 10.10(b)
(b)..................... 10.10(b), (f)
(c)..................... 5.7
Section 313(a)..................... 8.15(a)
(a)(4).................. 10.10(c)
(b)..................... 8.15(c), 10.10(c)
(c)..................... 10.8, 10.10(c)
(d)..................... 10.10(c)
Section 314(a)..................... 8.16, 10.10(d)
(b)..................... Not Applicable
(c)(1).................. 8.17, 10.10(d), (e)
(c)(2).................. 8.17, 10.10(d), (e)
(c)(3).................. 8.17, 10.10(d), (e)
(e)..................... 8.17, 10.10(e)
Section 315(a)..................... 8.1(d)
(b)..................... 8.2
(c)..................... 8.1(c)
(d)..................... 8.1(d)
(e)..................... Not Applicable
Section 316(a)..................... Not Applicable
(a)(1)(A)............... Not Applicable
(a)(1)(B)............... Not Applicable
(a)(2).................. Not Applicable
(b)..................... 5.13
(c)..................... 6.7
Section 317(a)(1).................. Not Applicable
(a)(2).................. 8.14
(b)..................... 5.10
Section 318(a)..................... 10.10(a)
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINED TERMS
SECTION 1.1. Definitions............................ 2
ARTICLE II. CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name................................... 14
SECTION 2.2. Office of the Delaware Trustee;
Principal Place of Business.......... 14
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses.............. 14
SECTION 2.4. Issuance of Capital Securities......... 15
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of Junior
Subordinated Debentures.............. 15
SECTION 2.6. Declaration of Trust................... 16
SECTION 2.7. Authorization to Enter into Certain
Transactions......................... 16
SECTION 2.8. Assets of Trust........................ 20
SECTION 2.9. Title to Trust Property................ 20
ARTICLE III. PAYMENT ACCOUNT
SECTION 3.1. Payment Account........................ 20
ARTICLE IV. DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.......................... 21
SECTION 4.2. Redemption............................. 22
SECTION 4.3. Subordination of Common Securities..... 25
SECTION 4.4. Payment Procedures..................... 26
SECTION 4.5. Tax Returns and Reports................ 26
SECTION 4.6. Payment of Taxes, Duties, Etc.
of the Issuer Trust.................. 27
SECTION 4.7. Payments under Indenture or Pursuant
to Direct Actions.................... 27
SECTION 4.8. Liability of the Holder of Common
Securities........................... 27
ARTICLE V. TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership...................... 27
SECTION 5.2. The Trust Securities Certificates...... 27
SECTION 5.3. Execution and Delivery of Trust
Securities Certificates.............. 28
SECTION 5.4. Global Capital Security................ 28
SECTION 5.5. Registration of Transfer and Exchange
Generally; Certain Transfers and
Exchanges; Capital Securities
Certificates......................... 30
</TABLE>
- i -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates........ 32
SECTION 5.7. Persons Deemed Holders................. 32
SECTION 5.8. Access to List of Holders'
Names and Addresses.................... 32
SECTION 5.9. Maintenance of Office or Agency........ 33
SECTION 5.10. Appointment of Paying Agent............ 33
SECTION 5.11. Ownership of Common Securities
by Depositor......................... 34
SECTION 5.12. Notices to Clearing Agency............. 34
SECTION 5.13. Rights of Holders...................... 34
ARTICLE VI. ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting
Rights.............................. 37
SECTION 6.2. Notice of Meetings..................... 38
SECTION 6.3. Meetings of Holders.................... 38
SECTION 6.4. Voting Rights.......................... 39
SECTION 6.5. Proxies, etc........................... 39
SECTION 6.6. Holder Action by Written Consent....... 39
SECTION 6.7 Record Date for Voting and Other
Purposes............................. 40
SECTION 6.8. Acts of Holders........................ 40
SECTION 6.9. Inspection of Records.................. 41
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties
of the Property Trustee and
the Delaware Trustee................. 41
SECTION 7.2. Representations and Warranties of
Depositor............................ 43
ARTICLE VIII. THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.... 44
SECTION 8.2. Certain Notices........................ 47
SECTION 8.3. Certain Rights of Property Trustee..... 47
SECTION 8.4. Not Responsible for Recitals
or Issuance of Securities............ 49
SECTION 8.5. May Hold Securities.................... 49
SECTION 8.6. Compensation; Indemnity; Fees.......... 49
SECTION 8.7. Corporate Property Trustee Required;
Eligibility of Trustees and
Administrators....................... 51
SECTION 8.8. Conflicting Interests.................. 51
SECTION 8.9. Co-Trustees and Separate Trustee....... 52
SECTION 8.10. Resignation and Removal; Appointment
of Successor......................... 53
SECTION 8.11. Acceptance of Appointment by
Successor.............................. 55
</TABLE>
- ii -
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.12. Merger, Conversion, Consolidation or
Succession to Business............... 55
SECTION 8.13. Preferential Collection of Claims
Against Depositor or Issuer Trust.... 56
SECTION 8.14. Trustee May File Proofs of Claims...... 56
SECTION 8.15. Reports by Property Trustee............ 57
SECTION 8.16. Reports to the Property Trustee........ 57
SECTION 8.17. Evidence of Compliance with Conditions
Precedent............................ 58
SECTION 8.18. Number of Issuer Trustees.............. 58
SECTION 8.19. Delegation of Power.................... 58
SECTION 8.20. Appointment of Administrators.......... 58
ARTICLE IX. DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date....... 59
SECTION 9.2. Early Termination...................... 59
SECTION 9.3. Dissolution............................ 60
SECTION 9.4. Liquidation............................ 60
SECTION 9.5. Mergers, Consolidations, Amalgamations
or Replacements of the Issuer Trust.. 62
ARTICLE X. MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders........ 63
SECTION 10.2. Amendment.............................. 64
SECTION 10.3. Separability........................... 65
SECTION 10.4. Governing Law.......................... 65
SECTION 10.5. Payments Due on Non-Business Day....... 65
SECTION 10.6. Successors............................. 66
SECTION 10.7. Headings............................... 66
SECTION 10.8. Reports, Notices and Demands........... 66
SECTION 10.9. Agreement Not to Petition.............. 67
SECTION 10.10. Trust Indenture Act; Conflict with
Trust Indenture Act.................. 67
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture.............. 69
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depositary Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Capital Securities Certificate
</TABLE>
- iii -
<PAGE> 6
AGREEMENT
Amended and Restated Trust Agreement, dated as of February 5,
1997, among (i) Sterling Financial Corporation, a Washington
corporation (including any successors or assigns, the "Depositor"),
(ii) Bankers Trust Company, a New York banking corporation, as property
trustee, (in such capacity, the "Property Trustee" and, in its separate
corporate capacity and not in its capacity as Property Trustee, the
"Bank"), and (iii) Bankers Trust (Delaware), a Delaware banking
corporation, as Delaware trustee (the "Delaware Trustee") (the Property
Trustee and the Delaware Trustee are referred to collectively herein as
the "Issuer Trustees") and (iv) the several Holders, as hereinafter
defined.
WITNESSETH
WHEREAS, the Depositor, the Property Trustee, and the Delaware
Trustee have heretofore duly declared and established a business trust
pursuant to the Delaware Business Trust Act by the entering into a
certain Trust Agreement, dated as of January 21, 1997 (the "Original
Trust Agreement"), and by the execution and filing by the Delaware
Trustee with the Secretary of State of the State of Delaware of the
Certificate of Trust, filed on January 21, 1997 (the "Certificate of
Trust"), attached as Exhibit A; and
WHEREAS, the Depositor and the Delaware Trustee 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 Underwriting Agreement, (iii) the acquisition by the
Issuer Trust from the Depositor of all of the right, title and interest
in the Junior Subordinated Debentures, and (iv) the appointment of the
Administrators.
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each party, for the benefit of the other parties and for
the benefit of the Holders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees, intending to be legally
bound, as follows:
<PAGE> 7
- 2 -
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article 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 as in effect at the time of computation;
(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 Trust Agreement;
(f) The words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to
any particular Article, Section or other subdivision; and
(g) all references to the date the Capital Securities were
originally issued shall refer to the date the Capital Securities were
originally issued.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" 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.
<PAGE> 8
- 3 -
"Administrators" means each Person appointed in accordance with
Section 8.20 solely in such Person's capacity as Administrator of the
Issuer Trust heretofore formed and continued hereunder and not in such
Person's individual capacity, or any successor Administrator appointed
as herein provided; with the initial Administrators being Harold B.
Gilkey and Daniel G. Byrne.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Capital Security or beneficial interest
therein, the rules and procedures of the Depositary for such Capital
Security, in each case to the extent applicable to such transaction and
as in effect from time to time.
"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
<PAGE> 9
- 4 -
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.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly
adopted by the Depositor's Board of Directors, or such committee of the
Board of Directors or officers of the Depositor to which authority to
act on behalf of the Board of Directors has been delegated, and to be
in full force and effect on the date of such certification, and
delivered to the Issuer Trustees.
"Business Day" means a day other than (a) a Saturday or Sunday,
(b) a day on which banking institutions in the City of New York, New
York or in the City of Spokane, Washington 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 Delaware Trustee's
Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as
Exhibit D.
"Capital Security" means an aggregate Liquidation Amount of
$40,000,000 of the Issuer Trust's ____% cumulative capital securities,
constituting a preferred undivided beneficial interest in the assets of
the Issuer Trust, having a Liquidation Amount of $25 and having the
rights provided therefor in this Trust Agreement, including the right
to receive Distributions and a Liquidation Distribution as provided
herein.
"Capital Treatment Event" means, in respect of any Issuer Trust,
the reasonable determination by the Depositor 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
<PAGE> 10
- 5 -
subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision
interpreting or applying such laws 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 Depositor will not be entitled to treat an amount equal
to the Liquidation Amount of the Capital Securities or any substantial
portion thereof as "Tier 1 Capital" (or the then equivalent thereof)
for purposes of the risk-based capital adequacy guidelines of the Board
of Governors of the Federal Reserve System, as then in effect,
provided, however, that it shall not be deemed to be a Capital
Treatment Event if the Depositor is not entitled to treat the aggregate
amount of the Liquidation Amount of such Capital Securities as "Tier 1
Capital" due to the restriction imposed by the Federal Reserve that no
more than 25% of Tier 1 Capital can consist of perpetual preferred
stock.
"Certificate Depositary Agreement" means the agreement among the
Issuer Trust, the Depositor and the Depository Trust Company ("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.
"Certificate of Trust" has the meaning specified in the preamble
to this Trust Agreement.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended. DTC shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time
a Clearing Agency effects book-entry transfers and pledges of
securities deposited with the Clearing Agency.
"Closing Date" means the Time of Delivery for the Capital
Securities, which date is also the date of execution and delivery of
this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at
any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
<PAGE> 11
- 6 -
"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 $25 and
having the rights provided therefor in this Trust Agreement, including
the right to receive Distributions and a Liquidation Distribution as
provided herein.
"Corporate Trust Office" means the principal office of the
Property Trustee located in the City of New York, New York, which at
the time of the execution of this Trust Agreement is located at Four
Albany Street, New York, New York 10006; Attention: Corporate Trust and
Agency Group - Corporate Market Services.
"Debenture Event of Default" means an "Event of Default" as
defined in 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 Bankers Trust Company, a New York
banking corporation and any successor.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. 3801, et seq., as it may be amended from
time to time.
"Delaware Trustee" means the corporation identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely in
its capacity as Delaware Trustee of the Issuer Trust continued
hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor trustee appointed as herein
provided.
"Depositary" means the Depository Trust Company or any successor
thereto.
"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.
<PAGE> 12
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"Early Termination Event" has the meaning specified in Section
9.2.
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the 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 a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause (b)
or (c) above) and continuation of such default or breach for a period
of 60 days after there has been given, by registered or certified mail,
to the Issuer Trustees and 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 any Bankruptcy Event with respect to the
Property Trustee or all or substantially all of its property if a
successor Property Trustee has not been appointed within a period of 90
days thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor statute thereto, in each case as amended
from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Global Capital Securities Certificate" means a Capital
Securities Certificate evidencing ownership of Global Capital
Securities.
"Global 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.
<PAGE> 13
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"Guarantee Agreement" means the Guarantee Agreement executed and
delivered by the Depositor and Bankers Trust Company, as 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 is registered in the Securities Register; any such Person
shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Indenture" means the Junior Subordinated Indenture, dated as of
May __, 1997, between the Depositor and the Debenture Trustee (as
amended or supplemented from time to time) relating to the issuance of
the Junior Subordinated Debentures.
"Investment Company Act" means the Investment Company Act of
1940, as amended.
"Investment Company Event" means the receipt by the Issuer Trust
of an Opinion of Counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or
a written change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, there is more
than an insubstantial risk that the Issuer Trust is or will be
considered an "investment company" that is required to be registered
under the Investment Company Act, which change or prospective change
becomes effective or would become effective, as the case may be, on or
after the date of the issuance of the Capital Securities.
"Issuer Trust" means Sterling Capital Trust I.
"Issuer Trustees" means, collectively, the Property Trustee and
the Delaware Trustee.
"Junior Subordinated Debentures" means the aggregate principal
amount of the Depositor's ____% junior subordinated deferrable interest
debentures issued pursuant to the Indenture, due September 30, 2027,
which date may be shortened once at any time by the Company to any date
not earlier than June ___, 2002, subject to the Company having received
prior approval of the Federal Reserve Board of Governors of the Federal
Reserve System (the "Federal Reserve") if then required under
applicable capital guidelines or policies of the Federal Reserve (such
date, as it may be shortened, the "Stated Maturity").
<PAGE> 14
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"Lien" means any lien, pledge, charge, encumbrance, mortgage,
deed of trust, adverse ownership interest, hypothecation, assignment,
security interest or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated
to the Common Securities and to the Capital Securities based upon the
relative Liquidation Amounts of such classes and (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of Trust
Securities in connection with a dissolution or liquidation of the
Issuer Trust, Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities of the Holder
to whom such Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in
connection with a dissolution and liquidation 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" or
"Majority in Liquidation Amount of the Common Securities" means, except
as provided by the Trust Indenture Act, Capital Securities or Common
Securities, as the case may be, representing more than 50% of the
aggregate Liquidation Amount of all then Outstanding Capital Securities
or Common Securities, as the case may be.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board and Chief Executive Officer, President or a Vice
President, and by the Chief Financial Officer, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the
Depositor, and delivered to the party provided herein. 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;
<PAGE> 15
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(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 each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for or an employee of the Depositor or any Affiliate of the
Depositor.
"Original Trust Agreement" has the meaning specified in the
preamble to this Trust Agreement.
"Outstanding," 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 for the Holders of such Capital Securities,
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 which have been paid or in exchange for or
in lieu of which other Trust Securities have been executed and
delivered pursuant to Sections 5.4, 5.5, 5.6 and 5.13; 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, any Administrator or any Affiliate of the Depositor 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 waiver, only Capital Securities that such Issuer Trustee or
such Administrator, as the case may be, knows to be so owned shall be
so disregarded and (b) the foregoing shall not apply at any time when
all of the outstanding Capital Securities are owned by the Depositor,
one or more of the Issuer Trustees, one or more of the Administrators
<PAGE> 16
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and/or any such Affiliate. Capital Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrators 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 Global
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 Property
Trustee.
"Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Property Trustee with the
Property Trustee in its trust department for the benefit of the Holders
in which all amounts paid in respect of the Junior Subordinated
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 organization or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"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 Issuer Trust formed and continued hereunder
and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein
provided.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, the date fixed for such redemption by or pursuant to this
Trust Agreement; provided that each Junior Subordinated Debenture
Redemption Date and the Stated Maturity of the Junior Subordinated
Debentures shall be a Redemption Date for a Like Amount of Trust
Securities, including but not limited to any date of redemption
pursuant to the occurrence of any Special Event.
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"Redemption Price" means with respect to a redemption of any
Trust Security, the Liquidation Amount of such Trust Security, together
with accumulated but unpaid Distributions to but excluding the date
fixed for redemption.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer" when used with respect to the Property
Trustee means any officer assigned to the Corporate Trust Office,
including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other
officer of the Property Trustee customarily performing functions
similar to those performed by any of the above designated officers and
having direct responsibility for the administration of the Indenture,
and also, 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.
"Securities Act" means the Securities Act of 1933, as amended,
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.
"Special Event" means any Tax Event, Capital Treatment Event or
Investment Company Event.
"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.
"Tax Event" means the receipt by the 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 prospective
change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or
therein, or as a result of any official or administrative pronouncement
or action or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which
pronouncement, action or
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decision is announced on or after the date of issuance of the Capital
Securities, there is more than an insubstantial risk that (i) the
Issuer Trust is, or will be within 90 days of the delivery of such
Opinion of Counsel, subject to United States Federal income tax with
respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Depositor on the Junior
Subordinated Debentures is not, or within 90 days of the delivery of
such Opinion of Counsel will not be, deductible by the Depositor, in
whole or in part, for United States federal income tax purposes, or
(iii) the Issuer Trust is, or will be within 90 days of the delivery of
such Opinion of Counsel, subject to more than a de minimis amount of
other taxes, duties or other governmental changes.
"Time of Delivery" means 10:00 a.m. Eastern Standard Time with
respect to the Capital Securities or Common Securities, on the third
Business Day (unless postponed in accordance with the provisions of
Section 9 of the Underwriting Agreement) following the date of
execution of the Underwriting Agreement, or such other time not later
than ten Business Days after such date as shall be agreed upon by the
Underwriters, the Issuer Trust and the Company.
"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 hereto, and (ii) for all purposes of this Amended and Restated
Trust Agreement any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of
and govern this Amended and Restated Trust Agreement and any
modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 or
any successor statute, in each case as amended from time to time.
"Trust Property" means (a) the Junior Subordinated 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 Securities Certificate" means any one of the Common
Securities Certificates or the Capital Securities Certificates.
"Trust Security" means any one of the Common Securities or the
Capital Securities.
"Underwriter" has the meaning specified in the Underwriting
Agreement.
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"Underwriting Agreement" means the Underwriting Agreement, dated
as of May __, 1997, among the Issuer Trust, the Depositor and the
Underwriter, as the same may be amended from time to time.
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.
The Issuer Trust continued hereby shall be known as "Sterling
Capital Trust I", as such name may be modified from time to time by the
Administrators following written notice to the Holders of Trust
Securities and the other Issuer Trustees, in which name the
Administrators and the Issuer Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments
on behalf of the Issuer Trust and sue and be sued.
SECTION 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is
Bankers Trust (Delaware), 1001 Jefferson Street, Suite 550, Wilmington,
DE 19801, Attention: Lisa Wilkins, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to
the Holders and the Depositor. The principal executive office of the
Issuer Trust is in care of Sterling Financial Corporation, 111 North
Wall Street, Spokane, Washington 99201, Attention: Office of the Senior
Vice President of Finance.
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses.
The Property Trustee acknowledges receipt in trust from the
Depositor in connection with this Trust Agreement of the sum of $10,
which constitutes the initial Trust Property. The Depositor shall pay
all 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 reasonable Issuer Trustee.
The Depositor shall make no claim upon the Trust Property for the
payment of such expenses.
SECTION 2.4. Issuance of the Capital Securities.
On May __, 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 Underwriting Agreement.
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Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrator, on behalf of the Issuer Trust, shall
manually execute in accordance with Section 5.3 and the Property
Trustee shall authenticate in accordance with Section 5.3 and deliver
to the Underwriter, Capital Securities Certificates, registered in the
names requested by the Underwriter, in an aggregate amount of 1,600,000
Capital Securities having an aggregate Liquidation Amount of
$40,000,000, against receipt of the aggregate purchase price of such
Capital Securities of $40,000,000, by the Property Trustee.
SECTION 2.5. Issuance of the Common Securities; Subscription and
Purchase of Junior Subordinated Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrator, on behalf of the Issuer Trust, shall
execute or cause to be executed in accordance with Section 5.2 and the
Property Trustee shall deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate
amount of 49,485 Common Securities having an aggregate Liquidation
Amount of $1,237,125 against receipt of the aggregate purchase price of
such Common Securities of $1,237,125 by the Property Trustee.
Contemporaneously with the executions, and deliveries of Common
Securities Certificates and any Capital Securities Certificates, an
Administrator, on behalf of the Issuer Trust, shall subscribe for and
purchase from the Depositor corresponding amounts of Junior
Subordinated Debentures, registered in the name of the Property Trustee
and having an aggregate principal amount equal to $41,237,125; and, in
satisfaction of the purchase price for such Junior Subordinated
Debentures, the Property Trustee, on behalf of the Issuer Trust, shall
deliver to the Depositor the sum of $41,237,125 and receive on behalf
of the Issuer Trust the Junior Subordinated Debentures.
SECTION 2.6. Declaration of Trust.
The exclusive purposes and functions of the Issuer Trust are to
(a) issue and sell Trust Securities and use the proceeds from such sale
to acquire the Junior Subordinated Debentures, and (b) engage in only
those other 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 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 Depositor hereby appoints the
Administrators, with such Administrators having all rights, powers and
duties set forth herein with respect to accomplishing the purposes of
the Issuer Trust, and the Administrators hereby accept such
appointment, provided, however, that it is the intent of the
<PAGE> 21
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parties hereto that such Administrators shall not be trustees or
fiduciaries with respect to the Issuer Trust and this Agreement shall
be construed in a manner consistent with such intent. The Property
Trustee shall have the right and power to perform those duties assigned
to the Administrators. 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
Administrators set forth herein. 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 2.7. Authorization to Enter into Certain Transactions.
(a) The Issuer Trustees and the Administrators 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 and in accordance with the following provisions (i), (ii)
and (iii), the Issuer Trustees and the Administrators shall act as
follows:
(i) Each Administrator shall:
(A) comply with the Underwriting Agreement regarding the
issuance and sale of the Trust Securities;
(B) assist in compliance with the Securities Act,
applicable state securities or blue sky laws, and the Trust
Indenture Act;
(C) assist in the listing of the Capital Securities upon
such securities exchange or exchanges or upon the Nasdaq
National Market as shall be determined by the Depositor, with
the registration of the Capital Securities under the Exchange
Act, if required, and the preparation and filing of all periodic
and other reports and other documents pursuant to the foregoing;
(D) execute and deliver an application for a taxpayer
identification number for the Issuer Trust; and
(E) assist with the preparation of a registration statement
and a prospectus 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 series of transactions subject to the
registration requirements of the Securities Act.
<PAGE> 22
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(F) take any action incidental to the foregoing as
necessary or advisable to give effect to the terms of this Trust
Agreement.
(ii) The Property Trustee shall have the power and authority to
act on behalf of the Issuer Trust with respect to the following
matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Junior Subordinated Debentures;
(C) the receipt and collection of interest, principal and
any other payments made in respect of the Junior Subordinated
Debentures in the Payment Account;
(D) the distribution of amounts owed to the Holders in
respect of the Trust Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Junior Subordinated Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Junior Subordinated
Debentures to the Holders in accordance with this Trust
Agreement;
(G) the distribution of the Trust Property in accordance
with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Issuer Trust
and the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware; and
(I) after an Event of Default (other than under paragraph
(b), (c), (d), or (f) of the definition of such term if such
Event of Default is by or with respect to the Property Trustee),
comply with the provisions of this Trust Agreement and take any
action to give effect to the terms of this Trust Agreement and
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); provided, however, that nothing in
this Section 2.7(a)(ii) shall require the Property Trustee to
take any action that is not otherwise required in this Trust
Agreement.
<PAGE> 23
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(b) So long as this Trust Agreement remains in effect, the
Issuer Trust (or the Issuer Trustees or Administrators 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, neither the Issuer Trustees nor the Administrators shall
(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 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 Property Trustee 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.
(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, and the
execution and delivery of, a registration statement, and a
prospectus 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 subject to the registration requirements
of the Securities Act;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part
of the Capital Securities and the determination of any and all
such acts, other than actions 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;
<PAGE> 24
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(iii) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the
sale of the Capital Securities;
(iv) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities; and
(v) compliance with the listing requirements of the Capital
Securities upon such securities exchange or exchanges, or upon
the Nasdaq National Market, as shall be determined by the
Depositor, the registration of the Capital Securities under the
Exchange Act, if required, and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing.
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Property Trustee 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 for the United States Federal
income tax purposes and so that the Junior Subordinated Debentures will
be treated as indebtedness of the Depositor for United States income
tax purposes. In this connection, the Property Trustee and the Holders
of Common Securities are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this
Trust Agreement, that the Property Trustee and Holders of Common
Securities determine in their discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect in
any material respect the interests of the holders of the Outstanding
Capital Securities. In no event shall the Administrators or 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
regulations or in the interpretation thereof.
SECTION 2.8. Assets of Trust.
The assets of the Issuer Trust shall consist solely of the Trust
Property.
SECTION 2.9. 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 for the benefit of the Issuer
Trust and the Holders in accordance with this Trust Agreement.
<PAGE> 25
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ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. 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 Junior Subordinated
Debentures. Amounts held in the Payment Account shall not be invested
by the Property Trustee pending distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial
interests in the Trust Property, and Distributions (including
Distributions of Additional Amounts) will be made on the Trust
Securities at the rate and on the dates that payments of interest
(including payments of Additional Interest, as defined in the
Indenture) are made on the Junior Subordinated Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be
cumulative and will accumulate whether or not there are funds of
the Issuer Trust available for the payment of Distributions.
Distributions shall accumulate from May __, 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 quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year,
commencing on September 30, 1997. If any date on which a
Distribution is otherwise payable on the Trust
<PAGE> 26
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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 (without any interest or other payment in respect
of any such delay), 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"). The amount of each
Distribution shall include amounts accrued through such
applicable Distribution Date.
(ii) The Trust Securities shall be entitled to
Distributions payable at a rate of ____% 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 four. The amount of Distributions payable
for any period shall include any Additional Amounts in respect
of such period.
(iii) So long as no Debenture Event of Default has occurred
and is continuing, the Depositor has the right under the
Indenture to defer the payment of interest on the Junior
Subordinated Debentures at any time and from time to time for a
period not exceeding 20 consecutive quarterly periods (an
"Extension Period"), provided that no Extension Period may
extend beyond September 30, 2027. As a consequence of any such
deferral, quarterly Distributions on the Trust Securities by the
Trust will also be deferred (and the amount of Distributions to
which Holders of the Trust Securities are entitled will
accumulate additional Distributions thereon at the rate per
annum of ____% per annum, compounded quarterly) from the
relevant payment date for such Distributions, 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. Additional
Distributions payable for each full Distribution period will be
computed by dividing the rate per annum by four (4). The term
"Distributions" as used in Section 4.1 shall include any such
additional Distributions provided pursuant to this Section
4.1(a)(iii).
(iv) 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.
<PAGE> 27
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(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 15th day of March, June, September or December (whether
or not a Business Day).
SECTION 4.2. Redemption.
(a) On each Junior Subordinated Debenture Redemption Date and on
the Stated Maturity of the Junior Subordinated 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 pursuant
to 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, a further notice shall be sent of the
actual Redemption Price on the date, or as soon as practicable
thereafter, that notice of such actual Redemption Price is
received pursuant to the Indenture);
(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 total 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 said date, except as provided in Section 4.2(d)
below; and
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(vi) the place or places where Trust Securities are to be
surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities shall use
"CUSIP" numbers, and the Property Trustee shall indicate the "CUSIP"
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 material.
(c) The Trust Securities redeemed on each Redemption Date shall
be redeemed at the Redemption Price with the applicable proceeds from
the contemporaneous redemption of Junior Subordinated 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 Capital Securities held in global form,
irrevocably deposit with the Clearing Agency for such 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 held in global form, the Property Trustee,
subject to Section 4.2(c), will irrevocably deposit with the Paying
Agent, to the extent available therefor, funds sufficient to pay the
applicable Redemption Price and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the Holder of
the Capital Securities 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 Register for the Trust Securities on the relevant
record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then,
upon the date of such deposit, all rights of 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 applicable
Redemption Price is payable is not a Business Day, then payment of
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the applicable Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that,
if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day, in each case, with
the same force and effect as if made on such date. In the event that
payment of the 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 applicable Redemption Price is
actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the applicable
Redemption Price.
(e) Subject to Section 4.3(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the
particular Capital Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Property Trustee from
the Outstanding Capital Securities not previously called for redemption
in such a manner as the Property Trustee shall deem fair and
appropriate.
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) 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 Securities based on the Liquidation Amount
of such Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Event of Default resulting
from a Debenture Event of Default 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 Amounts) 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 Amounts) 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
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payment in full in cash of all Distributions (including any Additional
Amounts) on, or the Redemption Price of, Capital Securities then due
and payable. The existence of an Event of Default does not entitle the
Holders of Capital Securities to accelerate the maturity thereof.
(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 4.4. Payment Procedures.
Payments of Distributions (including any Additional 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, which will credit the relevant
accounts on the applicable Distribution Dates. Payments of
Distributions to Holders of $1,000,000 or more in aggregate Liquidation
Amount of Capital Securities may be made by wire transfer of
immediately available funds upon written request of such Holder of
Capital Securities to the Securities Registrar not later than 15
calendar days prior to the date on which the Distribution is payable.
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 the Common Securities.
SECTION 4.5. Tax Returns and Reports.
The Administrators 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 Administrators
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 (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
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Administrators 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.
On or before December 15 of each year during which any Capital
Securities are outstanding, the Administrators shall furnish to the
Paying Agent such information as may be reasonably requested by the
Property Trustee in order that the Property Trustee may prepare the
information which 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 amended. Such information shall
include the amount of original issue discount includible in income for
each outstanding Capital Security during such year.
SECTION 4.6. Payment of Taxes; Duties, Etc. of the Issuer Trust.
Upon receipt under the Junior Subordinated 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.
SECTION 4.7. 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.
SECTION 4.8. Liability of the Holder of Common Securities.
The Holder of Common Securities shall be liable for the debts
and obligations of the Issuer Trust as set forth in Section 6.7 of the
Indenture regarding allocation of expenses.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the formation 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
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Securities are outstanding, the Depositor shall be the sole beneficial
owner of the Issuer Trust.
SECTION 5.2. The Trust Securities Certificates.
(a) The Trust Securities Certificates shall be executed on
behalf of the Issuer Trust by manual or facsimile signature of at least
one Administrator except as provided in Section 5.3. 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 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 fully
registered Global Capital Securities Certificates which will be
deposited with or on behalf of the Depositary and registered in the
name of the Depositary's nominee. Unless and until it is exchangeable
in whole or in part for the Capital Securities in definitive form, a
global security 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 or by
the Depositary or any such nominee to a successor of such Depositary or
a nominee of such successor.
(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 5.3. Execution and Delivery of Trust Securities
Certificates.
At the Time of Delivery, the Administrators 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 the Property Trustee and upon such delivery the
Property Trustee shall authenticate such Trust Securities Certificates
and deliver such Trust Securities Certificates upon the written order
of the Trust, executed by the Administrators thereof, without further
corporate action by the Trust, in authorized denominations.
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SECTION 5.4. Global Capital Security.
(a) Any Global Capital Security issued under this Trust
Agreement shall be registered in the name of the nominee of the
Clearing Agency and delivered to such custodian therefor, and such
Global Capital Security shall constitute a single Capital Security for
all purposes of this Trust Agreement.
(b) Notwithstanding any other provision in this Trust Agreement,
a Global Capital Security may not be exchanged in whole or in part for
Capital Securities registered, and no transfer of the Global Capital
Security in whole or in part may be registered, in the name of any
Person other than the Clearing Agency for such Global Capital Security,
or its nominee thereof unless (i) such Clearing Agency advises the
Property Trustee in writing that such Clearing Agency is no longer
willing or able to properly discharge its responsibilities as Clearing
Agency with respect to such Global Capital Security, and the Depositor
is unable to locate a qualified successor, (ii) the Issuer Trust at its
option advises the Depositary in writing that it elects to terminate
the book-entry system through the Clearing Agency, or (iii) there shall
have occurred and be continuing an Event of Default.
(c) If a Capital Security is to be exchanged in whole or in part
for a beneficial interest in a Global Capital Security, then either (i)
such Global Capital Security shall be so surrendered for exchange or
cancellation as provided in this Article V or (ii) the Liquidation
Amount thereof shall be reduced or increased by an amount equal to the
portion thereof to be so exchanged or cancelled, or equal to the
Liquidation Amount of such other Capital Security to be so exchanged
for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Security Registrar,
whereupon the Property Trustee, in accordance with the Applicable
Procedures, shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records. Upon
any such surrender or adjustment of a Global Capital Security by the
Clearing Agency, accompanied by registration instructions, the Property
Trustee shall, subject to Section 5.4(b) and as otherwise provided in
this Article V, authenticate and deliver any Capital Securities
issuable in exchange for such Global Capital Security (or any portion
thereof) in accordance with the instructions of the Clearing Agency.
The Property Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) Every Capital Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Capital Security or any portion thereof, whether pursuant to this
Article V or Article IV or otherwise, shall be
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authenticated and delivered in the form of, and shall be, a Global
Capital Security, unless such Global Capital Security is registered in
the name of a Person other than the Clearing Agency for such Global
Capital Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as the registered owner
of a Global Capital Security, shall be considered the Holder of the
Capital Securities represented by such Global Capital Security for all
purposes under this Trust Agreement and the Capital Securities, and
owners of beneficial interests in such Global Capital Security shall
hold such interests pursuant to the Applicable Procedures and, except
as otherwise provided herein, shall not be entitled to receive physical
delivery of any such Capital Securities in definitive form and shall
not be considered the Holders thereof under this Trust Agreement.
Accordingly, any such owner's beneficial interest in the Global Capital
Security shall be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the Clearing
Agency or its nominee. Neither the Property Trustee, the Securities
Registrar nor the Depositor shall have any liability in respect of any
transfers effected by the Clearing Agency.
(f) The rights of owners of beneficial interests in a Global
Capital Security shall be exercised only through the Clearing Agency
and shall be limited to those established by law and agreements between
such owners and the Clearing Agency.
SECTION 5.5. Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Capital Securities Certificates.
(a) The Property Trustee shall keep or cause to be kept at its
Corporate Trust Office a register or registers for the purpose of
registering Capital Securities Certificates and transfers and exchanges
of Capital Securities Certificates in which the registrar and transfer
agent with respect to the Capital Securities (the "Securities
Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Capital Securities
Certificates and Common Securities Certificates (subject to Section
5.11 in the case of Common Securities Certificates) and registration of
transfers and exchanges of Capital Securities Certificates as herein
provided. Such register is herein sometimes referred to as the
"Securities Register." The Property Trustee is hereby appointed
"Securities Registrar" for the purpose of registering Capital
Securities and transfers of Capital Securities as herein provided.
Upon surrender for registration of transfer of any Capital
Security at the offices or agencies of the Property Trustee designated
for that purpose, the Depositor shall execute, and authenticate and
deliver, in the name of the designated transferee
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or transferees, one or more new Capital Securities of the same series
of any authorized denominations of like tenor and aggregate principal
amount and bearing such legends as may be required by this Trust
Agreement.
At the option of the Holder, Capital Securities may be exchanged
for other Capital Securities of any authorized denominations, of like
tenor and aggregate Liquidation Amount and bearing such legends as may
be required by this Trust Agreement, upon surrender of the Capital
Securities to be exchanged at such office or agency. Whenever any
securities are so surrendered for exchange, the Property Trustee shall
execute and authenticate and deliver the Capital Securities that the
Holder making the exchange is entitled to receive.
All Capital Securities issued upon any transfer or exchange of
Capital Securities shall be the valid obligations of the Issuer Trust,
evidencing the same debt, and entitled to the same benefits under this
Trust Agreement, as the Capital Securities surrendered upon such
transfer or exchange.
Every Capital Security presented or surrendered for transfer or
exchange shall (if so required by the Property Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Property Trustee and the Securities Registrar, duly
executed by the Holder thereof or such Holder's attorney duly
authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Capital Securities, but the Property Trustee may require
payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange
of Capital Securities.
Neither the Issuer Trust nor the Property Trustee shall be
required, pursuant to the provisions of this Section, (i) to issue,
register the transfer of or exchange any Capital Security during a
period beginning at the opening of business 15 days before the day of
selection for redemption of 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.
(b) Certain Transfers and Exchanges. Trust Securities may only
be transferred, in whole or in part, in accordance with the terms and
conditions set forth in this Trust Agreement. Any transfer or purported
transfer of any Trust Security not made in accordance with this Trust
Agreement shall be null and void.
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(i) Non Global Security to Non Global Security. A Trust
Security that is not a Global Capital Security may be
transferred, in whole or in part, to a Person who takes delivery
in the form of another Trust Security that is not a Global
Security as provided in Section 5.5(a).
(ii) Free Transferability. Subject to this Section 5.5,
Capital Securities shall be freely transferable.
(iii) Exchanges Between Global Capital Security and
Non-Global Capital Security. A beneficial interest in a Global
Capital Security may be exchanged for a Capital Security that is
not a Global Capital Security as provided in Section 5.4.
SECTION 5.6. 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, loss or
theft of any Trust Securities Certificate and (b) there shall be
delivered to the Securities Registrar and the Administrators 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
Administrators, or any one of them, on behalf of the Issuer Trust shall
execute and make available for delivery, and the Property Trustee shall
authenticate, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate
under this Section, the Administrators or the Securities Registrar may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any
duplicate Trust Securities Certificate issued pursuant to this Section
shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Issuer Trust corresponding to that
evidenced by the lost, stolen or destroyed Trust Certificate, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Securities Certificate shall be found at any time.
SECTION 5.7. Persons Deemed Holders.
The Issuer Trustees, the Securities Registrar or the Depositor
shall treat the Person in whose name any Trust Securities are issued as
the owner of such Trust Securities for the purpose of receiving
Distributions and for all other purposes
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whatsoever, and none of the Issuer Trustees, the Administrators, the
Securities Registrar nor the Depositor shall be bound by any notice to
the contrary.
SECTION 5.8. Access to List of Holders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to
hold the Depositor, the Property Trustee, or the Administrators
accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 5.9. Maintenance of Office or Agency.
The Property Trustee shall designate, with the consent of the
Administrators, which consent shall not be unreasonably withheld, 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
Property Trustee initially designates its Corporate Trust Office at
Four Albany Street, New York, NY 10006, Attention: Corporate Trust and
Agency Group - Corporate Market Services, as its corporate trust office
for such purposes. The Property Trustee shall give prompt written
notice to the Depositor, the Administrators and to the Holders of any
change in the location of the Securities Register or any such office or
agency.
SECTION 5.10. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Holders from the
Payment Account and shall report the amounts of such Distributions to
the Property Trustee and the Administrators. 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 Property Trustee may revoke such power and remove any Paying Agent
in its sole discretion. The Paying Agent shall initially be the
Property Trustee. Any Person acting as Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the
Administrators, and the Property Trustee. In the event that the
Property Trustee shall no longer be the Paying Agent or a successor
Paying Agent shall resign or its authority to act be revoked, the
Property Trustee shall appoint a successor (which shall be a bank or
trust company) that is reasonably acceptable to the Administrators to
act as Paying Agent. Such successor Paying Agent or any additional
Paying Agent appointed by the Administrators shall execute and deliver
to the Issuer Trustees an instrument in which such successor Paying
Agent or additional Paying Agent shall agree
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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 Trust Agreement to the Paying Agent
shall include any co-paying agent chosen by the Property Trustee unless
the context requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor.
At each Time of Delivery, the Depositor shall acquire and retain
beneficial and record ownership of the Common Securities except (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) a transfer to 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 shall be void. The Administrators shall cause each
Common Securities Certificate issued to the Depositor to contain a
legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A
SUCCESSOR IN INTEREST TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR
IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST
AGREEMENT."
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the
Holders is required under this Trust Agreement, for so long as Capital
Securities are represented by a Global Capital Securities Certificate,
the Administrators and 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 5.13. Rights of Holders.
(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 ownership interest in the assets of
the Issuer Trust conferred by
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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
Junior Subordinated Debentures fail to declare the principal of all of
the Junior Subordinated Debentures to be immediately due and payable,
the Holders of at least 25% in Liquidation Amount of the Capital
Securities then Outstanding shall have such right to make such
declaration by a notice in writing to the Property Trustee, the
Depositor and the Debenture Trustee.
At any time after such a declaration of acceleration with
respect to the Junior Subordinated 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, the Holders of a
majority in Liquidation Amount of the Capital Securities, by written
notice to the Property Trustee, the Depositor and the Debenture
Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Junior Subordinated Debentures,
(B) any accrued Additional Interest on all of the
Junior Subordinated Debentures,
(C) the principal of any Junior Subordinated
Debentures which have become due otherwise than by such
declaration of acceleration and interest and Additional
Interest thereon at the rate borne by the Junior
Subordinated 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 Junior
Subordinated Debentures, other than the non-payment of the
principal of the Junior Subordinated Debentures which has
become due solely by such acceleration, have been cured or
waived as provided in Section 5.13 of the Indenture.
If the Property Trustee fails to annul any such declaration and
waive such default, the Holders of at least a Majority in Liquidation
Amount of the Capital Securities shall also have the right to rescind
and annul such declaration and its consequences by written notice to
the Depositor, the Property Trustee and the Debenture Trustee, subject
to the satisfaction of the conditions set forth in Clause (i) and (ii)
of this Section 5.13.
The Holders of at least a Majority in Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Capital
Securities, waive any past default under the Indenture, except a
default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been
deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding Junior
Subordinated Debentures. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders
of the Capital Securities all or part of which is represented by Global
Capital Securities, a record date shall be established for determining
Holders of Outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day
the Property Trustee receives such notice. The Holders on such record
date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such notice, whether or not such Holders remain
Holders after such record date; provided, that, unless such declaration
of acceleration, or rescission and annulment, as the case may be, shall
have become effective by virtue of the requisite percentage having
joined in such notice prior to the day which is 90 days after such
record date, such notice of declaration of acceleration, or rescission
and annulment, as the case may be, shall automatically and without
further action by any Holder be
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canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, after expiration
of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be,
that is identical to a written notice which has been canceled pursuant
to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section
5.13(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 the principal
amount of or interest on Junior Subordinated 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 Sections 5.13(b) and 5.13 (c), the Holders of Capital
Securities shall have no right to exercise directly any right or remedy
available to the holders of, or in respect of, the Junior Subordinated
Debentures.
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting Rights.
(a) Except as 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 members of an association.
(b) So long as any Junior Subordinated 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
executing any trust or power conferred on the Property Trustee with
respect to such Junior Subordinated 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 Junior Subordinated Debentures shall be due and payable or
(iv) consent
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to any amendment, modification or termination of the Indenture or the
Junior Subordinated 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 Junior Subordinated 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 Capital Securities,
except by a subsequent vote of the Holders of Capital Securities. The
Property Trustee shall notify all Holders of the Capital Securities of
any notice of default received with respect to the Junior Subordinated
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 will not cause the Issuer Trust to be taxable as a
corporation for United States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides
for, or the Issuer Trust otherwise proposes to effect, (i) any action
that would adversely affect in any material respect the interests,
powers, preferences or special rights of the Capital Securities,
whether by way of amendment to the Trust Agreement or otherwise, or
(ii) the dissolution of the Issuer Trust, other than pursuant to the
terms of this Trust Agreement, then the Holders of Outstanding Trust
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 for United States Federal income tax
purposes.
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Holders, 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 record, at his registered
address, at least 15 days and not more than 90 days before the meeting.
At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
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SECTION 6.3. Meetings of Holders.
No annual meeting of Holders is required to be held. The
Property Trustee, however, shall call a meeting of Holders to vote on
any matter upon the written request of the Holders of record of 25% of
the aggregate Liquidation Amount of the Capital Securities and the
Administrators or the Property Trustee may, at any time in their
discretion, call a meeting of Holders of Capital Securities to vote on
any matters as to which Holders are entitled to vote.
Holders of at least a Majority in Liquidation Amount of the
Capital Securities, present in person or represented by proxy, shall
constitute a quorum at any meeting of Holders of the Capital
Securities.
If a quorum is present at a meeting, an affirmative vote by the
Holders of record present, in person or by proxy, holding Capital
Securities representing at least a Majority in 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
Capital Securities, unless this Trust Agreement requires a greater
number of affirmative votes.
SECTION 6.4. Voting Rights.
Holders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Outstanding Trust Securities in
respect of any matter as to which such Holders are entitled to vote.
SECTION 6.5. 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 Property Trustee, or
with such other officer or agent of the Issuer Trust as the Property
Trustee 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
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rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 6.6. Holder Action by Written Consent.
Any action which may be taken by Holders at a meeting may be
taken without a meeting if Holders holding at least a Majority in
Liquidation Amount of all Trust 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.
SECTION 6.7. 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 Administrators
or Property Trustee 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 6.8. Acts of Holders.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to
be given, made or taken by 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 the
Property 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.
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 his
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individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which
any Issuer Trustee or Administrator 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
Administrators 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, the Administrators
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.
A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee Agreement to enforce its rights under the
Guarantee Agreement without first instituting a legal proceeding
against the Guarantee Trustee (as defined in the Guarantee Agreement),
the Issuer Trust, any Issuer Trustee, any Administrator or any person
or entity.
SECTION 6.9. Inspection of Records.
Upon reasonable notice to the Administrators and the Property
Trustee, the records of the Issuer Trust shall be open to inspection by
Holders during normal business hours for any purpose reasonably related
to such Holder's interest as a Holder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. 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 banking corporation with trust
powers, duly organized, validly existing and in good standing under the
laws of New York, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms
of this Trust Agreement.
(b) The execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate action on the part of the Property Trustee; and
this Trust Agreement has been duly executed and delivered by the
Property Trustee, and constitutes a legal, valid and binding obligation
of the Property Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of this Trust
Agreement by the Property Trustee does not conflict with or constitute
a breach of the certificate of incorporation or by-laws of the Property
Trustee.
(d) At the Time of Delivery, the Property Trustee has not
knowingly created any liens or encumbrances on the Trust Securities.
(e) No consent, approval or authorization of, or registration
with or notice to, any New York State or federal banking authority is
required for the execution, delivery or performance by the Property
Trustee, of this Trust Agreement.
(f) The Delaware Trustee is duly organized, validly existing and
in good standing under the laws of the State of Delaware, with trust
power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, the Trust Agreement.
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(g) The execution, delivery and performance by the Delaware
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate action on the part of the Delaware Trustee; and
this Trust Agreement has been duly executed and delivered by the
Delaware Trustee, and constitutes a legal, valid and binding obligation
of the Delaware Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' right generally
and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
(h) The execution, delivery and performance of this Trust
Agreement by the Delaware Trustee does not conflict with or constitute
a breach of the certificate of incorporation or by-laws of the Delaware
Trustee.
(i) No consent, approval or authorization of, or registration
with or notice to any state or Federal banking authority is required
for the execution, delivery or performance by the Delaware Trustee, of
this Trust Agreement.
(j) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
SECTION 7.2. 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, and, subject to payment
therefor, 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 each 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 the Property Trustee or the Delaware Trustee, as
the case may be, of this Trust Agreement.
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ARTICLE VIII
THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees and
the Administrators shall be as provided by this Trust Agreement and, in
the case of the Property Trustee, by the Trust Indenture Act.
Notwithstanding the foregoing, no provision of this Trust Agreement
shall require the Issuer Trustees or the Administrators to expend or
risk their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder, or in the exercise of any
of their rights or powers, if they shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it 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 or the Administrators shall
be subject to the provisions of this Section. Nothing in this Trust
Agreement shall be construed to release an Administrator from liability
for his or its own negligent action, his or its own negligent failure
to act, or his or its own willful misconduct. To the extent that, at
law or in equity, an Issuer Trustee or Administrator has duties and
liabilities relating to the Issuer Trust or to the Holders, such Issuer
Trustee or Administrator shall not be liable to the Issuer Trust or to
any Holder for such Issuer Trustee's or Administrator'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 and Administrators otherwise
existing at law or in equity, are agreed by the Depositor and the
Holders to replace his or such other duties and liabilities of the
Issuer Trustees and Administrators.
(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 his or its acceptance
of a Trust Security, agrees that he or it will look solely to the
revenue and proceeds from the Trust Property to the extent legally
available for distribution to it or him as herein provided and that
neither the Issuer Trustees nor the Administrators are personally
liable to it or him 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
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expressly set forth elsewhere in this Trust Agreement or, in the case
of the Property Trustee, in the Trust Indenture Act.
(c) 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 of
the Indenture), the Property Trustee shall enforce this Trust Agreement
for the benefit of the Holders and 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
would exercise or use under the circumstances in the conduct of his or
her own affairs.
(d) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) 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;
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(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 Junior
Subordinated 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 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 Administrators 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, the Administrators 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
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terms of this Trust Agreement or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) The Administrators shall not be responsible for monitoring
the compliance by the Issuer Trustee or the Depositor with their
respective duties under this Trust Agreement, nor shall either
Administrator be liable for the default or misconduct of any other
Administrator, the Issuer Trustees or the Depositor.
SECTION 8.2. Certain Notices.
Within five Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property
Trustee, the Property Trustee shall transmit, in the manner and to the
extent provided in Section 10.8, notice of such Event of Default to the
Holders and the Administrators, 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 Junior Subordinated 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 Administrators, unless such exercise shall have been revoked.
SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be fully protected
in acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, debenture, note, other evidence of indebtedness
or 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 direction or act of the Depositor contemplated by this
Trust Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(c) 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 re-recording, refiling or reregistration
thereof;
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(d) the Property Trustee may consult with counsel of its own
choosing (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;
(e) 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 security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction; provided that, nothing
contained in this Section 8.3(e) 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;
(f) 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;
(g) the Property Trustee may execute any of the trusts or powers
hereunder or perform any of its duties hereunder either directly or by
or through its agents or attorneys, provided that the Property Trustee
shall not be responsible for any misconduct or negligence on the part
of any agent or attorney appointed with due care by it hereunder;
(h) 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 fully
protected in acting in accordance with such instructions; and
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(i) 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 or Administrator to
perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it
shall be illegal, or in which the Property Trustee shall be unqualified
or incompetent in accordance with applicable law, to perform any such
act or acts, or to exercise any such right, power, duty or obligation.
No permissive power or authority available to any Issuer Trustee or
Administrator shall be construed to be a duty.
SECTION 8.4. 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 Issuer Trust, and
the Issuer Trustees and the Administrators do not assume any
responsibility for their correctness. The Issuer Trustees and the
Administrators shall not be accountable for the use or application by
the Depositor of the proceeds of the Junior Subordinated Debentures.
SECTION 8.5. May Hold Securities.
Except as provided in the definition of the term "Outstanding"
in Article I, the Administrators, any Issuer Trustee or any other 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, may otherwise deal with the
Issuer Trust with the same rights it would have if it were not an
Administrator, Issuer Trustee or such other agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor, as borrower, agrees:
(a) to pay to the Issuer Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) to reimburse the Issuer Trustees upon request for all
reasonable expenses, disbursements and advances incurred or made
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by the Issuer Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to their negligence or
willful misconduct; and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Issuer Trustee, (ii) each
Administrator, (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 arising out of or
in connection with the creation, operation or dissolution 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 respect of any loss, damage or claim incurred by such Indemnified
Person by reason of negligence or willful misconduct with respect to
such acts or omissions.
The provisions of this Section 8.6 shall survive the termination
of this Trust Agreement.
No Issuer Trustee may claim any lien or charge on any Trust
Property as a result of any amount due pursuant to this Section 8.6.
The Depositor, any Administrator and any Issuer Trustee 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 Administrator,
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
Administrator or any Issuer Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other
opportunity. Any Issuer Trustee may engage or be interested in any
financial or other transaction with the Depositor or any Affiliate of
the
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Depositor, or may act as depository for, trustee or agent for, or act
on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
SECTION 8.7. Corporate Property Trustee Required; Eligibility of
Trustees and Administrators.
(a) There shall at all times be a Property Trustee hereunder
with respect to the Trust Securities. The Property Trustee shall be a
Person that is a national or state chartered bank and eligible pursuant
to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. 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, 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,
it shall resign immediately in the manner and with the effect
hereinafter specified in this 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 Administrators
hereunder. Each Administrator 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. An employee, officer or
Affiliate of the Depositor may serve as an Administrator.
(c) There shall at all times be a Delaware Trustee. The Delaware
Trustee shall either be (i) a natural person who is at least 21 years
of age and a resident of the State of Delaware or (ii) a legal entity
with its principal place of business in the State of Delaware and that
otherwise meets the requirements of applicable Delaware law that shall
act through one or more persons authorized to bind such entity.
SECTION 8.8. 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.
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(b) The Guarantee Agreement and the Indenture shall be deemed to
be sufficiently 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 8.9. 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, the Property
Trustee shall have power to appoint, and upon the written request of
the Property Trustee, the Depositor and the Administrators shall for
such purpose join with the Property Trustee in the execution, delivery,
and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Property Trustee either
to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as
separate trustee of any such property, in either case with such powers
as may be provided in the instrument of appointment, and to vest in
such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other
provisions of this Section. Any co-trustee or separate trustee
appointed pursuant to this Section shall either be (i) a natural person
who is at least 21 years of age and a resident of the United States or
(ii) a legal entity with its principal place of business in the United
States that shall act through one or more persons authorized to bind
such entity.
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
Administrators, and the Trust Securities shall be executed and
delivered and all rights, powers, duties, and obligations hereunder in
respect of the custody of securities, cash and other personal property
held by, or required to be deposited or pledged with, the Property
Trustees specified hereunder, shall be exercised, solely by the
Property Trustee and not by such co-trustee or separate trustee.
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(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 and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law
of any jurisdiction in which any particular act is to be performed, the
Property Trustee shall be incompetent or unqualified to perform such
act, in which event such rights, powers, duties and obligations shall
be exercised and performed by such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor. Upon the
written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided
in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other trustee hereunder.
(e) The Property Trustee shall not be 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 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Issuer Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of appointment by
the successor Trustee in accordance with the applicable requirements of
Section 8.11.
Subject to the immediately preceding paragraph, a Relevant
Trustee may resign at any time by giving written notice thereof to the
Holders. The Relevant Trustee shall appoint a successor by requesting
from at least three Persons meeting the eligibility
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requirements its expenses and charges to serve as the successor Trustee
on a form provided by the Administrators, and selecting the Person who
agrees to the lowest expenses and charges. If the instrument of
acceptance by the successor 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 Issuer Trust, any court of competent
jurisdiction for the appointment of a successor Trustee.
The Property Trustee or the Delaware Trustee may be removed at
any time by Act of the Holders of at least a Majority in Liquidation
Amount of the Capital Securities, delivered to the Relevant Trustee (in
its individual capacity and on behalf of the Issuer Trust) (i) for
cause (including upon the occurrence of an Event of Default described
in subparagraph (f) of the definition thereof with respect to the
Relevant Trustee), or (ii) if a Debenture Event of Default shall have
occurred and be continuing at any time.
If any Relevant Trustee shall resign, it shall appoint its
successor. If a resigning Relevant Trustee shall fail to appoint a
successor, or if a Relevant Trustee shall be removed or become
incapable of acting as Issuer Trustee, or if any vacancy shall occur in
the office of any Issuer Trustee for any cause, the Holders of the
Capital Securities, by Act of the Holders of record of not less than
25% in aggregate Liquidation Amount of the Capital Securities then
Outstanding delivered to such Relevant Trustee, shall promptly appoint
a successor Trustee or Trustees, and such successor Issuer Trustee
shall comply with the applicable requirements of Section 8.11. If no
successor Trustee shall have been so appointed by the Holders of the
Capital Securities and accepted appointment in the manner required by
Section 8.11, any Holder, on behalf of himself and all others similarly
situated, or any other Issuer Trustee, may petition any court in the
State of Delaware for the appointment of a successor Trustee.
The Property Trustee shall give notice of each resignation and
each removal of an a Relevant Trustee and each appointment of a
successor Trustee to all Holders in the manner provided in Section 10.8
and shall give notice to the Depositor and to the Administrators. Each
notice shall include the name of the 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, in the event any Delaware Trustee who is a natural
person dies or becomes, in the opinion of the Holders of the Common
Securities, incompetent or incapacitated, the vacancy created by such
death, incompetence or incapacity may be filled by the Property Trustee
following the procedures regarding expenses
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and charges set forth above (with the successor in each case being a
Person who satisfies the eligibility requirement for Administrators or
Delaware Trustee, as the case may be, set forth in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee, the
retiring Relevant Trustee and each such successor Trustee with respect
to the Trust Securities shall execute, acknowledge and deliver an
amendment hereto wherein each successor 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 Trustee all the rights, powers, trusts and duties of the
retiring 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 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 Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the Relevant Trustee; but, on request of the Issuer Trust or
any successor Trustee such Relevant Trustee shall duly assign, transfer
and deliver to such successor Trustee all Trust Property, all proceeds
thereof and money held by such Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
Upon request of any such successor Trustee, the Issuer Trust
shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights,
powers and trusts referred to in the first or second preceding
paragraph, as the case may be.
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.
SECTION 8.12. 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
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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 8.13. 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 any other obligor upon the Trust Securities), the
Property Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of claims against the Depositor
(or any such other obligor) as is required by the Trust Indenture Act.
SECTION 8.14. 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, 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 owning 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 monies 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 8.15. Reports by Property Trustee.
(a) Not later than January 31 of each year commencing with
January 31, 1998, 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; and
(ii) 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 as set forth
in Section 10.10 of this Trust Agreement.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with the
Depositor.
SECTION 8.16. Reports to the Property Trustee.
The Depositor and the Administrators 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 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, as set forth in Section 10.10
of this Trust Agreement. The Depositor and the Administrators shall
annually file with the Property Trustee a certificate specifying
whether such Person is
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in compliance with all the terms and covenants applicable to such
Person hereunder.
SECTION 8.17. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrators 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 as set forth in Section 10.10 of this
Trust Agreement. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall
be given in the form of an Officers' Certificate.
SECTION 8.18. Number of Issuer Trustees.
(a) The number of Issuer Trustees shall be two. 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 the Issuer Trust.
SECTION 8.19. Delegation of Power.
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents
contemplated in Section 2.7(a) or making any governmental filing; and
(b) The Administrators shall have power to delegate from time to
time to such of their number the doing of such things and the execution
of such instruments either in the name of the Issuer Trust or the names
of the Administrators or otherwise as the Administrators may deem
expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Trust Agreement.
SECTION 8.20. Appointment of Administrators.
(a) The Administrators (other than the initial Administrators)
shall be appointed by the Holders of a Majority in Liquidation Amount
of the Common Securities and all Administrators (including the initial
Administrators) may be removed by the
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Holders of a Majority in Liquidation Amount of the Common Securities or
may resign at any time. Each Administrator shall sign an agreement
agreeing to comply with the terms of this Trust Agreement. If at any
time there is no Administrator, 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 Administrators.
(b) Whenever a vacancy in the number of Administrators shall
occur, until such vacancy is filled by the appointment of an
Administrator in accordance with this Section 8.20, the Administrators
in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrators and shall discharge all the duties imposed upon the
Administrators by this Trust Agreement.
(c) Notwithstanding the foregoing, or any other provision of
this Trust Agreement, in the event any Administrator or a Delaware
Trustee who is a natural person dies or becomes, in the opinion of the
Holders of a Majority in Liquidation Amount of the Common Securities,
incompetent, or incapacitated, the vacancy created by such death,
incompetence or incapacity may be filled by the remaining
Administrators, if there were at least two of them prior to such
vacancy, and by the Depositor, if there were not two such
Administrators immediately prior to such vacancy (with the successor in
each case being a Person who satisfies the eligibility requirement for
Administrators or Delaware Trustee, as the case may be, set forth in
Section 8.7).
(d) Except as otherwise provided in this Trust Agreement, or by
applicable law, any one Administrator may execute any document or
otherwise take any action which the Administrators are authorized to
take under this Trust Agreement.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall automatically
dissolve on September 30, 2028 (the "Expiration Date"), following the
distribution of the Trust Property in accordance with Section 9.4.
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SECTION 9.2. Early Termination.
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of the appointment of a receiver or other
similar official in any liquidation, insolvency or similar proceeding
with respect to the Depositor or all or substantially all of its
property, or a court or other governmental agency shall enter a decree
or order and such decree or order shall remain unstayed and
undischarged for a period of 60 days, unless the Depositor shall
transfer the Common Securities as provided by Section 5.11, in which
case this provision shall refer instead to any such successor Holder of
the Common Securities;
(b) the written direction to the Property Trustee from the
Holder of the Common Securities at any time to dissolve the Issuer
Trust and to distribute the Junior Subordinated Debentures to Holders
in exchange for the Capital Securities (which direction, subject to
Section 9.4(a), is optional and wholly within the discretion of the
Holders of the Common Securities);
(c) the redemption of all of the Capital Securities in
connection with the redemption of all the Junior Subordinated
Debentures; and
(d) the entry of an order for dissolution of the Issuer Trust by
a court of competent jurisdiction.
SECTION 9.3. Dissolution.
The respective obligations and responsibilities of the Issuer
Trustees, the Administrators 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, (c) the discharge of all
administrative duties of the Administrators, including the performance
of any tax reporting obligations with respect to the Issuer Trust or
the Holders and (d) the filing of a certificate of cancellation with
the Delaware Secretary of State pursuant to Section 3810 of the
Delaware Business Trust Act.
SECTION 9.4. 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 Property Trustee as
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expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the
Issuer Trust as provided by applicable law, to each Holder a Like
Amount of Junior Subordinated 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 later than 15 nor more
than 45 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities
Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that, from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures;
and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates
for Junior Subordinated Debentures, or if Section 9.4(d) applies
receive a Liquidation Distribution, as the Administrators or the
Property Trustee shall deem appropriate.
(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
Junior Subordinated Debentures to Holders, the Property Trustee shall
establish a record date for such distribution (which shall be not more
than 30 days prior to the Liquidation Date) and, either itself acting
as exchange agent or through the appointment of a separate exchange
agent, shall establish such procedures as it shall deem appropriate to
effect the distribution of Junior Subordinated 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) the Clearing Agency for the Capital Securities or
its nominee, as the registered holder of the Global Capital Securities
Certificate, shall receive a registered global certificate or
certificates representing the Junior Subordinated Debentures to be
delivered upon such distribution with respect to Capital Securities
held by the Clearing Agency or its nominee, and, (iii) any Trust
Securities Certificates not held by the Clearing Agency for the Capital
Securities or its nominee as specified in clause (ii) above will be
deemed to represent Junior Subordinated Debentures having a principal
amount equal to the stated Liquidation Amount of the Trust Securities
represented thereby and bearing accrued and unpaid interest in an
amount equal to the accumulated and unpaid Distributions on such Trust
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Securities until such certificates are presented to the Securities
Registrar for transfer or reissuance.
(d) If, 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 Junior
Subordinated Debentures is not practical, or if any Early Termination
Event specified in clause (c) of Section 9 occurs, the Trust Property
shall be liquidated, and the Issuer Trust shall be dissolved by the
Property Trustee in such manner as the Property Trustee determines. In
such event, on the date of the dissolution 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 applicable
law, an amount equal to the aggregate of Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If, upon
any such dissolution, 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 Holders of the Common Securities will be
entitled to receive Liquidation Distributions upon any such dissolution
pro rata (determined as aforesaid) with Holders of Capital Securities,
except that, if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the
Common Securities as provided in Section 4.3.
SECTION 9.5. Mergers, Consolidations, Amalgamations or
Replacements of the Issuer Trust.
The Issuer Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, any entity,
except pursuant to this Section 9.5. At the request of the Holders of
the Common Securities, and with the consent of the Holders of at least
a Majority in Liquidation Amount of the Capital Securities, 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, however, 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
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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 Junior Subordinated 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 if the Capital Securities were rated by any
nationally recognized statistical rating organization immediately prior
to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, (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 Issuer Trustee has received an Opinion of Counsel from
independent counsel experienced in such matters 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 any permitted transferee to whom
it has transferred the Common Securities hereunder own 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 100% in Liquidation Amount 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 for United States Federal income tax purposes.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death or incapacity of
any person having an interest, beneficial or otherwise, in Trust
Securities shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives 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. Any
merger or similar agreement shall be executed by the Administrators on
behalf of the Trust.
SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee and the Holders of a Majority in Liquidation Amount of
all the Common Securities, without the consent of any Holder of the
Capital Securities (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, provided, however, that
such amendment shall not adversely affect in any material respect the
interests of any Holder 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
for United States Federal income tax purposes at any time 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.
(b) Except as provided in Section 10.2(c) hereof, any provision
of this Trust Agreement may be amended by the Property Trustee and the
Holders of a Majority in Liquidation Amount of the Common Securities
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 for United States federal income tax purposes or affect the
Issuer Trust's exemption from status of an "investment company" under
the Investment Company Act.
(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected
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Holder (such consent being obtained in accordance with Section 6.3 or
6.6 hereof), this Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to
be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a Holder to institute suit for the
enforcement of any such payment on or after such date.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Issuer Trustee shall enter into or consent to any
amendment to this Trust Agreement which 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 be taxable as
a corporation for United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor and the Administrators,
this Trust Agreement may not be amended in a manner which imposes any
additional obligation on the Depositor or the Administrators.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrators 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 which
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.
(h) Any amendments to this Trust Agreement shall become
effective when notice of such amendment is given to the holders of the
Trust Securities.
SECTION 10.3. 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.
<PAGE> 70
- 65 -
SECTION 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF
THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE ISSUER TRUSTEES AND
THE ADMINISTRATORS 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.
SECTION 10.5. 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 4.2(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 10.6. Successors.
This Trust Agreement shall be binding upon and shall inure to
the benefit of any successor to the Depositor, the Issuer Trust, the
Administrators 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 10.7. Headings.
The Article and Section headings are for convenience only and
shall not affect the construction of this Trust Agreement.
SECTION 10.8. Reports, Notices and Demands.
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 Common
Securities or the Depositor, to Sterling Financial Corporation, 111
North Wall Street, Spokane, Washington 99201, Attention: Office of the
Senior Vice President of Finance, facsimile no.: (509) 458-2391 or to
such other address as may be specified in a written notice by the
Depositor to the Property Trustee. Such notice, demand or other
communication to or upon a
<PAGE> 71
- 66 -
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.
Any notice, demand or other communication which by any provision
of this Trust Agreement is required or permitted to be given or served
to or upon the Issuer Trust, the Property Trustee, the Delaware
Trustee, the Administrators, or the Issuer Trust shall be given in
writing addressed (until another address is published by the Issuer
Trust) as follows: (a) with respect to the Property Trustee to Bankers
Trust Company, Four Albany Street, 4th Floor, New York, NY 10006,
Attention: Corporate Trust and Agency Group Corporate Market Services;
(b) with respect to the Delaware Trustee to Bankers Trust (Delaware),
1001 Jefferson Street, Suite 550, Wilmington, Delaware 19801,
Attention: Ms. Lisa Wilkins; and (c) with respect to the
Administrators, to them at the address above for notices to the
Depositor, marked "Attention: Office of the Secretary". Such notice,
demand or other communication to or upon the Issuer Trust or the
Property Trustee shall be deemed to have been sufficiently given or
made only upon actual receipt of the writing by the Issuer Trust, the
Property Trustee, or such Administrator.
SECTION 10.9. Agreement Not to Petition.
Each of the Issuer Trustees, the Administrators 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 dissolved 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, without
limitation, 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. In the
event the Depositor takes action in violation of this Section 10.9, the
Property Trustee agrees, for the benefit of Holders, that at the
expense of the Depositor, it shall file an answer with the bankruptcy
court or otherwise properly contest the filing of such petition by the
Depositor against the 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 Trustee or the
Issuer Trust may assert. If any Issuer Trustee or Administrator takes
action in violation of this Section 10.9, the Depositor agrees, for the
benefit of the Holders, that at the expense of the Depositor, it shall
file an answer with the bankruptcy court or otherwise properly contest
the filing of such petition by such Person against the Depositor or the
commencement
<PAGE> 72
- 67 -
of such action and raise the defense that such Person 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
Trustee or the Issuer Trust may assert. The provisions of this Section
10.9 shall survive the termination of this Trust Agreement.
SECTION 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act.
(a) Trust Indenture Act; Application. (i) This Trust Agreement
is subject to the provisions of the Trust Indenture Act that are
required to be a part of this Trust Agreement and shall, to the extent
applicable, be governed by such provisions; (ii) 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; (iii) for
purposes of this Trust Agreement, the Property Trustee, to the extent
permitted by applicable law and/or the rules and regulations of the
Commission, shall be the only Issuer Trustee which is a trustee for the
purposes of the Trust Indenture Act; and (iv) the application of the
Trust Indenture Act to this Trust Agreement shall not affect the nature
of the Capital Securities and the Common Securities as equity
securities representing undivided beneficial interests in the assets of
the Issuer Trust.
(b) Lists of Holders of Capital Securities. (i) Each of the
Depositor and the Administrators on behalf of the Trust shall provide
the Property Trustee with such information as is required under Section
312(a) of the Trust Indenture Act at the times and in the manner
provided in Section 312(a) and (ii) the Property Trustee shall comply
with its obligations under Sections 310(b), 311 and 312(b) of the Trust
Indenture Act.
(c) Reports by the Property Trustee. Within 60 days after May 15
of each year, the Property Trustee shall provide to the Holders of the
Trust Securities such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form, in the manner and at the
times provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
(d) Periodic Reports to Property Trustee. Each of the Depositor
and the Administrators on behalf of the Issuer Trust shall provide to
the Property Trustee, the Commission and the Holders of the Trust
Securities, as applicable, such documents, reports and information as
required by Section 314(a)(1) -(3) (if any) of the Trust Indenture Act
and the compliance certificates required by Section 314(a)(4) and (c)
of the Trust Indenture Act (provided that any certificate to be
provided pursuant to Section
<PAGE> 73
- 68 -
314(a)(4) of the Trust Indenture Act shall be provided within 120 days
of the end of each fiscal year of the Issuer Trust.
(e) Evidence of Compliance with Conditions Precedent. Each of
the Depositor and the Administrators 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
which 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
pursuant to Section 314(c) shall comply with Section 314(e) of the
Trust Indenture Act.
(f) Disclosure of Information. The disclosure of information as
to the names and addresses of the Holders of Trust Securities in
accordance with Section 312 of the Trust Indenture Act, regardless of
the source from which such information was derived, shall not be deemed
to be a violation of any existing law or any law hereafter enacted
which does not specifically refer to Section 312 of the Trust Indenture
Act, nor shall the Property Trustee be held accountable by reason of
mailing any material pursuant to a request made under Section 312(b) of
the Trust Indenture Act.
SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee
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 THE 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.
<PAGE> 74
- 69 -
STERLING FINANCIAL CORPORATION
as Depositor
By:
------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Property Trustee
By:
------------------------------------
Name:
Title:
BANKERS TRUST (DELAWARE),
as Delaware Trustee and not
in its individual capacity
By:
------------------------------------
Name:
Title:
Subscribed to and Accepted by,
as the Initial Administrators:
- ------------------------------------
Harold B. Gilkey
- ------------------------------------
Daniel G. Byrne
<PAGE> 75
EXHIBIT A
[INSERT CERTIFICATE OF TRUST FILED WITH DELAWARE]
<PAGE> 76
EXHIBIT B
[INSERT FORM OF CERTIFICATE DEPOSITARY AGREEMENT]
<PAGE> 77
EXHIBIT C
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
Certificate Number Number of Common Securities
C-__ 31,299
Certificate Evidencing Common Securities
of
Sterling Capital Trust I
9.25 % Common Securities
(liquidation amount $25 per Common Security)
Sterling Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Issuer Trust"), hereby
certifies that Sterling Financial Corporation (the "Holder") is the
registered owner of _________ (_____) common securities of the Issuer
Trust representing undivided beneficial interests in the Issuer Trust
and has designated the ____% Common Securities (liquidation amount $25
per Common Security) (the "Common Securities"). Except in accordance
with Section 5.11 of the Trust Agreement (as defined below) the Common
Securities are not transferable and any attempted transfer hereof other
than in accordance therewith shall be void. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of
the Common Securities are set forth in, and this certificate and the
Common Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and
Restated Trust Agreement of the Issuer Trust, dated as of May __, 1997,
as the same may be amended from time to time (the "Trust Agreement")
among Sterling Financial Corporation, as Depositor, Bankers Trust
Company, as Property Trustee, Bankers Trust (Delaware), as Delaware
Trustee, and the Holders of Trust Securities, including the designation
of the terms of the Common Securities as set forth therein. The Issuer
Trust will furnish a copy of the Trust Agreement to the Holder without
charge upon written request to the Issuer Trust at its principal place
of business or registered office.
Upon receipt of this certificate, the Holder is bound by
the Trust Agreement and is entitled to the benefits thereunder.
<PAGE> 78
Terms used but not defined herein have the meanings set
forth in the Trust Agreement.
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this ___ day of ______________,
____.
STERLING CAPITAL TRUST I
By: ____________________________________
Name:
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By: ________________________
Name:
Signatory Officer
<PAGE> 79
EXHIBIT D
[IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE A GLOBAL
CAPITAL SECURITIES CERTIFICATE, INSERT -- This Capital Securities
Certificate is a Global Capital Securities Certificate within the
meaning of the Trust Agreement hereinafter referred to and is
registered in the name of a Depositary or a nominee of a Depositary.
This Capital Security Certificate is exchangeable for Capital
Securities Certificates registered in the name of a person other than
the Depositary or its nominee only in the limited circumstances
described in the Trust Agreement 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 Trust
Agreement.
Unless this Capital Security Certificate is presented by an
authorized representative of The Depository Trust Company, a New York
Corporation ("DTC"), to Sterling Capital Trust I or its agent for
registration of transfer, exchange or payment, and any Capital Security
Certificate issued is registered in the name of such nominee as is
requested by an authorized representative of DTC (and any payment is
made to such entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO A PERSON IS WRONGFUL inasmuch as the registered owner hereof,
has an interest herein.]
CERTIFICATE NUMBER NUMBER OF CAPITAL SECURITIES
P-__
CUSIP NO. ________________________
CERTIFICATE EVIDENCING CAPITAL SECURITIES
OF
STERLING CAPITAL TRUST I
____% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY)
Sterling Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Issuer Trust"), hereby
certifies that (the "Holder") is the registered owner of) ( )
preferred securities of the Trust representing a preferred undivided
beneficial interest in the assets of the Issuer Trust and has
designated the Sterling Capital Trust I 9.25
<PAGE> 80
% Capital Securities (liquidation amount $25 per Capital Security) (the
"Capital Securities"). The Capital Securities are transferable on the
books and records of the Issuer Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 5.5 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities are set forth in, and this certificate and the Capital
Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Issuer Trust, dated as of May __, 1997, as the same
may be amended from time to time (the "Trust Agreement"), among
Sterling Financial Corporation, as Depositor, Bankers Trust Company, as
Property Trustee, Bankers Trust (Delaware), as Delaware Trustee, and
the Holders of Trust Securities, including the designation of the terms
of the Capital Securities as set forth therein. The Holder is entitled
to the benefits of the Guarantee Agreement entered into by Sterling
Financial Corporation, a Washington corporation, and Bankers Trust
Company, as guarantee trustee, dated as of February 5, 1997 (the
"Guarantee Agreement"), to the extent provided therein. The Issuer
Trust will furnish a copy of the Issuer Trust Agreement and the
Guarantee Agreement to the Holder without charge upon written request
to the Issuer Trust at its principal place of business or registered
office.
Upon receipt of this certificate, the Holder is bound by
the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this day of , .
STERLING CAPITAL TRUST I
By:
____________________________________
Name:
Administrator
<PAGE> 81
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:
-----------------------------
Name:
Authorized Signatory
<PAGE> 82
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers
this Capital Security to:
-----------------------------------------------------------------------
(Insert assignee's social security or tax
identification number)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
----------------------------------------------
-----------------------------------------------------------------------
agent to transfer this Capital Security Certificate on the books of the
Issuer Trust. The agent may substitute another to act for him or her.
Date:
------------------------
Signature:
-----------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Capital Security
Certificate)
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17Ad-15.
<PAGE> 1
GUARANTEE AGREEMENT
Between
STERLING FINANCIAL CORPORATION
(as Guarantor)
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
May __, 1997
<PAGE> 2
STERLING CAPITAL TRUST I
Certain Sections of this Guarantee Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Guarantee Agreement
Act Section Section
- --------------- -------------------
<S> <C> <C>
Section 310 (a) (1)........................ 4.1 (a)
(a) (2)........................ 4.1 (a)
(a) (3)........................ Not Applicable
(a) (4)........................ Not Applicable
(b)............................ 2.8, 4.1 (c)
Section 311 (a)............................ Not Applicable
(b)............................ Not Applicable
Section 312 (a)............................ 2.2 (a)
(b)............................ 2.2 (b)
(c)............................ Not Applicable
Section 313 (a)............................ 2.3
(a) (4)........................ 2.3
(b)............................ 2.3
(c)............................ 2.3
(d)............................ 2.3
Section 314 (a)............................ 2.4
(b)............................ 2.4
(c) (1)........................ 2.5
(c) (2)........................ 2.5
(c) (3)........................ 2.5
(e)............................ 1.1, 2.5, 3.2
Section 315 (a)............................ 3.1 (d)
(b)............................ 2.7
(c)............................ 3.1 (c)
(d)............................ 3.1 (d)
(e)............................ Not Applicable
Section 316 (a)............................ 1.1, 2.6, 5.4
(a) (1) (A).................... 5.4
(a) (1) (B).................... 5.4
(a) (2)........................ Not Applicable
(b)............................ 5.3
(c)............................ Not Applicable
Section 317 (a) (1)........................ Not Applicable
(a) (2)........................ Not Applicable
(b)............................ Not Applicable
Section 318 (a)............................ 2.1
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Guarantee Agreement.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
Section 1.1. Definitions.................................... 2
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application............... 5
Section 2.2. List of Holders................................ 6
Section 2.3. Reports by the Guarantee Trustee............... 6
Section 2.4. Periodic Reports to Guarantee
Trustee........................................ 6
Section 2.5. Evidence of Compliance with
Conditions Precedent........................... 6
Section 2.6. Events of Default; Waiver...................... 7
Section 2.7. Event of Default; Notice....................... 7
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............ 9
Section 3.3. Indemnity...................................... 11
Section 3.4. Expenses....................................... 11
ARTICLE IV. GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility................. 11
Section 4.2. Appointment, Removal and Resignation
of the Guarantee Trustee....................... 12
ARTICLE V. GUARANTEE
Section 5.1. Guarantee...................................... 13
Section 5.2. Waiver of Notice and Demand.................... 13
Section 5.3. Obligations Not Affected....................... 13
Section 5.4. Rights of Holders.............................. 14
Section 5.5. Guarantee of Payment........................... 15
Section 5.6. Subrogation.................................... 15
Section 5.7. Independent Obligations........................ 15
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.................................. 16
Section 6.2. Pari Passu Guarantees.......................... 16
ARTICLE VII. TERMINATION
Section 7.1. Termination.................................... 16
- i -
<PAGE> 4
Page
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns......................... 16
Section 8.2. Amendments..................................... 17
Section 8.3. Notices........................................ 17
Section 8.4. Benefit........................................ 18
Section 8.5. Interpretation................................. 18
Section 8.6. Governing Law.................................. 19
Section 8.7. Counterparts................................... 19
- ii -
<PAGE> 5
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of May __, 1997 is executed and
delivered by STERLING FINANCIAL CORPORATION, a Washington corporation (the
"Guarantor"), having its principal office at 111 North Wall Street, Spokane,
Washington 99201, and BANKERS TRUST COMPANY, a New York banking corporation, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of
Sterling Capital Trust I, a Delaware statutory business trust (the "Issuer
Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of May __, 1997, among Sterling Financial
Corporation, as Depositor, Bankers Trust Company, as Property Trustee (the
"Property Trustee"), Bankers Trust (Delaware), as Delaware Trustee (the
"Delaware Trustee") (collectively, the "Issuer Trustees") and the Holders from
time to time of preferred undivided beneficial ownership interests in the assets
of the Issuer Trust, the Issuer Trust is issuing $40,000,000 aggregate
Liquidation Amount (as defined herein) of its ____% Cumulative Capital
Securities, Liquidation Amount $25 per capital security (the "Capital
Securities"), representing preferred undivided beneficial ownership interests in
the assets of the Issuer Trust and having the terms set forth in the Trust
Agreement;
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
Junior Subordinated Debentures due June 30, 2027 or such shorter period (as
defined in the Trust Agreement) (the "Junior Subordinated Debentures") of the
Guarantor which will be deposited with Bankers Trust Company, as Property
Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as 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) and to make certain other payments 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 shall benefit
the Guarantor, and intending to be legally bound hereby, the Guarantor executes
and delivers this Guarantee Agreement for the benefit of the Holders from time
to time of the Capital Securities.
<PAGE> 6
- 2 -
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Trust Agreement as in effect on the date hereof.
"Additional Amounts" has the meaning specified in the Trust Agreement.
"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.
"Capital Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer Trust.
"Distributions" means preferential cumulative cash distributions
accumulating from May __, 1997 and payable quarterly in arrears on March 31,
June 30, September 30, and December 31 of each year, commencing September 30,
1997, at the annual rate of ____% of the Liquidation Amount.
"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.
"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 accrued 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
<PAGE> 7
- 3 -
hand available therefor at such time, (ii) the Redemption Price, with respect to
the Capital Securities called for redemption by the Issuer Trust to the extent
that the Issuer Trust shall have funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary termination, winding-up or liquidation
of the Issuer Trust, unless Junior Subordinated Debentures are distributed to
the Holders, the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment to the extent the
Issuer Trust shall have funds on hand available to make such payment at such
time and (b) the amount of assets of the Issuer Trust remaining available for
distribution to Holders in liquidation of the Issuer Trust (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means Bankers Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first paragraph of
this Guarantee Agreement.
"Holder" means any holder, as registered on the books and records of
the Issuer Trust, 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 May __,
1997, between Sterling Financial Corporation and Bankers Trust Company, as
trustee, as may be modified, amended or supplemented from time to time.
"Issuer Trust" shall have the meaning specified in the first paragraph
of this Guarantee Agreement.
"Liquidation Amount" means the stated amount of $25 per Capital
Security.
"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 issued by the Issuer Trust.
"Like Amount" means (a) with respect to a redemption of Capital
Securities, Capital Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture,
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the proceeds of which will be used to pay the Redemption Price of such Capital
Securities, (b) with respect to a distribution of Junior Subordinated Debentures
to Holders of Capital Securities in connection with a dissolution or liquidation
of the Issuer Trust, Junior Subordinated Debentures having a principal amount
equal to the Liquidation Amount of the Capital Securities of the Holder to whom
such Junior Subordinated Debentures are distributed, and (c) with respect to any
distribution of Additional Amounts to Holders of Capital Securities, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities in respect of which such distribution is made.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such Person, 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, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Redemption Date" means, with respect to any Capital Security to be
redeemed, the date fixed for such redemption by or pursuant to the Trust
Agreement; provided that each Junior Subordinated Debenture Redemption Date (as
such term is defined in the Indenture) and the stated maturity of the Junior
Subordinated
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Debentures shall be a Redemption Date for a Like Amount of Capital Securities.
"Redemption Price" shall have the meaning specified in the Trust
Agreement.
"Responsible Officer" means, when used with respect to the Guarantee
Trustee, any officer assigned to the Corporate Trust Office, including any
managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Indenture, and also, 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.
"Senior Indebtedness" shall have the meaning specified in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
May __, 1997, executed by Sterling Financial Corporation, as Depositor, Bankers
Trust (Delaware), as Delaware Trustee, and Bankers Trust Company, as Property
Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Guarantee Agreement, the provision of the Trust Indenture Act shall
control. If any provision of this Guarantee Agreement modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Guarantee Agreement as so
modified or excluded, as the case may be.
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SECTION 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to the
Guarantee Trustee:
(i) semi-annually, not more than 15 days after June 15
and December 15 in each year, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders as of such date;
and
(ii) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor of any
such request, a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished.
(b) The Guarantee Trustee shall comply with the requirements of
Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than January 31 of each year, commencing January 31, 1998,
the Guarantee Trustee shall provide to the Holders such reports, if any, as are
required by Section 313 of the Trust Indenture Act in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. 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.
SECTION 2.5. 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 pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
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SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Capital
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any 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 therefrom.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such Events of Default have been cured before the giving of such
notice; provided that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the Board of Directors, the executive committee or a
trust committee of directors and/or 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 a Responsible Officer charged with the
administration of this Guarantee Agreement shall have received written notice of
such Event of Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.1. 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 a Holder exercising his
or her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment
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to act as Successor 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 be obligated 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 willful misconduct, except that:
(i) Prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this Guarantee
Agreement (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
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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; and
(iv) No provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers if the Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or liability
is not assured to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document 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
<PAGE> 14
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the absence of bad faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel,
and the advice or written opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in good faith
and in accordance with such advice or opinion. Such legal counsel may be legal
counsel to the Guarantor or any of its Affiliates and may be one of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holder, unless such Holder shall have provided
to the Guarantee Trustee such security and indemnity 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.
(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 the Guarantee Trustee shall not be
responsible for any negligence or wilful misconduct on the part of any such
agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the Holders,
(B) may refrain from enforcing such remedy or right or taking such other action
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until such instructions are received and (C) shall be fully protected in acting
in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. Indemnity.
The Guarantor agrees 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.
SECTION 3.4. Expenses.
The Guarantor shall from time to time reimburse the Guarantee Trustee
for its reasonable expenses and costs (including reasonable attorneys' or
agents' fees) incurred in connection with the performance of its duties
hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. 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 eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section
310(a) of the Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
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supervising or examining authority, then, for the purposes of this Section and
to the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.2(b).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee.
(a) No resignation or removal of the Guarantee Trustee and no
appointment of a Successor Guarantee Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the Successor Guarantee
Trustee by written instrument executed by the Successor Guarantee Trustee and
delivered to the Holders and the Guarantee Trustee.
(b) Subject to the immediately preceding paragraph, a Guarantee
Trustee may resign at any time by giving written notice thereof to the Holders.
The Guarantee Trustee shall appoint a successor by requesting from at least
three Persons meeting the eligibility requirements such Person's expenses and
charges to serve as the Guarantee Trustee, and selecting the Person who agrees
to the lowest expenses and charges. If the instrument of acceptance by the
Successor Guarantee Trustee shall not have been delivered to the Guarantee
Trustee within 60 days after the giving of such notice of resignation, the
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee may be removed for cause at any time by
Act (within the meaning of Section 6.8 of the Trust Agreement) of the Holders of
at least a Majority in Liquidation Amount of the Capital Securities, delivered
to the Guarantee Trustee.
(d) If a resigning Guarantee Trustee shall fail to appoint a
successor, or if a Guarantee Trustee shall be removed or become incapable of
acting as Guarantee Trustee, or if any vacancy shall occur in the office of any
Guarantee Trustee for any cause, the Holders of the Capital Securities, by Act
of the Holders of
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record of not less than 25% in aggregate Liquidation Amount of the Capital
Securities then outstanding delivered to such Guarantee Trustee, shall promptly
appoint a successor Guarantee Trustee. If no Successor Guarantee Trustee shall
have been so appointed by the Holders of the Capital Securities and such
appointment accepted by the Successor Guarantee Trustee, any Holder, on behalf
of himself and all others similarly situated, may petition any court of
competent jurisdiction for the appointment of a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full on
a subordinated basis as set forth in Section 6.1 hereof 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 which 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. The
Guarantor shall give prompt written notice to the Guarantee Trustee in the event
it makes any direct payment hereunder.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, 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 5.3. 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 of any of the following:
(a) the release or waiver, by operation of law or otherwise, 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;
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(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 Junior Subordinated Debentures as so 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, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Issuer 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 5.4. 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 time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this
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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 5.5. 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 Junior Subordinated Debentures
to Holders as provided in the Trust Agreement.
SECTION 5.6. 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, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7. 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 6.1. Subordination.
This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Guarantor to the extent and in the manner set forth in the
Indenture with
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respect to the Junior Subordinated 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 of the Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of preferred or capital securities issued by the Issuer
Trust and with any other security, guarantee or other obligation that is
expressly stated to rank pari passu with the obligations of the Guarantor under
this Guarantee Agreement.
ARTICLE VII. TERMINATION
SECTION 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Capital Securities,
(ii) the distribution of Junior Subordinated 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 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders 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 assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder, and any purported assignment that is not in accordance
with these provisions shall be void.
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SECTION 8.2. Amendments.
Except with respect to any changes that do not materially adversely
affect the rights of the Holders (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 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied (confirmed by delivery of the original) or
mailed by first class mail as follows:
(a) if given to the Guarantor, to the address or telecopy number
set forth below or such other address or telecopy number or to the attention of
such other Person as the Guarantor may give notice to the Holders:
Sterling Financial Corporation
111 North Wall Street
Spokane, Washington 99201
Facsimile No.: (509) 458-2391
Attention: Office of the Senior
Vice President-Finance
(b) if given to the Issuer Trust, in care of the Guarantee
Trustee, at the Issuer Trust's (and the Guarantee Trustee's) address set forth
below or such other address or telecopy number or to the attention of such other
Person as the Guarantee Trustee on behalf of the Issuer Trust may give notice to
the Holders:
c/o Sterling Financial Corporation
111 North Wall Street
Spokane, Washington 99201
Facsimile No.: (509) 458-2391
Attention: Office of the Senior
Vice President-Finance
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with a copy to:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group;
Corporate Market Services
(c) if given to the Guarantee Trustee:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group
Corporate Market Services
(d) if given to any Holder, at the address set forth on the books
and records of the Issuer Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Capital Securities.
SECTION 8.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them in
Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the
same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
<PAGE> 23
- 19 -
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 8.7. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE> 24
- 20 -
THIS GUARANTEE AGREEMENT is executed as of the day and year first above written.
STERLING FINANCIAL CORPORATION
By:____________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Guarantee Trustee
and not in its individual
capacity
By:____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE THREE MONTHS ENDING MARCH 31, 1997
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
---------- ----------
<S> <C> <C>
DECEMBER 31, 1996 1,458,020,871 1,399,761,466
JANUARY 31, 1997 1,470,263,105 1,393,450,705
FEBRUARY 28, 1997 1,478,999,648 1,389,348,086
MARCH 31, 1997 1,477,689,274 1,397,241,375
5,884,972,898 5,579,801,632
DIVIDE BY NUMBER OF MONTHS 4 4
AVERAGE 1,471,243,225 1,394,950,408
INTEREST INCOME (EXPENSE) FOR QUARTER 29,648,000 (18,596,000)
AVERAGE INTEREST RATE (1) 8.17% 5.41%
NET INTEREST INCOME 11,052,000
NET INTEREST SPREAD (2) 2.77%
NET INTEREST MARGIN (3) 3.05%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 2
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE THREE MONTHS ENDING MARCH 31, 1996
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
---------- ----------
<S> <C> <C>
DECEMBER 31, 1995 1,430,721,184 1,367,739,050
JANUARY 31, 1996 1,433,380,101 1,377,493,781
FEBRUARY 28, 1996 1,419,915,993 1,358,086,206
MARCH 31, 1996 1,414,294,078 1,363,182,175
5,698,311,356 5,466,501,212
DIVIDE BY NUMBER OF MONTHS 4 4
AVERAGE 1,424,577,839 1,366,625,303
INTEREST INCOME (EXPENSE) FOR QUARTER 27,979,000 (18,782,000)
AVERAGE INTEREST RATE (1) 7.90% 5.53%
NET INTEREST INCOME 9,197,000
NET INTEREST SPREAD (2) 2.37%
NET INTEREST MARGIN (3) 2.60%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 3
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE SIX MONTHS ENDING DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1996 1,396,934,990 1,350,355,283
JULY 31, 1996 1,397,649,388 1,345,687,300
AUGUST 31, 1996 1,402,652,538 1,330,534,362
SEPTEMBER 30, 1996 1,448,628,258 1,389,192,574
OCTOBER 31, 1996 1,466,005,828 1,402,692,696
NOVEMBER 30, 1996 1,471,180,022 1,419,669,398
DECEMBER 31, 1996 1,458,020,871 1,399,761,466
10,041,071,895 9,637,893,079
DIVIDE BY NUMBER OF MONTHS 7 7
AVERAGE 1,434,438,842 1,376,841,868
INTEREST INCOME (EXPENSE) FOR YEAR 57,614,000 (37,411,000)
AVERAGE INTEREST RATE (1) 7.97% 5.39%
NET INTEREST INCOME 20,203,000
NET INTEREST SPREAD (2) 2.58%
NET INTEREST MARGIN (3) 2.79%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 4
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE SIX MONTHS ENDING DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1995 1,460,547,627 1,401,562,119
JULY 31, 1995 1,464,905,542 1,403,520,610
AUGUST 31, 1995 1,473,146,061 1,406,569,230
SEPTEMBER 30, 1995 1,475,464,059 1,409,416,824
OCTOBER 31, 1995 1,476,637,475 1,412,933,872
NOVEMBER 30, 1995 1,470,808,496 1,409,835,423
DECEMBER 31, 1995 1,430,721,184 1,367,739,050
10,252,230,444 9,811,577,228
DIVIDE BY NUMBER OF MONTHS 7 7
AVERAGE 1,464,604,349 1,401,653,890
INTEREST INCOME (EXPENSE) FOR YEAR 57,518,000 (40,486,000)
AVERAGE INTEREST RATE (1) 7.79% 5.73%
NET INTEREST INCOME 17,032,000
NET INTEREST SPREAD (2) 2.06%
NET INTEREST MARGIN (3) 2.31%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 5
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1995 1,460,547,627 1,401,562,119
JULY 31, 1995 1,464,905,542 1,403,520,610
AUGUST 31, 1995 1,473,146,061 1,406,569,230
SEPTEMBER 30, 1995 1,475,464,059 1,409,416,824
OCTOBER 31, 1995 1,476,637,475 1,412,933,872
NOVEMBER 30, 1995 1,470,808,496 1,409,835,523
DECEMBER 31, 1995 1,430,721,184 1,367,739,050
JANUARY 31, 1996 1,433,380,101 1,377,493,781
FEBRUARY 28, 1996 1,419,915,993 1,358,086,206
MARCH 31, 1996 1,414,294,078 1,363,182,175
APRIL 30, 1996 1,409,679,056 1,355,165,705
MAY 31, 1996 1,405,097,567 1,353,676,145
JUNE 30, 1996 1,396,934,990 1,350,355,283
18,731,532,229 17,969,536,523
DIVIDE BY NUMBER OF MONTHS 13 13
AVERAGE 1,440,887,095 1,382,272,040
INTEREST INCOME (EXPENSE) FOR YEAR 113,080,000 (77,610,000)
AVERAGE INTEREST RATE (1) 7.85% 5.61%
NET INTEREST INCOME 35,470,000
NET INTEREST SPREAD (2) 2.24%
NET INTEREST MARGIN (3) 2.46%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 6
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1994 1,309,872,499 1,261,574,152
JULY 31, 1994 1,348,617,463 1,300,561,032
AUGUST 31, 1994 1,384,522,634 1,331,326,550
SEPTEMBER 30, 1994 1,414,257,646 1,362,302,640
OCTOBER 31, 1994 1,457,190,271 1,405,063,319
NOVEMBER 30, 1994 1,484,713,066 1,443,577,458
DECEMBER 31, 1994 1,525,072,519 1,484,849,598
JANUARY 31, 1995 1,539,985,723 1,500,694,330
FEBRUARY 28, 1995 1,507,169,333 1,459,657,170
MARCH 31, 1995 1,486,218,342 1,434,897,755
APRIL 30, 1995 1,495,560,533 1,442,010,219
MAY 31, 1995 1,468,553,267 1,419,412,881
JUNE 30, 1995 1,460,547,627 1,401,562,119
18,882,280,923 18,247,489,223
DIVIDE BY NUMBER OF MONTHS 13 13
AVERAGE 1,452,483,148 1,403,653,017
INTEREST INCOME (EXPENSE) FOR YEAR 107,255,000 (71,864,000)
AVERAGE INTEREST RATE (1) 7.38% 5.12%
NET INTEREST INCOME 35,391,000
NET INTEREST SPREAD (2) 2.26%
NET INTEREST MARGIN (3) 2.44%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 7
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE YEAR ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1993 998,662,051 960,351,397
JULY 31, 1993 984,234,768 943,457,435
AUGUST 31, 1993 987,892,777 942,076,307
SEPTEMBER 30, 1993 1,018,771,199 974,049,872
OCTOBER 31, 1993 1,039,562,208 988,706,550
NOVEMBER 30, 1993 1,095,333,605 1,051,515,816
DECEMBER 31, 1993 1,096,532,703 1,054,367,389
JANUARY 31, 1994 1,086,667,920 1,040,893,070
FEBRUARY 28, 1994 1,088,621,339 1,044,268,831
MARCH 31, 1994 1,156,086,154 1,112,961,719
APRIL 30, 1994 1,188,107,927 1,145,410,339
MAY 31, 1994 1,292,067,675 1,240,600,258
JUNE 30, 1994 1,309,872,499 1,261,574,152
14,342,412,825 13,760,233,135
DIVIDE BY NUMBER OF MONTHS 13 13
AVERAGE 1,103,262,525 1,058,479,472
INTEREST INCOME (EXPENSE) FOR YEAR 76,599,000 (44,610,000)
AVERAGE INTEREST RATE (1) 6.94% 4.21%
NET INTEREST INCOME 31,989,000
NET INTEREST SPREAD (2) 2.73%
NET INTEREST MARGIN (3) 2.90%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 8
EXHIBIT 12.1
(Continued)
COMPUTATION OF NET INTEREST MARGIN AND NET INTEREST SPREAD
FOR THE YEAR ENDED JUNE 30, 1993
<TABLE>
<CAPTION>
INTEREST INTEREST
EARNING BEARING
ASSETS LIABILITIES
-------- -----------
<S> <C> <C>
JUNE 30, 1992 600,680,404 593,902,147
JULY 31, 1992 602,364,959 583,492,720
AUGUST 31, 1992 615,187,611 593,132,824
SEPTEMBER 30, 1992 622,752,360 600,231,297
OCTOBER 31, 1992 646,709,985 619,914,409
NOVEMBER 30, 1992 623,231,307 596,860,352
DECEMBER 31, 1992 645,199,389 620,011,975
JANUARY 31, 1993 696,900,000 670,430,000
FEBRUARY 28, 1993 811,533,000 785,808,000
MARCH 31, 1993 841,629,000 810,555,000
APRIL 30, 1993 977,580,898 944,144,064
MAY 31, 1993 989,108,381 956,326,522
JUNE 30, 1993 998,662,051 960,351,397
9,671,539,345 9,325,160,707
DIVIDE BY NUMBER OF MONTHS 13 13
AVERAGE 743,964,565 717,320,054
INTEREST INCOME (EXPENSE) FOR YEAR 57,793,000 (32,292,000)
AVERAGE INTEREST RATE (1) 7.77% 4.50%
NET INTEREST INCOME 25,501,000
NET INTEREST SPREAD (2) 3.27%
NET INTEREST MARGIN (3) 3.43%
</TABLE>
(1) TOTAL INTEREST INCOME (EXPENSE) DIVIDED BY AVERAGE EARNING ASSETS
(LIABILITIES).
(2) AVERAGE YIELD ON ALL INTEREST EARNING ASSETS DURING THE PERIOD, MINUS
AVERAGE RATE PAID ON ALL INTEREST-BEARING LIABILITIES DURING THE PERIOD.
(3) NET INTEREST INCOME, DIVIDED BY THE MONTHLY AVERAGE OF INTEREST-EARNING
ASSETS.
<PAGE> 9
EXHIBIT 12.1
(Continued)
COMPUTATION OF BOOK VALUE PER COMMON SHARE (PRIMARY)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)
AS OF MARCH 31, AS OF DECEMBER 31,
-----------------------------------------
1997 1996 1996 1995
-------- ------- --------- -------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY $86,835 $87,314 $89,220 $91,962
LIQUIDATION PREFERENCE VALUE
OF PREFERRED STOCK (26,000) (26,000) (26,000) (26,000)
--================== ====================
COMMON SHAREHOLDERS' EQUITY (A) 60,835 61,314 63,220 65,962
==================== ====================
UNIDENTIFIED INTANGIBLES (1,635) (2,376) (1,725) (2,621)
--================== ====================
ADJUSTED SHAREHOLDERS' EQUITY $59,200 $58,938 $61,495 $63,341
==================== ====================
IDENTIFIED INTANGIBLES (7,811) (10,059) (8,303) (10,648)
--================== ====================
ADJUSTED SHAREHOLDERS' EQUITY $51,389 $48,879 $53,192 $52,693
==================== ====================
COMMON SHARES OUTSTANDING 5,543,007 5,425,648 5,539,178 5,411,022
COMMON SHARES OUTSTANDING -
ADJUSTED FOR DIVIDENDS (B) 5,543,007 5,425,648 5,539,178 5,411,022
--================== ====================
BOOK VALUE PER COMMON SHARE (PRIMARY) (A/B) $10.98 $11.30 $11.41 $12.19
==================== ====================
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------------------------------------
1996 1995 1994 1993
---------- ------- -------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY $85,745 $89,907 $76,529 $48,272
LIQUIDATION PREFERENCE VALUE
OF PREFERRED STOCK (26,000) (26,000) (26,000) 0
------------------------===================
COMMON SHAREHOLDERS' EQUITY (A) 59,745 63,907 50,529 48,272
===========================================
UNIDENTIFIED INTANGIBLES (2,131) (3,101) (4,244) (5,509)
------------------------===================
ADJUSTED SHAREHOLDERS' EQUITY $57,614 $60,806 $46,285 $42,763
===========================================
IDENTIFIED INTANGIBLES (9,473) (11,836) (13,670) (2,922)
------------------------===================
ADJUSTED SHAREHOLDERS' EQUITY $48,141 $48,970 $32,615 $39,841
===========================================
COMMON SHARES OUTSTANDING 5,426,398 4,908,054 4,563,717 4,071,485
COMMON SHARES OUTSTANDING -
ADJUSTED FOR DIVIDENDS (B) 5,426,398 5,398,859 5,020,089 4,926,497
------------------------===================
BOOK VALUE PER COMMON SHARE (PRIMARY) (A/B) $11.01 $11.84 $10.07 $9.80
===========================================
</TABLE>
<PAGE> 10
EXHIBIT 12.1
(Continued)
COMPUTATION OF ALLOWANCE FOR LOAN LOSSES TO NONPERFORMING LOANS
AND TOTAL LOANS RECEIVABLE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------- -------------------------
1997 1996 1996 1995
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES $ 7,999 $ 7,833 $ 7,891 $ 7,993
LESS - LOANS CLASSIFIED AS LOSS (42) (209) (262) (256)
----------- --------- ----------- ---------
ADJUSTED ALLOWANCE FOR LOAN LOSSES $ 7,957 $ 7,624 $ 7,629 $ 7,737
=========== ========= =========== =========
NONPERFORMING LOANS $ 2,678 $ 4,757 $ 2,544 $ 4,496
LESS - NONPERFORMING LOANS CLASSIFIED AS LOSS 0 (91) 0 (229)
----------- --------- ----------- ---------
ADJUSTED BALANCE - NONPERFORMING LOANS $ 2,678 $ 4,666 $ 2,544 $ 4,267
=========== ========= =========== =========
TOTAL LOANS RECEIVABLE $ 1,073,857 $ 985,453 $ 1,034,190 $ 946,666
=========== ========= =========== =========
LOAN LOSS ALLOWANCE TO NONPERFORMING LOANS
(BOTH EXCLUSIVE OF LOANS CLASSIFIED AS LOSS) 297.12% 163.39% 299.88% 181.32%
=========== ========= =========== =========
LOAN LOSS ALLOWANCE TO TOTAL LOANS RECEIVABLE
(BOTH EXCLUSIVE OF LOANS CLASSIFIED AS LOSS) 0.74% 0.77% 0.74% 0.82%
=========== ========= =========== =========
NONPERFORMING LOANS TO TOTAL LOANS 0.25% 0.47% 0.25% 0.45%
=========== ========= =========== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------
1996 1995 1994 1993
------- ----------- --------- ---------
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES $ 7,890 $ 7,361 $ 5,740 $ 4,719
LESS - LOANS CLASSIFIED AS LOSS (213) (147) (7) (314)
------- ----------- --------- ---------
ADJUSTED ALLOWANCE FOR LOAN LOSSES $ 7,677 $ 7,214 $ 5,733 $ 4,405
======= =========== ========= =========
NONPERFORMING LOANS $ 3,592 $ 3,649 $ 2,450 $ 5,348
LESS - NONPERFORMING LOANS CLASSIFIED AS LOSS (122) (141) (4) (223)
------- ----------- --------- ---------
ADJUSTED BALANCE - NONPERFORMING LOANS $ 3,470 $ 3,508 $ 2,446 $ 5,125
======= =========== ========= =========
TOTAL LOANS RECEIVABLE $1,006,766 1,134,024 $ 893,834 $ 613,517
========== =========== ========= =========
LOAN LOSS ALLOWANCE TO NONPERFORMING LOANS
(BOTH EXCLUSIVE OF LOANS CLASSIFIED AS LOSS) 221.24% 205.64% 234.38% 85.95%
======= =========== ========= =========
LOAN LOSS ALLOWANCE TO TOTAL LOANS RECEIVABLE
(BOTH EXCLUSIVE OF LOANS CLASSIFIED AS LOSS) 0.76% 0.64% 0.64% 0.72%
======= =========== ========= =========
NONPERFORMING LOANS TO TOTAL LOANS 0.34% 0.31% 0.27% 0.84%
======= =========== ========= =========
</TABLE>
<PAGE> 11
EXHIBIT 12.1
(Continued)
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, December 31, Fiscal Years Ended June 30,
--------------------- --------------------- -----------------------------------------
EXCLUDING INTEREST ON DEPOSITS 1997 1996 1996 1995 1996 1995 1994 1993
---------------------- --------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-Deposit Interest Expense $ 8,095 $ 7,866 $ 16,340 $17,820 $33,353 $32,049 $20,273 $ 9,376
Implicit Interest on Leases 73 71 132 140 279 356 446 328
Preferred Stock Dividend Requirement(1) 760 742 1,387 1,483 3,011 2,822 417 0
------- ------- -------- ------- ------- ------- ------- -------
8,928 8,679 17,859 19,443 36,643 35,227 21,136 9,704
Income (Loss) Before Income Taxes 3,668 2,947 (991) 5,051 10,856 13,907 13,086 12,301
------- ------- -------- ------- ------- ------- ------- -------
12,596 11,626 16,868 24,494 47,499 49,134 34,222 22,005
Divide by Fixed Charges 8,928 8,679 17,859 19,443 36,643 35,227 21,136 9,704
------- ------- -------- ------- ------- ------- ------- -------
Earnings to Fixed Charges 1.41 1.34 0.94 1.26 1.30 1.39 1.62 2.27
======= ======= ======== ======= ======= ======= ======= =======
Earnings Insufficient
to Cover Fixed Charges $ 991
========
INCLUDING INTEREST ON DEPOSITS
Total Interest Expense $18,596 $18,783 $ 37,411 $40,486 $77,611 $71,864 $44,610 $32,292
Implicit Interest on Leases 73 71 132 140 279 356 446 328
Preferred Stock Dividend Requirement(1) 760 742 1,387 1,483 3,011 2,822 417 0
------- ------- -------- ------- ------- ------- ------- -------
19,429 19,596 38,930 42,109 80,901 75,042 45,473 32,620
Income (Loss) Before Income taxes 3,668 2,947 (991) 5,051 10,856 13,907 13,086 12,301
------- ------- -------- ------- ------- ------- ------- -------
23,097 22,543 37,939 47,160 91,757 88,949 58,559 44,921
Divide by Fixed Charges 19,429 19,596 38,930 42,109 80,901 75,042 45,473 32,620
------- ------- -------- ------- ------- ------- ------- -------
Earnings to Fixed Charges 1.19 1.15 0.97 1.12 1.13 1.19 1.29 1.38
======= ======= ======== ======= ======= ======= ======= =======
Earnings Insufficient
to Cover Fixed Charges $ 991
========
</TABLE>
(1) The preferred stock dividend requirement for the six months ended December
31, 1996 has been adjusted to exclude the $430 effect of change in tax
estimates of prior periods.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Sterling Financial Corporation on Form S-3 of our report, which includes an
explanatory paragraph describing changes in the Company's methods of accounting
for mortgage servicing rights and impairment of long-lived assets as of July 1,
1996 and impaired loans as of July 1, 1995, dated February 7, 1997, on our
audits of the consolidated financial statements of Sterling Financial
Corporation as of December 31, 1996 and June 30, 1996, and for the six months
ended December 31, 1996 and the fiscal years ended June 30, 1996 and 1995. We
also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Spokane, Washington
May 12, 1997
<PAGE> 1
EXHIBIT 24.2
CERTIFICATE OF RESOLUTION
OF
STERLING FINANCIAL CORPORATION
I, Ned M. Barnes, Secretary of the Board of Directors of Sterling
Financial Corporation, a Corporation incorporated under the laws of the State of
Washington, hereby certify that the following is a full, true and correct copy
of a Resolution of the Board of Directors of the Corporation, duly adopted by
unanimous consent of the Board of Directors of the Corporation in accordance
with the law and the Bylaws of the Corporation on May 5, 1997:
RESOLVED, that the Chairman of the Board, the President, the
Chief Financial Officer and each director be, and hereby is, authorized
to execute a power of attorney appointing any person (whether an
officer or director of the Corporation or not) as his or her
attorney-in-fact and agent for the purpose of executing the
Registration Statement and any amendments and post-effective amendments
thereto.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Corporation this 5 day of May, 1997.
/s/ Ned M. Barnes
----------------------------------
NED M. BARNES, Secretary
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2)____________________
----------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
<TABLE>
<S> <C>
STERLING FINANCIAL CORPORATION STERLING CAPITAL TRUST I
(Exact name of Registrant as specified in its charter) (Exact name of Registrant as specified in its charter)
WASHINGTON 91-1572822 DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. employer (State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.) incorporation or organization) Identification no.)
111 NORTH WALL STREET C/O STERLING FINANCIAL CORPORATION
SPOKANE, WASHINGTON 99201 111 NORTH WALL STREET
(Address, including zip code SPOKANE, WASHINGTON 99201
of principal executive offices) (Address, including zip code of
principal executive offices)
</TABLE>
CUMULATIVE CAPITAL SECURITIES OF STERLING CAPITAL TRUST I
JUNIOR SUBORDINATED DEBENTURES OF STERLING FINANCIAL CORPORATION
GUARANTEE OF STERLING FINANCIAL CORPORATION OF CERTAIN
OBLIGATIONS UNDER THE CUMULATIVE CAPITAL SECURITIES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
NAME ADDRESS
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3. -15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers
Trust Company dated August 7, 1990, Certificate of
Amendment of the Organization Certificate of Bankers
Trust Company dated June 21, 1995 - Incorporated
herein by reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171, and
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated March 20,
1996, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated herein by
reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as
amended on February 18, 1997, Incorporated herein by
reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 333-24509-01.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. - Incorporated herein by
reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
EXHIBIT 7 - A copy of the latest report of condition of
Bankers Trust Company dated as of December 31, 1996.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of May, 1997.
BANKERS TRUST COMPANY
By: /s/ KEVIN WEEKS
---------------------------
Kevin Weeks
Assistant Treasurer
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of May, 1997.
BANKERS TRUST COMPANY
By: Kevin Weeks
Kevin Weeks
Assistant Treasurer
-5-
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
ASSETS / / / / / / / / / / / /
1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin(1) ........................ 0081 1,545,000 1.a.
b. Interest-bearing balances(2) ................................................. 0071 2,494,000 |1.b.
2. Securities: / / / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A) ................... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D).................. 1773 4,368,000 2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic offices / / / / / / / / / / / /
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: / / / / / / / / / / / /
a. Federal funds sold ........................................................... 0276 3,651,000 3.a.
b. Securities purchased under agreements to resell .............................. 0277 3,230,000 3.b.
4. Loans and lease financing receivables: / / / / / / / / / / / /
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 27,239,000 / / / / / / / / / / / /4.a.
b. LESS: Allowance for loan and lease losses........................RCFD 3123 917,000 / / / / / / / / / / / /4.b.
c. LESS: Allocated transfer risk reserve ...........................RCFD 3128 0 / / / / / / / / / / / /4.c.
d. Loans and leases, net of unearned income, / / / / / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c) ......................... 2125 28,889,000 4.d.
5. Assets held in trading accounts ................................................... 3545 38,272,000 5.
6. Premises and fixed assets (including capitalized leases) .......................... 2145 914,000 6.
7. Other real estate owned (from Schedule RC-M) ...................................... 2150 213,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 184,000 8.
9. Customers' liability to this bank on acceptances outstanding ...................... 2155 597,000 9.
10. Intangible assets (from Schedule RC-M) ............................................. 2143 17,000 10.
11. Other assets (from Schedule RC-F) .................................................. 2160 6,056,000 11.
12. Total assets (sum of items 1 through 11) ........................................... 2170 90,430,000 12
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands / / / / / Bil Mil Thou
<S> <C> <C> <C>
LIABILITIES / / / / // / / / / / /
13. Deposits: / / / / // / / / / / /
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 11,985,000 13.a.
(1) Noninterest-bearing(1) ........................... RCON 6631 2,734,000...... / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing .................................. RCON 6636 6,657,000...... / / / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E / / / / / / / / / / /
part II) RCFN 2200 21,619,000 13.b.
(1) Noninterest-bearing .............................. RCFN 6631 654,000 / / / / / / / / / / / 13.b.(1)
(2) Interest-bearing ................................. RCFN 6636 22,731,000 / / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in / / / / / / / / / / /
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: / / / / / / / / / / /
a. Federal funds purchased ....................................................... RCFD 0278 6,560,000 14.a.
b. Securities sold under agreements to repurchase ................................ RCFD 0279 120,000 14.b.
15. a. Demand notes issued to the U.S. Treasury ...................................... RCON 2840 0 15.a.
b. Trading liabilities ........................................................... RCFD 3548 19,172,000 15.b.
16. Other borrowed money: / / / / / / / / / / /
a. With original maturity of one year or less .................................... RCFD 2332 15,909,000 16.a.
b. With original maturity of more than one year .................................. RCFD 2333 3,097,000 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ....................... RCFD 2910 31,000 17.
18. Bank's liability on acceptances executed and outstanding ............................. RCFD 2920 597,000 18.
19. Subordinated notes and debentures .................................................... RCFD 3200 1,229,000 19.
20. Other liabilities (from Schedule RC-G) ............................................... RCFD 2930 5,235,000 20.
21. Total liabilities (sum of items 13 through 20) ....................................... RCFD 2948 85,554,000 21.
/ / / / / / / / / / /
22. Limited-life preferred stock and related surplus ..................................... RCFD 3282 0 22.
EQUITY CAPITAL / / / / / / / / / / /
23. Perpetual preferred stock and related surplus ........................................ RCFD 3838 600,000 23.
24. Common stock ......................................................................... RCFD 3230 1,001,000 24.
25. Surplus (exclude all surplus related to preferred stock) ............................. RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves .......................................... RCFD 3632 3,131,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ........ RCFD 8434 (14,000) 26.b.
27. Cumulative foreign currency translation adjustments .................................. RCFD 3284 (382,000) 27.
28. Total equity capital (sum of items 23 through 27) .................................... RCFD 3210 4,876,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, / / / / / / / / / /
and 28) ............................................................................. RCFD 3300 90,430,000 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C>
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995........................................................ RCFD 6724 N/A M.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE> 8
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of
New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated March 20, 1996, providing for an increase in
authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares
with a par value of $10 each designated as Common Stock and 500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 21ST day of MARCH in the Year of our Lord one thousand nine hundred
and NINETY-SIX.
Peter M. Philbin
------------------------------
Deputy Superintendent of Banks
<PAGE> 9
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Three Hundred Fifty One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670),
divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One
Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 500 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 10
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
20th day of March , 1996.
James T. Byrne, Jr.
--------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
--------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
--------------------------------
Lea Lahtinen
Sworn to before me this 20th day of March, 1996.
Sandra L. West
--------------------
Notary Public
SANDRA L. WEST Counterpart filed in the
Notary Public State of New York Office of the Superintendent of
No. 31-4942101 Banks, State of New York,
Qualified in New York County This 21st day of March, 1996
Commission Expires September 19, 1996
