As filed with the Securities and Exchange Commission on March 27, 1998.
Registration No. 333- and Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
<S> <C>
GUARANTY FINANCIAL CORPORATION GUARANTY CAPITAL TRUST I
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Virginia Delaware
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
(Primary Standard Industrial Classification Code Number) (Primary Standard Industrial Classification Code Number)
54-1786496 54-6422391
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
1658 State Farm Blvd. c/o Guaranty Financial Corporation
Charlottesville, VA 22911 1658 State Farm Blvd.
(804) 970-1100 Charlottesville, VA 22911
(804) 970-1100
(Address, including zip code, and telephone number, including (Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices) area code, of registrant's principal executive offices)
</TABLE>
Thomas P. Baker
1658 State Farm Blvd.
Charlottesville, VA 22911
(804) 970-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of Communications to:
R. Brian Ball, Esquire
Wayne A. Whitham, Jr., Esquire
Williams, Mullen, Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
(804) 643-1991
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
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, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Amount of Proposed Maximum Proposed Maximum Amount of
Title of Securitiesto be Registered Securities to be Offering Price Per Aggregate Offering Registration
Registered Unit Price Fee
- ---------------------------------------------------- ---------------- ------------------ ------------------- ------------
<S> <C> <C> <C> <C>
$ Convertible Preferred Securities of
Guaranty Capital Trust I 276,000 $25.00 $6,900,000 $2,036
- ---------------------------------------------------- ---------------- ------------------ ------------------- ------------
Junior Subordinated Debt Securities of
Guaranty Financial Corporation (1) n/a n/a n/a n/a
- ---------------------------------------------------- ---------------- ------------------ ------------------- ------------
Common Stock, par value $1.25 per share, of
Guaranty Financial Corporation (2) n/a n/a n/a
- ---------------------------------------------------- ---------------- ------------------ ------------------- ------------
Guarantee of Guaranty Financial Corporation
as to the Convertible Preferred Securities (2)(3) n/a n/a n/a n/a
- ---------------------------------------------------- ---------------- ------------------ ------------------- ------------
TOTAL (4) 276,000 100% $6,900,000 (5) $2,036
=========================================================================================================================
</TABLE>
(1) Junior Subordinated Debt Securities to be purchased by Guaranty Capital
Trust I with the proceeds of the sale of the Convertible Preferred
Securities. No separate consideration will be received from purchasers of
Convertible Preferred Securities for the Junior Subordinated Debt
Securities.
(2) Such indeterminate number of shares of common stock, par value $1.25 per
share, of Guaranty Financial Corporation as may be issuable upon conversion
of the Convertible Preferred Securities registered hereunder. Shares of
Common Stock issuable upon conversion of the Convertible Preferred
Securities will be issued without the payment of additional consideration.
This Registration Statement also covers such shares as may be issuable upon
such conversion pursuant to anti-dilution adjustments.
(3) No separate consideration will be received for the guarantee of Guaranty
Financial Corporation.
(4) This Registration Statement is deemed to cover $6,900,000 aggregate
principal amount of Junior Subordinated Debt Securities, the rights of
holders of such debt securities under the related Indenture, the rights of
holders of the Convertible Preferred Securities under the Amended and
Restated Declaration of Trust of Guaranty Capital Trust I, and the rights
of holders of the Convertible Preferred Securities under the Guarantee of
Guaranty Financial Corporation, which taken together fully and
unconditionally guarantee the obligations of Guaranty Capital Trust I with
respect to the Convertible Preferred Securities.
(5) Such amount represents the aggregate liquidation amount of Convertible
Preferred Securities to be issued hereunder and $6,900,000 aggregate
principal amount of Junior Subordinated Debt Securities to be issued
hereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant 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 Section 8(a), may
determine.
================================================================================
<PAGE>
PRELIMINARY PROSPECTUS DATED MARCH 27, 1998, SUBJECT TO COMPLETION
PROSPECTUS
GUARANTY CAPITAL TRUST I
$6,000,000
(Aggregate Liquidation Amount)
$ Convertible Preferred Securities
(Liquidation Amount $25.00 per Preferred Security)
guaranteed to the extent set forth herein by
GUARANTY FINANCIAL CORPORATION
The $ Convertible Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the assets
of GUARANTY CAPITAL TRUST I, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"). GUARANTY FINANCIAL CORPORATION, a Virginia
corporation (the "Corporation"), will own all the common securities representing
undivided beneficial interests in the assets of the Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities").
The Preferred Securities are convertible at any time prior to maturity,
unless previously redeemed or conversion rights terminated, into shares of
Common Stock of the Corporation at a conversion price of $ per Preferred
Security, subject to adjustment under certain conditions. The Common Stock of
the Corporation is listed on the NASDAQ National Market ("GSLC") and the closing
price of the Corporation's Common Stock as reported by NASDAQ on March , 1998
was $ per share. The Preferred Securities are redeemable in whole or in part at
the Liquidation Amount after , 2003, and the conversion rights cannot be
terminated until after , 2001 and then only if the closing price of the Common
Stock exceeds 115% of the conversion price for 20 of 30 consecutive trading
days. The Trust reserves the right to increase the Aggregate Liquidation Amount
by not more than $900,000.
(continued on next page)
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE VIRGINIA STATE CORPORATION COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS ANY STATE OR FEDERAL AGENCY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
- ------------------------ --------------------- ------------------------------ ---------------------------
Price to Public Underwriting Discount (1) Proceeds to Trust
(2)(3)(4)
- ------------------------ --------------------- ------------------------------ ---------------------------
<S> <C> <C> <C>
Per Preferred Security $25.00 (2) $25.00
- ------------------------ --------------------- ------------------------------ ---------------------------
Total $6,000,000 (2) $6,000,000
- ------------------------ --------------------- ------------------------------ ---------------------------
</TABLE>
(1) Guaranty Capital Trust I and Guaranty Financial Corporation have agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debt Securities as
described herein, Guaranty Financial Corporation has agreed to pay directly
to the Underwriter, as compensation (the "Underwriters' Compensation") for
its arranging the investment therein of such proceeds $ per Preferred
Security (or $ in the aggregate). See "Underwriting."
(3) Expenses of the offering which are payable by Guaranty Financial
Corporation are estimated to be $ .
(4) Assumes the sale of the entire 240,000 Preferred Securities offered hereby.
If the Trust exercises its right to increase the Aggregate Liquidation
Amount by $900,000, total Proceeds to Trust will be increased to $6,900,000
and the total Underwriters' Compensation payable by the Corporation will
increase to $ .
----------------
The Preferred Securities are offered by the Underwriter, as selling
agent for the Trust, subject to prior sale, on a best efforts basis, and subject
to certain other conditions, including the right to reject any order in whole or
in part. This offering will close on or about , 1998. Funds received by the
Underwriter will be deposited at, and held by, Wilmington Trust Company (the
"Escrow Agent") in a noninterest-bearing escrow account in Wilmington, Delaware.
It is expected that such funds will be released from the escrow account and
delivery of the Preferred Securities will be made on or about , 1998.
---------------
McKinnon & Company, Inc.
The date of this Prospectus is March , 1998
---------------
<PAGE>
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 state.
<PAGE>
(cover page continued)
Distributions on the Preferred Securities are payable quarterly March
15, June 15, September 15 and December 15, beginning June 15, 1998 in arrears.
The Preferred Securities offered hereby represent beneficial ownership
interests in Guaranty Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"). Guaranty Financial Corporation,
a Virginia corporation ("the Corporation"), will be the direct or indirect owner
of all of the beneficial ownership interests represented by common securities of
the Trust (the "Common Securities" and, collectively with the Preferred
Securities, the "Trust Securities"). Wilmington Trust Company is the Property
Trustee of the Trust. The Trust exists for the exclusive purposes of issuing the
Trust Securities, investing the proceeds from the sale of the Trust Securities
in Junior Subordinated Debt Securities (the "Junior Subordinated Debt
Securities") to be issued by the Corporation and certain other limited
activities described herein. The Junior Subordinated Debt Securities will mature
on , 2028 (the "Stated Maturity"). The Preferred Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Common
Securities. See "Description of Preferred Securities-Subordination of Common
Securities."
Holders of the Trust Securities will be entitled to receive cumulative
cash distributions, in each case arising from the payment of interest on the
Junior Subordinated Debt Securities accruing from the date of original issuance
and payable quarterly in arrears on the 15th day of March, June, September and
December of each year, commencing June 15, 1998, at $ per annum per Trust
Security ("Distributions"). Subject to certain exceptions, the Corporation has
the right to defer payments of interest on the Junior Subordinated Debt
Securities 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, however, that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all interest then accrued
and unpaid (together with interest thereon accumulated at % per annum,
compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period, subject to the
requirements set forth herein. If interest payments on the Junior Subordinated
Debt Securities are so deferred, during any Extension Period, Distributions on
the Preferred Securities and on the Common Securities will also be deferred and
the Corporation will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to, or make
purchases of, the Corporation's capital stock (which includes common and
preferred stock) or to make any payment with respect to debt securities of the
Corporation that rank pari passu in all respects with or junior to the Junior
Subordinated Debt Securities. During an Extension Period, interest on the Junior
Subordinated Debt Securities will continue to accrue (and the amount of
Distributions to which holders of the Preferred Securities are entitled will
accumulate) at % per annum, compounded quarterly, and holders of Preferred
Securities will be required to accrue interest income for United States Federal
income tax purposes. See "Description of Junior Subordinated Debt
Securities-Option to Extend Interest Payment Date" and "Certain United States
Federal Income Tax Consequences-Interest Income and Original Issue Discount."
Each Preferred Security is convertible in the manner described herein
at the option of the holder thereof, at any time prior to the earlier of (i)
5:00 p.m. (Richmond, Virginia time) on the Business Day (as defined herein)
immediately preceding the date of repayment of such Preferred Security, whether
at maturity or upon redemption, and (ii) 5:00 p.m. (Richmond, Virginia time) on
the Conversion Termination Date (as defined herein), if any, into a number of
shares of the Corporation's common stock, par value $1.25 per share (the "Common
Stock") that equals the quotient obtained by dividing (i) $25.00 by (ii) $ ,
subject to adjustment in certain circumstances. See "Description of Preferred
Securities -- Conversion Rights." The Common Stock is listed on the NASDAQ
National Market under the symbol "GSLC." On March , 1998, the last reported sale
price of the Common Stock on the NASDAQ National Market was $ per share.
ii
<PAGE>
Taken together, the Corporation's obligations under the Guarantee
Agreement, the Declaration, the Junior Subordinated Debt Securities and the
Indenture (each as defined herein), including the Corporation's obligation to
pay the costs, expenses and liabilities of the Trust (other than the Trust's
obligations to holders of the Trust Securities under such Trust Securities),
provide, in the aggregate, a full irrevocable and unconditional guarantee, as
described herein, of all of the payments of Distributions and other amounts due
on the Preferred Securities. See "Relationship Among the Preferred Securities,
the Junior Subordinated Debt Securities and the Guarantee-Full and Unconditional
Guarantee." The Corporation has agreed to guarantee the payment of Distributions
and payments on liquidation or redemption of the Trust Securities, but only in
each case to the extent of funds held by the Trust, as described herein (the
"Guarantee"). See "Description of Guarantee." If the Corporation does not make
interest payments on the Junior Subordinated Debt Securities held by the Trust,
the Trust will have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover the payment of Distributions when the
Trust does not have sufficient funds to pay such Distributions. In event of a
Debenture Event of Default (as hereafter defined), a holder of Preferred
Securities may institute a legal proceeding directly against the Corporation for
enforcement of payment to such holder of the principal of or interest on Junior
Subordinated Debt Securities having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities held by such holder (a "Direct
Action"). See "Description of Junior Subordinated Debt Securities-Enforcement of
Certain Rights by Holders of Preferred Securities." The obligations of the
Corporation under the Guarantee and the Junior Subordinated Debt Securities are
subordinate and junior in right of payment to all Senior Debt (as defined in
"Description of Junior Subordinated Debt Securities-Subordination") of the
Corporation. In addition, because the Corporation is a holding company, the
Junior Subordinated Debt Securities and the Guarantee are effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, including deposits. See "Risk Factors-Ranking of Obligations Under
the Guarantee and the Junior Subordinated Debt Securities" and "Status of the
Corporation as a Bank Holding Company."
The Preferred Securities are subject to mandatory redemption (i) in
whole, but not in part, upon repayment of the Junior Subordinated Debt
Securities at the Stated Maturity or their earlier 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 , 2003 contemporaneously with the optional redemption by the Corporation
of the Junior Subordinated Debt Securities in whole or in part. The Junior
Subordinated Debt Securities are redeemable prior to maturity at the option of
the Corporation (i) on or after , 2003, 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 (each as defined herein), in each case at a
redemption price set forth herein, which includes the accrued and unpaid
interest on the Junior Subordinated Debt Securities so redeemed to the date
fixed for redemption. The ability of the Corporation to exercise its rights to
redeem the Junior Subordinated Debt Securities or to cause the redemption of the
Preferred Securities prior to the Stated Maturity may be subject to prior
regulatory approval by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), if then required under applicable Federal Reserve capital
guidelines or policies.
In addition to the rights of the Corporation to redeem the Preferred
Securities under the circumstances described in this Prospectus, the Corporation
also will have the right to terminate the convertibility of the Preferred
Securities into Common Stock as described in this paragraph. If for at least 20
trading days within any period of 30 consecutive trading days ending on or after
, 2001, including the last trading day of such period, the Closing Price (as
defined herein) of the Common Stock exceeds 115% of the then applicable
Conversion Price (as hereafter defined) of the Preferred Securities, the
Corporation may, at its option, terminate the right to convert the Junior
Subordinated Debt Securities into Common Stock, in which case the right to
convert the Preferred Securities into Common Stock will likewise terminate. To
exercise this conversion termination option, the Corporation must cause the
Trust to issue a press release announcing the date upon which conversion rights
will expire (the "Conversion Termination Date"), prior to the opening of
business on the
iii
<PAGE>
second trading day after a period in which the condition in the preceding
sentence has been met, but in no event may such press release be issued prior to
, 2001. The Conversion Termination Date shall be a Business Day not less than 30
and not more than 60 days following the date of the press release. See
"Description of Preferred Securities-Conversion Rights."
The Corporation, as the holder of the outstanding Common Securities,
has the right at any time (including, without limitation, upon the occurrence of
a Tax Event, an Investment Company Event or a Capital Treatment Event (as
defined herein)) to terminate the Trust and cause a Like Amount (as defined
herein) of the Junior Subordinated Debt Securities to be distributed to the
holders of the Trust Securities upon liquidation of the Trust, subject to 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 of such
termination of the Trust, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Preferred Securities
generally will be entitled to receive a Liquidation Amount of $25.00 per
Preferred Security plus accumulated and unpaid Distributions thereon to the date
of payment, which may be in the form of a distribution of a Like Amount of
Junior Subordinated Debt Securities in certain circumstances. See "Description
of Preferred Securities-Liquidation of the Trust and Distribution of Junior
Subordinated Debt Securities."
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, as amended and supplemented from time to time, between the
Corporation and Wilmington Trust Company, as trustee (the "Debenture Trustee"),
and (ii) the "Declaration means the Amended and Restated Declaration of Trust
relating to the Trust among the Corporation, as Depositor (the "Depositor"),
Wilmington Trust Company, as Property Trustee (the "Property Trustee"),
Wilmington Trust Company, as Delaware Trustee (the "Delaware Trustee"), and the
individuals named as Administrative Trustees therein (the "Administrative
Trustees") (collectively with the Property Trustee and the Delaware Trustee, the
"Trustees").
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK
DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING AFFILIATE OF
GUARANTY FINANCIAL CORPORATION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
iv
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with 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
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov.).
No separate financial statements of the Trust have been included
herein. The Corporation and the Trust do not consider that such financial
statements would be material to holders of the Preferred Securities because the
Trust 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 Debt
Securities and issuing the Trust Securities. See "Guaranty Capital Trust I,"
"Description of Preferred Securities," "Description of Junior Subordinated Debt
Securities" and "Description of Guarantee."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Prospectus are not
historical facts, including, without limitation, statements of future
expectations, projections of results of operations and financial condition,
statements of future economic performance and other forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Corporation to
differ materially from those contemplated in such forward-looking statements. In
addition to the specific matters referred to herein, including, without
limitation, those noted under the caption "Risk Factors," important factors
which may cause actual results to differ from those contemplated in such
forward-looking statements include: (i) the results of the Corporation's efforts
to implement its business strategy; (ii) the effect of economic conditions and
the performance of borrowers; (iii) actions of the Corporation's competitors and
the Corporation's ability to respond to such actions; (iv) the cost of the
Corporation's capital, which may depend in part on the Corporation's portfolio
quality, ratings, prospects and outlook; (v) changes in governmental regulation,
tax rates and similar matters; and (vi) other risks detailed in the
Corporation's other filings with the Commission.
1
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
GUARANTY FINANCIAL CORPORATION
Guaranty Financial Corporation, a Virginia bank holding company
("Guaranty" or the "Corporation"), headquartered in Charlottesville, Virginia,
engages in commercial banking through its subsidiary, Guaranty Bank (the "Bank")
which opened for business in 1981. Until June 30, 1997, the Bank operated as a
federally-chartered savings association. The Bank operates five branch offices,
four of which are in Charlottesville/Albemarle County, Virginia. This area had a
collective population of approximately 108,000 in 1990 according to census
figures, is located in central Virginia 110 miles southwest of Washington, D.C.
and 75 miles west of Richmond, Virginia, and includes the University of
Virginia, the area's largest employer. The two largest financial institutions
operating in Charlottesville and Albemarle County, with a combined 44% of total
deposits at June 30, 1997, were acquired by the same out-of-state regional bank
at year-end 1997. The fifth branch, in Harrisonburg, Virginia opened in May
1997. Harrisonburg is in the Shenandoah Valley, approximately 70 miles west of
Charlottesville, and is the largest city in the Shenandoah Valley with a diverse
manufacturing base and an unemployment rate consistently among the lowest in
Virginia (currently 1.7%). A sixth branch at Lake Monticello in Fluvanna County,
Virginia is expected to open in 1998. Lake Monticello is a planned community
with approximately 11,000 residents, and the nearest bank branch at this time is
eight miles from Guaranty's site. In addition, Guaranty has entered into a
letter of intent, subject to regulatory approval, to lease a seventh branch site
on West Main Street near the University of Virginia Hospital in Charlottesville
that an acquired statewide bank will close in mid-1998. The Corporation's total
deposits at December 31, 1997 were $112.9 million, up 38.8% from $81.4 million
at December 31, 1996. At December 31, 1997 total assets were $130.7 million and
shareholders' equity was $11.9 million.
Since December 31, 1996, the Corporation has hired four senior
officers, including two senior loan officers from larger statewide or regional
banks for construction and commercial lending. Management believes that, with
its existing five branch network, two new branch offices opening in 1998, its
new loan officers and the major mergers occurring in its primary market area,
the significant growth in loans and deposits over the last two years will
continue near term. During 1997, the Bank had residential loan closings of $54.4
million, up 62.9% from the $33.4 million in 1996. The most recent loan officer,
hired in December 1997, was a construction lender in Charlottesville and
Richmond for another large regional bank that was acquired by another
out-of-state bank holding company in late 1997.
The Corporation is a legal entity separate and distinct from the Bank
and its nonbanking subsidiaries. Accordingly, the right of the Corporation, and
thus the right of the Corporation's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of the Corporation in its capacity
as a creditor may be recognized. The principal sources of the Corporation's
revenues are dividends from the Bank. The Corporation is a bank holding company
registered with the Board of Governors of the Federal Reserve under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). The Corporation's
executive offices are located at 1658 State Farm Blvd., Charlottesville,
Virginia, 22911. Its mailing address is P. O. Box 7206, Charlottesville,
Virginia 22906-7206 and its telephone number is (804) 970-1100.
2
<PAGE>
GUARANTY CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) the Declaration and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on October , 1997. The Trust's business and
affairs are conducted by the Trustees: Wilmington Trust Company, as Property
Trustee, Wilmington Trust Company, as Delaware Trustee, and individual
Administrative Trustees who are employees or officers of or affiliated with the
Corporation. The Trust 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 Debt Securities issued by the
Corporation and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. The Junior Subordinated Debt Securities will be
the sole assets of the Trust, and payments under the Junior Subordinated Debt
Securities will be the sole revenues of the Trust. All of the Common Securities
will be owned directly or indirectly by the Corporation.
THE OFFERING
Securities Offered............. $6,000,000 of Preferred Securities
(liquidation amount $25.00 per Preferred
Security). The Trust reserves the right to
increase the Aggregate Liquidation Amount by
not more than $900,000.
Offering Price................. $25.00 per Preferred Security.
Conversion..................... Each Preferred Security is convertible until
maturity, unless previously redeemed or
conversion rights terminated, into Common
Stock of the Corporation at $ per share,
subject to adjustment under certain
conditions. (See "Preferred Securities -
Conversion Rights").
Distribution Dates............. Quarterly, commencing June 15, 1998.
Extension Periods.............. Distributions on Preferred Securities will
be deferred for the duration of any
Extension Period elected by the Corporation
with respect to the payment of interest on
the Junior Subordinated Debt Securities. No
Extension Period will exceed 20 consecutive
quarterly periods or extend beyond the
Stated Maturity of the Junior Subordinated
Debt Securities. See "Description of Junior
Subordinated Debt Securities-Option to
Extend Interest Payment Date" and "Certain
United States Federal Income Tax
Consequences--Interest Income and Original
Issue Discount."
Ranking........................ As long as there has not been an Event of
Default, the Preferred Securities will rank
pari passu, and payments thereon will be
made pro rata, with the Common Securities.
If there has been an Event of Default, the
Preferred Securities will be senior to, and
payments thereon will be made prior to any
payments with respect to, the Common
Securities. See "Description of Preferred
Securities-Subordination of Common
Securities." The Junior Subordinated Debt
Securities will rank pari passu with all
other junior subordinated debt securities to
be issued by the Corporation pursuant to the
Indenture with substantially similar
subordination terms ("Other Debentures"),
and which may be issued and sold (if at all)
to other trusts to be
3
<PAGE>
established by the Corporation (if any), in
each case similar to the Trust ("Other
Trusts"), and will be unsecured and
subordinate and junior in right of payment
to the extent and in the manner set forth in
the Indenture to all Senior Debt of the
Corporation. See "Description of Junior
Subordinated Debt Securities." The Guarantee
will rank pari passu with all other
guarantees (if any) which may be issued by
the Corporation with respect to capital
securities (if any) which may be issued by
Other Trusts ("Other Guarantees") and will
constitute an unsecured obligation of the
Corporation and will rank subordinate and
junior in right of payment to the extent and
in the manner set forth in the Guarantee to
all Senior Debt of the Corporation. See
"Description of Guarantee." In addition,
because the Corporation is a holding
company, the Junior Subordinated Debt
Securities and the Guarantee are effectively
subordinated to all existing and future
liabilities of the Corporation's
subsidiaries, including deposits. See "Risk
Factors-Status of the Corporation as a Bank
Holding Company."
Option to Terminate
Conversion Rights.............. The Corporation may at its option terminate
the convertibility of the Preferred
Securities into Common Stock after , 2001,
if for at least 20 trading days within any
period of 30 consecutive trading days the
Closing Price of the Common Stock exceeds
115% of the Conversion Price.
Redemption..................... The Trust Securities are subject to
mandatory redemption (i) in whole, but not
in part, at the Stated Maturity upon
repayment of the Junior Subordinated Debt
Securities, (ii) in whole, but not in part,
contemporaneously with the optional
redemption at any time by the Corporation of
the Junior Subordinated Debt Securities at
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,
subject to possible regulatory approval and
(iii) in whole or in part, at any time on or
after , 2003, contemporaneously with the
optional redemption by the Corporation of
the Junior Subordinated Debt Securities in
whole or in part, in each case at the
applicable Redemption Price (as defined
herein). See "Description of Preferred
Securities-Redemption."
No Rating...................... The Preferred Securities are not expected to
be rated by any rating service, nor is any
other security issued by the Corporation so
rated.
ERISA Considerations........... Prospective purchasers must carefully
consider the restrictions on purchase set
forth. under "Notice to Investors" and
"Certain -ERISA Considerations."
Proposed Nasdaq OTC Bulletin
Board Symbol................... Application has been made to have the
Preferred Securities approved for quotation
on the Nasdaq OTC Bulletin Board under the
symbol "GSLCP".
4
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Securities will be
invested by the Trust in the Junior Subordinated Debt Securities. The
Corporation intends to apply the net proceeds from the sale of the Junior
Subordinated Debt Securities to its general funds and for general corporate
purposes, including making advances to the Bank to support its continued growth.
Pending any such application by the Corporation, the net proceeds may be
invested in interest-bearing securities.
RISK FACTORS
Prospective investors should carefully consider the matters set forth
under "Risk Factors."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to
fixed charges for the Corporation for each of the years in the four-year period
ended June 30, 1996, for the six months ended December 31, 1996 and for the year
ended December 31, 1997. For purposes of computing these ratios, earnings
represent net income, plus total taxes based on income, plus fixed charges.
Fixed charges include interest expense (ratios are presented both excluding and
including interest on deposits), the estimated interest component of net rental
expense and amortization of debt expense.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31 December 31 Years Ended June 30
----------- ----------- ------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
Excluding interest on deposits 2.24x .99x 1.48x 1.21x .83x 1.52x
Including interest on deposits 1.23x 1.00x 1.19x 1.10x .90x 1.29x
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following unaudited consolidated summary sets forth selected
financial data for the Corporation and its subsidiaries for the periods and at
the dates indicated. The following summary is qualified in its entirety by the
detailed information and the financial statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31 December 31 Year Ended June 30
----------- ----------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data (Dollars in thousands, except per share data)
Gross interest income................ $9,520 $4,276 $7,617 $6,788 $6,684 $7,717
Gross interest expense............... 6,038 2,940 5,192 4,663 5,073 5,094
Net interest income.................. 3,482 1,336 2,425 2,125 1,611 2,623
Provision (credit) for possible
loan losses........................ 122 92 57 (9) 74 37
Net interest income after
provision for loan losses.......... 3,360 1,244 2,368 2,134 1,537 2,586
Non-interest income.................. 1,867 462 1,107 872 126 828
Non-interest expense................. 3,843 1,716 2,487 2,530 2,182 1,958
Income (loss) before income taxes 1,384 (10) 988 476 (519) 1,456
Income taxes......................... 486 (4) 344 101 (235) 483
Income before cumulative effect of
change in accounting principle..... 898 (6) 644 375 (284) 973
Cumulative effect of change in
accounting for income taxes........ - - - - (196) -
------- ------- ------- ------- ------- -------
Net income........................... $897 $(6) $644 $375 $(480) $973
==== ==== ==== ==== ====== ====
Per Share Data (1)
Basic and diluted net income
(loss) (2)......................... $.61 $(.01) $.70 $.70 $(.90) $1.81
Cash dividends....................... .12 .05 .05 - - .25
Book value at period end............. 7.90 7.12 6.91 6.57 6.57 7.47
Tangible book value at period end.... 7.90 7.12 6.91 6.57 6.57 7.47
Period-End Balance Sheet Data
Total assets......................... $130,708 $116,020 $110,161 $89,461 $88,256 $92,832
Total loans.......................... 99,675 81,270 84,081 75,221 77,755 70,195
Total deposits....................... 112,947 81,401 74,687 52,461 53,467 50,020
Long-term debt....................... 2,360 2,706 3,144 3,981 4,834 9,499
Shareholders' equity................. 11,860 6,576 6,349 6,016 3,531 4,001
Shares outstanding...................1,501,383 924,008 919,168 915,568 537,168 537,168
Performance Ratios
Return on average assets............. .71% (.01%) .64% .41% (.49%) 1.00%
Return on average shareholders'
equity............................. 9.11 (.11) 10.24 9.67 (12.00) 26.31
Average shareholders' equity to
average total assets............... 7.77 5.68 6.24 4.22 4.07 3.80
Net interest margin (3).............. 2.96 2.50 2.54 2.38 1.68 2.82
Asset Quality Ratios
Net charge-offs to average loans..... .06% .01% .02% .00% .09% (.03%)
Allowance to period-end gross loans.. .93 1.02 .89 .93 .93 1.02
Allowance to non-performing loans.... 65.11 51.75 52.82 47.61 42.74 32.91
Nonaccrual loans to gross loans...... 1.42 1.97 1.67 1.94 1.31 1.27
Nonperforming assets to gross loans
and foreclosed properties.......... 1.49 2.04 1.72 2.11 1.60 2.83
Capital and Liquidity Ratios
Risk-based
Tier 1 capital..................... 14.29% 11.64% 12.13% 13.31% 7.75% 9.05%
Total capital...................... 15.42 12.89 13.28 14.56 9.01 10.31
Leverage capital ratio............... 9.34 5.81 6.01 6.72 4.00 4.32
Total equity to total assets......... 9.07 5.66 5.76 6.72 4.00 4.32
</TABLE>
- -------------------
(1) All per share figures have been adjusted to reflect a two-for-one stock
split on January 15, 1996.
(2) Net income per share is computed using the weighted average outstanding
shares.
(3) Net interest margin is calculated as tax-equivalent net interest income
divided by average earning assets and represents the Corporation's net
yield on its earning assets.
6
<PAGE>
RISK FACTORS
Prospective purchasers of the Preferred Securities should consider
carefully, in addition to the other information contained in this Prospectus,
the following risk factors before purchasing shares of the Preferred Securities
offered hereby. This Prospectus contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other comparable
terminology. The Corporation cautions readers that the following important
factors, among others, in some cases have affected, and in the future could
affect, the Corporation's actual results and could cause the Corporation's
actual results in 1998 and beyond to differ materially from those expressed in
any forward-looking statements made herein.
Ranking of Obligations Under the Guarantee and the Junior Subordinated Debt
Securities
The obligations of the Corporation under the Guarantee issued by the
Corporation for the benefit of the holders of Preferred Securities and under the
Junior Subordinated Debt Securities are unsecured and rank subordinate and
junior in right of payment to all Senior Debt (which, as defined, includes all
outstanding subordinated debt of the Corporation). At December 31, 1997, the
Corporation had no aggregate outstanding Senior Debt on an unconsolidated basis.
The obligations of the Corporation under the Guarantee also rank subordinate and
junior in right of payment to creditors of the Bank and the Corporation's other
subsidiaries. See "Status of the Corporation as a Bank Holding Company." Upon
the issuance of the Junior Subordinated Debt Securities, the Corporation will
not have any indebtedness that ranks pari passu with or junior to its
obligations under the Guarantee and the Junior Subordinated Debt Securities.
None of the Indenture, the Guarantee or the Declaration places any limitation on
the amount of secured or unsecured debt, including Senior Debt, that may be
incurred by the Corporation or any subsidiary. See "Description of Junior
Subordinated Debt Securities-Subordination" and "Description of Guarantee-Status
of the Guarantee."
The ability of the Trust to pay amounts due on the Preferred Securities
is solely dependent upon the Corporation making payments on the Junior
Subordinated Debt Securities as and when required.
Status of the Corporation as a Bank Holding Company
The Corporation is a legal entity separate and distinct from the Bank,
although the principal source of the Corporation's cash revenues is dividends
from the Bank. The right of the Corporation to participate in the distribution
of assets of any subsidiary, including the Bank, upon the latter's liquidation,
reorganization or otherwise (and thus the ability of the holders of Preferred
Securities to benefit indirectly from any such distribution) will be subject to
the prior claims of such subsidiary's creditors, which will take priority except
to the extent that the Corporation may itself be a creditor of such subsidiary
with a recognized claim. Accordingly, the Junior Subordinated Debt Securities
will be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debt Securities
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debt Securities. Because the Corporation is a holding company with
limited assets and liabilities, a substantial portion of the consolidated
liabilities of the Corporation are liabilities of its subsidiaries. The
Guarantee will constitute an unsecured obligation of the Corporation and will
rank subordinate and junior in right of payment to all Senior Debt in the same
manner as the Junior Subordinated Debt Securities.
As a holding company, the Corporation conducts its operations through
its subsidiaries and, therefore, its principal source of cash is receipt of
dividends from the Bank. However, there are legal limitations on the source and
amount of dividends that a Virginia-chartered, Federal Reserve member bank such
as the Bank is
7
<PAGE>
permitted to pay. A Virginia-chartered bank may pay dividends only from net
undivided profits. Additionally, a dividend may not be paid if it would impair
the paid-in capital of the bank. In addition, prior approval of the Federal
Reserve is required if the total of all dividends declared by a member bank in
any calendar year will exceed the sum of that bank's net profits for that year
and its retained net profits for the preceding two calendar years, less any
required transfers to either surplus or any fund for retirement of any preferred
stock. At January 1, 1998, the Bank could have paid approximately $1.7 million
in dividends to the Corporation without prior Federal Reserve approval. The
payment of dividends by the Bank may also be affected by other factors, such as
requirements for the maintenance of adequate capital. In addition, the Federal
Reserve is authorized to determine, under certain circumstances relating to the
financial condition of a member bank, whether the payment of dividends would be
an unsafe or unsound banking practice and to prohibit payment thereof.
Rapid Growth
It is the intention of Guaranty's management to expand Guaranty's asset
base. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Overview." In particular, Guaranty hopes to utilize the
capital raised in the Offering to support anticipated increases in its deposit
base and loans. Additional capital also would increase Guaranty's legal lending
limit under federal law, which in turn would allow Guaranty to compete more
actively in its market area for larger construction, land development,
commercial real estate and business loans. Guaranty's ability to manage growth
successfully will depend on its ability to maintain cost controls and asset
quality while attracting additional loans and deposits, as well as on factors
beyond Guaranty's control, such as economic conditions and interest rate trends.
If Guaranty grows too quickly and is not able to control costs and maintain
asset quality, Guaranty's growth could materially adversely affect its financial
performance.
Option to Extend Interest Payment Date; Tax Consequences; Market Price
Consequences
So long as no Debenture Event of Default (as defined herein) has
occurred and is continuing, the Corporation has the right under the Indenture to
defer the payment of interest on the Junior Subordinated Debt Securities at any
time or from time to time for a period not exceeding 20 consecutive quarterly
periods with respect to each Extension Period, provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. As a consequence of any such deferral, quarterly
Distributions on the Preferred Securities by the Trust will also be deferred
(and the amount of Distributions to which holders of the Preferred Securities
are entitled will accumulate additional Distributions thereon at % per annum
thereof, compounded quarterly from the relevant payment date for such
Distributions during any such Extension Period). During any Extension Period,
the Corporation 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 Corporation's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, on, or repay,
repurchase or redeem any debt securities of the Corporation (including Other
Debentures) that rank pari passu with or junior in interest to, the Junior
Subordinated Debt Securities or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including Other Guarantees) if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debt Securities (other
than (a) dividends or distributions in Common Stock of the Corporation, (b) any
Declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) purchases or acquisitions of shares of the
Corporation's Common Stock in connection with the satisfaction by the
Corporation of its obligations under any employee benefit plan or any other
contractual obligation of the Corporation (other than a contractual obligation
ranking pari passu with or junior to the Junior Subordinated Debt Securities),
(e) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock or (f) the
purchase of fractional
8
<PAGE>
interests in shares of the Corporation's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any Extension Period, the
Corporation may further extend such Extension Period, provided, however, that
such extension does not cause such Extension Period to exceed 20 consecutive
quarterly periods or to extend beyond the Stated Maturity. Upon the termination
of any Extension Period and the payment of all interest then accrued and unpaid
on the Junior Subordinated Debt Securities (together with interest thereon
accrued at % per annum, compounded quarterly, to the extent permitted by
applicable law), and subject to the foregoing limitations, the Corporation may
elect to begin a new Extension Period. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period. See
"Description of Preferred Securities-Distributions" and "Description of Junior
Subordinated Debt Securities-Option to Extend Interest Payment Date."
If an Extension Period occurs, for United States federal income tax
purposes, a holder of Preferred Securities will continue to include income (in
the form of original issue discount) in respect of its pro rata share of the
Junior Subordinated Debt Securities held by the Trust as long as the Junior
Subordinated Debt Securities remain outstanding. As a result, during an
Extension Period a holder of Preferred 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 the
Trust if the holder disposes of the Preferred Securities prior to the record
date for the payment of Distributions thereafter. See "Certain United States
Federal Income Tax Consequences-Interest Income and Original Issue Discount" and
"Sales or Redemption of the Preferred Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debt Securities in the future, the market
price of the Preferred Securities is likely to be adversely affected. A holder
that disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
the Corporation's right to defer interest payments on the Junior Subordinated
Debt Securities, the market price of the Preferred Securities (which represent
beneficial ownership interests in the Trust holding the Junior Subordinated Debt
Securities as its sole assets) may be more volatile than the market prices of
other securities that are not subject to such deferrals.
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 Corporation has the
right to redeem the Junior Subordinated Debt Securities 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 Preferred Securities and Common Securities. The
ability of the Corporation to exercise its rights to redeem the Junior
Subordinated Debt Securities 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
Junior Subordinated Debt Securities-Optional Redemption" and "Description of
Preferred Securities-Mandatory Redemption" and "Description of Preferred
Securities-Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities."
A "Tax Event" means the receipt by the Trust of an opinion of counsel
to the Corporation 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 Preferred Securities, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days of the delivery of such
opinion,
9
<PAGE>
subject to United States federal income tax with respect to income received or
accrued on the Junior Subordinated Debt Securities (ii) interest payable by the
Corporation on the Junior Subordinated Debt Securities is not, or within 90 days
of the delivery of such opinion will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes or (iii) the
Trust is, or will be within 90 days of the delivery of the opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
The Corporation believes that under current law it is entitled to
deduct the interest accruing on the Junior Subordinated Debt Securities. Under
the Taxpayer Relief Act of 1997, enacted on August 5, 1997, issuers of certain
convertible debt instruments are not entitled to deduct interest thereon. For
example, interest is not deductible if the debt instrument is convertible into
equity of the issuer (or a related party) at the option of the holder and there
is a substantial certainty that the holder will exercise the conversion option.
Similarly, interest is not deductible if the debt instrument is part of an
arrangement which is reasonably expected to result in a conversion at the option
of the issuer (or a related party). The Corporation believes that this
legislation should not apply to the Junior Subordinated Debt Securities. The
Internal Revenue Service (the "Service"), however, has not yet issued any
guidance regarding its interpretation of the new legislation. There can be no
assurance that the Service will not take the position that interest on the
Junior Subordinated Debt Securities is not deductible. Accordingly, there can be
no assurance that an audit or future interpretation by the Service of the new
legislation will not result in a Tax Event and an early redemption of the
Preferred Securities before, or after, , 2001 at the Redemption Price.
In addition, in recent years, there have been several proposals to
adopt legislation which, if enacted and made applicable to the Junior
Subordinated Debt Securities, would preclude the Corporation from deducting
interest thereon. The most recent proposal was made by the Clinton
Administration in 1997. Such proposals have not been adopted by Congress, but
there can be no assurance that similar proposals will not be adopted in the
future and made applicable to the Junior Subordinated Debt Securities.
Accordingly, there can be no assurance that any such legislation will not result
in a Tax Event which would permit the Corporation to cause a redemption of the
Preferred Securities before, or after, , 2001 at the Redemption Price.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel to the Corporation 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 Trust 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
Preferred Securities.
A "Capital Treatment Event" means the reasonable determination by the
Corporation 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
Preferred Securities, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount up to the Liquidation Amount
of the Preferred Securities as 25% of the Corporation's "Tier I Capital" (or the
then equivalent thereof) for purposes of the risk-based capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation. See "Description of Junior Subordinated Debt Securities -Optional
Redemption," "Description of Preferred Securities-Mandatory Redemption" and
"Description of Preferred Securities-Liquidation of the Trust and Distribution
of Junior Subordinated Debt Securities."
10
<PAGE>
Liquidation of the Trust and Distribution of Junior Subordinated Debt Securities
The Corporation, as the holder of the outstanding Common Securities,
will have the right at any time to terminate the Trust and cause the Junior
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities. Under current United States federal income tax law, a distribution
of Junior Subordinated Debt Securities upon the dissolution of the Trust would
not be a taxable event to holders of the Preferred Securities. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the Junior Subordinated Debt Securities may constitute a
taxable event to holders of Preferred Securities. See "Certain United States
Federal Income Tax Consequences-Distribution of the Junior Subordinated Debt
Securities to Holders of Preferred Securities."
There can be no assurance as to the market prices for Preferred
Securities or Junior Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a liquidation of the Trust occurs.
Accordingly, the Preferred Securities or the Junior Subordinated Debt Securities
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debt Securities on termination of the Trust,
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Junior Subordinated Debt Securities and should
carefully review all the information regarding the Junior Subordinated Debt
Securities contained herein. See "Description of Preferred
Securities-Liquidation of the Trust and Distribution of the Junior Subordinated
Debt Securities" and "Description of Junior Subordinated Debt
Securities-General."
Termination of Conversion Rights
On and after , 2001, the Corporation may, subject to certain conditions
including advance public notice, at its option, cause the conversion rights of
holders of Junior Subordinated Debt Securities to terminate, provided that the
Closing Price of the Common Stock exceeds 115% of the then applicable Conversion
Price of the Preferred Securities for a specified period, in which case the
right to convert the Preferred Securities into Common Stock will likewise
terminate. See "Description of Preferred Securities-Conversion
Rights-Termination of Conversion Rights."
Rights Under the Guarantee
The Guarantee guarantees to the holders of the Trust Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Trust Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to any Trust Securities called for redemption, to
the extent that the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of
the Trust (unless the Junior Subordinated Debt Securities are distributed to
holders of the Trust Securities or all of the Preferred Securities are
redeemed), 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
the Trust has funds on hand available therefor at such time, and (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Trust Securities after the satisfaction of liabilities to creditors of the Trust
as required by applicable law.
The holders of not less than a majority in aggregate Liquidation Amount
of the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
(as defined herein) 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 Trust Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Corporation were to default on its obligation to pay amounts
payable under the Junior Subordinated Debt
11
<PAGE>
Securities, the Trust would lack funds for the payment of Distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and, in
such event, holders of the Preferred Securities would not be able to rely upon
the Guarantee for payment of such amounts. Instead, in the event a Debenture
Event of Default shall have occurred and be continuing, and such event is
attributable to the failure of the Corporation to pay principal of or interest
on the Junior Subordinated Debt Securities on the applicable payment date, then
a holder of Preferred Securities may institute a Direct Action. Notwithstanding
any payments made to a holder of Preferred Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to pay
the principal of and interest on the Junior Subordinated Debt Securities, and
the Corporation shall be subrogated to the rights of the holder of such
Preferred Securities with respect to payments on the Preferred Securities to the
extent of any payments made by the Corporation to such holder in any Direct
Action. Except as described herein, holders of Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities or assert directly any other rights in
respect of the Junior Subordinated Debt Securities. See "Description of Junior
Subordinated Debt Securities-Enforcement of Certain Rights by Holders of
Preferred Securities," "Description of Junior Subordinated Debt
Securities-Debenture Events of Default" and "Description of Guarantee." The
Declaration provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture. Wilmington
Trust Company will act as Guarantee Trustee under the Guarantee Agreement and
will hold the Guarantee for the benefit of the holders of the Preferred
Securities. Wilmington Trust Company will also act as Property Trustee under the
Declaration and as Debenture Trustee under the Indenture.
Limited Voting Rights
Holders of Preferred Securities will generally have limited voting
rights relating only to the modification of the Preferred Securities, the
dissolution, winding-up or liquidation of the Trust, and the exercise of the
Trust's rights as holder of Junior Subordinated Debt Securities. The right to
vote to appoint, remove or replace the Property Trustee, the Delaware Trustee or
the Administrative Trustees is vested exclusively in the holder of the Common
Securities except, with respect to the Property Trustee and the Delaware
Trustee, upon the occurrence of certain events described herein. The Property
Trustee, the Administrative Trustees and the Corporation may amend the
Declaration without the consent of holders of Preferred Securities to ensure
that the Trust will not be classified for United States Federal income tax
purposes as an association taxable as a corporation or, as other than a grantor
trust, even if such action adversely affects the interests of such holders. See
"Description of Preferred Securities-Removal of Trustees" and "Voting Rights;
Amendment of the Declaration."
Regulatory Capital Requirements
The Corporation and the Bank are subject to regulatory capital
guidelines. At December 31, 1997, the Bank was in compliance with applicable
regulatory capital requirements. The Corporation, at that date, had a total
capital to risk-weighted assets ratio of 15.4% and a Tier I Capital to
risk-weighted assets ratio of 14.3%, both above the minimum requirements of 8.0%
and 4.0%, respectively. The Corporation's leverage ratio at that date was 9.3%.
Although the minimum leverage ratio requirement is 3.0%, most bank
holding companies, including the Corporation, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the minimum.
However, the Federal Reserve may assign a specific capital ratio to an
individual bank holding company, including the Corporation, based on its
assessment of asset quality, earnings performance, interest-rate risk and
liquidity. As of the date of this Prospectus, the Federal Reserve has not
advised the Corporation of a specific leverage ratio requirement.
There can be no assurance that either the Corporation or the Bank will
continue to be able to meet their respective minimum capital ratios. In the
event that the Corporation or the Bank falls below the minimum
12
<PAGE>
capital requirements described above, agencies may take regulatory action
including, in the case of the Bank, "prompt corrective action." Such actions
could impair the Corporation's ability to make principal and interest payments
on the Junior Subordinated Debt Securities.
Trading Price
The Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debt Securities. A holder using the accrual method of
accounting (and a cash method holder, during and after an Extension Period or if
the Junior Subordinated Debt Securities are deemed to have been issued with OID)
who disposes of its Preferred Securities between Distribution Record Dates (as
defined herein) will be required to include accrued but unpaid interest (or OID)
on the Junior Subordinated Debt Securities through the date of disposition in
income as ordinary income and to add such amount to its adjusted tax basis in
its share of the underlying Junior Subordinated Debt Securities deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax
basis, 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. See "Certain United States Federal
Income Tax Consequences-Interest Income and Original Issue Discount" and "Sales
or Redemption of the Preferred Securities."
Absence of Public Market and Transfer Restrictions
There is no existing market for the Preferred Securities and there can
be no assurance as to the liquidity of any markets that may develop for the
Preferred Securities, the ability of the holders to sell their Preferred
Securities or at the price at which holders of the Preferred Securities will be
able to sell their Preferred Securities. Future trading prices of the Preferred
Securities will depend on many factors including, among other things, prevailing
interest rates, the Corporation's operating results, and the market for similar
securities. Although the Corporation intends to apply to have the Preferred
Securities approved for trading on the Nasdaq Over-the-Counter Bulletin Board,
there can be no assurance that such application will be approved, that an active
trading market for the Preferred Securities will develop or, if one does
develop, that it will be maintained. In addition, notwithstanding the
registration of the Preferred Securities, holders who are "affiliates" of the
Corporation or the Trust as defined under Rule 405 of the Securities Act may
publicly offer for sale or resell the Preferred Securities only in compliance
with the provisions of Rule 144 under the Securities Act.
GUARANTY CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) the original Declaration of Trust executed by the Corporation,
as Depositor, Wilmington Trust Company, as Delaware Trustee, and the
Administrative Trustees named therein, which original Declaration of Trust will
be amended and restated and executed by the Corporation, as Depositor,
Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, and the Administrative Trustees named therein (the
"Declaration"), and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on October , 1997. The Trust 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 Debt Securities and (iii) engaging in only those other activities
necessary or incidental thereto. Accordingly, the Junior Subordinated Debt
Securities will be the sole assets of the Trust, and payments under the Junior
Subordinated Debt Securities will be the sole revenues of the Trust. All of the
Common Securities will be owned directly or indirectly by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Preferred Securities, except that upon the occurrence and
continuance of any Debenture Event of Default (or an event that, with notice or
the passage of time, would become such an Event of Default) or an Event of
Default under the Declaration, the rights of the Corporation as holder of the
Common Securities to payment in respect of
13
<PAGE>
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of Preferred Securities--Subordination of Common Securities." The
Corporation will acquire Common Securities in an aggregate Liquidation Amount
equal to approximately 3% of the total capital of the Trust. The Trust has a
term of 40 years, but may terminate earlier as provided in the Declaration. The
Trust's business and affairs are conducted by its trustees, each appointed by
the Corporation as holder of the Common Securities. The trustees for the Trust
will be Wilmington Trust Company, as the Property Trustee, Wilmington Trust
Company, as the Delaware Trustee, and individual trustees as Administrative
Trustees who are employees or officers of or affiliated with the Corporation
(collectively, the "Trustees"). Wilmington Trust Company, as Property Trustee,
will act as sole indenture trustee under the Declaration. Wilmington Trust
Company will also act as trustee under the Guarantee Agreement and the
Indenture. See "Description of Junior Subordinated Debt Securities" and
"Description of Guarantee." The holder of the Common Securities, or the holders
of a majority in Liquidation Amount of the Preferred Securities if an Event of
Default under the Declaration resulting from a Debenture Event of Default has
occurred and is continuing, will be entitled to appoint, remove or replace the
Property Trustee and/or Delaware Trustee. In no event will the holders of the
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each Trustee are
governed by the Declaration. Pursuant to the expense provisions under the
Indenture, the Corporation, as obligor on the Junior Subordinated Debt
Securities, will pay all fees and expenses related to the Trust and the offering
of the Preferred Securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the Trust. See "Description of Preferred
Securities-Expenses and Taxes." The address and telephone number of the
principal executive office of the Trust is c/o:
Guaranty Financial Corporation
1658 State Farm Blvd.
Charlottesville, Virginia 22911
(804) 970-1100
14
<PAGE>
SELECTED FINANCIAL INFORMATION
The following unaudited consolidated summary sets forth selected
financial data for the Corporation and its subsidiaries for the periods and at
the dates indicated. The following summary is qualified in its entirety by the
detailed information and the financial statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31 December 31 Year Ended June 30
----------- ----------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
Income Statement Data (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Gross interest income................ $9,520 $4,276 $7,617 $6,788 $6,684 $7,717
Gross interest expense............... 6,038 2,940 5,192 4,663 5,073 5,094
Net interest income.................. 3,482 1,336 2,425 2,125 1,611 2,623
Provision (credit) for possible
loan losses........................ 122 92 57 (9) 74 37
Net interest income after
provision for loan losses.......... 3,360 1,244 2,368 2,134 1,537 2,586
Non-interest income.................. 1,867 462 1,107 872 126 828
Non-interest expense................. 3,843 1,716 2,487 2,530 2,182 1,958
Income (loss) before income taxes 1,384 (10) 988 476 (519) 1,456
Income taxes......................... 486 (4) 344 101 (235) 483
Income before cumulative effect of
change in accounting principle..... 898 (6) 644 375 (284) 973
Cumulative effect of change in
accounting for income taxes........ - - - - (196) -
------- ------- ------- ------- ------- -------
Net income........................... $897 $(6) $644 $375 $(480) $973
==== ==== ==== ==== ====== ====
Per Share Data (1)
Basic and diluted net income
(loss) (2)......................... $.61 $(.01) $.70 $.70 $(.90) $1.81
Cash dividends....................... .12 .05 .05 - - .25
Book value at period end............. 7.90 7.12 6.91 6.57 6.57 7.47
Tangible book value at period end.... 7.90 7.12 6.91 6.57 6.57 7.47
Period-End Balance Sheet Data
Total assets......................... $130,708 $116,020 $110,161 $89,461 $88,256 $92,832
Total loans.......................... 99,675 81,270 84,081 75,221 77,755 70,195
Total deposits....................... 112,947 81,401 74,687 52,461 53,467 50,020
Long-term debt....................... 2,360 2,706 3,144 3,981 4,834 9,499
Shareholders' equity................. 11,860 6,576 6,349 6,016 3,531 4,001
Shares outstanding...................1,501,383 924,008 919,168 915,568 537,168 537,168
Performance Ratios
Return on average assets............. .71% (.01%) .64% .41% (.49%) 1.00%
Return on average shareholders'
equity............................. 9.11 (.11) 10.24 9.67 (12.00) 26.31
Average shareholders' equity to
average total assets............... 7.77 5.68 6.24 4.22 4.07 3.80
Net interest margin (3).............. 2.96 2.50 2.54 2.38 1.68 2.82
Asset Quality Ratios
Net charge-offs to average loans..... .06% .01% .02% .00% .09% (.03%)
Allowance to period-end gross loans.. .93 1.02 .89 .93 .93 1.02
Allowance to non-performing loans.... 65.11 51.75 52.82 47.61 42.74 32.91
Nonaccrual loans to gross loans...... 1.42 1.97 1.67 1.94 1.31 1.27
Nonperforming assets to gross loans
and foreclosed properties.......... 1.49 2.04 1.72 2.11 1.60 2.83
Capital and Liquidity Ratios
Risk-based
Tier 1 capital..................... 14.29% 11.64% 12.13% 13.31% 7.75% 9.05%
Total capital...................... 15.42 12.89 13.28 14.56 9.01 10.31
Leverage capital ratio............... 9.34 5.81 6.01 6.72 4.00 4.32
Total equity to total assets......... 9.07 5.66 5.76 6.72 4.00 4.32
</TABLE>
- -------------------
(1) All per share figures have been adjusted to reflect a two-for-one stock
split on January 15, 1996.
(2) Net income per share is computed using the weighted average outstanding
shares.
(3) Net interest margin is calculated as tax-equivalent net interest income
divided by average earning assets and represents the Corporation's net
yield on its earning assets.
15
<PAGE>
THE CORPORATION
The following discussion includes selected financial and other data for
the Corporation and its subsidiaries and is qualified in its entirety by the
detailed information, and should be read in conjunction with the financial
statements and other information included elsewhere in this Prospectus.
Guaranty Financial Corporation, a Virginia corporation (the
"Corporation"), is a bank holding company that was formed in 1995 and is
headquartered in Charlottesville, Virginia. The Corporation's only subsidiary is
Guaranty Bank (the "Bank"), which opened for business in 1981.
The Bank operates four full service banking offices in
Charlottesville/Albemarle County, Virginia and is the only community bank
headquartered or with a branch in Albemarle County or Charlottesville. This area
had a collective population of approximately 108,000 in 1990 according to census
figures, is located in central Virginia 110 miles southwest of Washington, D.C.
and 75 miles west of Richmond, Virginia, and includes the University of
Virginia, the area's largest employer. The two largest financial institutions
operating in Charlottesville and Albemarle County, with 44% of total deposits at
June 30, 1997, were acquired by the same out-of-state regional bank at year-end
1997.
A fifth branch, in Harrisonburg, Virginia opened in May 1997.
Harrisonburg is in the Shenandoah Valley, approximately 70 miles west of
Charlottesville. The Harrisonburg/Rockingham County area is the largest area in
the Shenandoah Valley, which extends from Winchester to Lexington, Virginia. The
Harrisonburg/Rockingham County area is a manufacturing center with an
unemployment rate consistently among the lowest in Virginia (currently 1.7%)
located on Interstate 81 between Interstates 64 and 66. Major manufacturers
include WLR Foods, Inc.; Rocco, Inc.; Merck & Co., Inc.; Tenneco-Walker; Banta
Corporation; and Reynolds Metals Company. James Madison University, with 13,000
students, is located in Harrisonburg.
A sixth branch at Lake Monticello in Fluvanna County, Virginia is
expected to open in 1998. Fluvanna County is immediately east of Albemarle
County. The Lake Monticello area has a population of approximately 11,000 and
the nearest bank branch today is approximately eight miles from the Bank's
location. In addition, Guaranty has entered into a letter of intent, subject to
regulatory approval, to lease a seventh branch site near the University of
Virginia Hospital in Charlottesville that an acquired regional bank will close
in mid-1998.
When the Corporation decided to convert the Bank from a federal savings
association to a Virginia-chartered commercial bank, it also decided to
restructure the Bank's balance sheet. Historically, the Bank funded a
significant percentage of its loans with borrowings, primarily Federal Home Loan
Bank advances, and a significant percentage of its loan portfolio consisted of
long term, fixed rate residential mortgage loans. From June 30, 1995 to December
31, 1997, deposits increased from $52.5 million to $112.9 million. Over the same
period FHLB advances and other borrowings declined from 47.7% of deposits to
2.7%.
Fixed-rate residential mortgage loans comprised 29.4% and 24.6% of
gross loans at June 30, 1995 and December 31, 1997, respectively. In January
1997 the Bank adopted a policy of selling all new fixed-rate residential
mortgage loans and has emphasized originations of commercial mortgage, consumer
and construction loans.
The Corporation's total deposits at December 31, 1997 were $112.9
million, up 38.7% from $81.4 million at December 31, 1996. Net income for 1997
was $898,000, up 161.8% from the $343,000 in calendar year 1996 which included a
one-time SAIF assessment of $225,000. At December 31, 1997 total assets were
$130.7 million and shareholders' equity was $11.9 million.
16
<PAGE>
Since December 31, 1996, the Corporation has hired four senior
officers, including two senior loan officers from larger regional banks for
construction and commercial lending. Management believes that, with its existing
five branch network, two new branch offices opening in 1998, its new loan
officers and the major mergers occurring in its primary market area, the
significant growth in loans and deposits over the last two years will continue
near term. During 1997, the Bank had residential loan closings of $54.4 million,
up 62.9% from the $33.4 million in 1996. The most recent loan officer, hired in
December 1997, was a construction lender in Charlottesville and Richmond for
another large regional bank acquired by another out-of-state bank holding
company in late 1997.
The Corporation is a legal entity separate and distinct from the Bank
and its nonbanking subsidiaries. Accordingly, the right of the Corporation, and
thus the right of the Corporation's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of the Corporation in its capacity
as a creditor may be recognized. The principal sources of the Corporation's
revenues are dividends from the Bank.
The Corporation is a bank holding company registered with the Federal
Reserve under the BHCA. The Corporation's executive offices are located at 1658
State Farm Blvd., Charlottesville, Virginia 22911. Its mailing address is P. O.
Box 7206, Charlottesville, Virginia 22906-7206, and its telephone number is
(804) 970-1100.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following commentary discusses major components of Guaranty's
business and presents an overview of its consolidated financial position and
results of operations at and for the fiscal year ended December 31, 1997, the
six months ended December 31, 1996 and the fiscal years ended June 30, 1996 and
1995. This discussion should be reviewed in conjunction with the consolidated
financial statements and accompanying notes and other statistical information
presented elsewhere in this Prospectus. All income statement data for calendar
year 1996 are unaudited.
Guaranty is not aware of any current recommendations by regulatory
authorities, which, if implemented, would have a material effect on its
liquidity, capital resources or results of operations. There are no agreements
between Guaranty and the Federal Reserve, the Virginia State Corporation
Commission (the "SCC") or the FDIC, nor has any regulatory agency made any
recommendations concerning the operations of Guaranty that could have a material
effect on its liquidity, capital resources or results of operations.
Overview
On June 30, 1997, Guaranty Bank, the operating subsidiary of the
Corporation, converted from a federally-chartered savings association to a
Virginia-chartered, federal reserve member commercial bank. In anticipation of
the charter conversion, in early 1997, Guaranty began to implement a strategy to
gradually increase its net interest margin and profitability to levels more
characteristic of community banks operating in Virginia. In the second half of
1997, three statewide banks were acquired by out-of-state banks. Two of these
three acquired banks had a combined 44% share of bank deposits in
Charlottesville and Albemarle County at June 30, 1997. After the acquisitions
were announced, Guaranty immediately began to experience an increase in deposits
and, just as importantly, has been able to recruit experienced loan officers
with loyal customers who were displaced by the acquisitions. Guaranty's
strategy, is influenced by the consolidation occurring in its markets and is
expected to result in substantial loan and deposit growth in 1998. Because
growth in the amounts anticipated would significantly alter the size and
structure of Guaranty's balance sheet, Guaranty believes it is appropriate to
describe its strategy and expectations, which include the following:
In January 1997, to reduce interest rate risk and improve liquidity,
Guaranty began to sell all newly originated fixed-rate residential
mortgage loans. To further reduce interest rate risk and provide
liquidity for anticipated growth in portfolio loans, Guaranty sold an
additional $9.2 million in fixed-rate mortgage loans and
mortgage-backed securities in January 1998. Management anticipates that
these funds, deposit growth, sales of loans and loan participations
and, if necessary, FHLB advances will provide the liquidity needed to
fund loan growth.
Guaranty is focusing new originations of portfolio loans on commercial,
consumer, residential construction and land development loans, which
are currently priced approximately 175 to 250 basis points above
fixed-rate residential mortgage loans. Guaranty hired a commercial loan
officer in May 1997 and a construction loan officer in December 1997,
both of whom previously were with large banks in Virginia. Loans in the
above categories increased to an aggregate 42.6% of gross loans at
December 31, 1997 from 26.7% at December 31, 1996. A significant
portion of this increase is attributable to hiring these two loan
officers and to business shifting to Guaranty following the 1997
acquisitions of statewide banks by out-of-state banks. Guaranty expects
substantial loan growth in 1998 and has budgeted a $12.0 million
increase in commercial real estate loan balances, an increase of $30.0
million to $45.0 million in construction and land development loan
balances, an increase of $4.6 million in consumer loans, and an
additional $4.2 million in small business loans in 1998. Budgeted
amounts are merely estimates and a variety of factors, including
inadequate deposit growth,
18
<PAGE>
general economic conditions and competition for loans could cause
Guaranty to fall short of these targets.
Guaranty has emphasized deposit growth to fund loan growth and has
de-emphasized Federal Home Loan Bank advances and other short term
borrowings. Deposits increased from $81.4 million at December 31, 1996
to $112.9 million at December 31, 1997. Growth resulted from new
branches that opened in December 1996 and May 1997, as well as from
customer migration after the 1997 acquisitions of two statewide banks
by out-of-state banks that, in the aggregate, held 44% of bank deposits
in Charlottesville and Albemarle County at June 30, 1997. Despite its
deposit growth, Guaranty held only 7.0% of bank deposits in
Charlottesville and Albemarle County at June 30, 1997. Federal Home
Loan Bank advances and other short term borrowings decreased from $24.2
million at December 31, 1996 to $3.0 million at December 31, 1997.
In February 1998, a senior officer was recruited from an acquired
statewide bank to manage and reorganize Guaranty's branch network.
Guaranty's focus in its branch network for 1998 will be both to improve
installment lending programs to individuals and to continue the
emphasis on deposit growth. Guaranty expects significant growth in
deposits, primarily from customer migration and one or two new
branches. Having budgeted $30.0 million for deposit growth during 1998,
Guaranty had already experienced a growth of $5.0 million in
certificates of deposit and $3.0 million in checking accounts by the
end of February 1998. Although substantial deposit growth will be
necessary to fund anticipated loan growth and may restrain efforts to
reduce deposit costs, Guaranty plans to lower interest rates on its
certificates of deposit, and to aggressively promote customer checking
accounts in 1998.
Guaranty plans to establish monthly sales goals for each branch for
loan and deposit products. Guaranty also plans to provide an improved
array of products for customers, including additional checking account
options, sweep accounts for business customers and debit cards.
Guaranty has received regulatory approval to open a sixth full-service
retail branch at Lake Monticello, a planned community in Fluvanna
County, Virginia. Opening is anticipated to occur in mid-summer of
1998. In addition, Guaranty has entered into a letter of intent,
subject to regulatory approval, to lease a seventh branch site on West
Main Street near the University of Virginia in Charlottesville that an
acquired statewide bank will close in mid-1998.
Net Income
Net income for the year ending December 31, 1997 was $898,000, ($.61
per share), a 161.8% increase when compared to calendar year 1996 earnings of
$343,000 ($.37 per share). These increased earnings were primarily a result of
an increased net interest margin and gains on the sale of loans and securities
resulting from a favorable interest rate environment during a restructuring of
the balance sheet. These increased revenues were partially offset by expenses
relating to the conversion to a state-chartered commercial bank in June 1997 and
costs relating to the expansion of the branch network. Calendar 1997 was
positively impacted by the first full year of operations for the combined
corporate headquarters and branch that was opened on the east side of
Charlottesville, Virginia in December 1996. Also, in May 1997, a fifth
full-service branch was opened in Harrisonburg, Virginia.
In calendar year 1996, earnings were adversely affected by the one-time
SAIF assessment and reclassification of investment securities resulting in a
charge to earnings of approximately $325,000 (net of tax effect). The return on
average assets was 0.7% for the year ended December 31, 1997, compared to 0.3%
for the calendar year ended December 31, 1996.
19
<PAGE>
For the six months ended December 31, 1996, the Corporation experienced
a 102% decrease in earnings from the same period in 1995. During the six months
ended December 31, 1996, the Corporation's net loss was $6,000 compared to
earnings of $299,000 for the same period in 1995. Income decreased during the
six months ended December 31, 1996, due to a loss of $237,000 when it
restructured its investment portfolio and a one time special assessment of
$347,000 to recapitalize the Savings Association Insurance Fund ("SAIF"). In
order for Guaranty to convert to a commercial bank, securities classified as
available for sale had to be reclassified as trading securities. This resulted
in a mark to market loss of $237,000 which was charged against net income and
adjusted the basis of the securities. Without these items, Guaranty would have
reported an after tax net income of $376,000 for the six months ended December
31, 1996.
Guaranty's performance in its fiscal year ended June 30, 1996 showed
improvement over the year ended June 30, 1995. Net income increased 71.0% in
fiscal 1996 to $643,000 compared to $376,000 in fiscal 1995. After a 69.4%
increase in average shares outstanding following a 360,000 share public offering
completed on June 22, 1995, earnings per share were constant at $.70. Return on
average equity during fiscal 1996 increased to 10.2% from 9.7% for fiscal 1995.
The return on average assets was 0.6% in fiscal 1996, compared to 0.4% in fiscal
1995. Fiscal 1996 marked the first year since 1989 that Guaranty's average
earning assets have increased significantly over the prior fiscal year. From
1989 through fiscal 1995, due to capital constraints, management was forced to
downsize the Bank. Average interest earning assets increased 6.9% from $89.42
million in fiscal 1995 to $95.57 million in fiscal 1996. Total interest bearing
deposits on average increased 13.8% from $54.43 million in fiscal 1995 to $61.9
million in fiscal 1996. Average balances of securities increased 38.0% while, on
average, loans were relatively flat, up only 2.0% from fiscal 1995 to fiscal
1996.
Net Interest Income
Net interest income is the major component of Guaranty's earnings and
is equal to the amount by which interest income exceeds interest expense.
Earning assets consist primarily of loans and securities, while deposits and
borrowings represent the major portion of interest bearing liabilities. Changes
in the volume and mix of assets and liabilities, as well as changes in the
yields and rates paid, determine changes in net interest income. The net
interest margin is calculated by dividing net interest income by average earning
assets.
Net interest income was $3.5 million for the year ended December 31,
1997, 33.9% greater than the $2.6 million earned during calendar year 1996. This
improvement in net interest income was primarily due to volume increases in the
securities and loan portfolios. Average loans increased 9.6% for the year ended
December 31, 1997. The average balance of the securities portfolio was $22.6
million in 1997, up $7.7 million, or 51.9% over calendar year 1996. Although
market interest rates declined during the year ended December 31, 1997, the
yield on average loans increased 20 basis points from 8.3% in 1996 to 8.5% in
1997. The average yield on securities declined from 7.4% in calendar 1996 to
7.0% in 1997. Also contributing to the improvement in net interest income for
the year ended December 31, 1997 was a decline in the cost of average total
interest bearing liabilities from 5.6% in 1996 to 5.3% in 1997. The average rate
paid on interest bearing deposits decreased 7 basis points. The increase in net
interest margin was achieved from both volume gains and widening spreads. The
increase in average securities was a result of loan demand not keeping pace with
increases in deposits through the summer of 1997. This trend reversed in late
1997 as a result of the expanded branch network and additional loan officers.
Net interest income was $1.3 million for the six month period ended
December 31, 1996, 15.5% greater than the $1.2 million reported for the same
period in 1995. This improvement in net interest income was primarily due to
volume increases in the securities portfolio and to higher average yields on the
loan portfolio. The average balance of the securities portfolio was $17.6
million for the six month period ended December 31, 1996, up 124.7% over the
same period in 1995. The average balance of the loan portfolio was $83.8 million
for
20
<PAGE>
the six month period ended December 31, 1996, up 7.6% over the same period in
1995. The yield on average loans increased 4 basis points from 8.2% during the
six month period ended December 31, 1995 to 8.2% for the same period in 1996,
while the yield on securities declined 182 basis points to 7.2% for the six
month period ended December 31, 1996 from 9.0% for the same period in 1995. Also
contributing to the improved net interest margin was a 38 basis point decrease
in the rate paid on average interest bearing liabilities to 5.6% for the six
month period ended December 31, 1996 from 5.9% for the same period in 1995.
Net interest income was $2.4 million in fiscal 1996, 14.1% greater than
the $2.1 million reported during fiscal 1995. This improvement in net interest
income was primarily due to volume increases in the securities portfolio and to
higher average yields on the loan portfolio. The average balance of the
securities portfolio was $10.5 million in fiscal 1996, up $3.0 million, or 40.2%
over fiscal 1995. The average balance of the loan portfolio was $79.9 million in
fiscal 1996, up $1.5 million, or 2.0% over fiscal 1995. The yield on average
loans increased 54 basis points from 7.5% in fiscal 1995 to 8.1% in fiscal 1996,
while the yield on securities declined 12 basis points to 7.8% in fiscal 1996
from 7.9% in fiscal 1995. Also contributing to the improvement in net interest
income in fiscal 1996 was a decline in the average amount of FHLB advances and
borrowings of $1.2 million, or 4.5%, to $25.8 million in fiscal 1996, from $27.0
million in fiscal 1995, and a decline in the average rates paid on such
borrowings of 22 basis points from 6.3% in fiscal 1995 to 6.0% in fiscal 1996. A
$9.5 million, or 24.5% increase in the average balances of certificates of
deposits from $38.9 million in fiscal 1995 to $48.5 million in fiscal 1996, more
than offset a slight decline in other deposit accounts and enabled Guaranty to
reduce FHLB advances and increase balances of investment securities. The average
rate paid on interest bearing deposits increased 58 basis points to 5.1% in
fiscal 1996 from 4.5% in fiscal 1995 but, with the decline in volume and rates
on FHLB advances, the average rates paid on all interest bearing liabilities
increased only 25 basis points to 5.7% in fiscal 1996 from 5.4% in fiscal 1995.
The following table sets forth average balances of total interest
earning assets and total interest bearing liabilities for the periods indicated,
showing the average distribution of assets, liabilities, stockholders' equity
and the related income, expense, and corresponding weighted average yields and
costs.
21
<PAGE>
Average Balances, Interest Income and Expenses, and Average Yields and Rates
<TABLE>
<CAPTION>
Six Months
Year Ended December 31 Ended December 31
---------------------- -----------------
1997 1996
---- ----
Average Average
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate(2) Balance(1) Expense Rate(2)
---------- ------- ------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Securities............... $22,637 $1,590 7.02% $17,640 $631 7.15%
Loans(3)................. 89,222 7,584 8.50% 83,816 3,455 8.24%
Interest bearing deposits
in other banks.......... 5,605 346 6.17% 5,257 190 7.23%
----- --- ----- ---
Total interest earning
assets................ 117,464 9,520 8.10% 106,713 4,276 8.01%
------- ----- ------- -----
Noninterest earning assets:
Cash and due from banks.. 1,898 1,082
Premises and equipment... 5,508 4,038
Other assets............. 2,624 2,680
Less: Allowance for loan
losses.................. (890) (826)
----- -----
Total noninterest earning
assets................ 9,140 6,974
----- -----
Total assets.......... $126,604 $113,687
======== ========
Liabilities and
Stockholders' Equity
Interest Bearing Liabilities:
Interest bearing deposits:
Demand/MMDA accounts.... $11,110 $289 2.60% $8,765 $121 2.76%
Savings................. 5,654 190 3.36% 4,870 83 3.41%
Certificates of deposits 80,779 4,443 5.50% 63,346 1,756 5.54%
------ ----- ------ -----
Total interest bearing
deposits.............. 97,543 4,922 5.05% 76,981 1,960 5.09%
FHLB advances and other
borrowings............. 14,070 804 5.71% 25,871 745 5.76%
Bonds payable........... 2,583 312 12.08% 3,060 235 15.36%
----- --- ----- ---
Total interest bearing
liabilities/total
interest expense...... 114,196 6,038 5.29% 105,912 2,940 5.55%
------- ----- ------- -----
Noninterest bearing
liabilities:
Demand deposits......... 1,658 1,324
Other liabilities....... 903 809
--- ---
Total liabilities...... 116,757 108,045
Stockholders' equity...... 9,847 5,642
----- -----
Total liabilities and
stockholders' equity.. $126,604 $113,687
======== ========
Interest spread (4)....... 2.82% 2.46%
Net interest income/net
interest margin (5)...... $3,482 2.96% $1,336 2.50%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------------------
1996 1995
---- ----
Average Average
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate(2) Balance(1) Expense Rate(2)
---------- ------- ------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Securities................ $10,523 $820 7.79% $7,506 $594 7.91%
Loans(3).................. 79,885 6,442 8.06% 78,382 5,897 7.52%
Interest bearing deposits
in other banks........... 5,163 355 6.88% 3,531 298 8.44%
----- --- ----- ---
Total interest earning
assets................. 95,571 7,617 7.97% 89,419 6,789 7.59%
------ ----- ------ -----
Noninterest earning assets:
Cash and due from banks... 2,011 1,290
Premises and equipment.... 1,427 415
Other assets.............. 2,377 1,876
Less: Allowance for loan
losses................... (756) (749)
----- -----
Total noninterest earning
assets................. 5,059 2,832
----- -----
Total assets........... $100,630 $92,251
======== =======
Liabilities and
Stockholders' Equity
Interest Bearing Liabilities:
Interest bearing deposits:
Demand/MMDA accounts..... $8,927 $245 2.74% $9,895 $280 2.83%
Savings.................. 4,541 152 3.35% 5,596 193 3.45%
Certificates of deposits 48,460 2,735 5.64% 38,938 1,967 5.05%
------ ----- ------ -----
Total interest bearing
deposits............... 61,928 3,132 5.06% 54,429 2,440 4.48%
FHLB advances and other
borrowings.............. 25,773 1,553 6.03% 26,991 1,688 6.25%
Bonds payable............ 3,520 507 14.40% 4,275 535 12.51%
----- --- ----- ---
Total interest bearing
liabilities/total
interest expense....... 91,221 5,192 5.69% 85,695 4,663 5.44%
------ ----- ------ -----
Noninterest bearing
liabilities:
Demand deposits.......... 1,066 787
Other liabilities........ 2,062 1,880
----- -----
Total liabilities....... 94,349 88,362
Stockholders' equity....... 6,281 3,889
----- -----
Total liabilities and
stockholders' equity $100,630 $92,251
======== =======
Interest spread (4)........ 2.28% 2.15%
Net interest income/net
interest margin (5)....... $2,425 2.54% $2,126 2.38%
====== ======
</TABLE>
(1) Average balances are computed on daily balances and Management believes
such balances are representative of the operations of the Corporation.
(2) Yield and rate percentages are all computed through the annualization
of interest income and expenses versus the average balances of their
respective accounts.
(3) Non-accrual loans are included in the average loan balances, and income
on such loans is recognized on a cash basis.
(4) Interest spread is the average yield earned on interest earning assets,
less the average rate incurred on interest bearing liabilities.
(5) Net interest margin is net interest income, expressed as a percentage
of average earning assets.
22
<PAGE>
The following table describes the impact on Guaranty's interest income
resulting from changes in average balances and average rates for the periods
indicated. The change in interest due to both volume and rate has been allocated
to volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
Volume and Rate Analysis
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1996
Year Ended December 31, 1997 compared to Year Ended June 30, 1996
compared to Six Months Ended compared to
Year Ended December 31, 1996 December 31, 1995 Year Ended June 30, 1995
Change Due To: Change Due To: Change Due To:
---------------------------- ---------------------------- ---------------------------
Increase Increase Increase
(Decrease) Rate Volume (Decrease) Rate Volume (Decrease) Rate Volume
---------- ---- ------ ---------- ---- ------ ---------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Securities.................. $490 ($54) $544 $279 ($143) $422 $226 ($9) $235
Loans....................... 827 163 664 262 31 231 545 430 115
Interest bearing deposits in
other banks............... (38) (49) 11 30 (39) 69 57 (38) 95
---- ---- -- -- ---- -- -- ---- -------
Total interest income..... 1,279 60 1,219 571 (151) 722 828 383 445
Interest expense:
Interest bearing deposits:
Demand/MMDA accounts........ 50 (13) 63 (6) (2) (4) (35) (9) (26)
Savings..................... 34 (1) 35 3 (0) 3 (41) (5) (36)
Certificates of deposits.... 1,159 (59) 1,218 550 (132) 682 768 248 520
----- --- ----- --- ---- --- --- --- ---
Total interest bearing
deposits................ 1,243 (73) 1,316 547 (134) 681 692 234 458
FHLB advances and other....... (638) (10) (628) (111) (154) 43 (135) (129) (6)
Bonds payable................. (154) (78) (76) (40) 35 (75) (28) 166 (194)
---- --- --- --- -- --- --- --- -----
Total interest expense.... 451 (161) 612 396 (253) 649 529 271 258
--- ----- --- --- ----- --- --- ------- -------
Net interest income........... $828 $221 $607 $175 $102 $73 $299 $112 $187
==== ==== ==== ==== ==== === ==== ======= =======
</TABLE>
Interest Sensitivity
An important element of both earnings performance and liquidity is the
management of the interest sensitivity gap. The interest sensitivity gap is the
difference between interest-sensitive assets and interest-sensitive liabilities
maturing or repricing within a specific time interval. The gap can be managed by
repricing assets or liabilities, by selling investments held for sale, by
replacing an asset or liability prior to maturity, or by adjusting the interest
rate during the life of an asset or liability. Matching the amounts of assets
and liabilities repricing in the same time interval helps to hedge the risk and
minimize the impact on net income of changes in market interest rates.
Guaranty evaluates interest rate risk and then formulates guidelines
regarding asset generation and pricing, funding sources and pricing, and
off-balance sheet commitments in order to decrease sensitivity risk. These
guidelines are based upon management's outlook regarding future interest rate
movements, the state of the regional and national economy, and other financial
and business risk factors.
At December 31, 1997, Guaranty had $19.0 million more in liabilities
than assets that reprice within one year or less and therefore was in a
liability-sensitive position. A negative gap adversely impacts earnings in a
period of rising interest rates. This negative position is primarily a result of
maturing certificates of deposit. As a result of loan and security sales in
January 1998, Guaranty's ratio of cumulative rate sensitive assets to rate
sensitive liabilities was 99.3% in a one year time frame. This trend is expected
to continue as prime rate lending is increased. In addition, a principal focus
of deposit marketing programs will be the attraction of low rate transaction
accounts.
23
<PAGE>
Guaranty has an Asset/Liability Committee ("ALCO"). The ALCO meets to
discuss deposit pricing, changes in borrowed money, investment and trading
activity, loan sale activities, liquidity levels and the overall interest
sensitivity. The actions of this committee are reported to the Board of
Directors monthly. The daily monitoring of interest rate risk, investment and
trading activity, along with any other significant transactions are managed by
the CEO and CFO with input from other ALCO members.
The following table presents the amounts of Guaranty's interest
sensitive assets and liabilities that mature or reprice in the periods
indicated.
Interest Sensitivity Analysis
<TABLE>
<CAPTION>
December 31, 1997
Maturing or Repricing In:
--------------------------------------------------
3 Months 4-12 1-5 Over
or less Months Years 5 Years
------- ------ ----- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-sensitive assets:
Loans..................................................... $35,586 $28,562 $6,765 $31,594
Investments and mortgage-backed securities(1)............. 1,066 270 1,016 13,324
Deposits at other institutions............................ 3,078 - - -
----- - - -
Total interest-sensitive assets......................... 39,730 28,832 7,781 44,918
====== ====== ===== ======
Cumulative interest-sensitive assets........................ 39,730 68,562 76,343 121,261
Interest-sensitive liabilities:
NOW accounts (2).......................................... - - - 9,266
Money market deposit accounts............................. 4,001 - - -
Savings accounts (3)...................................... 1,608 901 772 3,152
Certificates of deposit................................... 22,147 55,509 12,820 -
Borrowed money............................................ 2,989 - - -
Bonds payable............................................. 95 283 1,023 1,118
-- --- ----- -----
Total interest-sensitive liabilities.................... $30,840 $56,693 $14,615 $13,536
======= ======= ======= =======
Cumulative interest-sensitive liabilities................... $30,840 $87,533 $102,148 $115,684
Period gap.................................................. 8,890 (27,861) (6,834) 31,382
Cumulative gap.............................................. 8,890 (18,971) (25,805) 5,577
Ratio of cumulative interest-sensitive
assets to interest-sensitive liabilities.................. 128.83% 78.33% 74.74% 104.82%
Ratio of cumulative gap to total assets..................... 6.80% (14.52%) (19.76%) 4.27%
</TABLE>
- --------------------
(1) Includes Federal Home Loan Bank stock.
(2) The Corporation has found that NOW accounts are generally not sensitive
to changes in interest rates and therefore has placed such deposits in
the "over 5 years" category.
(3) In accordance with standard industry practice, decay factors have been
applied to savings accounts.
24
<PAGE>
Investments
Total available for sale and trading securities decreased 24.4% to
$12.6 million at December 31, 1997 from $16.7 million at December 31, 1996. The
overall decrease was primarily a result of securities sales to provide liquidity
to fund anticipated loan closings during the first half of 1998. At December 31,
1996, as a result of a combined federal and state examination relating to the
banks conversion to a state chartered commercial bank, $15.7 million of
available for sale securities were reclassified as trading. Subsequently, on
January 1, 1997, these securities were transferred back to available for sale,
at the then current market value.
Mortgage-backed securities available for sale increased in fiscal 1996
due to the growth in deposits. Since loan growth was not increasing at the rate
of deposit growth, the excess funds were invested in mortgage-backed securities.
The following table shows the amortized cost and fair market value of
investment securities and mortgage-backed securities at the dates indicated.
Investments
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1997 1996 1996 1995
------------------ ------------------ ------------------ ----------------
Cost Market Cost Market Cost Market Cost Market
---- ------ ---- ------ ---- ------ ---- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-maturity
Mortgage-backed securities.... $2,745 $2,759 $3,157 $3,349 $ 3,731 $ 3,879 $ 4,733 $ 4,887
Other......................... 100 100 - - - - - -
------- ------- ------- ------- ------- ------- ------- -------
Total held-to-maturity...... 2,845 2,859 3,157 3,349 3,731 3,879 4,733 4,887
Available for sale
Bonds......................... 11,415 11,474 - - - - - -
U.S. Government Obligations .. 50 50 - - - - - -
Mortgage-backed securities.... - - - - 9,993 9,564 - -
------- ------- ------- ------- ------- ------- ------- -------
Total available for sale.... 11,465 11,524 - - 9,993 9,564 - -
Trading
Mortage Backed Securities..... - - 16,937 16,736 - - - -
U.S. Government Obligations... 1,031 1,032 - - - - - -
------- ------- ------- ------- ------- ------- ------- -------
Total trading............... 1,031 1,032 - - - - - -
Restricted...................... 7 7 - - - - - -
Federal Reserve Bank stock...... 72 72 - - - - - -
Federal Home Loan Bank stock.... 860 860 1,360 1,360 1,360 1,360 1,360 1,360
Other........................... 71 80 - - - - - -
------- ------- ------- ------- ------- ------- ------- -------
Total..................... $16,280 $16,354 $21,454 $21,445 $15,084 $14,803 $ 6,093 $ 6,247
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
25
<PAGE>
The table below shows the weighted average expected yields, maturities
and expected principal repayments, at carrying value, of held to maturity and
available for sale debt securities at December 31, 1997:
Maturities of Investments
<TABLE>
<CAPTION>
Maturity or Expected After One But After Five But
Principal Repayment Within One Year Within Five Years Within Ten Years After Ten Years Total
----------------- ------------------ ----------------- ------------------ ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to maturity:
Mortgage-backed
securities........ $165 8.00% $883 8.26% $411 8.53% $1,286 8.53% $2,745 8.46%
Other............... 100 5.25% - - - - - - 100 5.25%
Available for sale:
Bonds............... - - 1,014 6.75% 3,039 6.65% 7,421 7.98% 11,474 7.52%
---- ---- ------ ----- ----- ----- ----- ----- ------- -----
Total............... $ 265 $1,897 $3,450 $8,707 $ 14,319
===== ====== ===== ===== =======
</TABLE>
The following table sets forth the composition of Guaranty's investment
portfolio at the dates indicated.
Portfolio of Investment Securities
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
------------ ------------ -----------------------------------------
1997 1996 1996 1995
------------------ ----------------- ------------------- --------------------
Book % of Book % of Book % of Book % of
Value Total Value Total Value Total Value Total
----- ----- ----- ----- ----- ----- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
FHLMC mortgage-backed
securities........... 2,745 16.73% 6,819 32.08% 7,459 50.89% 4,733 77.68%
GNMA mortgage-backed
securities........... - 0.00% 11,967 56.31% 5,836 39.81% - 0.00%
Corporate bonds ....... 11,474 70.23% - 0.00% - 0.00% - 0.00%
Treasury notes ........ 1,082 6.29% 1,104 5.19% - 0.00% - 0.00%
Other................. 100 .58% - 0.00% - 0.00% - 0.00%
-- - - -
Subtotal............. 15,401 93.83% 19,980 93.58% 13,295 90.70% 4,733 77.68%
------ ------ ------ ------ ------ ------ ----- ------
Other:
FHLB stock............... 860 5.24% 1,360 6.42% 1,360 9.28% 1,360 22.32%
FRB Stock................ 72 0.44% - 0.00% - 0.00% - 0.00%
Other.................... 7 0.49% 3 0.01% 3 0.02% - 0.00%
------ ------ ------ ------ ------ ------ ----- -------
Total investment
securities .............. $16,340 100.00% $21,250 100.00% $14,658 100.00% $6,093 100.00%
======= ======= ======= ======= ======= ======= ====== =======
</TABLE>
26
<PAGE>
Loans
Net loans consist of total loans minus undisbursed loan funds, deferred
loan fees and the allowance for loan losses. Net loans were $99.7 million at
December 31, 1997, an increase of 22.65% over December 31, 1996. Net loans were
$84.1 million at June 30, 1996, an 11.8% increase over net loans of $75.2
million at June 30, 1995. Net loans decreased 3.3% in the fiscal year ended June
1995 from a balance of $77.8 million at June 30, 1994. The average balance of
total loans as a percentage of average assets was 70.5%, 73.7%. and 79.4% for
the year ended December 31, 1997, the six month period ended December 31, 1996
and the fiscal year ended June 30, 1996, respectively.
The following tables set forth the composition of Guaranty's loan
portfolio in dollars and percentages at the dates indicated.
Loan Portfolio by Amount
<TABLE>
<CAPTION>
December 31, December 31, June 30,
------------ ------------ ----------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
Residential...................... $66,035 $67,016 $66,136 $62,175 $67,385 $59,845
Commercial....................... 16,641 8,486 7,670 4,508 4,251 4,155
Construction and land loans...... 18,263 5,220 8,813 8,887 5,819 4,900
------ ----- ----- ----- ----- -----
Total real estate.............. 100,939 80,722 82,619 75,570 77,455 68,900
Consumer loans (1)................. 6,705 4,175 5,386 4,580 3,685 4,462
Total loans receivable....... 107,644 84,897 88,005 80,150 81,140 73,362
------- ------ ------ ------ ------ ------
Less:
Undisbursed loans in
process........................ 6,752 2,467 2,824 3,858 2,249 1,978
Deferred fees and unearned
discounts...................... 282 290 314 323 382 442
Allowance for losses............. 935 870 786 747 754 746
--- --- --- --- --- ---
Total net items................ 7,969 3,627 3,924 4,928 3,385 3,166
----- ----- ----- ----- ----- -----
Total loans receivable, net.. $99,675 $81,270 $84,081 $75,222 $77,755 $70,196
======= ======= ======= ======= ======= =======
</TABLE>
- -------------------
(1) Includes commercial business loans of approximately $503,000.
Loan Portfolio by Percent of Gross Loans
<TABLE>
<CAPTION>
December 31, December 31, June 30,
------------ ------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
Residential................. 61.34% 78.94% 75.15% 77.57% 83.05% 81.57%
Commercial.................. 15.45 10.00 8.72 5.62 5.24 5.67
Construction and land loans. 16.97 6.15 10.01 11.09 7.17 6.68
----- ---- ----- ----- ---- ----
Total real estate......... 93.76 95.09 93.88 94.29 95.46 93.92
Consumer and other loans...... 6.24 4.91 6.12 5.71 4.54 6.08
---- ---- ---- ---- ---- ----
Total loans receivable.. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
27
<PAGE>
The following tables show the composition of Guaranty's loan portfolio
by fixed and adjustable rate at the dates indicated.
Fixed Rate and Adjustable Rate Loans by Amount
<TABLE>
<CAPTION>
December 31, December 31, June 30,
------------ ------------ ---------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed - Rate Loans:
Real Estate
Residential................. $26,514 $26,061 $28,907 $23,577 $27,796 $22,105
Construction and land
loans..................... 37 138 339 69 - -
-- --- --- -- - -
Total real estate......... 26,551 26,199 29,246 23,646 27,796 22,105
Consumer loans.................. 3,099 1,396 597 736 691 1,547
----- ----- --- --- --- -----
Total fixed-rate loans.... 29,650 27,595 29,843 24,382 28,487 23,652
Adjustable-Rate Loans:
Real Estate
Residential................. 39,521 40,955 37,229 38,598 39,590 37,740
Commercial.................. 16,641 8,486 7,670 4,508 4,251 4,155
Construction and land
loans..................... 18,226 5,082 8,474 8,818 5,819 4,900
------ ----- ----- ----- ----- -----
Total real estate......... 74,388 54,523 53,373 51,924 49,660 46,795
Consumer loans.................. 3,606 2,779 4,789 3,844 2,993 2,915
----- ----- ----- ----- ----- -----
Total adjustable-rate
loans................... 77,994 57,302 58,162 55,768 52,653 49,710
------ ------ ------ ------ ------ ------
Total loans receivable.. 107,644 84,897 88,005 80,150 81,140 73,362
------- ------ ------ ------ ------ ------
Less:
Undisbursed loans in
process..................... 6,752 2,467 2,824 3,858 2,249 1,978
Deferred fees and
unearned discounts.......... 282 290 314 323 382 442
Allowance for losses.......... 935 870 786 747 754 746
--- --- --- --- --- ---
Total net items............. 7,969 3,627 3,924 4,928 3,385 3,166
----- ----- ----- ----- ----- -----
Total loans receivable,
net..................... $99,675 $81,270 $84,081 $75,222 $77,755 $70,196
======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
Fixed Rate and Adjustable Rate Loans By Percentage
<TABLE>
<CAPTION>
December 31, December 31, June 30,
------------ ------------ ----------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed - Rate Loans:
Real Estate
Residential............... 24.63% 30.70% 32.84% 29.41% 34.26% 30.13%
Construction and land
loans................... .03% .16% 0.39% 0.09% 0.00% 0.00%
---- ---- ----- ----- ----- -----
Total real estate 24.66% 30.86% 33.23% 29.50% 34.26% 30.13%
Consumer loans................ 2.88% 1.64% 0.68% 0.92% 0.85% 2.11%
----- ----- ----- ----- ----- -----
Total fixed-rate loans.. 27.54% 32.50% 33.91% 30.42% 35.11% 32.24%
Adjustable-Rate Loans:
Real Estate
Residential............... 36.71% 43.04% 42.30% 48.16% 48.79% 51.45%
Commercial................ 15.46% 9.38% 8.72% 5.62% 5.24% 5.66%
Construction and land
loans................... 16.93% 8.52% 9.63% 11.00% 7.17% 6.68%
------ ----- ----- ------ ----- -----
Total real estate....... 69.10% 60.94% 60.65% 64.78% 61.20% 63.79%
Consumer loans................ 3.36% 6.56% 5.44% 4.80% 3.69% 3.97%
----- ----- ----- ----- ----- -----
Total adjustable-rate
loans................. 72.46% 67.50% 66.09% 69.58% 64.89% 67.76%
------ ------ ------ ------ ------ ------
Total loans receivable 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
The following tables summarize the contractual repayment terms of gross
loans as of December 31, 1997, as well as the amount of fixed rate and variable
rate loans due after December 31, 1997. The tables have not been adjusted for
estimates of prepayments and do not reflect periodic repricing of adjustable
rate loans.
Loan Portfolio Maturity Schedule
<TABLE>
<CAPTION>
Balance Principal Repayment Contractually Due
Outstanding in 12-Month Period Ending December 31,
----------- ------------------------------------------------------------------
December 31, 2001- 2003- 2008 and
1997 1998 1999 2000 2002 2007 Thereafter
---- ---- ---- ---- ---- ---- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Residential and
commercial real estate... $82,676 $1,295 $ 17 $308 $1,383 $3,603 $76,070
Construction............... 18,263 18,263 - - - - -
Consumer and other
loans.................... 6,705 6,613 92 - - - -
------- ------- ---- ---- ------ ------- -------
Total.................... $107,644 $26,171 $109 $308 $1,383 $3,603 $76,070
======== ======= ==== ==== ====== ====== =======
</TABLE>
Contractual principal repayments of loans do not necessarily reflect
the actual term of Guaranty's loan portfolio. The average life of mortgage loans
is substantially less than their contractual terms because of loan prepayments
and enforcement of due-on-sale clauses, which gives Guaranty the right to
declare a loan immediately due and payable in the event, among other things, the
borrower sells the real property subject to the mortgage and the loan is not
repaid. In addition, certain borrowers increase their equity in the security
property by making payments in excess of those required under the terms of the
mortgage.
29
<PAGE>
Asset Quality
Asset quality is an important factor in the successful operation of a
financial institution. Federal regulations require insured institutions to
classify their own assets and to establish prudent general allowances for losses
for assets classified "substandard" or "doubtful." For the portion of assets
classified as "loss," an institution is required to either establish specific
allowances of 100% of the amount classified or charge such amounts off its
books. Assets which do not currently expose the insured institution to
sufficient risk to warrant classification in one of the aforementioned
categories but possess potential weaknesses are required to be designated
"special mention" by management. On the basis of management's review of its
assets, at December 31, 1997, Guaranty had classified $2.9 million of its assets
as substandard, $8,000 as loss and none as doubtful. Not all of Guaranty's
assets that have been classified are included in the table of non-performing
assets set forth below. Several of these loans are classified because of
previous credit problems but are performing.
Unless well secured and in the process of collection, Guaranty places
loans on a nonaccrual status after being delinquent greater than 90 days, or
earlier in situations in which the loans have developed inherent problems that
indicate payment of principal and interest may not be made in full. Whenever the
accrual of interest is stopped, previously accrued but uncollected interest
income is reversed. Thereafter, interest is recognized only as cash is received.
The loan is reinstated to an accrual basis after it has been brought current as
to principal and interest under the contractual terms of the loan.
The following table reflects the composition of nonperforming assets at
the dates indicated.
Nonperforming Assets
<TABLE>
<CAPTION>
December 31 December 31 June 30
----------- ----------- --------------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans........................... $1,436 $1,670 $1,458 $1,556 $ 887 $934
Restructured loans......................... - 11 11 12 415 1,143
- -- -- -- --- -----
Total non-performing loans............. 1,436 1,681 1,469 1,568 1,302 2,077
----- ----- ----- ----- ----- -----
Foreclosed assets.......................... 65 51 41 122 - -
-- -- -- --- - -
Total non-performing assets............ 1,501 1,732 1,510 1,690 1,302 2,077
----- ----- ----- ----- ----- -----
Loans past due 90 or more days and
accruing interest........................ $189 $ - $19 $1 $288 $190
Non-performing loans to total loans
at period end............................ 1.42% 1.98% 1.67% 2.06% 1.65% 2.91%
Non-performing assets to period end
total loans and foreclosed assets........ 1.49% 2.04% 1.72% 2.21% 1.65% 2.91%
</TABLE>
Delinquent and Problem Loans
When a borrower fails to make a required payment on a loan, Guaranty
attempts to cure the delinquency by contacting the borrower. A notice is mailed
to the borrower after a payment is 17 days past due and again when the loan is
30 days past due. For most loans, if the delinquency is not cured within 60
days, Guaranty issues a notice of intent to foreclose on the property and if the
delinquency is not cured within 90 days, Guaranty may institute foreclosure
action. If foreclosed on, real property is sold at a public sale and may be
purchased by Guaranty. In most cases, deficiencies are cured promptly.
30
<PAGE>
The following table sets forth information concerning delinquent
mortgage and other loans at December 31, 1997. The amounts presented represent
the total remaining principal balances of the related loans, rather that the
actual payment amounts which are overdue.
Delinquent Loans
<TABLE>
<CAPTION>
Residential Commercial Construction
Real Estate Real Estate and Land Consumer
----------------- ----------------- ----------------- -----------------
Number Amount Number Amount Number Amount Number Amount
------ ------ ------ ------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
31-59 days........... 16 $1,260 - $- - $- 6 $ 65
60-89 days........... 3 515 - - - - 1 68
90 days and over..... 11 862 - - - - 1 140
-- --- - - - - - ---
Total delinquent loans 30 $2,637 - $- - $- 8 $273
== ====== = == = == = ====
</TABLE>
Allowance for Losses on Loans and Real Estate
Guaranty provides valuation allowances for anticipated losses on loans
and real estate when its management determines that a significant decline in the
value of the collateral has occurred, if the value of the collateral is less
than the amount of the unpaid principal of the related loan plus estimated costs
of acquisition and sale. In addition, Guaranty also provides reserves based on
the dollar amount and type of collateral securing its loans, in order to protect
against unanticipated losses. A loss experience percentage is established for
each loan type and is reviewed annually. Each quarter, the loss percentage is
applied to the portfolio, by product type, to determine the minimum amount of
reserves required. Although management believes that it uses the best
information available to make such determinations, future adjustments to
reserves may be necessary, and net income could be significantly affected, if
circumstances differ substantially from the assumptions used in making the
initial determinations.
31
<PAGE>
An analysis of the allowance for loan losses, including charge-off
activity, is presented below for the periods indicated.
Allowance for Loan Losses
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, December 31, Year Ended June 30,
------------ ------------ -----------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period......... $870 $788 $747 $754 $746 $689
Provision (credit) charged to
operations.......................... 122 92 57 (10) 74 37
Charge-offs:
Real estate.......................... 57 10 39 - 66 -
Consumer............................. - - - 1 - -
Recoveries:
Real Estate.......................... - - 19 - - -
Consumer............................. - - 4 4 - 20
Net Charge-offs........................ 57 10 16 (3) 66 (20)
-- -- -- --- -- ----
Balance, end of period................. $935 $870 $788 $747 $754 $746
==== ==== ==== ==== ==== ====
Allowance for loan losses to period
end total loans...................... 0.93% 1.06% 0.93% 0.98% 0.96% 1.05%
Allowance for loan losses to
nonaccrual loans.................... 67.20% 52.10% 54.05% 48.01% 85.01% 79.87%
Net charge-offs to average loans....... 0.06% 0.01% 0.02% 0.00% 0.09% (0.03%)
</TABLE>
Provision for Loan Losses
For the year ended December 31, 1997, the provision for loan losses was
$122,000, compared to $138,000 for calendar year 1996 and $92,000 for the six
month period ended December 31, 1996. The provision for loan losses increased to
$57,000 for the fiscal year ended June 30, 1996 from a credit of $9,000 for the
fiscal year ended June 30, 1995. Guaranty monitors its loan loss allowance
monthly and makes provisions as necessary. Management believes that the level of
Guaranty's loan loss reserve is adequate. The provision decreased to a credit of
$9,000 for the fiscal year ended June 30, 1995 from $74,000 for the fiscal year
ended June 30, 1994.
32
<PAGE>
A breakdown of the allowance for loan losses in dollars and loans in
each category to total loans in percentages is provided in the following tables.
Because all of these factors are subject to change, the breakdown is not
necessarily predictive of future loan losses in the indicated categories.
Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31 December 31 Year Ended June 30
1997 1996 1996
----------------------- ----------------------- -----------------------
Ratio of Ratio of Ratio of
Loans to Loans to Loans to
Total Total Total
Gross Gross Gross
Allowance Loans Allowance Loans Allowance Loans
--------- ----- --------- ----- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate.......... $ 523 57.40% $ 471 73.74% $ 327 75.15%
Commercial real estate........... 166 8.12 179 9.38 194 8.72
Construction..................... 52 17.10 38 8.68 70 10.01
Consumer and other loans......... 43 17.38 13 8.20 40 6.12
Unallocated...................... 115 - 8 - - -
--- - - - - -
Total general allowance........ 899 100.00% 709 100.00% 631 100.00%
======= ======= =======
Total specific allowance....... 36 161 157
-- --- ---
Total allowance............. $935 $870 $788
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------------------------------------------
1995 1994 1993
----------------------- ----------------------- ------------------------
Ratio of Ratio of Ratio of
Loans to Loans to Loans to
Total Total Total
Gross Gross Gross
Allowance Loans Allowance Loans Allowance Loans
--------- ----- --------- ----- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate............. $311 77.58% $300 83.05% $185 81.58%
Commercial real estate.............. 220 5.62 253 5.24 270 5.66
Construction........................ 86 11.09 62 7.17 108 6.68
Consumer and other loans............ 32 5.71 30 4.54 15 6.08
-- ---- -- ---- -- ----
Total general allowance........... 649 100.00% 645 100.00% 578 100.00%
======= ======= =======
Total specific allowance.......... 98 109 168
-- --- ---
Total allowance............... $747 $754 $746
==== ==== ====
</TABLE>
Non-Interest Income
Guaranty's non-interest income consists primarily of loan fees and
servicing income, net gains on the sale of loans and securities, and fees and
service charges on deposit accounts. For the year ended December 31, 1997,
non-interest income totaled $1.9 million. Loan fees and servicing income were
$456,000, gains on sales of loans and securities were $907,000, service charges
on checking accounts totaled $166,000, gain on the sale of purchased servicing
was $160,000, and other income was $178,000. Management concluded that the costs
associated with managing the purchased servicing portfolio, which was secured by
property located outside of Guaranty's market area, exceeded the benefits
derived from the monthly servicing income. After this sale, primarily all of
Guaranty's servicing portfolio is secured by property located in Guaranty's
market area. Guaranty intends to continue to service all residential mortgage
loans sold in the secondary market that it originates. This is consistent with
its focus on a customer service approach to banking. Management does not
anticipate purchasing any material servicing rights. Loan and securities sales
were a result of the continued strategy of selling all newly originated fixed
rate mortgage loans in the secondary market and a restructuring of
33
<PAGE>
the balance sheet to reduce interest rate risk relating to fixed rate mortgages
and to provide liquidity to fund anticipated loan closings during the first half
of 1998.
For the six months ended December 31, 1996, non-interest income was
$462,000. Loan fees and servicing income, gains on the sale of loans and
securities, and service charges on checking comprised 57.8%, 15.8% and 11.3%,
respectively, of total non-interest income for the six months ending December
31, 1997.
In the years ended June 30, 1996, 1995 and 1994, loan fees and
servicing income accounted for 55.1%, 74.8% and 317.3%, respectively, of
non-interest income. Gains on sales of loans and securities were 21.9% and 0.0%
of non-interest income in fiscal 1996 and fiscal 1995, respectively. In the year
ended June 30, 1994, Guaranty had a loss of $491,000 on sales of loans and
securities. Service charges on checking accounts were $90,000 in fiscal 1996 and
$78,000 in each of the years ended June 30, 1995 and 1994.
Non-interest income in fiscal year ended June 30, 1996 was $1.1
million, an increase of $235,000 or 27.0% over non-interest income of $872,000
in fiscal year 1995. Non-interest income for fiscal year ended June 30, 1995,
increased by $745,000 or 591.0% over fiscal year 1994.
Mortgage loan servicing is a significant business for Guaranty, and a
by-product of its residential lending business. Guaranty derives fees from
mortgage servicing rights ("MSRs"). Loan servicing includes collecting and
remitting loan payments, accounting for principal and interest, holding escrow
funds for payment of taxes and insurance, making required inspections of the
mortgaged premises, contacting delinquent mortgagors, supervising foreclosures
in the event of unremitted defaults and generally administering the loans for
the investors to whom they have been sold. MSRs are assets that represent the
rights to service mortgage loans and in turn to receive the service fee income
associated with the mortgage loans. MSRs are amortized against income over the
estimated average lives of the loans serviced. If loans are prepaid at rates
faster than those originally assumed, adjustments may be required to the
unamortized balance, which could result in charges to current earnings.
Conversely, slower prepayment rates could result in increases in mortgage loan
servicing income in future periods. At December 31, 1997, MSRs totaled $904,000.
The weighted average note rate of mortgage loans serviced for others was 7.94%
and 7.77% at December 31, 1997 and 1996, respectively. See "Financial
Statements-Summary of Accounting Policies." At December 31, 1997 and 1996 loans
serviced for others totaled $123.8 million and $172.8 million, respectively.
Guaranty serviced loans for others aggregating approximately $168.4 million at
June 30, 1996 and $169.6 million at June 30, 1995.
Guaranty sells fixed rate residential production on an individual loan
basis and securitizes loans through the creation of Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") and
Government National Mortgage Association ("GNMA") mortgage-backed securities.
During the year ended December 31, 1997 and the six month period ended
December 31, 1996, Guaranty sold $24.4 million and $11.8, respectively, of loans
and securitized loans. Guaranty sold $7.3 million of fixed rate mortgage loans
and securitized loans during fiscal year 1996, compared to $17.2 million in
fiscal year 1995. The sale of fixed rate product creates liquidity and an income
stream from servicing fees on loans sold.
Guaranty also trades treasury securities in an effort to take advantage
of short term movements in market interest rates. It is Guaranty's policy not to
hold trading securities with a cost in excess of $5 million at one time. Trading
securities are marked to market monthly. Sale of trading account securities
totaled $89.5 million, $35.3 million, $107.3 million and $43.1 million during
the year ended December 31, 1997, the six month period ended December 31, 1996
and the years ended June 30, 1996 and 1995, respectively. Guaranty experienced a
gain of $5,000 and $24,000 on such sales in the year ended December 31, 1997 and
fiscal 1995,
34
<PAGE>
respectively, and net losses of $255,000 and $64,000 during the six month period
ended December 31, 1996 and the year ended June 30, 1996, respectively.
Generally accepted accounting principles ("GAAP") allow the inclusion
of loan fees in current income to an amount limited to loan underwriting and
closing costs. The remaining deferred fees are amortized into income over the
estimated remaining lives of the loans to which they relate. Guaranty had
deferred fees, net of direct underwriting costs, of $283,000, $290,000 and
$314,000 at December 31, 1997 and 1996, and June 30, 1996, respectively.
Non-Interest Expenses
For the year ended December 31, 1997, non-interest expenses were $3.9
million, compared to $3.0 million for calendar year 1996. The $860,000 increase
was due primarily to increased costs associated with the expanded branch network
and costs associated with conversion to a state chartered bank effective June
30, 1997. For the six-month period ended December 31, 1996, non-interest
expenses were $1.7 million compared to $1.2 million for the same period in 1995.
This increase was primarily due to overall growth of the Corporation.
Non-interest expenses were $2.5 million for the year ended June 30,
1996, compared to $2.5 million for fiscal year 1995, a 1.6% decrease, that
resulted primarily from a reduction in personnel expense after loan production
offices in Richmond, Virginia, and Waynesboro, Virginia, were closed.
Income Taxes
Income tax expense for the year ended December 31, 1997 and the fiscal
years ended June 30, 1996 and 1995 was $486,000, $344,000 and $100,000,
respectively. The increases are a direct result of increased earnings. For the
six month period ended December 31, 1996, the Corporation reported an income tax
benefit of $4,000 due to a loss before taxes of $10,000.
Sources of Funds
Deposits
Deposits have traditionally been the principal source of Guaranty's
funds for use in lending and for other general business purposes. In addition to
deposits, Guaranty derives funds from loan repayments, cash flows generated from
operations, which includes interest credited to deposit accounts, and from
repurchase agreements entered into with commercial banks and FHLB of Atlanta
advances. Contractual loan payments are a relatively stable source of funds,
while deposit inflows and outflows and the related cost of such funds have
varied widely. Borrowings may be used to compensate for reductions in deposits
or deposit-inflows at less than projected levels and have been used on a
longer-term basis to support expanded lending activities.
Guaranty attracts both short-term and long-term deposits from the
general public by offering a wide assortment of accounts and rates. Guaranty
offers statement savings accounts, various checking accounts, various money
market accounts, fixed-rate certificates with varying maturities, individual
retirement accounts and is expanding to provide products and services for small
businesses. Guaranty does not solicit brokered deposits. Guaranty's principal
use of deposits is to originate loans and fund investment securities.
At December 31, 1997, deposits were $112.9 million, up 38.8% from $81.4
million at December 31, 1996. Deposits increased 42.3% to $74.7 million at June
30, 1996 from $52.5 million at June 30, 1995. In order to reduce the overall
cost of funds and reduce the Corporation's reliance on high cost time deposits
and
35
<PAGE>
short term borrowings as a funding source, management plans extensive marketing
efforts towards attracting lower cost transaction accounts. However, there is no
assurance that these efforts will be successful, or if successful, will reduce
the Corporation's reliance on time deposits and short term borrowings.
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by Guaranty at the dates indicated.
Deposits
<TABLE>
<CAPTION>
December 31 December 31 June 30 June 30
1997 1996 1996 1995
-------------- -------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Statement savings accounts............ $6,434 $4,738 $4,654 $4,688
Now accounts.......................... 12,037 6,929 6,440 5,818
Money market accounts................. 4,000 3,410 3,213 4,131
30- to 180-day certificates........... 1,326 250 227 324
Nine-month certificate................ 1,638 - - -
One- to five-year fixed-rate
certificates........................ 87,467 66,013 52,698 29,987
Eighteen-month prime rate certificate. 45 61 7,455 7,513
------ ------ ------ ------
Total............................... $112,947 $81,401 $74,687 $52,461
======== ======= ======= =======
</TABLE>
The following table contains information pertaining to the average
amount of and the average rate paid on each of the following deposit categories
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 December 31 Years Ended June 30
----------- ----------- -------------------
1997 1996 1996 1995
---- ---- ---- ----
Average Average Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid Balance Rate Paid
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand
deposits $1,658 0.00% $1,324 0.00% $1,066 0.00% $787 0.00%
Interest bearing demand
deposits 2.59% 2.76% 2.74% 2.83%
11,110 8,765 8,927 9,895
Savings deposits 3.36% 3.41% 3.35% 3.45%
5,654 4,870 4,541 5,596
Time deposits 80,779 5.51% 63,346 5.54% 48,460 5.64% 38,938 5.05%
------- ----- ------- ----- ------- ----- ------- -----
Total deposits $99,201 4.97% $78,305 5.00% $62,994 5.06% $55,216 4.81%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
The variety of deposit accounts offered by Guaranty has allowed it to
be competitive in obtaining funds and has allowed it to respond with flexibility
to, although not eliminate, the threat of disintermediation (the flow of funds
away from depository institutions into direct investment vehicles such as
government and corporate securities). The ability of Guaranty to attract and
maintain deposits, and its cost of funds, has been, and will continue to be,
significantly affected by money market conditions.
36
<PAGE>
The following table sets forth the deposit flows of Guaranty during the
periods indicated.
Deposit Flows
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 December 31 Year Ended June 30
----------------- ------------------ -------------------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Opening balance................. $81,401 $74,687 $52,461 $53,467
Net deposits (withdrawals)...... 26,624 4,754 19,093 (3,446)
Interest credited............... 4,922 1,960 3,133 2,440
----- ----- ----- -----
Ending balance.................. $112,947 $81,401 $74,687 $52,461
======== ======= ======= =======
Net increase (decrease)......... $31,546 $6,714 $22,226 ($1,006)
Percent increase (decrease)..... 38.75% 8.99% 42.37% (1.88%)
</TABLE>
The following table indicates the amount of Guaranty's certificates of
deposits by time remaining until maturity as of December 31, 1997.
Maturities of CDs
<TABLE>
<CAPTION>
Maturity
--------------------------------------------------------------------------
3 Months Over 3 to Over 6 to Over
or less 6 months 12 months 12 months Total
------- -------- --------- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than
$100,000................................ $16,452 $19,070 $31,879 $11,967 $79,368
Certificates of deposit of $100,000 or
more.................................... 5,715 649 3,895 849 11,108
------ ------ ------- ------ -------
Total of certificates of deposits....... $22,167 $19,719 $35,774 $12,816 $90,476
======= ======= ======= ======= =======
</TABLE>
Borrowings
As a member of the FHLB of Atlanta, Guaranty is required to own capital
stock in the FHLB of Atlanta and is authorized to apply for advances from the
FHLB of Atlanta. Each FHLB credit program has its own interest rate, which may
be fixed or variable, and range of maturities. The FHLB of Atlanta may prescribe
the acceptable uses to which these advances may be put, as well as on the size
of the advances and repayment provisions. The advances are collateralized by
Guaranty's investment in Federal Home Loan Bank stock and certain mortgage
loans. See Note 9 of the Notes to Consolidated Financial Statements for
information regarding the maturities and rate structure of Guaranty's FHLB
advances. At December 31, 1997, no advances were outstanding to the FHLB.
Guaranty's borrowings also include securities sold under agreements to
repurchase, with mortgage-backed securities or Treasury securities pledged as
collateral. The proceeds are used by Guaranty for general corporate purposes. At
December 31, 1997, Guaranty had $3.0 million outstanding in securities sold
under agreement to repurchase.
Guaranty uses borrowings to supplement deposits when they are available
at a lower overall cost to Guaranty or they can be invested at a positive rate
of return.
37
<PAGE>
The following table sets forth the maximum month-end balances, average
balances and weighted average rates, of FHLB advances and securities sold under
agreements to repurchase for the periods indicated.
Borrowings
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31 December 31 Year Ended June 30
----------- ----------- ------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Maximum Balance:
FHLB advances............... $17,500 $22,500 $28,050 $28,250
Securities sold under
agreements to repurchase.. 5,867 9,957 9,930 4,230
</TABLE>
<TABLE>
<CAPTION>
Average Average Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FHLB advances................. $10,869 6.23% $19,550 5.79% $22,829 6.21% $26,208 6.67%
Securities sold under
agreements to repurchase.... 3,200 3.97% 6,321 5.66% 3,112 5.65% 783 7.98%
</TABLE>
The following table sets forth the balances of Guaranty's short-term
borrowings at the dates indicated.
Short-Term Borrowings
<TABLE>
<CAPTION>
December 31 December 31 June 30
--------------- ---------------- ------------------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
FHLB advances..................................... $0 $7,500 $12,500 $19,550
Securities sold under agreements to repurchase.... 2,989 6,681 6,104 0
----- ----- ----- -
Total short-term borrowings................... $2,989 $14,181 $18,604 $19,550
====== ======= ======= =======
Weighted average interest rate of
short-term FHLB advances........................ 0.00% 6.35% 6.02% 4.52%
Weighted average interest rate of
securities sold under agreements to repurchase.. 6.29% 6.50% 5.65% 0.00%
</TABLE>
See notes 6, 7 and 8 to the Consolidated Financial Statements.
Liquidity and Capital Resources
Liquidity is the ability to meet present and future financial
obligations either through the sale of existing assets or the acquisition of
additional funds through asset and liability management. Cash flow projections
are regularly reviewed and updated to assure that adequate liquidity is
provided. As a result of Guaranty's management of liquid assets and the ability
to generate liquidity through increasing deposits, Management believes that
Guaranty maintains overall liquidity that is sufficient to satisfy its
depositors' requirements and meet its customers' credit needs.
Guaranty's primary sources of funds are deposits, borrowings, and
amortization, prepayments and maturities of outstanding loans and investments
and loan sales. While scheduled payments from the amortization of loans and
securities are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. Excess funds are invested in
38
<PAGE>
overnight deposits to fund cash requirements experienced in the normal course of
business. Guaranty has been able to generate sufficient cash through its
deposits as well as borrowings.
The following information should be read in conjunction with the
statements of cash flows, which appear on pages F-8 through F-10 of Guaranty's
consolidated financial statements.
Cash and cash equivalents were approximately $6.0 million at December
31, 1997 and 1996. The $16.0 million of net cash provided by operating
activities was primarily a result of $898,000 of net income, proceeds from loan
sales of $24.8 million, and proceeds from the sale of securities of $114.5
million. In addition, financing activities provided $14.3 million primarily as a
result of a net increase in deposits of $31.5 million, and net proceeds of $4.5
million from a secondary stock offering that closed in January 1997. Total cash
provided by operating and financing activities of $30.3 million was absorbed by
investing activities consisting primarily of a net increase in loans of $18.5
million, expenditures of $1.4 million for property and equipment (primarily for
the new Harrisonburg branch that opened in May 1997), and purchases of available
for sale securities totaling $33.3 million (offset by sales of available for
sale securities of $21.9 million).
For the year ended June 30, 1995, cash and cash equivalents increased
$4.5 million to $5.8 million, as the net cash provided by investing and
financing activities exceeded the cash used in operating activities. The $3.7
million of net funds provided by investing activities resulted mainly from a
$2.5 million decrease in loans and $1.3 million in principal payment on held to
maturity securities. The $1.2 million of net cash provided by financing
activities resulted primarily from proceeds from the issuance of common stock of
$2.1 million.
Guaranty uses its sources of funds primarily to meet operating needs,
to pay deposit withdrawals and fund loan commitments. At December 31, 1997 and
1996, total approved loan commitments were $3.8 million and $3.0 million,
respectively. In addition, at December 31, 1997 and 1996, commitments under
unused lines of credit were $14.3 million and $6.4 million, respectively. At
June 30, 1996, the total approved loan commitments outstanding amounted to $3.9
million. At the same date, commitments under unused lines of credit amounted to
$5.4 million. Certificates of deposits scheduled to mature in one year or less
at December 31, 1997 and 1996, and June 30, 1996 totaled $77.7 million, $57.3
million and $51.2 million, respectively. Management believes that a significant
portion of maturing deposits will remain with Guaranty.
Management intends to fund anticipated loan closings and operating
needs during 1998 through cash on hand, proceeds from the sale of this offering,
proceeds from the sale of loans and securities, cash generated from operations
and anticipated increases in deposits. Through February 28, 1998, net deposits
were $121.4 million, an increase of $8.5 million in comparison to total deposits
at December 31, 1997 of $112.9 million. This increase consisted primarily of
increases in time deposits (primarily with a one-year maturity at origination)
of $3.4 million and demand deposits of $2.2 million. Current and anticipated
marketing programs will be primarily targeted at the attraction of lower cost
transaction accounts. Concurrent with the strategies employed to attract these
accounts, management plans to gradually reduce the rate paid on time deposits in
comparison to the competition. However, the pricing of time deposits will be
balanced against upcoming maturities to ensure that liquidity is not adversely
impacted by a large run off of time deposits.
Proceeds from the sale of securitized loans and fixed rate loans
originated for sale in the secondary market were $11.6 million through February
28, 1997. In addition, at February 28, 1997, loans available for sale in the
secondary market were $10.6 million (cost approximates market at this date).
Although management has no plans to sell adjustable rate mortgages (ARMs),
approximately $24.0 million of conforming ARMs are currently carried in the loan
portfolio and could be sold if needed to meet liquidity needs of the
Corporation. The need to sell portfolio loans to meet liquidity requirements is
mitigated by the Bank's $20.0 million line of credit at the FHLB. As of the date
of this Prospectus, no outstanding balances existed under this line nor was this
line
39
<PAGE>
used during the period January 1, 1998 through the date of this Prospectus to
fund short term cash needs of the Corporation.
No assurances can be made that management's plans to provide for the
Corporation's liquidity needs will be successful, or if successful, will
generate the cash needed to fund operations or reduce the Corporation's
historical reliance on higher cost time deposits and FHLB advances as the
primary funding source.
Capital represents funds, earned or obtained, over which financial
institutions can exercise greater control in comparison with deposits and
borrowed funds. The adequacy of Guaranty's capital is reviewed by management on
an ongoing basis with reference to size, composition, and quality of Guaranty's
resources and consistent with regulatory requirements and industry standards.
Management seeks to maintain a capital structure that will support anticipated
asset growth and absorb any potential losses.
The Corporation and the Bank are subject to Federal Reserve
regulations, including the BHCA. At December 31, 1997, the Corporation exceeded
all such regulatory capital requirements as shown in the following table.
Capital
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31 December 31 Year Ended June 30
--------------- ----------------- ---------------------------------
1997 1996 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 Capital:
Common stock............................... $1,877 $1,155 $1,149 $1,144
Capital surplus............................ 5,725 1,976 1,981 1,971
Retained earnings.......................... 4,208 3,445 3,498 2,900
Unrealized Loss on available for sale
securities............................... - - - -
------ ----- ----- -----
Total Tier 1 Capital..................... 11,810 6,576 6,628 6,015
------ ----- ----- -----
Tier 2 Capital:
Allowance for loan losses (1).............. 935 706 631 565
Allowable long-term debt................... - - - -
------ ----- ----- -----
Total Tier 2 Capital..................... 935 706 631 565
------ ----- ----- -----
Total Risk-Based Capital............... $12,745 $7,282 $7,259 $6,580
======= ====== ====== ======
Risk-weighted assets......................... $82,666 $56,500 $54,650 $45,200
Capital Ratios:
Tier 1 Risk-Based Capital ratio............ 14.29% 11.64% 12.13% 13.31%
Total Risk-Based Capital ratio............. 15.42% 12.89% 13.28% 14.56%
Tier 1 Capital to average adjusted total
assets.................................. 9.57% 5.81% 6.59% 6.52%
</TABLE>
- ------------------
(1) The allowance for loan losses included in Tier 1 Capital calculation is
limited by regulation to 1.25% of Risk-weighted assets.
40
<PAGE>
Impact of Inflation and Changing Prices and Seasonality
The financial statements in this document have been prepared in
accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time due to inflation.
Unlike industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the price
of goods and services, since such prices are affected by inflation.
Accounting Rules
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
128"). SFAS 128 is effective for financial statements, including interim
periods, issued for periods ending after December 15, 1997. SFAS 128 provides a
different method for calculating earnings per share than is currently used in
accordance with APB 15, "Earnings per Share." SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that could share in earnings of an entity, similar to fully diluted earnings per
share.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 is effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. Management does not expect the application of this pronouncement
to have a material effect on the financial statements of the Corporation.
Subsidiary Activities
The Bank has two wholly owned subsidiaries, GMSC, Inc. ("GMSC") and
Guaranty Investments Corporation ("GICO"). GMSC is a financing subsidiary
through which Guaranty formed a Real Estate Mortgage Investment Conduit
("REMIC"). See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Guaranty sells non-deposit investment products through
GICO. GICO had a net loss of $27,000 for the year ended December 31, 1997 and
net income of $3,000 and $1,000 for the six month period ended December 31, 1996
and the year ended June 30, 1996, respectively.
In 1987, Guaranty formed GMSC and entered into a REMIC in order to
create liquidity. Guaranty utilized the REMIC to pool $19.9 million of fixed
rate mortgages into mortgage backed securities, which were used as collateral
for bonds sold to private investors. The bonds bore a coupon of 8.0% and were
sold at a discount and costs of issuance of approximately $3.3 million. The bond
discount and issuance costs are amortized against income as mortgage underlying
the bonds repay. In the fiscal years ended June 30, 1996, 1995, and 1994, with
rapidly falling interest rates, Guaranty experienced significant repayment of
mortgages, resulting in an amortization expense of $160,000, $124,000, and
$968,000, respectively. For the year ended
41
<PAGE>
December 31, 1997 and the six month period ended December 31, 1996, amortization
expense was $64,000 and $39,000, respectively. The amortization of the REMIC
expenses is treated as interest expense.
Year 2000 Project
The Year 2000 presents problems for businesses that are dependent on
computer hardware and software to perform date dependent calculations and logic
comparisons. A great deal of software and microchip technology was developed
utilizing two digit years rather than four digit years (example: 97 instead of
1997). Technology utilizing two digit years most likely will not be able to
distinguish the year 2000 from 1900, and therefore may shut down or perform
miscalculations and comparisons as much as 100 years off.
Management is fully aware this presents a potential business disruption
and has begun a program of due diligence in addressing the impact of the Year
2000 on the Corporation. Presently, the Corporation is still in the discovery
stage of identifying all areas and processes rendering exposure to the Year 2000
problem. However, the Corporation, in conjunction with its outside service
bureau, has developed a plan to address Year 2000 exposure surrounding the
Corporation's computer and data processing systems. Since early 1997, the
Corporation has been updating its systems hardware to be Year 2000 compliant.
The next step involves testing system software, which is scheduled to begin in
mid to late 1998, and it is estimated that the process will cost approximately
$25,000 to complete. In conjunction with this testing, the Corporation plans to
test its other systems that are not related to the service bureau. Management
anticipates the Corporation will be Year 2000 compliant, thus satisfying all
regulatory requirements.
42
<PAGE>
BUSINESS
General
Guaranty is a Virginia corporation which was organized in 1995 for the
purpose of becoming the holding company of the Bank. The Bank is a Virginia
state chartered bank which began business in February 1981 and is headquartered
in Charlottesville, Virginia.
Effective December 29, 1995, Guaranty acquired all of the issued and
outstanding standing shares of Common Stock of the Bank. The principal asset of
Guaranty is the outstanding stock of the Bank, its wholly owned subsidiary.
Guaranty presently has no separate operations and its business consists only of
the business of the Bank. All references to Guaranty, unless otherwise
indicated, at or before December 29, 1995, refer to the Bank and its
subsidiaries on a consolidated basis. Guaranty's Common Stock is quoted on The
Nasdaq National Market System under the symbol "GSLC".
Guaranty's principal business activities are attracting checking and
savings deposits from the general public through its retail banking offices and
originating, servicing, investing in and selling loans. Of Guaranty's $107.6
million of gross loans outstanding at December 31, 1997, 61.3% represented
residential first mortgages. Guaranty also lends funds to retail banking
customers by means of home equity, installment loans, and, to a lesser extent,
originates loans secured by commercial property and multi-family dwellings.
Guaranty has recently begun to offer consumer loans and government-insured and
conventional small business loans. Guaranty invests in certain United States
government and agency obligations and other investments permitted by applicable
laws and regulations.
Guaranty's main office is located at 1658 State Farm Boulevard,
Charlottesville, Virginia 22911 and the telephone number is (804) 970-1100.
Market Area
Guaranty is the only independent community banking organization
headquartered in, or even with an office in, Charlottesville or Albemarle
County, Virginia. This area had a collective population of approximately 108,000
in 1990 according to census figures, is located in central Virginia 110 miles
southwest of Washington, D.C. and 70 miles west of Richmond, Virginia, and
includes the University of Virginia, the area's largest employer. Guaranty
operates five full service retail branches, which serve Charlottesville,
Albemarle County, and Harrisonburg, Virginia.
Competition
Guaranty faces strong competition both in originating real estate loans
and in attracting deposits. Competition in originating real estate loans comes
primarily from commercial banks and mortgage bankers who also make loans secured
by real estate located in the Bank's market area. The Bank competes for real
estate loans principally on the basis of the interest rates and loan fees it
charges, the types of loans it originates and the quality of services it
provides to borrowers.
Guaranty faces substantial competition in attracting deposits from
commercial banks, money market and mutual funds, credit unions and other
investment vehicles. The ability of Guaranty to attract and retain deposits
depends on its ability to provide an investment opportunity that satisfies the
requirements of investors as to rate of return, liquidity, risk and other
factors. Guaranty competes for these deposits by offering a variety of deposit
products at competitive rates and convenient business hours.
43
<PAGE>
Guaranty operates in a highly competitive environment, competing for
deposits and loans with commercial banks and other financial institutions, many
of which possess substantially greater financial resources than those available
to Guaranty. Certain of these institutions have significantly higher lending
limits than Guaranty. In addition, there can be no assurance that other
financial institutions, with substantially greater resources than Guaranty, will
not establish operations in Guaranty's service area.
Credit Policies
The principal risk associated with each of the categories of loans in
Guaranty's portfolio is the creditworthiness of its borrowers. Within each
category, such risk is increased or decreased, depending on prevailing economic
conditions. In an effort to manage the risk, Guaranty's policy gives loan amount
approval limits to individual loan officers based on their level of experience.
The risk associated with real estate mortgage loans and consumer loans varies,
based on employment levels, consumer confidence, fluctuations in the value of
real estate and other conditions that affect the ability of borrowers to repay
indebtedness. The risk associated with real estate construction loans varies,
based on the supply and demand for the type of real estate under construction.
Guaranty has written policies and procedures to help manage credit
risk. The loan portfolio is managed under a specifically defined credit process.
This process includes formulation of portfolio management strategy, guidelines
for underwriting standards and risk assessment, procedures for ongoing
identification and management of credit deterioration, and regular portfolio
reviews to establish loss exposure and to ascertain compliance with Guaranty's
policies.
Guaranty uses a Management Loan Committee and Directors Loan Committee
to approve loans. The Management Loan Committee, which consists of the President
and two additional loan underwriters, meets as necessary to review all loan
applications. A Directors Loan Committee, which currently consists of all
directors, approves loans in excess of $500,000 that have been previously
approved by the Management Loan Committee. Guaranty's President is responsible
for reporting to the Directors Loan Committee monthly on the activities of the
Management Loan Committee and on the status of various delinquent and
non-performing loans. The Directors Loan Committee also reviews lending policies
proposed by Management.
Residential loan originations come primarily from walk-in customers,
real estate brokers and builders. Commercial real estate loan originations are
obtained through broker referrals, direct solicitation of developers and
continued business from customers. All completed loan applications are reviewed
by Guaranty's salaried loan officers. As part of the application process,
information is obtained concerning the income, financial condition, employment
and credit history of the applicant. If commercial real estate is involved,
information is also obtained concerning cash flow after debt service. Loan
quality is analyzed based on the Bank's experience and guidelines with respect
to credit underwriting, as well as the guidelines issued by the Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association
("FNMA") and other purchasers of loans, depending on the type of loan involved.
The non-conforming one- to four-family adjustable-rate mortgage loans originated
by Guaranty, however, are not readily salable in the secondary market because
they do not meet all of the secondary marketing guidelines. These loans are
evaluated by the loan committee for "overall" merit and will not exceed an 80%
loan to value ratio. Real estate is appraised by independent fee appraisers who
have been pre-approved by the Board of Directors. Loans are submitted to the
underwriting department for review. All conforming loans including HUD/FHA, VA
and applicable VHDA loans are underwritten and acted upon within loan
administration requiring two signatures of approval.
In the normal course of business, Guaranty makes various commitments
and incurs certain contingent liabilities which are disclosed but not reflected
in its annual financial statements, including commitments to extend credit. At
December 31, 1997, commitments to extend credit totaled $16.6 million.
44
<PAGE>
One- to Four-Family Residential Real Estate Lending
Guaranty's primary lending program has been the origination of loans
secured by one- to four-family residences, all of which have been located in its
market area. Guaranty evaluates both the borrower's ability to make principal
and interest payments and the value of the property that will secure the loan.
Federal law permits Guaranty to make loans in amounts of up to 100% of the
appraised value of the underlying real estate. Loans are made with a loan to
value up to 95% for conventional mortgage loans and up to 100% for loans
guaranteed by either the Federal Housing Authority ("FHA") or the Veterans
Administration ("VA"). For conventional loans in excess of 80% loan to value,
private mortgage insurance is secured insuring the mortgage loans to 75% loan to
value. In addition to fixed rate mortgage loans, Guaranty makes adjustable rate
mortgages with the primary loan indexed to the one year treasury. Generally if
the loans are not made to credit standards of FHLMC, additional fees and rate
are charged. If the loan to value exceeds 80%, private mortgage insurance is
generally secured.
Although, due to competitive market pressures, the Bank does originate
fixed-rate mortgage loans, it currently underwrites and documents all such loans
to permit their sale in the secondary mortgage market. At December 31, 1997,
$26.5 million, or 24.6%, of Guaranty's loan portfolio consisted of fixed-rate
mortgage loans.
Guaranty's current one- to four-family residential adjustable-rate
mortgage loans ("ARMs") have interest rates that adjust every year, generally in
accordance with the rates on one-year U.S. Treasury Bills. Guaranty's ARMs
generally limit interest rate increases to 2% each rate adjustment period and
have an established ceiling rate at the time the loans are made of up to 6% over
the original interest rate. Borrowers are qualified at the first year interest
rate plus 2%. To compete with other lenders in its market area, Guaranty makes
one-year ARMs at interest rates which, for the first year, are below the index
rate which would otherwise apply to these loans. At December 31, 1997, $39.1
million, or 36.3%, of Guaranty's loan portfolio consisted of ARMs. There are
unquantifiable risks resulting from potential increased costs to the borrower as
a result of repricing. It is possible, therefore, that during periods of rising
interest rates, the risk of defaults on ARMs may increase due to the upward
adjustment of interest costs to borrowers.
All one- to four-family real estate mortgage loans being originated by
Guaranty contain a "due-on-sale" clause providing that Guaranty may declare the
unpaid principal balance due and payable upon the sale of the mortgage property.
It is Guaranty's policy to enforce these due-on-sale clauses concerning
fixed-rate loans and to permit assumptions of ARMs, for a fee, by qualified
borrowers.
Guaranty requires, in connection with the origination of residential
real estate loans, title opinions and fire and casualty insurance coverage, as
well as flood insurance where appropriate, to protect Guaranty's interest. The
cost of this insurance coverage is paid by the borrower. Guaranty does require
escrows for taxes and insurance.
Construction Lending
Guaranty makes local construction loans, primarily residential and lot
loans. The construction loans are secured by the property for which the loan was
obtained. At December 31, 1997, construction and land loans outstanding were
$18.4 million, or 17.1%, of gross loans. The average life of a construction loan
is approximately nine months and they reprice daily to meet the market, normally
prime plus two percent. Because the interest charged on these loans floats with
the market, they help Guaranty in managing its interest rate risk. Construction
lending entails significant additional risks, compared with residential mortgage
lending. Construction loans often involve larger loan balances concentrated with
single borrowers or groups of related
45
<PAGE>
borrowers. Construction loans involve additional risks attributable to the fact
that loan funds are advanced upon the security of the home under construction,
which is of uncertain value prior to the completion of construction. Thus, it is
more difficult to evaluate accurately the total loan funds required to complete
a project and related loan-to-value ratios. To minimize the risks associated
with construction lending, Guaranty limits loan amounts to 80.0% of appraised
value, in addition to its usual credit analysis of its borrowers. Guaranty also
obtains a first lien on the security property as security for its construction
loans.
Commercial Real Estate Lending
Guaranty also originates commercial real estate loans. These loans are
secured by various types of commercial real estate, including multi-family
residential buildings, commercial buildings and offices, small shopping centers
and churches. At December 31, 1997, commercial real estate aggregated $16.6
million or 15.5% of Guaranty's gross loans. Guaranty's commercial real estate
loans have been made at interest rates that adjust based on yields for one-year
U.S. Treasury securities, with a 2% annual cap on rate adjustments and a 6% cap
on interest rates over the life of the loan. Beginning in September 1996, the
interests rates on commercial real estate loans, in most cases, have been tied
to the prime lending rate. Typically, Guaranty charges fees ranging from 1% to
2% on these loans. Commercial real estate loans made by Guaranty generally
amortize over 15 to 25 years and may have a call provision of 3 or 5 years.
Guaranty's commercial real estate loans are secured by properties in its market
area.
In its underwriting of commercial real estate, Guaranty may lend, under
federal regulation, up to 100% of the security property's appraised value,
although Guaranty's loan to original appraised value ratio on such properties is
80% or less in most cases. Commercial real estate lending entails significant
additional risk, compared with residential mortgage lending. Commercial real
estate loans typically involve larger loan balances concentrated with single
borrowers or groups of related borrowers. Additionally, the payment experience
on loans secured by income producing properties is typically dependent on the
successful operation of a business or a real estate project and thus may be
subject, to a greater extent, to adverse conditions in the real estate market or
in the economy generally. Guaranty's commercial real estate loan underwriting
criteria require an examination of debt service coverage ratios, the borrower's
creditworthiness and prior credit history and reputation, and Guaranty generally
requires personal guarantees or endorsements of borrowers. Guaranty also
carefully considers the location of the security property.
Consumer Lending
Guaranty offers various secured and unsecured consumer loans, including
unsecured personal loans and lines of credit, share loans, automobile loans,
deposit account loans, installment and demand loans, letters of credit, and home
equity loans. At December 31, 1997, Guaranty had consumer loans of $7.0 million
or 6.5% of gross loans. During 1997, Guaranty increased its level of consumer
loans. Such loans were generally made to customers with which Guaranty had an
pre-existing relationships and were generally in amounts of under $75,000.
Guaranty originates all of its consumer loans in its market area and intends to
continue its consumer lending in this geographic area.
Consumer loans may entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured, such as
lines of credit, or secured by rapidly depreciable assets such as automobiles.
In such cases, any repossessed collateral for a defaulted consumer loan may not
provide an adequate source of repayment of the outstanding loan balance as a
result of the greater likelihood of damage, loss or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Furthermore, the application of various federal and state laws, including
federal and state
46
<PAGE>
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. Such loans may also give rise to claims and defenses by a consumer
loan borrower against an assignee of such loan such as Guaranty, and a borrower
may be able to assert against such assignee claims and defenses which it has
against the seller of the underlying collateral. Guaranty adds general
provisions to its loan loss allowance at the time the loans are originated.
Consumer loan delinquencies often increase over time as the loans age.
The underwriting standards employed by Guaranty for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. The stability of the applicant's monthly income may be determined by
verification of gross monthly income for primary employment, and additionally
from any verifiable secondary income. Although creditworthiness of the applicant
is of primary consideration, the underwriting process also includes an analysis
of the value of the security in relation to the proposed loan amount.
During 1997, Guaranty began offering all types of consumer loans due to
its improved capital position. Generally these loans provide higher yields than
one-to-four-family mortgages.
Commercial Loans
In July 1996, Guaranty began making commercial loans to qualified small
businesses in its market area. Commercial business loans generally have a higher
degree of risk than residential mortgage loans, but have commensurately higher
yields. To manage these risks, Guaranty generally secures appropriate collateral
and carefully monitors the financial condition of its business borrowers.
Residential mortgage loans generally are made on the basis of the borrower's
ability to make repayment from his employment and other income and are secured
by real estate whose value tends to be easily ascertainable. In contrast,
commercial business loans typically are made on the basis of the borrower's
ability to make repayment from cash flow from its business and are secured by
business assets, such as commercial real estate, accounts receivable, equipment
and inventory. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself. Further, the collateral for commercial business loans may
depreciate over time and cannot be appraised with as much precision as
residential real estate. Guaranty has a credit review and monitoring system to
regularly review the cash flow of commercial borrowers.
Properties
Guaranty's current principal office opened in December 1996 and is
located at 1658 State Farm Boulevard, Charlottesville, Virginia.
Guaranty has operated an office on Seminole Trail in Charlottesville
since 1983. Guaranty purchased this office in June 1996 at a cost of $1.15
million.
Guaranty has operated a branch in downtown Charlottesville since 1981,
and has operated its current Main Street location since 1992. The current lease
expires in 2002, subject to Guaranty's right to renew for three additional five
year periods under certain circumstances. Guaranty has operated a branch in
Charlottesville near the University of Virginia since 1985, including the
Arlington Boulevard branch that opened in 1994. The current lease for this
branch expires in 1999, subject to Guaranty's right to renew for three
additional five year periods.
In December 1996, Guaranty opened a new main office, operations center
and fourth retail branch in the Pantops area in Albemarle County, just east of
Charlottesville. Guaranty also opened a branch in Harrisonburg, Virginia in May,
1997.
47
<PAGE>
Employees
At December 31, 1997, Guaranty had the equivalent of 64 full-time
employees, and currently has 65 full-time employees. None of Guaranty's
employees is represented by any collective bargaining unit.
Legal Proceedings
In the course of its operations, Guaranty is a party to various legal
proceedings. Based upon information currently available, management believes
that such legal proceedings, in the aggregate, will not have a material adverse
effect on Guaranty's business, financial position, or results of operations.
Supervision and Regulation
The discussion below is only a summary of the principal laws and
regulations that comprise the regulatory framework applicable to Guaranty and
the Bank. The descriptions of these laws and regulations, as well as
descriptions of laws and regulations contained elsewhere herein, do not purport
to be complete and are qualified in their entirety by reference to applicable
laws and regulations.
As a bank holding company, Guaranty is subject to regulation under the
Bank Holding Company Act of 1956 (as amended, the "BHCA") and the examination
and reporting requirements of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). Under the BHCA, a bank holding company may
not directly or indirectly acquire ownership or control of more than 5% of the
voting shares or substantially all of the assets of any additional bank or merge
or consolidate with another bank holding company without the prior approval of
the Federal Reserve Board. The BHCA also generally limits the activities of a
bank holding company to that of banking, managing or controlling banks, or any
other activity which is determined to be so closely related to banking or to
managing or controlling banks that an exception is allowed for those activities.
As a state-chartered bank, the Bank is subject to regulation,
supervision and examination by the Virginia State Corporation Commission's
Bureau of Financial Institutions (the "Virginia SCC"). The Bank is also subject
to regulation, supervision and examination by the Federal Reserve Board and the
Federal Deposit Insurance Corporation (the "FDIC"). State and federal law also
govern the activities in which the Bank may engage, the investments it may make
and the aggregate amount of loans that may be granted to one borrower. Various
consumer and compliance laws and regulations also affect the Bank's operations.
The earnings of the Bank, and therefore the earnings of Guaranty, are
affected by general economic conditions, management policies and the legislative
and governmental actions of various regulatory authorities, including those
referred to above. The following description summarizes some of the state and
federal laws to which Guaranty and the Bank are subject.
The Virginia SCC and the Federal Reserve Bank of Richmond conduct
regular examinations of the Bank, reviewing such matters as the adequacy of loan
loss reserves, quality of loans and investments, management practices,
compliance with laws, and other aspects of their operations. In addition to
these regular examinations, the Bank must furnish the Virginia SCC and the
Federal Reserve with periodic reports containing a full and accurate statement
of its affairs. Supervision, regulation and examination of banks by these
agencies are intended primarily for the protection of depositors rather than
shareholders.
Insurance of Accounts, Assessments and Regulation by the FDIC. The
deposits of the Bank are insured by the FDIC up to the limits set forth under
applicable law. The deposits of the Bank are subject to the deposit insurance
assessments of the Bank Insurance Fund ("BIF") of the FDIC.
48
<PAGE>
For the semi-annual period beginning January 1, 1998, the assessments
imposed on all FDIC deposits for deposit insurance have an effective rate
ranging from 0 to 27 basis points per $100 of insured deposits, depending on the
institution's capital position and other supervisory factors. However, because
the legislation enacted in 1996 requires that both Savings Association Insurance
Fund ("SAIF") insured and BIF-insured deposits pay a pro rata portion of the
interest due on the obligations issued by the Financing Corporation ("FICO"),
the FDIC is assessing BIF-insured deposits an additional 1.30 basis points per
$100 of deposits to cover those obligations.
The FDIC is authorized to prohibit any BIF-insured institution from
engaging in any activity that the FDIC determines by regulation or order to pose
a serious threat to the respective insurance fund. Also, the FDIC may initiate
enforcement actions against banks, after first giving the institution's primary
regulatory authority an opportunity to take such action. The FDIC may terminate
the deposit insurance of any depository institution if it determines, after a
hearing, that the institution has engaged or is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, order or any condition imposed in
writing by the FDIC. It also may suspend deposit insurance temporarily during
the hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If deposit insurance is terminated, the
deposits at the institution at the time of termination, less subsequent
withdrawals, shall continue to be insured for a period from six months to two
years, as determined by the FDIC. Management is aware of no existing
circumstances that could result in termination of the Bank's deposit insurance.
Capital. The Federal Reserve Board has issued risk-based and leverage
capital guidelines applicable to banking organizations they supervise. Under the
risk-based capital requirements, Guaranty and the Bank are each generally
required to maintain a minimum ratio of total capital to risk-weighted assets
(including certain off-balance sheet activities, such as standby letters of
credit), of 8%. At least half of the total capital is to be composed of common
equity, retained earnings and qualifying perpetual preferred stock, less certain
intangibles ("Tier 1 capital"). The remainder may consist of certain
subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock and a limited amount of the loan loss allowance ("Tier 2
capital" and, together with Tier 1 capital, "total capital"). At December 31,
1997, Guaranty's Tier 1 capital and total capital ratios were 14.29% and 15.42%,
respectively.
In addition, each of the Federal bank regulatory agencies have
established minimum leverage capital ratio requirements for banking
organizations. These requirements provide for a minimum leverage ratio of Tier 1
capital to adjusted average quarterly assets equal to 3% for banks and bank
holding companies that meet certain specified criteria. All other banks and bank
holding companies will generally be required to maintain a leverage ratio of at
least 100 to 200 basis points above the stated minimum. Guaranty's leverage
ratio at December 31, 1997 was 9.34%.
The risk-based capital standards of the Federal Reserve Board
explicitly identify concentrations of credit risk and the risk arising from
non-traditional activities, as well as an institution's ability to manage these
risks, as important factors to be taken into account by the agency in assessing
an institution's overall capital adequacy. The capital guidelines also provide
that an institution's exposure to a decline in the economic value of its capital
due to changes in interest rates be considered by the agency as a factor in
evaluating a bank's capital adequacy. The Federal Reserve Board also has
recently issued additional capital guidelines for bank holding companies that
engage in certain trading activities.
Other Safety and Soundness Regulations. There are a number of
obligations and restrictions imposed on bank holding companies and their
depository institution subsidiaries by Federal law and regulatory policy that
are designed to reduce potential loss exposure to the depositors of such
depository institutions and to the FDIC insurance funds in the event the
depository institution becomes in danger of default or is in default. For
example, under a policy of the Federal Reserve Board with respect to bank
holding company operations, a bank holding
49
<PAGE>
company is required to serve as a source of financial strength to its subsidiary
depository institutions and to commit resources to support such institutions in
circumstances where it might not do so otherwise. In addition, the
"cross-guarantee" provisions of Federal law require insured depository
institutions under common control to reimburse the FDIC for any loss suffered or
reasonably anticipated by either the SAIF or the BIF as a result of the default
of a commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default. The FDIC may decline to enforce the cross-guarantee provision
if it determines that a waiver is in the best interests of the SAIF or the BIF
or both. The FDIC's claim for reimbursement is superior to claims of
shareholders of the insured depository institution or its holding company but is
subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution.
The Federal banking agencies also have broad powers under current
Federal law to take prompt corrective action to resolve problems of insured
depository institutions. The extent of these powers depends upon whether the
institution in question is well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized,
as defined by the law. As of December 31, 1997, Guaranty and the Bank were
classified as well-capitalized.
State regulatory authorities also have broad enforcement powers over
the Bank, including the power to impose fines and other civil and criminal
penalties, and to appoint a receiver in order to conserve the assets of any such
institution for the benefit of depositors and other creditors.
Payment of Dividends. Guaranty is a legal entity separate and distinct
from the Bank. Virtually all of the revenues of Guaranty result from dividends
paid to Guaranty by the Bank. The Bank also is subject to state laws that limit
the amount of dividends it can pay. In addition, both Guaranty and the Bank are
subject to various general regulatory policies relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. The Federal Reserve Board has indicated that banking organizations
should generally pay dividends only if (1) the organization's net income
available to common shareholders over the past year has been sufficient to fund
fully the dividends and (2) the prospective rate of earnings retention appears
consistent with the organization's capital needs, asset quality and overall
financial condition. Guaranty does not expect that any of these laws,
regulations or policies will materially impact the ability of the Bank to pay
dividends.
Community Reinvestment. The requirements of the Community Reinvestment
Act ("CRA") are also applicable to the Bank. The CRA imposes on financial
institutions an affirmative and ongoing obligation to meet the credit needs of
their local communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of those institutions. A financial
institution's efforts in meeting community credit needs currently are evaluated
as part of the examination process pursuant to twelve assessment factors. These
factors also are considered in evaluating mergers, acquisitions and applications
to open a branch or facility. To the best knowledge of the Bank, it is meeting
its obligations under the CRA. The Bank's CRA rating is "satisfactory".
Interstate Banking and Branching. Current Federal law authorizes
interstate acquisitions of banks and bank holding companies without geographic
limitation. Effective June 1, 1997, a bank headquartered in one state will be
authorized to merge with a bank headquartered in another state, as long as
neither of the states has opted out of such interstate merger authority prior to
such date. States are authorized to enact laws permitting such interstate bank
merger transactions prior to June 1, 1997, as well as authorizing a bank to
establish "de novo" interstate branches. Virginia has enacted early "opt in"
laws, permitting interstate bank merger transactions. Once a bank has
established branches in a state through an interstate merger transaction, the
bank may establish and acquire additional branches at any location in the state
where a bank headquartered in that state could have established or acquired
branches under applicable Federal or state law.
50
<PAGE>
Economic and Monetary Polices. The operations of Guaranty are affected
not only by general economic conditions, but also by the economic and monetary
policies of various regulatory authorities. In particular, the Federal Reserve
regulates money, credit and interest rates in order to influence general
economic conditions. These policies have a significant influence on overall
growth and distribution of loans, investments and deposits and affect interest
rates charged on loans or paid for time and savings deposits. Federal Reserve
monetary policies have had a significant effect on the operating results of
commercial banks in the past and are expected to continue to do so in the
future.
51
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following information sets forth the names, ages, principal
occupations and business experience for all directors and executive officers of
the Corporation. The date shown for first election as a director in the
information below represents the year in which the nominee or incumbent director
was first elected to the Board of Directors of the Corporation or previously to
the Board of Directors of the Bank. Unless otherwise indicated, the business
experience and principal occupations shown for each individual has extended five
or more years.
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Douglas E. Caton 55 Chairman of the Board 1981
Harry N. Lewis 70 Vice Chairman of the Board 1976
Thomas P. Baker 51 President, Chief Executive 1990
Officer and Director
Henry J. Browne 65 Director 1976
Robert P. Englander 78 Director 1976
John R. Metz 60 Director 1980
James R. Sipe, Jr. 42 Director 1996
Oscar W. Smith, Jr. 67 Director 1976
John B. Syer 54 Director 1998
Vincent B. McNelley 32 Senior Vice President, Chief
Financial Officer and Treasurer
Donna W. Richards 34 Senior Vice President - Mortgage Lending
Rex L. Smith 39 Senior Vice President - Retail Operations
</TABLE>
Douglas E. Caton has been Chairman of the Corporation's Board of
Directors since 1989. Mr. Caton is a commercial real estate developer and has
been President of Management Services Corp., a real estate management company,
since 1972. Mr. Caton is a member of the Virginia State Bar and is a Major
General in the United States Army Reserve.
Harry N. Lewis has served as the Vice Chairman of the Corporation's
Board of Directors since 1976. Mr. Lewis has been President of Lewis Insurance
Agency, Inc., an insurance sales company in Charlottesville, Virginia, since
July 1952. Mr. Lewis is an alumnus of the Colgate Darden Graduate School of
Business Administration and is a member of the Board of Directors of the United
Way. He is also a member of the Board of Directors of Keller & George and is the
past president of the Central Virginia Chapter of the C.P.C.U.
52
<PAGE>
Thomas P. Baker has served as the President and Chief Executive Officer
of the Bank since January 1, 1990.
Henry J. Browne is an architect in private practice with studios in
Keswick, Virginia and Boca Grande, Florida. He was President of Browne, Eichmon,
Dalgliesh, Gilpin & Paxton, an architecture firm in Charlottesville, Virginia,
from March 1958 to April 1996. Mr. Browne is a past director of Farmington
Country Club, past president of the Virginia Chapter of the American Institute
of Architects and past president of Downtown Charlottesville, Inc.
Robert P. Englander is President of the Englander Agency, a life
insurance company in Charlottesville, Virginia. Mr. Englander has been an
insurance agent since 1949.
John R. Metz has been a pharmacist at Martha Jefferson Hospital in
Charlottesville, Virginia, since October 1967. Mr. Metz is a member of the Board
of Directors of the Virginia Pharmaceutical Association Research and Education
Foundation.
James R. Sipe, Jr. is an associate broker with Prudential Funkhouser &
Associates, a real estate sales company in Harrisonburg, Virginia.
Oscar W. Smith, Jr. is President of K-B Management Co.,
Charlottesville, Virginia. Mr. Smith is a director of Smith/Eastman, Inc. and is
the past president of the Albemarle County Rotary Club. He is a master mason and
the past president of the University of Virginia Touchdown Club.
John B. Syer has been the Executive Director of the University of
Virginia Alumni Association and UVA Fund since 1994. Mr. Syer was formerly the
owner and Chief Executive Officer of S&N Transportation in Norfolk, Virginia,
President and Chief Operating Officer of Essex Financial Group, Inc. and its
affiliates in Norfolk, Virginia, and Managing Partner of Home Health of
Tidewater.
Vincent B. McNelley was appointed Senior Vice President and Chief
Financial Officer in July 1997. From June 1993 to June 1997, he was a Senior
Audit Associate with BDO Seidman LLP.
Donna W. Richards was appointed Senior Vice President of Mortgage
Lending in April 1995. Ms. Richards has been employed by the Corporation since
April 1993 and has served in the past as Manager of Loan Originations and a Loan
Officer. From December 1991 to April 1993, she was a Senior Loan Processor for
Virginia Federal.
Rex L. Smith, III has been Senior Vice President - Retail Operations
since February 1998 and was Senior Vice President - Commerical from September
1996 to February 1997. Between March 1997 and January 1998, Mr. Smith was a Vice
President with Central Fidelity National Bank. From March 1993 until August
1996, he was Vice President/Senior Business Manager of Crestar Financial
Corporation.
53
<PAGE>
Security Ownership of Management
The following table sets forth information as of March 1, 1998
regarding the number of shares of Common Stock beneficially owned by all
directors and by all directors and executive officers as a group. Beneficial
ownership includes shares, if any, held in the name of the spouse, minor
children or other relatives of the nominee living in such person's home, as well
as shares, if any, held in the name of another person under an arrangement
whereby the director or executive officer can vest title in himself at once or
at some future time.
Common Stock
Name Beneficially Owned Percentage of Class
---- ------------------ -------------------
Directors
Thomas P. Baker (1) 9,215 0.61%
Henry J. Browne 32,462 2.16%
Douglas E. Caton 253,640 16.88%
Robert P. Englander 10,560 0.70%
Harry N. Lewis 5,688 0.38%
John R. Metz 13,992 0.93%
James R. Sipe, Jr. 1,500 0.10%
Oscar W. Smith, Jr. 20,034 1.33%
John B. Syer 1,000 0.06%
All present executive
officers and directors
as a group (12 Persons) 350,221 23.30%
- --------------------
(1) Includes beneficial ownership of shares issuable upon the exercise of
stock options exercisable within 60 days of March 1, 1998.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of March 1, 1998
regarding the number of shares of Common Stock beneficially owned by all persons
who own five percent or more of Common Stock of the Corporation:
<TABLE>
<CAPTION>
Common Stock
Name and Address Beneficially Owned Percentage of Class
---------------- ------------------ -------------------
<S> <C> <C>
Douglas E. Caton 253,640 16.88%
4 Deer Park
Earlysville, Virginia
Ferguson, Andrews Investment Advisers, Inc. 88,600 5.90%
2560 Ivy Road
Charlottesville, Virginia 22903
</TABLE>
54
<PAGE>
Executive Compensation
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal year ended December 31, 1997,
the six months ended December 31, 1996 and the fiscal years ended June 30, 1996
and 1995, the cash compensation paid by the Corporation, as well as certain
other compensation paid or accrued for those years, to the named Executive
Officer in all capacities in which he served:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1)
----------------------
All Other
Name and Principal Position Year Salary Bonus Compensation (2)
- --------------------------- ---- ------ ----- ----------------
<S> <C> <C> <C> <C>
Thomas P. Baker 1997 $115,200 $3,252 $2,869
President and 1996 (3) 56,850 - 568
Chief Executive Officer 1996 (4) 113,700 - 1,137
1995 113,700 - 1,137
</TABLE>
- --------------------
(1) All benefits that might be considered of a personal nature did not
exceed the lesser of $50,000 or 10% of total annual salary and bonus
for the officer named in the table.
(2) Amounts reflect the Corporation's matching contribution under its
Section 401(k) retirement plan.
(3) Six months ended December 31, 1996.
(4) Fiscal year ended June 30, 1996.
Options Grants in Last Fiscal Year
The following table sets forth for the year ended December 31, 1997,
the grants of stock options to the named Executive Officer:
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Percent of Total
Number of Securities Options Granted to
Underlying Options Employees in Fiscal Exercise or Base
Name Granted (#) (a) Year (%) (b) Price ($/Share) Expiration Date
<S> <C> <C> <C> <C>
Thomas P. Baker 2,000 5.0 12.00 8/28/00
2,000 5.0 13.20 8/28/01
2,000 5.0 14.52 8/28/02
2,000 5.0 15.97 8/28/03
2,000 5.0 17.57 8/28/04
- --------------------
</TABLE>
(a) Stock options were awarded at or above the fair market value of the shares
of Common Stock at the date of award. The options with an exercise price of
$12.00 are immediately exercisable. The options with exercise prices of
$13.20, $14.52, $15.97 and $17.57 will become exercisable on August 28,
1998, 1999, 2000 and 2001, respectively.
(b) Options to purchase 40,000 shares of Guaranty Common Stock were granted to
employees during the year ended December 31, 1997.
55
<PAGE>
Option Exercises and Holdings
Set forth in the table below is information concerning each exercise of
stock options during the fiscal year ended December 31, 1997 by the named
Executive Officer and the year end value of unexercised options.
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR Value
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARS In-The-Money Options/SARs
at FY-End(#) (1) at FY-End ($) (2)
---------------- -----------------
Shares Acquired Value
Name On Exercise (#) Realized ($)(3) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Baker 2,375 28,500 2,000 8,000 5,000 2,600
</TABLE>
- --------------------
(1) Each of these options relates to Common Stock.
(2) These values are based on $14.50, the closing price of Common Stock on
December 31, 1997.
(3) The total number of options exercised was 4,000. However, in accordance
with the plan document, this was done using a "cashless exercise" which
resulted in 2,375 shares of stock being awarded to Mr. Baker and no
money being received by the Corporation.
Directors' Fees
Directors, excluding directors who are officers of the Corporation,
received fees of $450 for each meeting of the Board of Directors attended and
$300 for each Compensation, Planning and Audit Committee meeting attended during
fiscal 1997. Mr. Caton, who is an ex officio of all Committees and devotes
additional time to the Corporation's affairs as Chairman of the Board of
Directors, received a fee of $25,200 in the fiscal year ended December 31, 1997
in lieu of any fees for attending Board of Directors and Committee meetings.
Employment Agreements
The Corporation and Thomas P. Baker are parties to an employment
agreement that provides for Mr. Baker to serve as President and Chief Executive
Officer of the Corporation. The agreement is for a period ending December 31,
2000 and provides for a base salary of $115,300, which the Board of Directors
may increase. If Mr. Baker's employment is terminated for reasons other than
cause, he will be entitled to receive severance pay equal to one-half of his
annual base salary in effect at the time.
If termination of employment due to a change in control had occurred in
fiscal 1997, Mr. Baker would be entitled to severance payments amounting to
approximately $115,000.
Transactions with Management
Some of the directors and officers of the Corporation are at present,
as in the past, customers of the Corporation and, the Corporation has had, and
expects to have in the future, banking transactions in the ordinary course of
its business with directors, officers, principal shareholders and their
associates, on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for comparable
transactions with others. These transactions do not involve more than the normal
risk of collectibility or present other unfavorable features. The largest
aggregate outstanding balance of loans to directors, executive officers and
their associates, as a group in the fiscal year ended December 31, 1997 was
approximately $386,000. Such balances totaled $386,000 at December 31, 1997, or
3.3% of the Corporation's equity capital at that date.
56
<PAGE>
There are no legal proceedings to which any director, officer,
principal shareholder or associates is a party that would be material and
adverse to the Bank.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation at December 31, 1997. See "Use of Proceeds." This table is based on,
and is qualified in its entirety by, the historical consolidated financial
statements of the Corporation, including the related notes thereto, which are
included in documents incorporated by reference herein, and should be read in
conjunction therewith.
<TABLE>
<CAPTION>
December 31,
1997
------------------
(Dollars in
Thousands)
<S> <C>
Long-term debt $2,360
Capitalized lease obligations
Shareholders' Equity
Common Stock, par value $1.25 per share, authorized
4,000,000 shares, shares outstanding - 1,501,383 1,876
Capital surplus 5,725
Retained earnings 4,208
Unrealized gains on securities available for sale, net of 51
------
income taxes
Total shareholders' equity 11,860
Total capitalization $14,220
Consolidated Capital Ratios
Equity to assets 9.07%
Tier 1 Capital 14.29%
Total Capital 15.42%
</TABLE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Corporation and, accordingly, the financial statements of the
Trust will be consolidated into the Corporation's consolidated financial
statements. The Preferred Securities will be shown in the Corporation's
consolidated balance sheet as "Corporation-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust." The financial statement footnotes of
the Corporation will reflect that the sole asset of the Trust will be the amount
of the Junior Subordinated Debt Securities maturing on , 2028 All future reports
filed by the Corporation under the Exchange Act will present information
regarding the Trust and any other similar trusts in the manner described above.
57
<PAGE>
REGULATORY TREATMENT
As a registered bank holding company, the Corporation is required by
the Federal Reserve to maintain certain levels of capital for bank regulatory
purposes. The Corporation expects that the Preferred Securities will be treated
as "Tier I Capital" of the Corporation for such purposes; provided that
Preferred Securities can only comprise 25% of the Corporation's Tier I Capital.
Based on the Corporation's Tier I Capital at December 31, 1997, approximately
$3.9 million of the Preferred Securities would be initially included in the
Corporation's Tier I Capital.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Declaration, the Trustees on behalf of the
Trust will issue the Preferred Securities and the Common Securities. The
Preferred Securities will represent beneficial ownership interests in the Trust
and the holders thereof will be entitled to a preference in certain
circumstances with respect to Distributions and amounts payable on redemption of
the Trust Securities or liquidation of the Trust over the Common Securities, as
well as other benefits as described in the Declaration. See "Subordination of
Common Securities." The Declaration will be qualified under the Trust Indenture
Act of 1939 (the "Trust Indenture Act"). This summary of certain provisions of
the Preferred Securities, the Common Securities and the Declaration does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Declaration, including the definitions
therein of certain terms. The form of the Declaration is available upon request
from the Trustees.
General
The Preferred Securities will be limited to $6.0 million Aggregate
Liquidation Amount at any one time outstanding. The Trust reserves the right to
increase the Aggregate Liquidation Amount by not more than $900,000. The
Preferred 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." Legal title to the Junior Subordinated Debt Securities will
be held by the Property Trustee on behalf of the Trust in trust for the benefit
of the holders of the Preferred Securities and Common Securities. The Guarantee
Agreement executed by the Corporation for the benefit of the holders of the
Preferred Securities (the "Guarantee Agreement") will provide for the Guarantee
on a subordinated basis with respect to the Preferred Securities but will not
guarantee payment of Distributions or amounts payable on redemption of the
Preferred Securities or on liquidation of the Trust when the Trust does not have
funds on hand available to make such payments. See "Description of Guarantee."
Distributions
The Preferred Securities represent beneficial ownership interests in
the Trust, and Distributions on each Preferred Security will be payable at $___
per annum, and will be payable quarterly in arrears on the 15th day of March,
June, September and December of each year to the holders of the Preferred
Securities at the close of business on the Business Day (as defined herein)
immediately preceding such Distribution Date (each, a "Record Date").
Distributions on the Preferred Securities will be cumulative. Distributions will
accumulate from the Issue Date. The first Distribution Date for the Preferred
Securities will be June 15, 1998. The amount of Distributions payable for any
period will be computed on the actual number of days elapsed in a year of twelve
30-day months. In the event that any date on which Distributions are payable on
the Preferred Securities is not a Business Day, payment of the Distributions
payable on such date will be made on the next succeeding day that is a Business
Day (and without any additional Distributions or other payments in respect to
any such delay) with the same force and effect as if made on the date such
payment was originally payable (each date on which Distributions are payable in
accordance with the foregoing. a "Distribution Date"). A "Business Day"
58
<PAGE>
shall mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in Richmond, Virginia are authorized or required by law or
executive order to remain closed, or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debt Securities 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 Debt Securities. As
a consequence of any such election, quarterly Distributions on the Preferred
Securities by the Trust will be deferred during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at __% per annum thereof, compounded
quarterly from the relevant payment date for such Distributions during any such
Extension Period, to the extent permitted by applicable law. The term
"Distributions" as used herein shall include any such additional Distributions.
During any such Extension Period, the Corporation 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 Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari passu
with or junior in interest to the Junior Subordinated Debt Securities, or (iii)
make any guarantee payments with respect to any guarantee by the Corporation of
the debt securities of any subsidiary of the Corporation (including Other
Guarantees) if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debt Securities (other than (a) dividends or distributions
in Common Stock of the Corporation, (b) any Declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) purchases or acquisitions of shares of the Corporation's Common
Stock in connection with the satisfaction by the Corporation of its obligations
under any employee benefit plan or any other contractual obligation of the
Corporation (other than a contractual obligation ranking pari passu with or
junior to the Junior Subordinated Debt Securities), (e) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock or (f) the purchase of
fractional interests in shares of the Corporation's stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Corporation may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 20 consecutive
quarterly periods or to extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. Upon the termination of any such Extension Period
and the payment of all amounts then accrued and unpaid on the Junior
Subordinated Debt Securities (together with interest thereon accrued at __% per
annum, compounded quarterly, to the extent permitted by applicable law), and
subject to the foregoing limitations, the Corporation may elect to begin a new
Extension Period. No interest or other amounts shall be due and payable during
an Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any such Extension Period at least three Business Days prior
to the earlier of (i) the date the Distributions on the Preferred Securities
would have been payable except for the election to begin such Extension Period
or (ii) the date the Administrative Trustees are required to give notice to any
automated quotation system or to holders of such Preferred Securities of the
record date or the date such Distributions are payable, but in any event not
less than three Business Days prior to such record date. The Debenture Trustee
shall give notice of the Corporation's election to begin or extend an Extension
Period to the holders of the Preferred Securities. There is no limitation on the
number of times that the Corporation may elect to begin an Extension Period. See
"Description of Junior Subordinated Debt Securities--Option to Extend Interest
Payment Date" and "Certain United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
59
<PAGE>
The Corporation has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debt Securities.
The revenue of the Trust available for distribution to holders of the
Preferred Securities will be limited to payments under the Junior Subordinated
Debt Securities in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. See "Description of Junior Subordinated Debt
Securities-General." If the Corporation does not make interest payments on the
Junior Subordinated Debt Securities, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantee."
Conversion Rights
General. Preferred Securities will be convertible at any time prior to
the earlier of (i) 5:00 p.m. (Richmond, Virginia time) on the Business Day
immediately preceding the date of redemption or repayment of such Preferred
Securities, whether at maturity or upon redemption, and (ii) 5:00 p.m.
(Richmond, Virginia time) on the Conversion Termination Date (if any), at the
option of the holders thereof and in the manner described below, into a number
of shares of Common Stock that equals the quotient obtained by dividing (i) $25
(ii) the Conversion Price referred to on the cover page of this Prospectus,
subject to adjustment as described below under "-- Conversion Price
Adjustments." The Trust will covenant in the Declaration not to convert Junior
Subordinated Debt Securities held by it except pursuant to a notice of
conversion delivered to the Property Trustee, as initial conversion agent (the
"Conversion Agent"), by a holder of Preferred Securities.
A holder of Preferred Securities wishing to exercise its conversion
right will be required to deliver an irrevocable conversion request, together
with the certificate evidencing such Preferred Security, to the Conversion Agent
which will exchange such Preferred Security for an equivalent amount of the
Junior Subordinated Debt Securities (based on an exchange ratio of $25.00 in
principal amount of Junior Subordinated Debt Securities for each $25.00 in
Liquidation Amount of Preferred Securities) on behalf of such holder and
immediately convert such Junior Subordinated Debt Securities into Common Stock.
Holders may obtain copies of the required form of the conversion request from
the Conversion Agent.
Holders of Preferred Securities at 5:00 p.m. (Richmond, Virginia time)
on a Distribution Record Date will be entitled to receive the Distribution
payable on such Preferred Securities on the corresponding Distribution Date
notwithstanding the conversion of such Preferred Securities following such
Distribution Record Date but on or prior to such Distribution Date. Except as
provided in the immediately preceding sentence, neither the Trust nor the
Corporation will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid Distributions, whether or not in arrears,
on converted Preferred Securities; provided, however, that if notice of
redemption of Preferred Securities is mailed or otherwise given to holders of
Preferred Securities or the Trust issues a press release announcing a Conversion
Termination Date, then, if any holder of Preferred Securities converts any
Preferred Securities into Common Stock on any date on or after the date on which
such notice of redemption is mailed or otherwise given or the date of such press
release, as the case may be, and if such date of conversion falls on any day
from and including the first day of an Extension Period and on or prior to the
Distribution Date upon which such Extension Period ends, such converting holder
shall be entitled to receive either (i) if the date of such conversion falls
after a Distribution Record Date and on or prior to the next succeeding
Distribution Date, all accrued and unpaid Distributions on such Preferred
Securities (including interest thereon, if any, to the extent permitted by
applicable law) to such Distribution Date or (ii) if the date of such conversion
does not fall on a date described in clause (i) above, all accrued and unpaid
Distributions on such Preferred Securities (including interest thereon, if any,
to the extent permitted by applicable law) to the most recent Distribution Date
prior to the date of such conversion, which
60
<PAGE>
Distributions shall, in either such case, be paid to such converting holder
unless the date of conversion of such Preferred Securities is on or prior to the
Distribution Date upon which such Extension Period ends and after the
Distribution Record Date for such Distribution Date, in which case such
Distributions shall be paid to the person who was the holder of such Preferred
Securities (or one or more predecessor Preferred Securities) at 5:00 p.m.
(Richmond, Virginia time) on such Distribution Record Date. The Corporation will
make no payment or allowance for distributions on the shares of Common Stock
issued upon such conversion, except to the extent that such shares of Common
Stock are held of record on the record date for any such distributions. Each
conversion will be deemed to have been effected immediately prior to 5:00 p.m.
(Richmond, Virginia time) on the day on which the related conversion request was
received by the Conversion Agent.
No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Corporation in cash based on the Closing Price of the Common Stock on the date
such Preferred Securities are converted.
Conversion Price Adjustments - General. The Conversion Price is subject
to adjustment in certain events, including (a) the issuance after the Issue Date
of shares of Common Stock as a dividend or a distribution with respect to Common
Stock, (b) subdivisions, combinations and reclassifications of Common Stock
effected after the Issue Date, (c) the issuance to all holders of Common Stock
after the Issue Date of rights or warrants entitling them (for a period not
exceeding 45 days) to subscribe for or purchase shares of Common Stock at less
than the then Current Market Price (as defined below) of the Common Stock, (d)
the distribution to all holders of Common Stock after the Issue Date of
evidences of its indebtedness, capital stock, cash or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above and dividends and distributions paid exclusively in cash), (e)
the payment of dividends (and other distributions) on Common Stock after the
Issue Date paid exclusively in cash, excluding cash dividends if the annualized
per share amount thereof does not exceed 15% of the Current Market Price of
Common Stock as of the trading day immediately preceding the date of declaration
of such dividend, and (f) payment to holders of Common Stock after the Issue
Date in respect of a tender or exchange offer (other than an odd-lot offer) by
the Corporation for Common Stock at a price in excess of 110% of the then
Current Market Price of Common Stock as of the trading day next succeeding the
last date tenders or exchanges may be made pursuant to such tender or exchange
offer.
"Current Market Price" means, in general, the average of the daily
Closing Prices (as defined below) for the five consecutive trading days selected
by the Corporation commencing not more than 20 trading days before, and ending
not later than, the earlier of the day in question or, if applicable, the day
before the "ex" date (as defined) with respect to the issuance or distribution
in question.
The Corporation from time to time may reduce the conversion price of
the Junior Subordinated Debt Securities (and thus the Conversion Price of the
Preferred Securities) by any amount selected by the Corporation for any period
of at least 20 days, in which case the Corporation shall give at least 15 days'
notice of such reduction. The Corporation may, at its option, make such
reductions in the Conversion Price, in addition to those set forth above, as the
Corporation deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. See
"Certain United States Federal Income Tax Consequences-Adjustment of Conversion
Price."
No adjustment of the Conversion Price will be made upon the issuance of
any shares of Common Stock pursuant to any present or future plan providing for
the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in shares of
Common Stock under any such plan, or upon the issuance of any shares of Common
Stock or options or rights to purchase such shares pursuant to any employee
benefit plan or program, or pursuant to any option, warrant, right or any
exercisable, exchangeable or convertible security outstanding as of the date on
which the Junior Subordinated
61
<PAGE>
Debt Securities are first issued. No adjustment of the Conversion Price will be
made upon the issuance of rights under any shareholder rights plan. No
adjustment in the Conversion Price will be required unless adjustment would
require a change of at least one percent (1%) in the Conversion Price then in
effect; provided, however, that any adjustment that would not be required to be
made shall be carried forward and taken into account in any subsequent
adjustment. If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one adjustment
shall be made with respect to that action and such adjustment shall be the
amount of adjustment that has the highest absolute value to the holder of the
Preferred Securities.
Conversion Price Adjustment-Merger, Consolidation or Sale of Assets of
the Corporation. In the event that the Corporation shall be a party to any
transaction, including, without limitation, and with certain exceptions, (a) a
recapitalization or reclassification of the Common Stock, (b) consolidation of
the Corporation with, or merger of the Corporation into, any other person, or
any merger of another person into the Corporation, (c) any sale, transfer or
lease of all or substantially all of the assets of the Corporation or (d) any
compulsory share exchange pursuant to which the Common Stock is converted into
the right to receive other securities, cash or other property (each of the
foregoing being referred to as a "Transaction"), then the holders of Preferred
Securities then outstanding will have the right to convert the Preferred
Securities into the kind and amount of securities, cash or other property
receivable upon the consummation of such Transaction by a holder of the number
of shares of Common Stock issuable upon conversion of such Preferred Securities
immediately prior to such Transaction.
In the case of a Transaction, each Preferred Security would become
convertible into the securities, cash or property receivable by a holder of the
number of shares of the Common Stock into which such Preferred Security was
convertible immediately prior to such Transaction. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the Preferred Securities in the future. For example, if the
Corporation was acquired in a cash merger, each Preferred Security would become
convertible solely into cash and would no longer be convertible into securities
which value would vary depending on the future prospects of the Corporation and
other factors.
Conversion Price adjustments or omissions in making such adjustments
may, under certain circumstances, be deemed to be distributions that could be
taxable as dividends to holders of Preferred Securities or to the holders of
Common Stock. See "Certain United States Federal Income Tax
Consequences-Adjustment of Conversion Price."
Termination of Conversion Rights. In addition to the rights of the
Corporation to redeem the Preferred Securities under the circumstances described
in this Prospectus, the Corporation also will have the right to terminate the
convertibility of the Preferred Securities into Common Stock as described in
this paragraph. On and after , 2001 and provided the Trust is current in the
payment of Distributions on the Preferred Securities (except to the extent that
the payment of Distributions may have been duly deferred as the result of an
Extension Period), the Corporation may, at its option, terminate the right to
convert the Junior Subordinated Debt Securities into Common Stock, in which case
the right to convert the Preferred Securities into Common Stock will likewise
terminate. The Corporation may exercise this option only if for at least 20
trading days within any period of 30 consecutive trading days ending on or after
, 2001, including the last trading day of such period, the Closing Price of the
Common Stock exceeds 115% of the then applicable Conversion Price of the
Preferred Securities. To exercise this conversion termination option, the
Corporation must cause the Trust to issue a press release for publication on the
Dow Jones News Service or on a comparable news service announcing the Conversion
Termination Date prior to the opening of business on the second trading day
after a period in which the condition in the preceding sentence has been met,
but in no event may such press release be issued prior to , 2001. The press
release shall announce the Conversion Termination
62
<PAGE>
Date and provide the Conversion Price and the Closing Price of the Preferred
Securities and the Common Stock, in each case as of the close of business on the
trading day next preceding the date of the press release.
Notice of the termination of conversion rights will be given by
first-class mail to the holders of the Preferred Securities not more than four
Business Days after the Trust issues the press release. The Conversion
Termination Date will be a Business Day selected by the Corporation not less
than 30 nor more than 60 days after the date on which the Trust issues the press
release announcing its intention to terminate conversion rights of Preferred
Security holders. In the event that the Corporation exercises its conversion
termination option, conversion rights will expire at 5:00 p.m. (Richmond,
Virginia time) on the Conversion Termination Date. In the event the Corporation
has not exercised its conversion termination option and the Preferred Securities
are otherwise called for redemption, the Preferred Securities will be
convertible at any time prior to 5:00 p.m. (Richmond, Virginia time) on the
Business Day immediately preceding the date of such redemption.
"Closing Price" of any security on any day means the last reported sale
price, regular way, on such day or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the NYSE Composite Tape, or, if such security is
not listed or admitted to trading on the NYSE, on the principal national
securities exchange on which such security is listed or admitted to trading, or
if such security is not listed or admitted to trading on a national securities
exchange, on the National Market System of the National Association of
Securities Dealers, Inc. or, if such security is not quoted or admitted to
trading on such quotation system, on the principal quotation system on which
such security is listed or admitted to trading or quoted, or, if not listed or
admitted to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available in such manner, as furnished by any NYSE member
firm selected from time to time by the Board of Directors of the Corporation for
that purpose or, if not so available in such manner, as otherwise determined in
good faith by the Board of Directors of the Corporation.
Redemption
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debt Securities, 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 Trust 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 Preferred Securities plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption Date").
See "Description of Junior Subordinated Debt Securities-Optional Redemption." If
less than all the Junior Subordinated Debt Securities 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 Preferred
Securities and the Common Securities.
The Corporation has the right to redeem the Junior Subordinated Debt
Securities (i) on or after , 2003, 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. A redemption of the Junior Subordinated Debt
Securities would cause a mandatory redemption of a Like Amount of the Preferred
Securities and Common Securities at the Redemption Price.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the City of Richmond, Virginia are
authorized or required by law or executive order to remain
63
<PAGE>
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.
"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 Debt
Securities to be contemporaneously redeemed in accordance with the Junior
Subordinated Indenture, allocated to the Common Securities and to the Preferred
Securities based upon the relative Liquidation Amounts of such classes and (ii)
with respect to a distribution of Junior Subordinated Debt Securities to holders
of Trust Securities in connection with a dissolution or liquidation of the
Trust, Junior Subordinated Debt Securities having a principal amount equal to
the Liquidation Amount of the Trust Securities of the holder to whom such Junior
Subordinated Debt Securities are distributed.
"Liquidation Amount" means the stated amount of $25.00 per Trust
Security.
"Tax Event" means the receipt by the Trust of an opinion of counsel to
the Corporation 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 Preferred Securities, there is more than an insubstantial
risk that (i) the Trust 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 Debt Securities, (ii) interest
payable by the Corporation on the Junior Subordinated Debt Securities is not, or
within 90 days of the delivery of such opinion, will not be, deductible by the
Corporation, in whole or in part, for United States federal income tax purposes
or (iii) the Trust is, or will be within 90 days of the delivery of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel to the Corporation 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 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 Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the
Corporation 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
Preferred Securities, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the Liquidation
Amount of the Preferred Securities as 25% of the Corporation's "Tier I Capital"
(or the then equivalent thereof) for purposes of the risk-based capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation.
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
the Trust is the holder of all the Junior Subordinated Debt Securities, the
Corporation will pay Additional Sums (as defined below), if any, on the Junior
Subordinated Debt Securities.
64
<PAGE>
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Preferred Securities and Common Securities of the Trust will not be
reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust has become subject as a result of a Tax Event.
Redemption Procedures
Trust Securities shall be redeemed, if at all, at the Redemption Price
with the proceeds from the contemporaneous repayment or redemption of the Junior
Subordinated Debt Securities. Redemptions of the Trust Securities shall be made
and the Redemption Price shall be payable on each Redemption Date (as defined
below) only to the extent that the Trust has funds on hand available for the
payment of such Redemption Price. See also "Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Preferred
Securities, then, by 12:00 noon, Richmond, Virginia time, on the date fixed for
redemption (the "Redemption Date"), to the extent funds are available, with
respect to the Preferred Securities held in global form, the Property Trustee
will deposit rrevocably with DTC funds sufficient to pay the Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of the Preferred Securities. See "Form, Denomination,
Book-Entry Procedures and Transfer." With respect to the Preferred Securities
held in certificated form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for the Preferred
Securities funds sufficient to pay the Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing the
Preferred Securities. See "Payment and Paying Agency." Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of the Preferred 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 the Preferred Securities will cease, except the right
of the holders of the Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, or to convert the holder's Preferred
Securities into Common Stock as described under "Conversion Rights" above and
the Preferred Securities will cease to be outstanding. In the event that any
date fixed for redemption of Preferred 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 (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 the event that payment of the Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Corporation pursuant to the Guarantee as described under "Description of
Guarantee," Distributions on Preferred Securities will continue to accrue at the
then applicable rate, from the Redemption Date originally established by the
Trust 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 law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender in the
open market or by private agreement.
Notice of any redemption (other than at the Stated Maturity of the
Junior Subordinated Debt Securities) will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each holder of Trust Securities
at its registered address. Unless the Corporation defaults in payment of the
Redemption Price on, or in the repayment of, the Junior Subordinated Debt
Securities, on and after the Redemption Date, Distributions will cease to accrue
on the Trust Securities called for redemption.
65
<PAGE>
Liquidation of the Trust and Distribution of Junior Subordinated Debt Securities
The Corporation, as the holder of the outstanding Common Securities,
will have the right at any time (including, without limitation, upon the
occurrence of a Tax Event, an Investment Company Event or Capital Treatment
Event) to terminate the Trust and cause a Like Amount of the Junior Subordinated
Debt Securities to be distributed to the holders of the Trust Securities upon
liquidation of the Trust. Such right to terminate is subject to prior approval
of the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
Upon liquidation of the Trust and certain other events, the Junior
Subordinated Debt Securities may be distributed to holders of the Preferred
Securities. Under current United States federal income tax law, a distribution
of Junior Subordinated Debt Securities upon the dissolution of the Trust would
not be a taxable event to holders of the Preferred Securities. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the Junior Subordinated Debt Securities may constitute a
taxable event to holders of Preferred Securities. See "Certain United States
Federal Income Tax Consequences--Distribution of Junior Subordinated Debt
Securities to Holders of Preferred Securities."
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debt
Securities to the holders of the Trust Securities if the Corporation, as
Depositor, has given written direction to the Property Trustee to terminate the
Trust (which direction is optional and, except as described above, wholly within
the discretion of the Corporation, as Depositor); (iii) redemption of all of the
Trust Securities as described under "Mandatory Redemption" above; (iv)
expiration of the term of the Trust; and (v) the entry of an order for the
dissolution of the Trust by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii), (iv)
or (v) above, the Trust shall be liquidated by the Trustees as expeditiously as
the Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated Debt
Securities, unless such distribution would not be practical, in which event such
holders will be entitled to receive out of the assets of the Trust available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to, in the case of holders
of Preferred 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 the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Preferred Securities,
except that if a Debenture Event of Default (or an event that, with notice or
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration has occurred and is continuing, the Preferred Securities
shall have a priority over the Common Securities with respect to any such
distributions. See "Subordination of Common Securities." If an early termination
occurs as described in clause (v) above, the Junior Subordinated Debt Securities
will be subject to optional redemption in whole (but not in part).
"Like Amount" means (i) with respect to a redemption of Preferred
Securities, Preferred Securities having a Liquidation Amount equal to that
portion of the principal amount of Junior Subordinated Debt Securities to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of the Preferred Securities and (ii) with respect to a
distribution of Junior Subordinated Debt Securities to holders of Preferred
Securities in connection with a
66
<PAGE>
dissolution or liquidation of the Trust, Junior Subordinated Debt Securities
having a principal amount equal to the Liquidation Amount of the Trust
Securities of the holder to whom such Junior Subordinated Debt Securities are
distributed.
If the Corporation elects not to redeem the Junior Subordinated Debt
Securities prior to maturity and the Trust is not liquidated and the Junior
Subordinated Debt Securities are not distributed to holders of the Trust
Securities, the Preferred Securities will remain outstanding until the repayment
of the Junior Subordinated Debt Securities at the Stated Maturity.
On and after the liquidation date is fixed for any distribution of
Junior Subordinated Debt Securities to holders of the Trust Securities, (i) the
Preferred Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debt Securities to be delivered upon such distribution with respect
to Preferred Securities held by DTC or its nominee and (iii) any certificates
representing Preferred Securities not held by DTC or its nominee will be deemed
to represent Junior Subordinated Debt Securities having a principal amount equal
to the Liquidation Amount of such Preferred Securities and bearing accrued and
unpaid interest in an amount equal to the accumulated and unpaid Distributions
on such Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for cancellation, whereupon the
Corporation will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Junior Subordinated Debt
Securities.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for the Trust Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Junior Subordinated Debt Securities that the investor may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, shall be made pro rata to the
holders of Preferred Securities and Common Securities based on the Liquidation
Amount of the Trust Securities, provided that, if on any Distribution Date or
Redemption Date any Debenture Event of Default (or an event that, with notice or
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration shall have occurred and be continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
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 of the outstanding Preferred Securities, 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 the
Redemption Price of, the Preferred Securities then due and payable.
In the case of any Event of Default under the Declaration resulting
from a Debenture Event of Default, the Corporation as holder of the Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default under the Declaration until the effect of all such Events
of Default have been cured, waived or otherwise eliminated. Until all such
Events of Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Preferred Securities and not on behalf of the Corporation as holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
67
<PAGE>
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under
the Declaration (an "Event of Default") (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):
(i) the occurrence of a Debenture Event of Default (see
"Description of Junior Subordinated Debt Securities-Debenture Events of
Default"); or
(ii) default by the Trust in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Trust 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 Trustees in the
Declaration (other than a covenant or warranty, a default in the
performance of which or the breach of which is addressed 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, to the defaulting Trustee or Trustees by the holders of
at least 25% in aggregate Liquidation Amount of the outstanding
Preferred 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 Declaration; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by the
Corporation to appoint a successor Property Trustee within 60 days
thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Corporation, as Depositor, unless such Event of
Default shall have been cured or waived. The Corporation, as Depositor, and the
Administrative Trustees 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 Declaration.
If a Debenture Event of Default (or an event that with notice or the
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration has occurred and is continuing, the Preferred Securities
shall have a preference over the Common Securities as described above. See
"Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities" and "Subordination of Common Securities."
Removal of Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation
68
<PAGE>
or removal of a 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 Declaration.
Co-trustees and Separate Property 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's
property may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust's property, or 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 such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Declaration. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Merger or Consolidation of Trustees
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Declaration,
provided such person shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the Declaration. The Trust may, at
the request of the Corporation, as Depositor, with the consent of the
Administrative Trustees but without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a trust organized as such
under the laws of any State; provided, however, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect to
the Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Corporation expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Junior Subordinated Debt
Securities, (iii) the Successor Securities are listed or traded, or any
Successor Securities will be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, (v)
such successor entity has a purpose identical and limited to that of the Trust,
(vi) prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Corporation has received an opinion from independent
counsel to the Trust 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 Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940 (the "Investment Company Act") and
69
<PAGE>
(vii) the Corporation or any permitted successor or assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity to be classified as an association taxable as a corporation or
as other than a grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of the Declaration
Except as provided below and under "Description of
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the Preferred Securities will have no voting rights.
The Declaration may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add to
any provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust or as other than an association taxable as a corporation at
all times that any Trust Securities are outstanding or to ensure that the Trust
will not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (i), such action
shall not adversely affect in any material respect the interests of any holder
of Trust Securities, and any amendments of the Declaration shall become
effective when notice thereof is given to the holders of the Trust Securities.
The Declaration may be amended by the Trustees and the Corporation with (i) the
consent of holders representing not less than a majority (based upon Liquidation
Amounts) of the outstanding Preferred Securities, and (ii) receipt by the
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not cause the Trust to be classified as an association taxable as a
corporation or affect the Trust's status as a grantor trust for United States
federal income tax purposes or the Trust's exemption from status as an
"investment company" under the Investment Company Act. In addition, without the
consent of each holder of Trust Securities, the Declaration 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.
So long as any Junior Subordinated Debt Securities are held by the
Trust, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debt Securities, (ii) waive any past default that is
waivable under Section 5.13 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debt Securities shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Junior Subordinated Debt
Securities, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debt Securities affected thereby, no such consent
shall be given by the Property Trustee without the prior consent of each holder
of the Preferred Securities. The Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
70
<PAGE>
except by subsequent vote of such holders. The Property Trustee shall notify
each holder of Preferred Securities of any notice of default with respect to the
Junior Subordinated Debt Securities. In addition to obtaining the foregoing
approvals of such holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust will not be classified
as an association taxable as a corporation for United States federal income tax
purposes as a result of such action and such action would not cause the Trust to
be classified as other than a grantor trust for United States federal income tax
purposes.
Any required approval of holders of Preferred Securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Preferred 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 holder of record of Preferred Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel the Preferred Securities in
accordance with the Declaration.
Notwithstanding that holders of the Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Corporation, the Trustees or any
affiliate of the Corporation or any Trustees, shall, for purposes of such vote
or consent, be treated as if they were not outstanding.
Expenses and Taxes
In the Indenture, the Corporation, as borrower, has agreed to pay all
debts and other obligations (other than with respect to payments of
Distributions, amounts payable upon redemption and the Liquidation Amount of the
Trust Securities) and all costs and expenses of the Trust (including costs and
expenses relating to the organization of the Trust, the fees and expenses of the
Trustees and the costs and expenses relating to the operation of the Trust) and
the offering of the Preferred Securities, and to pay any and all taxes and all
costs and expenses with respect to the foregoing (other than United States
withholding taxes) to which the Trust might become subject. The foregoing
obligations of the Corporation under the 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
Corporation directly against the Corporation, and the Corporation has
irrevocably waived any right or remedy to require that any such Creditor take
any action against the Trust or any other person before proceeding against the
Corporation. The Corporation has also agreed in the Indenture to execute such
additional agreement(s) as may be necessary or desirable to give full effect to
the foregoing.
Form, Denomination, Book-Entry Procedures and Transfer
Preferred Securities may be transferred or exchanged in the manner and
at the offices described below.
The Preferred Securities initially will be evidenced by certificates in
fully registered form (each, a "Certificate"). The Property Trustee will from
time to time register the transfer of any outstanding Certificate upon surrender
thereof at the office of the Property Trustee which is currently located at 1100
N. Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration (the "Property Trustee's Office"), duly endorsed by, or
accompanied by a written instrument or instruments of transfer in a form
satisfactory to the Property Trustee duly executed by the holder thereof, a duly
appointed legal representative or a duly authorized attorney. Such signature
must be guaranteed by a bank or trust company having a correspondent office in
New York City or by a broker or dealer that is a member of the National
Association of Securities Dealers, Inc. (the
71
<PAGE>
"NASD") or a member of a national securities exchange. A new Certificate will be
issued to the transferee upon any such registration of transfer.
At the option of a holder, Certificates may be exchanged for other
Certificates representing a like number of Preferred Securities, upon surrender
to the Property Trustee at the Property Trustee's Office of the Certificates to
be exchanged. The Corporation will thereupon execute, and the Property Trustee
will authenticate and deliver, one or more new Certificates representing such
like number of Preferred Securities.
If any Certificate is mutilated, lost, stolen or destroyed, the
Corporation shall execute, and the Property Trustee shall authenticate and
deliver, in exchange and substitution for such mutilated Certificate, or in
replacement for such lost, stolen or destroyed Certificate, a new Certificate
representing the same number of Preferred Securities represented by such
Certificate, but only upon receipt of evidence satisfactory to the Corporation
and to the Property Trustee of loss, theft or destruction of such Certificate
and security or indemnity, if requested, satisfactory to them. Holders
requesting replacement Certificates must also comply with such other reasonable
regulations as the Corporation or the Property Trustee may prescribe.
No service charge will be made for any registration of transfer or
exchange of Certificates, but the Corporation may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection therewith, other than exchanges not involving any transfer. In the
case of the replacement of mutilated, lost, stolen or destroyed Certificates,
the Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith and any
other expenses (including the fees and expenses of the Property Trustee)
connected therewith.
Possible Exchange for Book-Entry Preferred Securities
Following the issuance of the Preferred Securities, the Corporation
will make the Preferred Securities available in book-entry form ("Book-Entry
Preferred Securities"). Holders may (but are not required to) exchange
Certificates for Book-Entry Preferred Securities, which will be represented by a
beneficial interest in a Global Security (as defined below), by causing the
Certificates to be delivered to Depository Trust Company ("DTC"), in proper form
for deposit into DTC's book-entry system, on or after the Initial Exchange Date
(as defined below). Certificates received by DTC for exchange during the period
commencing on a date designated by the Corporation (the "Initial Exchange Date")
and ending on the fifth day after the Initial Exchange Date (the "Initial
Exchange Period") will be exchanged for Book-Entry Preferred Securities by the
close of business on the Business Day on which they are received by DTC (if
received by DTC by its then applicable cut-off time for same-day credit) or on
the following Business Day (if received by DTC by its then applicable cut-off
time for next-day credit).
After the last day of the Initial Exchange Period, DTC will not be
required to accept delivery of Certificates in exchange for Book-Entry Preferred
Securities, but DTC may permit such Certificates to be so exchanged on a
case-by-case basis. It is anticipated that after the Initial Exchange Period,
Certificates delivered to DTC in good order and in proper form for deposit will
be accepted by DTC for exchange for Book-Entry Preferred Securities generally
within three to four Business Days after delivery to DTC. However, there can be
no assurance that such Certificates will be accepted for exchange or, if
accepted, that such exchange will occur within such time period. Certificates
surrendered at any time for exchange for Book-Entry Preferred Securities may not
be delivered for settlement or transfer until such exchange has been effected.
Accordingly, persons purchasing Preferred Securities in secondary market trading
after the Initial Exchange Date may wish to make specific arrangements with
brokers or DTC's participants if they wish to purchase only Book-Entry Preferred
Securities and not Certificates.
72
<PAGE>
The Corporation will notify DTC, the Property Trustee and each holder
of a Certificate by first-class mail that exchanges of Certificates for
Book-Entry Preferred Securities will commence on the Initial Exchange Date,
which will be approximately one Business Day after the date on which the
Corporation notifies DTC that it has elected to permit such exchanges. The
Initial Exchange Date will not be later than one day after , 1998.
In order to be exchanged for Book-Entry Preferred Securities, a
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, holders of Preferred Securities that are not
Participants must deliver their Certificates, in proper form for deposit, to a
Participant, either directly or through a brokerage firm that maintains an
account with a Participant, in order to have their Certificates exchanged for
Book-Entry Preferred Securities. Holders of Preferred Securities that desire to
exchange their Certificates for Book-Entry Preferred Securities should contact
their broker or a Participant to obtain information on procedures for submitting
their Certificates to DTC, including the proper form for submission and (during
the Initial Exchange Period) the cut-off times for same-day and next-day
exchange. A Certificate that is held on behalf of a beneficial owner in nominee
or "street name" may be automatically exchanged for Book-Entry Preferred
Securities by the broker or other entity that is the registered holder of such
Preferred Securities, without any action of or consent by the beneficial owner
of the Preferred Securities.
Book-Entry System
Any Book-Entry Preferred Securities will be represented by a single
global security (a "Global Security"), which will be deposited with, or on
behalf of, DTC, and registered in the name of a nominee of DTC. Certificates
that have been exchanged for Book-Entry Preferred Securities may not be
re-exchanged for Certificates, except under the limited circumstances described
in "Description of Preferred Securities-Form, Denomination, Book-Entry
Procedures and Transfer-Exchange of Book-Entry Preferred Securities for
Certificated Preferred Securities." Unless and until it is exchanged in whole or
in part for Certificates, the 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.
Transfer of beneficial interests in the Global Preferred Securities
will be subject to the applicable rules and procedures of DTC and its direct or
indirect participants which may change from time to time.
Depositary Procedures
DTC has advised the Trust and the Corporation 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 participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities 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
(including the Underwriter), banks, trust companies, clearing corporations and
certain other organizations. Indirect access to DTC's system is also available
to other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Preferred
Securities, DTC will credit the accounts of Participants with portions of
73
<PAGE>
the principal amount of the Global Preferred Securities and (ii) ownership of
such interests in the Global Preferred Securities will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Preferred Securities).
Investors in the Global Preferred Securities may hold their interests
therein directly through DTC, if they are Participants in DTC, or indirectly
through organizations which are Participants in such system. All interests in a
Global Preferred Security will be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in certificated form of certain securities, such as the Preferred Securities,
that they own. Consequently, the ability to transfer beneficial interests in a
Global Preferred Security to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having
beneficial interests in a Global Preferred Security to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Preferred Securities, see "Exchange of Book-Entry
Preferred Securities for Certificated Preferred Securities."
Except as described below, owners of beneficial interests in the Global
Preferred Securities will not be entitled to have Preferred Securities
registered in their names, will not receive or be entitled to receive physical
delivery of Preferred Securities in certificated form and will not be considered
the registered owners or holders thereof under the Declaration for any purpose.
Payments in respect of the Global Preferred Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC or its
nominee as the registered holder under the Declaration by wire transfer in
immediately available funds on each Distribution Date. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose names the
Preferred Securities, including the Global Preferred Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to, or payments made on account of, beneficial ownership interests in
the Global Preferred Securities, or for maintaining, supervising or reviewing
any of DTC's records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the Global Preferred
Securities, or (ii) any other matter relating to the actions and practices of
DTC or any of its Participants or Indirect Participants. DTC has advised the
Trust and the Corporation that its current practice, upon receipt of any payment
in respect of securities such as the Preferred Securities, is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in Liquidation Amount of
beneficial interests in the Global Preferred Security, as shown on the records
of DTC, unless DTC has reason to believe it will not receive payment on such
payment date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Preferred Securities represented by Global Preferred
Securities held through such Participants will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Property Trustee or the Trust. Neither the Trust nor the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Preferred Securities, and the Trust and
the Property Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee for all purposes.
Interests in the Global Preferred Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
74
<PAGE>
DTC has advised the Trust and the Corporation that it will take any
action permitted to be taken by a holder of Preferred Securities (including,
without limitation, the presentation of Preferred Securities for exchange as
described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Preferred Securities are credited and
only in respect of such portion of the aggregate Liquidation Amount of the
Preferred Securities represented by the Global Preferred Securities as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Declaration, DTC reserves the right to
exchange the Global Preferred Securities for legended Preferred Securities in
certificated form and to distribute such Preferred Securities to its
Participants.
So long as DTC or its nominee is the registered owner of the Global
Preferred Securities, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Preferred Securities represented by
the Global Preferred Security for all purposes under the Declaration.
Neither DTC nor its nominee will consent or vote with respect to the
Preferred Securities. Under its usual procedures, DTC would mail an omnibus
proxy to the Trust as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of DTC or its nominee to those
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the omnibus proxy).
The information in this section concerning DTC and its book-entry
system has been obtained from sources that the Trust and the Corporation believe
to be reliable, but neither the Trust nor the Corporation takes responsibility
for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Preferred Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trust nor the Property Trustee will have any responsibility for the performance
by DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Book-Entry Preferred Securities for Certificated Preferred
Securities
A Global Preferred Security is exchangeable for Preferred Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is no
longer willing or able to properly discharge its responsibilities with respect
to the Preferred Securities and the Corporation is unable to locate a qualified
successor, or (y) has ceased to be a "clearing agency" registered under the
Exchange Act; (ii) the Trust at its sole option elects to terminate the
book-entry system through DTC; or (iii) there shall have occurred and be
continuing a Debenture Event of Default. In addition, beneficial interests in a
Global Preferred Security may be exchanged by or on behalf of DTC for
certificated Preferred Securities upon request by DTC, but only upon at least 20
days prior written notice given to the Property Trustee in accordance with DTC's
customary procedures. In all cases, certificated Preferred Securities delivered
in exchange for any Global Preferred Security or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures)
and will bear the restrictive legend referred to in "Notice to Investors,"
unless the Property Trustee (based on an opinion of counsel) determines
otherwise in compliance with applicable law.
Payment and Paying Agency
Payments in respect of the Preferred Securities held in global form
shall be made to DTC, which shall credit the relevant accounts at DTC on the
applicable Distribution Dates or in respect of the Preferred Securities that are
not held by DTC, such payments shall be made by check mailed to the address of
the holder entitled
75
<PAGE>
thereto as such address shall appear on the register. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any co-paying agent
chosen by the Property Trustee and acceptable to the Administrative Trustees and
the Corporation. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee, the Administrative
Trustees and the Corporation. In the event that the Property Trustee shall no
longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
Wilmington Trust Company has informed the Trust that so long as it
serves as paying agent for the Preferred Securities, it anticipates that
information regarding Distributions on the Preferred Securities, including
payment date, record date and redemption information, will be made available
through Wilmington Trust Company at 1100 N. Market Street, Wilmington, Delaware,
Attention: Corporate Trust Administration.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Preferred Securities.
Registration of transfers of the Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer or exchange of the Preferred Securities after they 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 Declaration and, during the existence of an 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 Declaration at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action or to construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of the Preferred Securities or the
Common Securities are entitled under the Declaration to vote, then the Property
Trustee shall take such action as is directed by the Corporation and, if not so
directed, shall take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for its
own bad faith, negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes or as other than a grantor trust
for United States federal income tax purposes, and so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Corporation
for United States federal income tax purposes. In this connection, the
Corporation and the Administrative Trustees are authorized to take any action,
not inconsistent with applicable law, the certificate of trust of the Trust or
the Declaration, that the Corporation and the Administrative Trustees 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 Trust Securities.
76
<PAGE>
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any
of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities are to be issued as a separate
series under a Junior Subordinated Indenture, as supplemented from time to time
(as so supplemented, the "Indenture"), between the Corporation and Wilmington
Trust Company, as trustee (the "Debenture Trustee"). The Indenture will be
qualified under the Trust Indenture Act. This summary of certain terms and
provisions of the Junior Subordinated Debt Securities and the Indenture does not
purport to be complete, and where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act.
General
Concurrently with the issuance of the Trust Securities, the Trust will
invest the proceeds thereof in Junior Subordinated Debt Securities issued by the
Corporation. The Junior Subordinated Debt Securities will bear interest at __%
per annum of the principal amount thereof, payable quarterly in arrears on the
15th day of March, June, September and December of each year (each, an "Interest
Payment Date"), commencing June 15, 1998, to the person in whose name each
Junior Subordinated Debt Security is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. It is anticipated that, until the liquidation of the Trust, each
Junior Subordinated Debt Security will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of the
actual number of days elapsed in a year of twelve 30-day months. In the event
that any date on which interest is payable on the Junior Subordinated Debt
Securities 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 (and 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
__% per annum thereof, compounded quarterly from the relevant Interest Payment
Date. The term "interest" as used herein shall include quarterly payments,
interest on quarterly interest payments not paid on the applicable Interest
Payment Date and Additional Sums, as applicable.
The Junior Subordinated Debt Securities will be issued as a series of
Junior Subordinated Debt Securities under the Indenture. Unless previously
redeemed or repurchased, the Junior Subordinated Debt Securities will mature on
, 2028. See "Optional Redemption."
The Junior Subordinated Debt Securities will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Debt. Because the
Corporation is a bank holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary, including the Bank,
upon such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of such subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of such subsidiary. Accordingly, the Junior Subordinated Debt Securities will be
subordinated to all Senior Debt and effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debt Securities should look only to the assets of the Corporation
for payments on the Junior Subordinated Debt
77
<PAGE>
Securities. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture or any existing or other indenture that the Corporation may
enter into in the future or otherwise. See "Subordination."
The Junior Subordinated Debt Securities will rank pari passu with all
Other Debentures issued under the Indenture and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt of the Corporation. See
"Subordination." As a holding company, the Corporation conducts its operations
principally through the Bank and, therefore, its principal source of cash, other
than its investing and financing activities, is receipt of dividends from the
Bank. The Corporation is a legal entity separate and distinct from the Bank and
its other subsidiaries. See "Risk Factors-Ranking of Obligations Under the
Guarantee and the Junior Subordinated Debt Securities" and "Status of the
Corporation as a Bank Holding Company." The Bank is subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, the Corporation and certain other affiliates, and on
investments in stock or other securities thereof. Such restrictions prevent the
Corporation and such other affiliates from borrowing from the Bank unless the
loans are secured by various types of collateral. In addition, payment of
dividends to the Corporation by the Bank is subject to ongoing review by banking
regulators and is subject to various statutory limitations and in certain
circumstances requires approval by banking regulatory authorities. The Other
Debentures will be issuable in one or more series pursuant to an indenture
supplemental to the Indenture or a resolution of the Corporation's Board of
Directors or a committee thereof.
Denominations, Registration and Transfer
The Junior Subordinated Debt Securities will be represented by one or
more global certificates registered in the name of Cede & Co. as the nominee of
DTC if, and only if, distributed to the holders of the Trust Securities. Until
such time, the Junior Subordinated Debt Securities will be held in the name of
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. Should the Junior Subordinated Debt Securities be distributed to
holders of the Trust Securities, beneficial interests in the Junior Subordinated
Debt Securities will be shown on, and transfers thereof will be effected only
through, records maintained by Participants in DTC. Except as described below,
Junior Subordinated Debt Securities in certificated form will not be issued in
exchange for the global certificates.
A global security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than Cede & Co. only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a "clearing agency" registered
under the Exchange Act, at a time when DTC is required to be so registered to
act as such depositary, (ii) the Corporation in its sole discretion determines
that such global security shall be so exchangeable, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for certificates registered in such names as DTC shall direct. It is expected
that such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security.
Payments on Junior Subordinated Debt Securities represented by a global
security will be made to DTC, as the depositary for the Junior Subordinated Debt
Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable, and Junior Subordinated
Debt Securities will be exchangeable for Junior Subordinated Debt Securities of
other denominations of a like aggregate principal amount, at the corporate
office of the Debenture Trustee in Wilmington, Delaware, or at the offices of
any paying agent or transfer agent appointed by the Corporation, provided that
payment of interest may be made at the option of the Corporation by check mailed
to the address of the persons entitled thereto or by wire transfer.
78
<PAGE>
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of Preferred Securities-Form, Denomination,
Book-Entry Procedures and Transfer." If the Junior Subordinated Debt Securities
are distributed to the holders of the Trust Securities upon the termination of
the Trust, the form, denomination, book-entry and transfer procedures with
respect to the Preferred Securities as described under "Description of Preferred
Securities-Form, Denomination, Book-Entry Procedures and Transfer," shall apply
to the Junior Subordinated Debt Securities mutatis mutandis.
Payment and Paying Agents
Payment of principal of and any interest on Junior Subordinated Debt
Securities will be made at the office of the Debenture Trustee in Wilmington,
Delaware or at the office of such Paying Agent or Paying Agents as the
Corporation may designate from time to time, except that at the option of the
Corporation payment of any interest may be made (except in the case of Junior
Subordinated Debt Securities in global form), (i) by check mailed to the address
of the person entitled thereto as such address shall appear in the register for
Junior Subordinated Debt Securities or (ii) by wire transfer to an account
specified by the person entitled thereto as specified in such register, provided
that proper transfer instructions have been received by the relevant Record
Date. Payment of any interest on any Junior Subordinated Debt Security will be
made to the person in whose name such Junior Subordinated Debt Security is
registered at the close of business on the Record Date for such interest, except
in the case of defaulted interest. The Corporation may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent; however
the Corporation will at all times be required to maintain a Paying Agent in each
Place of Payment for the Junior Subordinated Debt Securities.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of or
interest on any Junior Subordinated Debt Security and remaining unclaimed for
two years after such principal or interest has become due and payable shall, at
the request of the Corporation, be repaid to the Corporation and the holder of
such Junior Subordinated Debt Security shall thereafter look, as a general
unsecured creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debt Securities 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 Debt Securities. At
the end of an Extension Period, the Corporation must pay all interest then
accrued and unpaid on the Junior Subordinated Debt Securities (together with
interest thereon accrued at __% per annum, compounded quarterly from the
relevant Interest Payment Date, to the extent permitted by applicable law).
During an Extension Period and for so long as the Junior Subordinated Debt
Securities remain outstanding, interest will continue to accrue and holders of
Junior Subordinated Debt Securities (and holders of the Preferred Securities
while Preferred Securities are outstanding) will be required to accrue interest
income (in the form of OID) for United States federal income tax purposes. See
"Certain United States Federal Income Tax Consequences-Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation 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 Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including any Other Debentures) that rank pari
passu with or junior in interest to the Junior Subordinated Debt Securities or
(iii) make any
79
<PAGE>
guarantee payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including any Other Guarantees)
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debt Securities (other than (a) dividends or distributions in
Common Stock of the Corporation, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) purchases or
acquisitions of shares of the Corporation's Common Stock in connection with the
satisfaction by the Corporation of its obligations under any employee benefit
plan or any other contractual obligation of the Corporation (other than a
contractual obligation ranking pari passu with or junior to the Junior
Subordinated Debt Securities), (e) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock or (f) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged).
Prior to the termination of any Extension Period the Corporation may further
extend such Extension Period, provided, however, that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or to
extend beyond the Stated Maturity of the Junior Subordinated Debt Securities.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid on the Junior Subordinated Debt Securities (together
with interest thereon accrued at __% per annum, compounded quarterly, to the
extent permitted by applicable law), and subject to the foregoing limitations,
the Corporation 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
Corporation must give the Property Trustee, the Administrative Trustees and the
Debenture Trustee notice of its election to begin any Extension Period (or an
extension thereof) at least three Business Days prior to the earlier of (i) the
date the Distributions on the Preferred Securities would have been payable
except for the election to begin or extend such Extension Period or (ii) the
date the Administrative Trustees are required to give notice to any automated
quotation system or to holders of Preferred Securities of the record date or the
date such Distributions are payable, but in any event not less than three
Business Days prior to such record date. The Debenture Trustee shall give notice
of the Corporation's election to begin or extend a new Extension Period to the
holders of the Preferred Securities. There is no limitation on the number of
times that the Corporation may elect to begin an Extension Period.
Optional Redemption
The Junior Subordinated Debt Securities are redeemable prior to
maturity at the option of the Corporation (i) on or after , 2003, 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 Preferred Securities-Redemption"), in each case at the
redemption price described below. The proceeds of any such redemption will be
used by the Trust to redeem the Preferred 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 Debt Securities by the
Corporation 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.
80
<PAGE>
The Redemption Price for Junior Subordinated Debt Securities shall
equal 100% of the principal amount to be prepaid, plus accrued interest thereon
to the date of redemption.
Additional Sums
The Corporation has covenanted in the Junior Subordinated Indenture
that, if and for so long as (i) the Trust is the holder of all Junior
Subordinated Debt Securities and (ii) the Trust is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Corporation will pay as additional sums on the Junior Subordinated
Debt Securities such amounts as may be required so that the Distributions
payable by the Trust will not be reduced as a result of any such additional
taxes, duties or other governmental charges. See "Description of Preferred
Securities-Mandatory Redemption."
Interest
The Junior Subordinated Debt Securities shall bear interest at __% per
annum, from the original date of issuance, payable quarterly in arrears on the
15th day of March, June, September and December of each year, commencing June
15, 1998, to the person in whose name such Junior Subordinated Debt Security is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding, such Interest Payment Date. The term "interest" as
used herein, as such term relates to the Junior Subordinated Debt Securities,
includes any compounded interest or Additional Sums payable unless otherwise
stated. In the event the Junior Subordinated Debt Securities are not held solely
in book-entry only form, the Corporation will select relevant record dates,
which shall be 15 days prior to the relevant Interest Payment Date.
The amount of interest payable for any period will be computed on the
basis of the actual number of days elapsed in a year of twelve 30-day months. In
the event that any date on which interest is payable on the Junior Subordinated
Debt Securities 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 (and
without any interest or other payment in respect of any such delay) with the
same force and effect as if made on such date.
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debt Securities such amounts as
shall be required so that the Distributions payable by the Trust shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges. The Corporation has covenanted in the Indenture that, if and so long as
(i) the Trust is the holder of all Junior Subordinated Debt Securities and (ii)
a Tax Event in respect of the Trust has occurred and is continuing, it will pay
Additional Sums (as defined under "Description of Preferred Securities-Mandatory
Redemption") in respect of such Trust Securities to the Trust.
Restrictions on Certain Payments
The Corporation will also covenant 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 Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari passu
with or junior in interest to the Junior Subordinated Debt Securities or (iii)
make any guarantee payments with respect to any guarantee by the Corporation of
the debt securities of any subsidiary of the Corporation (including under Other
Guarantees) if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debt Securities (other than (a) dividends or distributions
in Common Stock of the
81
<PAGE>
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) purchases or
acquisitions of shares of the Corporation's Common Stock in connection with the
satisfaction by the Corporation of its obligations under any employee benefit
plan or any other contractual obligation of the Corporation (other than a
contractual obligation ranking pari passu with or junior in interest to the
Junior Subordinated Debt Securities), (e) as a result of a reclassification of
the Corporation's capital stock or the exchange or conversion of one class or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock or (f) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged),
if at such time (i) there shall have occurred a Debenture Event of Default, (ii)
the Corporation shall be in default with respect to its payment of any
obligations under the Guarantee or (iii) the Corporation shall have given notice
of its election of an Extension Period as provided in the Indenture and shall
not have rescinded such notice, or such Extension Period, or any extension
thereof, shall be continuing.
Modification of Indenture
From time to time the Corporation and the Debenture Trustee may,
without the consent of the holders of Junior Subordinated Debt Securities,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of Junior Subordinated Debt Securities or the holders of the Preferred
Securities so long as they remain outstanding) and maintaining the qualification
of the Indenture under the Trust Indenture Act. The Indenture contains
provisions permitting the Corporation and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of
outstanding Junior Subordinated Debt Securities, to modify the Indenture in a
manner affecting the rights of the holders of Junior Subordinated Debt
Securities; provided, however, that no such modification may, without the
consent of the holder of each outstanding Junior Subordinated Debt Security so
affected, change the Stated Maturity, or reduce the principal amount of the
Junior Subordinated Debt Securities, or reduce the rate or extend the time of
payment of interest thereon or reduce the percentage of principal amount of
Junior Subordinated Debt Securities, or have certain other effects as set forth
in the Indenture.
In addition, the Corporation and the Debenture Trustee may execute,
without the consent of any holder of Junior Subordinated Debt Securities, any
supplemental Indenture for the purpose of creating any Other Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debt Securities that has occurred
and is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay any interest on the Junior
Subordinated Debt Securities 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 Debt Securities 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 Indenture for 90 days after
written notice to the Corporation from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities; or
82
<PAGE>
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation; or
(v) the voluntary or involuntary dissolution, winding-up
or termination of the Trust, except in connection with the distribution
of the Junior Subordinated Debt Securities to the holder of Trust
Securities in liquidation of the Trust, the redemption of all of the
Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities 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 outstanding principal amount of the Junior Subordinated Debt
Securities 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 Debt Securities fail to make such declaration, the holders
of at least 25% in aggregate Liquidation Amount of the Preferred Securities
shall have such right. The holders of a majority in aggregate outstanding
principal amount of the Junior Subordinated Debt Securities may annul such
declaration and waive the default if the default (other than the nonpayment of
the principal of the Junior Subordinated Debt Securities which has become due
solely by such acceleration) has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee. Should the holders
of Junior Subordinated Debt Securities fail to annul such declaration and waive
such default, the holders of a majority in aggregate Liquidation Amount of the
Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Junior Subordinated Debt Securities, waive any past default,
except a default in the payment of principal of 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) on the Junior Subordinated Debt Securities 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 Debt Security. Should the holders of such Junior Subordinated Debt
Securities fail to annul such declaration and waive such default, the holders of
a majority in aggregate Liquidation Amount of the Preferred Securities shall
have such right. The Corporation is required to file annually with the Debenture
Trustee a certificate as to whether or not the Corporation is in compliance with
all the conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Junior Subordinated Debt Securities, and any other amounts
payable under the Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Junior Subordinated Debt
Securities.
Conversion of the Junior Subordinated Debt Securities
Junior Subordinated Debt Securities will be convertible at any time
prior to the earlier of (i) 5:00 p.m. (Richmond, Virginia time) on the Business
Day immediately preceding the date of repayment of such Junior Subordinated Debt
Securities, whether at maturity or upon redemption or prepayment, and (ii) 5:00
p.m. (Richmond, Virginia time) on the Conversion Termination Date (if any), into
Common Stock at the option of the holders of the Junior Subordinated Debt
Securities at the Conversion Price referred to on the cover page of this
Prospectus, subject to the Conversion Price adjustments described under
"Description of Preferred Securities-Conversion Rights." The Trust will covenant
not to convert Junior Subordinated Debt Securities held by it except pursuant to
a notice of conversion delivered to the Conversion Agent by a holder of
Preferred Securities.
83
<PAGE>
Upon surrender of a Preferred Security to the Conversion Agent for conversion,
the Trust will distribute $25.00 principal amount of the Junior Subordinated
Debt Securities to the Conversion Agent on behalf of the holder of the Preferred
Security so converted, whereupon the Conversion Agent will convert such Junior
Subordinated Debt Securities into Common Stock on behalf of such holder. The
Corporation's delivery to the holders of the Junior Subordinated Debt Securities
(through the Conversion Agent) of the fixed number of shares of Common Stock
into which the Junior Subordinated Debt Securities are convertible (together
with the cash payment, if any, in lieu of fractional shares) will be deemed to
satisfy the Corporation's obligation to pay the principal amount of the Junior
Subordinated Debt Securities so converted, and the accrued and unpaid interest
thereon attributable to the period from the last date to which interest has been
paid or duly provided for; provided, however, that if any Junior Subordinated
Debenture is converted after a Payment Record Date, the interest payable on the
related Interest Payment Date with respect to such Junior Subordinated Debenture
shall be paid to the Trust (which will distribute such interest to the holder of
such Junior Subordinated Debt Securities on the Payment Record Date) or other
holder of such Junior Subordinated Debenture on the Payment Record Date, as the
case may be, despite such conversion; provided, further, that if notice of
prepayment of Junior Subordinated Debt Securities is mailed or otherwise given
to holders of Junior Subordinated Debt Securities or the Trust issues a press
release announcing a Conversion Termination Date, then, if any holder of Junior
Subordinated Debt Securities converts any Junior Subordinated Debt Securities
into Common Stock on any date on or after the date on which such notice of
prepayment is mailed or otherwise given or the date of such press release, as
the case may be, and if such date of conversion falls on any day from and
including the first day of an Extension Period and on or prior to the Interest
Payment Date on which such Extension Period ends, such converting holder shall
be entitled to receive either (i) if the date of such conversion falls after a
Payment Record Date and on or prior to the next succeeding Interest Payment
Date, all accrued and unpaid interest on such Junior Subordinated Debt
Securities to such Interest Payment Date or (ii) if the date of such conversion
does not fall on a date described in clause (i) above, all accrued and unpaid
interest on such Junior Subordinated Debt Securities to the most recent Interest
Payment Date prior to the date of such conversion, which interest shall, in
either such case, be paid to such converting holder, unless the date of
conversion of such Junior Subordinated Debt Securities is on or prior to the
Interest Payment Date upon which such Extension Period ends and after the
Payment Record Date for such Interest Payment Date, in which case such interest
shall be paid to the person who was the holder of such Junior Subordinated Debt
Securities (or one or more predecessor Junior Subordinated Debt Securities) at
5:00 p.m. (Richmond, Virginia time) on such Payment Record Date, which amount
shall be simultaneously distributed to the holders of the Preferred Securities
so that any holder of Preferred Securities who delivers such Preferred
Securities for conversion (or who held such converted Preferred Securities at
5:00 p.m. (Richmond, Virginia time) on the Payment Record Date for the Interest
Payment Date upon which such Extension Period ends, as the case may be) under
the circumstances and during the periods described above will be entitled to
receive accumulated and unpaid Distributions in a corresponding amount. See
"Description of Preferred Securities-Conversion Rights" and "Redemption."
On and after , 2001, the Corporation may, at its option, terminate the
conversion rights of holders of the Junior Subordinated Debt Securities if (i)
the Corporation is then current in the payment of interest on the Junior
Subordinated Debt Securities (except to the extent that the payment of interest
has been duly deferred as the result of an Extension Period) and (ii) for at
least 20 trading days within any period of 30 consecutive trading days ending on
or after , 2001, including the last trading day of such period, the Closing
Price of the Common Stock shall have exceeded 115% of the then applicable
Conversion Price of the Junior Subordinated Debt Securities. In order to
exercise this conversion termination option, the Corporation must cause the
Trust to issue (or, if the Junior Subordinated Debt Securities shall have been
distributed to holders of the Preferred Securities following a Tax Event, an
Investment Company Event or a Capital Treatment Event, the Corporation must
issue) a press release for publication on the Dow Jones News Service or on a
comparable news service announcing the Conversion Termination Date prior to the
opening of business on the second trading day after a period in which the
condition in the preceding sentence has been met, but in no event prior to ,
2001. The press release shall announce the Conversion Termination Date and
provide the
84
<PAGE>
Conversion Price and the Closing Price of the Preferred Securities and the
Common Stock, in each case as of the close of business on the trading day next
preceding the date of the press release. The Corporation is also required to
give notice by first-class mail to holders of the Junior Subordinated Debt
Securities in the manner provided for holders of Preferred Securities under
"Description of Preferred Securities-Conversion Rights-Termination of Conversion
Rights." The Conversion Termination Date will be a Business Day selected by the
Corporation which is not less than 30 nor more than 60 calendar days after the
date on which such press release is issued. In the event that the Corporation
exercises its conversion termination option, conversion rights will expire at
5:00 p.m. (Richmond, Virginia time) on the Conversion Termination Date. In the
event that the Corporation has not exercised its conversion termination option
and the Junior Subordinated Debt Securities are otherwise called for prepayment,
the Junior Subordinated Debt Securities will be convertible at any time prior to
5:00 p.m. (Richmond, Virginia time) on the Business Day immediately preceding
the date of such redemption and in any other case at any time prior to 5:00 p.m.
(Richmond, Virginia time) on the Business Day immediately preceding the Stated
Maturity Date of the Junior Subordinated Debt Securities.
Enforcement of Certain Rights by Holders of Preferred Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Corporation to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, a holder of Preferred Securities may
institute a Direct Action. The Corporation may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior written consent
of the holders of all of the Preferred Securities. Notwithstanding any payments
made to a holder of Preferred Securities by the Corporation in connection with a
Direct Action, the Corporation shall remain obligated to pay the principal of
and interest on the Junior Subordinated Debt Securities, and the Corporation
shall be subrogated to the rights of the holder of such Preferred Securities
with respect to payments on the Preferred Securities to the extent of any
payments made by the Corporation to such holder in any Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Junior Subordinated Debt Securities unless there
shall have been an Event of Default under the Declaration. See "Description of
Preferred Securities-Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Corporation shall not consolidate with
or merge with or into any other person or convey, transfer or lease its
properties and assets substantially as an entirety to any person, and no person
shall consolidate with or merge with or into the Corporation or convey, transfer
or lease its properties and assets substantially as an entirety to the
Corporation, unless (i) in case the Corporation consolidates with or merges with
or 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 Corporation's obligations on the
Junior Subordinated Debt Securities issued under the Indenture; (ii) immediately
after giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing; (iii) if at the time any
Preferred Securities are outstanding, such transaction is permitted under the
Declaration and the Guarantee and does not give rise to any breach or violation
of the Declaration or the Guarantee; and (iv) certain other conditions as
prescribed in the Indenture are met.
85
<PAGE>
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debt Securities protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Junior Subordinated Debt Securities.
Subordination
In the Indenture, the Corporation has covenanted and agreed that any
Junior Subordinated Debt Securities issued thereunder shall be subordinate and
junior in right of payment to all Senior Debt to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of and interest, if any, on
such Senior Debt before the holders of Junior Subordinated Debt Securities, or
the Property Trustee on behalf of the holders, will be entitled to receive or
retain any payment or distribution in respect thereof.
In the event of the acceleration of the maturity of the Junior
Subordinated Debt Securities, the holders of all Senior Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before the
holders of the Junior Subordinates Debt Securities will be entitled to receive
or retain any payment in respect of the principal of or interest, if any, on the
Junior Subordinated Debt Securities.
In the event that the Corporation shall default in the payment of any
principal of or interest, if any, on any, Senior Debt 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, unless and until such default
shall have been cured or waived or shall have ceased to exist or all Senior Debt
shall have been paid, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made for
principal or interest, if any, on the Junior Subordinated Debt Securities, or in
respect of any redemption, repayment, retirement, purchase or other acquisition
of any of the Junior Subordinated Debt Securities.
"Senior Debt" means (a) the principal of, and premium, if any, and
interest on all indebtedness of the Corporation for money borrowed, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred, (b) all obligations to make payment pursuant to the terms
of financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (iii) similar financial instruments; except, in the case
of both (a) and (b) above, such indebtedness and obligations that are expressly
stated to rank junior in right of payment to, or pari passu in right of payment
with, the Junior Subordinated Debt Securities, and (c) indebtedness or
obligations of others of the kind described in both (a) and (b) above for the
payment of which the Corporation is responsible or liable as guarantor or
otherwise, and (d) any deferrals, renewals or extensions of any such Senior
Debt; provided, however, that Senior Debt shall not be deemed to include (i) any
debt of the Corporation which, when incurred and without respect to any election
under Section 1111 (b) of the United States Bankruptcy Code of 1978, was without
recourse to the Corporation, (ii) any debt of the Corporation to any of its
subsidiaries, (iii) debt to any employee of the Corporation, (iv) debt which by
its terms is subordinated to trade accounts payable or accrued liabilities
arising in the ordinary course of business to the extent that payments made to
the holders of such debt by the holders of the Junior Subordinated Debt
Securities as a result of the subordination provisions of the Indenture would be
greater than such payments otherwise would have been as a result of any
obligation of such holders of such debt to pay amounts over to the obligees on
such trade accounts payable or accrued liabilities arising in the ordinary
course of business as a result of subordination
86
<PAGE>
provisions to which such debt is subject, (v) trade accounts payable or accrued
liabilities arising in the ordinary course of business and (vi) any other debt
securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of Senior Debt that
may be incurred by the Corporation. The Corporation may from time to time incur
indebtedness constituting Senior Debt. At December 31, 1997 the Corporation had
no aggregate outstanding Senior Debt on an unconsolidated basis. The Indenture
also places no limitation on the indebtedness of the Corporation's subsidiaries,
which rank senior in right of payment to the Junior Subordinated Debt
Securities.
Governing Law
The Indenture and the Junior Subordinated Debt Securities will be
governed by and construed in accordance with the laws of the State of Virginia.
Information Concerning the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debt Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which 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.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Trust Securities for the
benefit of the holders from time to time of such Trust Securities. Wilmington
Trust Company will act as trustee (the "Guarantee Trustee") under the Guarantee
Agreement. The Guarantee Agreement will be qualified under the Trust Indenture
Act. 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
of the provisions of the Guarantee, including the definitions therein of certain
terms, and the Trust Indenture Act. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Securities.
General
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
herein) to the holders of the Trust Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Trust Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accrued and
unpaid Distributions required to be paid on the Trust Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to Trust Securities called for redemption, to the
extent that the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Trust (other than in connection with the distribution of Junior Subordinated
Debt Securities to the holders of the Trust Securities or the redemption of all
of the Preferred Securities) the lesser of (a) the Liquidation Distribution, to
the extent the Trust has funds available therefor and (b) the amount of assets
of the Trust remaining available for distribution to holders of the Trust
Securities upon liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as required by applicable law.
87
<PAGE>
The Corporation's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Corporation to the holders of the
Trust Securities or by causing the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust's obligations under the Trust Securities, although it will apply
only to the extent that the Trust has funds sufficient to make such payments,
and is not a guarantee of collection. If the Corporation does not make interest
payments on the Junior Subordinated Debt Securities held by the Trust, the Trust
will not be able to pay Distributions on the Preferred Securities and will not
have funds legally available therefor.
The Guarantee will rank subordinate and junior in right of payment to
all Senior Debt. See "Status of the Guarantee." As a holding company, the
Corporation conducts its operations principally through its subsidiaries and,
therefore, its principal source of cash is receipt of dividends from the Bank.
However, there are legal limitations on the source and amount of dividends that
a Virginia-chartered, Federal Reserve member bank such as the Bank is permitted
to pay. A Virginia-chartered bank may pay dividends only from net undivided
profits. Additionally, a dividend may not be paid if it would impair the paid-in
capital of the bank. In addition, prior approval of the Federal Reserve is
required if the total of all dividends declared by a member bank in any calendar
year will exceed the sum of that bank's net profits for that year and its
retained net profits for the preceding two calendar years, less any required
transfers to either surplus or any fund for the retirement of any preferred
stock. At January 1, 1998, the Bank could have paid approximately $1.7 million
in dividends to the Corporation without prior Federal Reserve approval. The
payment of dividends by the Bank may also be affected by other factors, such as
requirements for the maintenance of adequate capital. In addition, the Federal
Reserve is authorized to determine, under certain circumstances relating to the
financial condition of a member bank, whether the payment of dividends would be
an unsafe or unsound banking practice and to prohibit payment thereof. See "The
Corporation." The Guarantee does not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture, any other indenture that the Corporation may enter into in
the future or otherwise.
Taken together, the Corporation's obligations under the Guarantee, the
Declaration, the Junior Subordinated Debt Securities and the Indenture,
including the Corporation's obligation to pay the costs, expenses and other
liabilities of the Trust (other than the Trust's obligations to the holders of
the Trust Securities under the Trust Securities), provide, in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
under the Preferred Securities. No single document standing alone or operating
in conjunction with fewer than all of 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 the
Trust's obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debt Securities and the
Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Debt in the same manner as Junior Subordinated Debt Securities.
The Guarantee will rank pari passu with all Other Guarantees issued by
the Corporation. 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 Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Trust Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Trust or upon distribution to the holders
of the Trust Securities of the Junior Subordinated Debt Securities. The
Guarantee does not place a limitation on the amount of additional
88
<PAGE>
Senior Debt that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior Debt.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Trust 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 such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of Preferred Securities-Voting Rights;
Amendment of the Declaration." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the holders
of the Preferred Securities then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of
the Corporation to perform any of its payment or other obligations thereunder;
provided, however, that except with respect to a default in payment of any
Guarantee payment, the Corporation shall have received notice of default and
shall not have cured such default within 60 days after receipt of such notice;
and provided, further, that no event of default under the Guarantee shall occur
unless an Event of Default under the Declaration or a Debenture Event of Default
shall have occurred. The holders of not less than a majority in aggregate
Liquidation Amount of the Preferred 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.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation 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 Corporation in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after 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 Trust Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
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 Trust Securities, upon full payment
of the amounts payable upon liquidation of the Trust or upon distribution of
Junior Subordinated Debt Securities to the holders of the Trust 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 Trust Securities must restore payment of
any sums paid under the Trust Securities or the Guarantee.
89
<PAGE>
Governing Law
The Guarantee will be governed by and construed in accordance with the
laws of the State of Virginia.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantee." Taken together, the
Corporation's obligations under the Junior Subordinated Debt Securities, the
Indenture, the Declaration and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all of 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 the
Trust's obligations under the Preferred Securities. If and to the extent that
the Corporation does not make payments on the Junior Subordinated Debt
Securities, the Trust will not pay Distributions or other amounts due on the
Preferred Securities. The Guarantee does not cover payment of Distributions when
the Trust does not have sufficient funds to pay such Distributions. In such
event, the remedy of a holder of Preferred Securities is to institute a Direct
Action. The obligations of the Corporation under the Guarantee are subordinate
and junior in right of payment to all Senior Debt.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debt Securities, such payments will be sufficient to
cover Distributions and other payments due on the Preferred Securities,
primarily because (i) the aggregate principal amount or Redemption Price of the
Junior Subordinated Debt Securities will be equal to the sum of the aggregate
Liquidation Amount or Redemption Price, as applicable, of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Debt Securities will match the Distribution rate and Distribution
and other payment dates for the Preferred Securities; (iii) the Corporation
shall pay for all costs, expenses and liabilities of the Trust except the
Trust's obligations to holders of Trust Securities under such Trust Securities;
and (iv) the Declaration further provides that the Trust will not engage in any
activity that is not consistent with the limited purposes thereof.
Notwithstanding anything to the contrary in the Indenture, the
Corporation has the right to set off any payment it is otherwise required to
make thereunder with and to the extent the Corporation has theretofore made, or
is concurrently on the date of such payment making, any payment under the
Guarantee used to satisfy the related payment of indebtedness under the
Indenture.
Enforcement Rights of Holders of Preferred Securities
A holder of any Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
Trust or any other person or entity.
A default or event of default under any Senior Debt would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Debt, the
90
<PAGE>
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debt Securities until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on Junior Subordinated Debt Securities would
constitute an Event of Default under the Declaration.
Limited Purpose of the Trust
The Preferred Securities evidence a beneficial interest in the Trust,
and the Trust exists for the sole purpose of issuing the Preferred Securities
and Common Securities, investing the proceeds of the Trust Securities in Junior
Subordinated Debt Securities and engaging in other activities necessary or
incidental thereto.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or
liquidation of the Trust involving the liquidation of the Junior Subordinated
Debt Securities, after satisfaction of the liabilities of creditors of the Trust
as required by applicable law, the holders of the Trust Securities will be
entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of Preferred Securities-Liquidation of
the Trust and Distribution of Junior Subordinated Debt Securities." Upon any
voluntary or involuntary liquidation or bankruptcy of the Corporation, the
Property Trustee, as holder of the Junior Subordinated Debt Securities, would be
a subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Debt as set forth in the Indenture, but entitled to receive payment
in full of principal and interest, before any stockholders of the Corporation
receive payments or distributions. Since the Corporation is the guarantor under
the Guarantee and has agreed to pay for all costs, expenses and liabilities of
the Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Preferred Securities and a holder of
Junior Subordinated Debt Securities relative to other creditors and to
stockholders of the Corporation in the event of liquidation or bankruptcy of the
Corporation are expected to be substantially the same.
DESCRIPTION OF GUARANTY FINANCIAL CORPORATION CAPITAL STOCK
The Corporation's authorized capital stock consists of 4,000,000 shares
of Common Stock, par value $1.25 per share ("Common Stock") and 500,000 shares
of preferred stock. The Corporation had 1,501,383 issued and outstanding shares
of Common Stock held by 427 stockholders of record, at December 31, 1997. All
outstanding shares of Common Stock are fully paid and nonassessable. The
Corporation's Board of Directors has not authorized the issuance of any class or
series of preferred stock.
Common Stock
Holders of shares of Common Stock are entitled to receive dividends
when and as declared by the Board of Directors out of funds legally available
therefor, provided, however, that the payment of dividends to holders of shares
of Common Stock is subject to the preferential dividend rights of any preferred
stock that the Board of Directors authorizes for issuance in the future.
In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of Common Stock (and the holders of any class or series
of stock entitled to participate with the Common Stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets of the
Corporation available for distribution remaining after (i) payment or provision
for payment of the Corporation's debts and liabilities and (ii) distributions or
provisions for distributions to holders of any class or series of stock having
preference over the Common Stock in the liquidation, dissolution or winding up
of the Corporation.
91
<PAGE>
Holders of Common Stock are entitled to one vote per share on all
matters submitted to stockholders. There are no cumulative voting rights in the
election of directors. The Corporation's stockholders do not have preemptive
rights to purchase additional shares of any class of the Corporation's capital
stock. Holders of Common Stock have no conversion or redemption rights. The
shares of Common Stock presently outstanding are, and any Common Stock issued
upon conversion of Preferred Securities will be when issued, fully paid and
nonassessable. Registrar and Transfer Company is the transfer agent and
registrar for the Common Stock.
Preferred Stock
The Corporation's Articles of Incorporation authorize the Board of
Directors to determine the preferences, limitations and relative rights of any
class or series of preferred stock before the issuance of any shares of that
class or series. To date, the Corporation's Board of Directors has not
authorized the issuance of any class or series of preferred stock.
Limitations on Liability of Officers and Directors
The Articles of Incorporation of the Corporation provide that to the
full extent that Virginia law permits the limitation or elimination of the
liability of directors and officers, they will not be liable to the Corporation
or its shareholders for any money damages in excess of one dollar. At this time
Virginia law does not permit any limitation of liability if a director engages
in willful misconduct or a knowing violation of the criminal law or any federal
or state securities law.
To the fullest extent permitted by Virginia law, the Corporation's
Articles of Incorporation require it to indemnify any director or officer of the
Corporation who is made a party to any proceeding because he was or is a
director or officer of the Corporation against any liability, including
reasonable expenses and legal fees, incurred in the proceeding. Under the
Corporation's Articles of Incorporation, "proceeding" is broadly defined to
include pending, threatened or completed actions of all types, including actions
by or in the right of the Corporation. Similarly, "liability" is defined to
include, not only judgments, but also settlements, penalties, fines and certain
excise taxes. The Corporation's Articles of Incorporation also provide that the
Corporation may, but is not obligated to, indemnify its other employees or
agents. The Corporation must indemnify any person who is or was serving at the
written request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, to
the full extent provided by Virginia law. The indemnification provisions also
require the Corporation to pay reasonable expenses incurred by a director of
officer of the Corporation in a proceeding in advance of the final disposition
of any such proceeding, provided that the indemnified person undertakes to repay
the Corporation if it is ultimately determined that such person was not entitled
to indemnification. At this time, Virginia law does not permit indemnification
against willful misconduct or a knowing violation of the criminal law.
The rights of indemnification provided in the Corporation's Articles of
Incorporation are not exclusive of any other rights which may be available under
any insurance or other agreement, by vote of shareholders or disinterested
directors or otherwise. In addition, the Articles of Incorporation authorize the
Corporation to maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, whether or not the
Corporation would have the power to provide indemnification to such person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Corporation pursuant to the foregoing provisions, the Corporation has been
informed 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.
92
<PAGE>
CERTAIN ERISA CONSIDERATIONS
ERISA pension plans, qualified retirement plans, and IRAs (collectively
referred to as retirement plans) are subject to certain transactional
restrictions under ERISA and/or the Internal Revenue Code. For example, a
fiduciary (generally, someone who has discretionary control over plan assets or
receives money for investment advice) is prohibited under these restrictions
from (1) engaging in transactions in its own interest or for its own account or
(2) from receiving consideration from any party dealing with a plan with regard
to its assets. In addition, a plan may not enter into purchase, sale, or loan
transaction with a disqualified person. A disqualified person includes, among
other things, a fiduciary, the plan sponsor, and any entity providing services
(for example, custodial or administrative services) to a plan. Violation of
these transactional restrictions can result in the imposition of federal excise
taxes, federal and state income tax on otherwise exempt retirement trusts, and
accelerated federal and state income tax on the otherwise deferred income
accounts of retirement plan participants.
In the usual case, when a retirement plan invests plan assets in a
security, the security purchased replaces the purchase money as a plan asset and
the purchase money becomes an asset of the entity who offered the security for
sale. Because of a concern that certain enterprises were in reality functioning
as investment mangers to plans, but avoiding classification as a fiduciary under
ERISA through the device of issuing participation units in, for example, limited
partnerships, the Department of Labor issued regulations (the "Plan Asset
Regulations" or "Regulations") which provide that when certain equity interests
(including a beneficial interest in a trust as well as participation in a
limited partnership) are acquired by a plan, both the equity interest acquired
in the hands of the purchasing plan and the purchase money in the hands of the
issuer of the equity interest constitute plan assets. Since the issuer has
discretionary control over these assets, the issuer becomes a fiduciary under
ERISA with respect to the investing plan. As a result, unless an exception
applies, the Trust's purchase of the Junior Subordinated Debt Securities from
the Corporation with assets invested by retirement plans would constitute an
instance of the Trust as a fiduciary dealing on its own account and in its own
interest with plan assets or receiving consideration from an entity (the
Corporation) engaged in a transaction involving plan assets.
The Plan Asset Regulations provide certain exemptions to its plan asset
characterization rules.
It appears that one of the exemptions provided by the Regulations,
namely, the publicly-offered exemption, applies to Junior Subordinated Debt
Securities purchased by the Trust as consequence of a retirement plan's
investment in Preferred Securities with the result that the purchase money or
Junior Subordinated Debt Securities will not be deemed to be plan assets in the
hands of the Trustee. Under the Regulations, a publicly-offered equity interest
in a trust or other non-operating entity purchased by a plan does not constitute
a plan asset if the interest is freely transferable and widely held. The
Regulations provide that a security is publicly-offered if it is sold to a plan
as part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act of 1933 and the class of
securities of which such security is part is registered under the Securities
Exchange Act of 1934 within 120 days (or such later time as may be allowed by
the Securities and Exchange Commission) after the end of the fiscal year of the
issuer during which the offering of such securities to the public occurred. The
Corporation intends to cause the Preferred Securities to be so registered under
the Securities Exchange of 1934. Further, although ultimately under the
Regulations it is a question of fact, a security will be generally be deemed to
be freely transferable if its purchase price is $25,000 or less at the time of
the public offering. If, in addition, the securities when offered initially to
the public will be held by 100 or more persons independent of the issuer or of
one another, they will generally be deemed to be widely held. It is anticipated
that with regard to these criteria provided by the Plan Asset Regulations, the
Preferred Securities at the time of being initially offered constitute
securities which are publicly-offered, widely held, and freely transferable.
Retirement plans should, nevertheless, consult with their own counsel regarding
the application of the Plan Asset Regulations to the purchase of Preferred
Securities from the Trust.
93
<PAGE>
If the Corporation or the Bank provides any services to an investing
retirement plan, then it is a disqualified person with respect to that plan
irrespective of whether the Trust qualifies under the publicly-offered
securities exemption to the Plan Asset Regulations. Consequently, the purchase
of Junior Subordinated Debt Securities by the Trust would be an indirect loan
made by the retirement plan to the Corporation and, as such, would constitute a
prohibited transaction under ERISA.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary addresses only the tax
consequences to a "U.S. Holder" (as defined below) that acquires Preferred
Securities on their original issue at their original offering price and does not
address the tax consequences to persons that may be subject to special treatment
under United States federal income tax law, such as banks, insurance companies,
thrift institutions, regulated investment companies, real estate investment
trusts, tax-exempt organizations, dealers in securities or currencies, persons
that hold Preferred Securities as part of a position in a "straddle" or as part
of a "hedging", "conversion" or other integrated investment transaction for
United States federal income tax purposes, persons whose functional currency is
not the United States dollar or persons that do not hold Preferred Securities as
capital assets. For purposes of this summary, a U.S. Holder is a Securityholder
(as defined below) who or that is (i) an individual citizen or resident of the
United States, (ii) a domestic corporation or partnership organized under the
laws of the United States or any State thereof or the District of Columbia or
(iii) an estate or trust the income of which is subject to United States federal
income taxation regardless of source.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Williams Mullen Christian & Dobbins, tax counsel to
the Corporation and the Trust. This summary is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change at any time. Such changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of the Preferred Securities. The authorities on
which this summary is based are subject to various interpretations, and it is
therefore possible that the United States federal income tax treatment of the
purchase, ownership and disposition of the Preferred Securities may differ from
the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The Corporation intends to take the position that, under current law,
the Junior Subordinated Debt Securities constitute indebtedness for federal
income tax purposes and, by acceptance of a Preferred Security, each holder
covenants to treat the Junior Subordinated Debt Securities as indebtedness and
the Preferred Securities as evidence of an indirect beneficial interest in the
Junior Subordinated Debt Securities. No assurances can be given, however, that
such position of the Corporation will not be challenged by the Internal Revenue
Service (the "Service") or, if challenged, that such challenge will not be
successful. The remainder of this discussion assumes that the Junior
Subordinated Debt Securities are classified as indebtedness for federal income
tax purposes.
94
<PAGE>
Classification of the Junior Subordinated Debt Securities and the Trust
Under current law and assuming compliance with the terms of the
Declaration, the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes. Moreover, the Trust
should be classified as a grantor trust, and if not so classified will be
classified as a partnership, for United States federal income tax purposes. As a
result, each beneficial owner of Preferred Securities (a "Securityholder") that
is a U.S. Holder will be required to include in its gross income its pro rata
share of the interest income, including OID, paid or accrued with respect to the
Junior Subordinated Debt Securities, whether or not cash is actually distributed
to the Securityholders. See "Interest Income and Original Issue Discount,"
below. The Junior Subordinated Debt Securities will be classified as
indebtedness of the Corporation for United States federal income tax purposes.
Interest Income and Original Issue Discount
Under applicable Treasury regulations (the "Regulations"), a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation
believes that the likelihood of its exercising its option to defer payments of
interest is remote. Based on the foregoing, the Corporation believes that the
Junior Subordinated Debt Securities will not be considered to be issued with OID
at the time of their original issuance.
Because the discount at which the Junior Subordinated Debt Securities
are being issued is less than 1/4 of 1 percent of the Junior Subordinated Debt
Securities stated redemption price at maturity times the number of complete
years to maturity of the Junior Subordinated Debt Securities, such discount will
constitute de minimis OID and will not be required to be taken into account on a
current basis. The following discussion assumes that unless and until the
Corporation exercises its option to defer interest on the Junior Subordinated
Debt Securities, the Junior Subordinated Debt Securities will not be treated as
issued with OID other than de minimis OID.
Under the Regulations, if the Corporation exercised its option to defer
any payment of interest, the Junior Subordinated Debt Securities would be
treated as reissued with OID, and, thereafter, all stated interest on the Junior
Subordinated Debentures would be treated as OID as long as the Junior
Subordinated Debt Securities remained outstanding. In such event, all of a U.S.
Holder's taxable interest income with respect to the Junior Subordinated Debt
Securities would be accounted for as OID on an economic accrual basis regardless
of such U.S. Holder's method of tax accounting, and actual distributions of
stated interest would not be reported separately as taxable income.
Consequently, a U.S. Holder would be required to include OID in gross income
even though the Corporation would not make any actual cash payments during an
Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take the
position that the Junior Subordinated Debt Securities were issued with OID at
the time of their original issuance.
Because income on the Preferred Securities will constitute interest or
OID, corporate U.S. Holders will not be entitled to the dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities. If any Special Interest or Additional Distributions are paid on the
Preferred Securities it is possible that such Special Interest or Additional
Distributions might constitute OID (whether or not an Extension Period has
occurred).
Subsequent uses of the term "interest" in this summary shall include
income in the form of OID.
95
<PAGE>
Distribution of the Junior Subordinated Debt Securities to Holders of Preferred
Securities
Under current law, a distribution by the Trust of the Junior
Subordinated Debt Securities, as described under the caption "Description of
Preferred Securities--Liquidation of the Trust and Distribution of Junior
Subordinated Debt Securities," will be nontaxable and will result in a U.S.
Holder receiving directly its pro rata share of the Junior Subordinated Debt
Securities previously held indirectly through the Trust, with a holding period
and aggregate adjusted tax basis equal to the holding period and aggregate
adjusted tax basis such U.S. Holder had in its Preferred Securities immediately
before such distribution. If, however, the liquidation of the Trust were to
occur because the Trust were subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debt
Securities, the distribution of Junior Subordinated Debt Securities to U.S.
Holders by the Trust would be a taxable event to the Trust and each U.S. Holder,
and each U.S. Holder would recognize gain or loss as if the U.S. Holder had
exchanged its Preferred Securities for the Junior Subordinated Debt Securities
it received upon the liquidation of the Trust. A U.S. Holder will include
interest in respect of the Junior Subordinated Debt Securities received from the
Trust in the manner described above under "Interest Income and Original Issue
Discount."
Sales or Redemption of the Preferred Securities
Gain or loss will be recognized by a U.S. Holder on a sale, exchange,
or other disposition of the Preferred Securities (including a redemption for
cash) in an amount equal to the difference between the amount realized and the
U.S. Holder's adjusted tax basis in the Preferred Securities sold or so
redeemed. Assuming that the Corporation does not exercise its option to defer
payment of interest on the Junior Subordinated Debt Securities, a U.S. Holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price. If the Junior Subordinated Debentures are deemed to be issued
with OID (as a result of the Corporation's deferral of any interest payment), a
U.S. Holder's adjusted tax basis in the Preferred Securities generally will be
its initial purchase price, increased by OID previously included in such U.S.
Holder's gross income to the date of disposition and decreased by distributions
or other payments received on the Preferred Securities other than payments of
stated interest that are not treated as OID. Gain or loss recognized by a U.S.
Holder on the Preferred Securities generally will be taxable as capital gain or
loss (except to the extent any amount realized is treated as a payment of
accrued interest with respect to such U.S. Holder's pro rata share of the Junior
Subordinated Debt Securities required to be included in income) and generally
will be long-term capital gain or loss if the Preferred Securities have been
held for more than one year.
Should the Corporation exercise its option to defer any payment of
interest on the Junior Subordinated Debt Securities, the Preferred Securities
may trade at a price that does not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debt Securities. In
the event of such a deferral, a Securityholder that disposes of its Preferred
Securities between record dates for payments of Distributions (and consequently
does not receive a Distribution from the Trust for the period prior to such
disposition) will nevertheless be required to include in income as ordinary
income accrued but unpaid interest on the Junior Subordinated Debt Securities
through the date of disposition and to add such amount to its adjusted tax basis
in its Preferred Securities disposed of Such U.S. Holder will recognize a
capital loss on the disposition of its Preferred Securities to the extent the
selling price (which may not fully reflect the value of accrued but unpaid
interest) is less than the U.S. Holder's adjusted tax basis in the Preferred
Securities (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
Conversion of Preferred Securities
A holder of Preferred Securities generally will not recognize income,
gain or loss upon the conversion, through the Conversion Agent, of its Preferred
Securities into Common Stock. A holder will, however, recognize
96
<PAGE>
gain upon the receipt of cash in lieu of a fractional share of Common Stock
equal to the amount of cash received less the holder's tax basis in such
fractional share. A holder's tax basis in the Common Stock received upon
exchange and conversion will generally be equal to the holder's tax basis in the
Preferred Securities delivered to the Conversion Agent for exchange less that
basis allocated to any fractional share for which cash is received, and a
holder's holding period in the Common Stock received upon exchange and
conversion will generally begin on the date the holder acquired the Preferred
Securities delivered to the Conversion Agent for exchange.
Adjustment of Conversion Price
Treasury Regulations promulgated under Section 305 of the Internal
Revenue Code would treat holders of Preferred Securities as having received a
constructive distribution from the Corporation in the event the Conversion Price
of the Junior Subordinated Debt Securities were adjusted if (i) as a result of
such adjustment, the proportionate interest (measured by the quantum of Common
Stock into or for which the Junior Subordinated Debt Securities are convertible
or exchangeable) of the holders of the Preferred Securities in the assets or
earnings and profits of the Corporation were increased, and (ii) the adjustment
was not made pursuant to a bona fide, reasonable antidilution formula. An
adjustment in the Conversion Price would not be considered made pursuant to such
a formula if the adjustment was made to compensate for certain taxable
distributions with respect to the Common Stock. Thus, under certain
circumstances, a reduction in the Conversion Price for the holders may result in
deemed dividend income to holders to the extent of the current or accumulated
earnings and profits of the Corporation. Holders of the Preferred Securities
would be required to include their allocable share of such deemed dividend
income in gross income but would not receive any cash related thereto.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a nonresident alien individual, a foreign
partnership or a nonresident fiduciary of a foreign estate or trust.
Under current United States federal income tax law, and subject to the
discussion of backup withholding below: (i) payments by the Trust or any of its
paying agents to any Securityholder who or that is a United States Alien Holder
will not be subject to United States federal withholding tax; provided that (a)
the Securityholder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Corporation entitled
to vote, (b) the Securityholder is not a controlled foreign corporation that is
related to the Corporation through stock ownership and (c) either (A) the
Securityholder certifies to the Trust or its agent, under penalties of perjury,
that it is not a United States holder and provides its name and address or (B) 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 Preferred Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the Securityholder by it or by a Financial
Institution holding such security for the Securityholder and furnishes the Trust
or its agent with a copy thereof, and (ii) a United States Alien Holder of a
Preferred Security will not be subject to United States federal withholding tax
on any gain realized upon the sale or other disposition of a Preferred Security.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Preferred Securities held by a
foreign partnership, that (x) the certification described in clause (i)(c) above
be provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for payments
made after December 31, 1997. There can be no assurance that the
97
<PAGE>
Proposed Regulations will be adopted or as to the provisions that they will
include if and when adopted in temporary or final form.
Information Reporting to Securityholders
Generally, income on the Preferred Securities will be reported to
Securityholders on Forms 1099, which forms should be mailed to Securityholders
by January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the
Securityholder complies with certain certification requirements. Any withheld
amounts will be allowed as a credit against the Securityholder's United States
federal income tax, provided the required information is furnished to the
Internal Revenue Service on a timely basis.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
THE ALTERNATIVE MINIMUM TAX AND THE STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
The Underwriter, McKinnon & Company, Inc., 555 Main Street, Norfolk,
Virginia, has agreed, subject to the terms and conditions contained in an
Underwriting Agreement with the Trust and the Corporation, to sell, as selling
agent, on a best efforts basis, up to $6.0 million of Preferred Securities. The
Trust reserves the right to increase the Aggregate Liquidation Amount by not
more than $900,000. The Underwriter is not obligated to purchase the Preferred
Securities if they are not sold to the public.
The Underwriter has informed the Trust and the Corporation that it
proposes to sell the Preferred Securities as selling agent for the Trust,
subject to prior sale, when, as and if issued by the Trust, in part to the
public at the public offering price set forth on the cover page of this
Prospectus and, in part, through certain selected dealers, who are members of
the National Association of Securities Dealers, Inc., to customers of such
selected dealers at such public offering price, for which each selected dealer
will receive a commission of $ , for each $25.00 of Preferred Securities that it
sells. The Underwriter reserves the right to reject any order for the purchase
of Preferred Securities through it in whole or in part.
The public offering is not contingent upon the occurrence of any event
or the sale of a minimum or maximum number of Preferred Securities. Funds
received by the Underwriter from investors in the public offering will be
deposited with and held by the Escrow Agent in a non-interest bearing account
until the closing of the public offering. Closing is expected to occur on or
about , 1998.
As the proceeds of the sale of the Preferred Securities will ultimately
be used to purchase the Junior Subordinated Debt Securities, the Underwriting
Agreement provides that the Corporation will pay as compensation ("Underwriter's
Compensation") an amount directly to the Underwriter for its arranging the
98
<PAGE>
investment therein of such proceeds $1.00 per Preferred Security (or up to
$240,000 in the aggregate) for the account of the Underwriter.
The Underwriting Agreement provides that Corporation and the Trust will
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act or contribute to payments the Underwriter may be
required to make in respect thereof.
The Preferred Securities are a new issue of securities with no
established trading market. The Corporation and the Trust do not intend to apply
for listing of the Preferred Securities on any securities exchange. The
Corporation and the Trust have been advised by the Underwriter that it may make
a market in the Preferred Securities. The Underwriter, however, is not obligated
to make a market in the Preferred Securities and may discontinue any market
making at any time without notice. Neither the Corporation nor the Trust can
provide any assurance that a secondary market for the Preferred Securities will
develop.
The Underwriter provides or has provided investment banking services to
the Corporation from time to time in the ordinary course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Declaration and the formation of
the Trust will be passed upon by Richards, Layton & Finger, special Delaware
counsel to the Corporation and the Trust. The validity of the Guarantee, the
Junior Subordinated Debt Securities, the Common Stock issuable upon conversion
of the Preferred Securities and certain matters relating to United States
federal income tax considerations, will be passed upon for the Corporation by
Williams, Mullen, Christian & Dobbins, P.C., Richmond, Virginia. Williams,
Mullen, Christian & Dobbins, P.C. will rely on the opinion of Richards, Layton &
Finger as to matters of Delaware law.
ACCOUNTANTS
The consolidated balance sheets of Guaranty Financial Corporation and
subsidiary as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1997 and the six months ended December 31, 1996, and for each of
the two years in the period ended June 30, 1996 are included herein in reliance
on the report of BDO Seidman, LLP, independent certified public accountants, and
upon the authority of said firm as experts in accounting and auditing.
99
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Financial Statements
For the Year Ended December 31, 1997,
the Six Months Ended December 31, 1996 and
the Years Ended June 30, 1996 and 1995
<PAGE>
GUARANTY FINANCIAL CORPORATION
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Balance Sheets as of December 31, 1997 and 1996 F-4
Statements of Operations for the years ended December 31, 1997 and
June 30, 1996 and 1995 and the six months ended December 31, 1996 F-5 - F-6
Statements of Stockholders' Equity for the years ended December 31, 1997
and June 30, 1996 and 1995 and the six months ended December 31, 1996. F-7
Statements of Cash Flows for the years ended December 31, 1997 and June 30, 1996
and 1995 and the six months ended December 31, 1996 F-8 - F-10
Summary of Accounting Policies F-11 - F-17
Notes to Consolidated Financial Statements F-18 - F-39
</TABLE>
F-2
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders
Guaranty Financial Corporation
Charlottesville, Virginia
We have audited the consolidated balance sheets of Guaranty Financial
Corporation and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1997 and the six months ended December 31, 1996, and
for each of the two years in the period ended June 30, 1996. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Guaranty Financial Corporation and subsidiary as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for the year ended
December 31, 1997, the six months ended December 31, 1996 and for each of the
two years in the period ended June 30, 1996 in conformity with generally
accepted accounting principles.
As explained in the Summary of Accounting Policies, Guaranty Financial
Corporation adopted Statement of Financial Accounting Standards No. 122 and
Statement of Financial Accounting Standards No. 109 in the years ended June 30,
1996 and 1995, respectively.
BDO Seidman, LLP
Richmond, Virginia
January 30, 1998
F-3
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 5,916,504 $ 6,076,315
Investment securities (Notes 1 and 7)
Held-to-maturity 2,845,560 3,156,857
Available for sale 11,523,908 -
Trading 1,032,188 16,736,295
Investment in Federal Home Loan Bank stock, at
cost (Note 9) 860,100 1,360,200
Other investments 79,000 -
Loans receivable, net (Notes 2 and 11) 99,674,549 81,270,173
Accrued interest receivable 844,212 671,211
Real estate owned 64,985 50,964
Office properties and equipment, net (Note 3) 5,999,778 4,946,153
Other assets (Note 2) 1,867,693 1,751,757
- --------------------------------------------------------------------------------------------------------
$130,708,477 $116,019,925
========================================================================================================
</TABLE>
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
<S> <C> <C>
Liabilities
Deposits (Note 4) $112,947,012 $81,401,071
Bonds payable (Notes 1 and 7) 2,360,083 2,705,813
Advances from Federal Home Loan Bank (Note 9) - 17,500,000
Securities sold under agreement to repurchase (Notes 1 and 8) 2,989,000 6,681,000
Accrued interest payable 58,404 60,989
Income taxes payable (Note 10) 181,100 -
Prepayments by borrowers for taxes and insurance 80,824 105,901
Other liabilities 231,900 989,402
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 118,848,323 109,444,176
- ------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 12, 14 and 15)
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (Notes 13 and 14)
Preferred stock, par value $1 per share, 500,000 shares
authorized, none issued
Common stock, par value $1.25 per share, 4,000,000 shares
authorized, 1,501,383, and 924,008 shares issued and
outstanding 1,876,729 1,155,010
Additional paid-in capital 5,724,954 1,975,695
Unrealized gain on available for sale securities (Note 1) 50,971 -
Retained earnings - substantially restricted 4,207,500 3,445,044
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 11,860,154 6,575,749
- ------------------------------------------------------------------------------------------------------------------------
$130,708,477 $116,019,925
========================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
1997 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Loans $7,584,732 $3,454,559 $6,441,903 $5,897,002
Mortgage-backed securities 1,045,831 564,079 652,639 495,620
Investment securities 889,245 254,833 498,686 383,555
Trading account assets - 2,911 23,390 12,176
- ------------------------------------------------------------------------------------------------------------------------
Total interest income 9,519,808 4,276,382 7,616,618 6,788,353
- ------------------------------------------------------------------------------------------------------------------------
Interest expense
Deposits 4,922,258 1,960,029 3,132,660 2,439,585
Borrowings (Notes 7, 8 and 9) 1,116,152 979,936 2,059,402 2,223,267
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 6,038,410 2,939,965 5,192,062 4,662,852
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 3,481,398 1,336,417 2,424,556 2,125,501
Provision (credit) for loan losses
(Note 2) 122,320 91,850 56,665 (9,443)
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 3,359,078 1,244,567 2,367,891 2,134,944
- ------------------------------------------------------------------------------------------------------------------------
Other income
Loan fees and servicing income 456,515 266,505 610,020 651,852
Net gain on sale of loans
and securities 1,067,348 72,547 242,866 206
Service charges on checking 166,072 52,058 90,156 77,542
Other 177,837 70,977 164,090 142,034
- ------------------------------------------------------------------------------------------------------------------------
Total other income 1,867,772 462,087 1,107,132 871,634
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
continued...
F-5
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Operations
(continued)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other expenses
Personnel (Notes 14 and 15) $2,010,794 $ 748,083 $1,013,674 $1,194,410
Occupancy (Note 12) 523,502 131,593 302,139 310,114
Data processing (Note 12) 422,851 165,548 257,038 210,110
BIF/SAIF premium disparity
assessment - 346,851 - -
Deposit insurance premiums 87,298 100,908 190,263 195,818
Other 798,650 223,553 724,321 619,373
- -----------------------------------------------------------------------------------------------------------------------
Total other expenses 3,843,095 1,716,536 2,487,435 2,529,825
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income
taxes 1,383,755 (9,882) 987,588 476,753
Provision for income taxes (Note 10) 486,040 (3,500) 344,338 100,508
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 897,715 $ (6,382) $ 643,250 $ 376,245
=======================================================================================================================
Basic and Diluted Earnings Per Share $ .61 $ (.01) $ .70 $ .70
=======================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
Additional Gain (Loss) on Total
Common Paid-in Available for Retained Stockholders'
Stock Capital Sale Securities Earnings Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1994 $ 671,460 $ 335,730 $ - $2,524,089 $ 3,531,279
Stock options exercised
(Note 14) 23,000 57,200 - - 80,200
Issuance of common stock
(Note 13) 450,000 1,578,015 - - 2,028,015
Net income - - - 376,245 376,245
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1995 1,144,460 1,970,945 - 2,900,334 6,015,739
Stock options exercised
(Note 14) 4,500 10,800 - - 15,300
Cash dividend - - - (45,958) (45,958)
Unrealized loss on available for
sale securities (Note 1) - - (279,182) - (279,182)
Net income - - - 643,250 643,250
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 1,148,960 1,981,745 (279,182) 3,497,626 6,349,149
Cash dividend - - - (46,200) (46,200)
Realized loss on available
for sale securities (Note 1) - - 279,182 - 279,182
Stock options exercised (Note 14) 12,500 32,000 - - 44,500
Repurchase of common stock (6,450) (38,050) - - (44,500)
Net loss - - - (6,382) (6,382)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 1,155,010 1,975,695 - 3,445,044 6,575,749
Issuance of common stock (Note 13) 718,750 3,752,228 - - 4,470,978
Cash dividend - - - (135,259) (135,259)
Unrealized gain on available for
sale securities (Note 1) - - 50,971 - 50,971
Stock options exercised (Note 14) 5,000 14,520 - - 19,520
Repurchase of common stock (2,031) (17,489) - - (19,520)
Net income - - - 897,715 897,715
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $1,876,729 $5,724,954 $ 50,971 $4,207,500 $11,860,154
====================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities
Net income (loss) $ 897,715 $ (6,382) $ 643,250 $ 376,245
Adjustments to reconcile net
income (loss) to net cash
provided (absorbed) by
operating activities
Provision (credit) for loan losses 122,320 91,850 56,665 (9,443)
Depreciation and amortization 354,005 76,160 95,511 93,775
Amortization of deferred loan fees (89,564) (63,841) (136,086) (123,528)
Net amortization of premiums
and accretion of discounts 64,154 84,606 199,060 54,822
Loss (gain) on sale of loans (518,736) (216,537) (204,901) 60,367
Originations of loans held
for sale (24,280,323) (11,773,561) (7,203,819) (11,765,459)
Proceeds from sale of loans 24,799,059 11,822,300 7,160,241 11,825,826
Gain on sale of
mortgage-backed securities (236,761) (111,039) - (36,418)
Originations of loans securitized - - - (5,596,082)
Purchase of mortgage backed
securities (24,754,127) (23,980,081) - -
Proceeds from sale of
mortgage-backed securities 24,990,888 17,844,790 - 5,415,983
Gain on sale of securities
available for sale (147,433) - (101,685) -
Gain on disposal of office
properties and equipment - - (1,341) (1,806)
(Gain) loss on sale of trading
account securities (5,520) 255,030 63,720 (24,155)
Purchases of trading account
securities (73,838,893) (36,330,973) (107,346,227) (43,113,114)
Sales of trading account
securities 89,548,520 35,305,544 107,282,507 43,137,269
</TABLE>
continued...
F-8
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities (cont'd)
Changes in
Accrued interest receivable $ (173,001) $ 40,631 $ (127,600) $ (27,424)
Other assets (115,936) (24,917) (442,298) (192,025)
Accrued interest payable (15,698) (38,308) 13,018 (21,951)
Income taxes 214,100 (3,000) - (87,000)
Prepayments by borrowers
for taxes and insurance (25,077) (39,829) (160,616) 181,671
Other liabilities (777,389) (1,141,898) 689,882 (592,864)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (absorbed)
by operating activities 16,012,303 (8,209,455) 479,281 (445,311)
- -----------------------------------------------------------------------------------------------------------------------------------
Investing activities
Net (increase) decrease in
loans (18,451,153) 2,880,494 (8,486,970) 2,484,824
Principal repayments on held
to maturity securities 309,815 776,007 998,457 1,260,076
Purchase of securities
available for sale (33,334,183) - (28,399,062) -
Proceeds from sales of
securities available for sale 21,929,679 - 18,507,960 -
Sale of FHLB stock 500,100 - - 77,300
Proceeds from sale of office
properties and equipment - - 4,522 15,389
Purchases of office properties
and equipment (1,407,630) (1,515,180) (3,186,982) (152,668)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (absorbed)
by investing activities (30,453,372) 2,141,321 (20,562,075) 3,684,921
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
continued...
F-9
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
1997 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financing activities
Net increase (decrease)
in deposits $31,545,941 $ 6,713,625 $22,226,807 $(1,006,244)
Repayment of Federal Home
Loan Bank advances (21,000,000) (10,000,000) (31,510,000) (15,200,000)
Proceeds from Federal Home
Loan Bank advances 3,500,000 10,000,000 23,960,000 16,300,000
Principal payments on bonds
payable, including
unapplied payments (408,402) (531,459) (988,607) (968,556)
Increase (decrease) in
securities sold under
agreements to repurchase (3,692,000) 577,000 6,104,000 -
Proceeds from issuance of
common stock 4,470,978 - 15,300 2,108,215
Dividends paid (135,259) (46,200) (45,958) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided
by financing activities 14,281,258 6,712,966 19,761,542 1,233,415
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (159,811) 644,832 (321,252) 4,473,025
Cash and cash equivalents,
beginning of period 6,076,315 5,431,483 5,752,735 1,279,710
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 5,916,504 $ 6,076,315 $ 5,431,483 $ 5,752,735
===================================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-10
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
Nature of Business Guaranty Financial Corporation (the "Parent Company")
and Regulatory is a bank holding company whose principal asset is its
Environment wholly-owned subsidiary, Guaranty Bank (the "Bank").
The Bank provides a full range of banking services to
individual and corporate customers. In these financial
statements, the consolidated group is referred to
collectively as the "Corporation".
At June 30, 1997, the Bank was converted from a federal
savings association to a Virginia chartered Federal
Reserve member bank. As a result, the Corporation
changed their year end from June 30, to December 31.
The Federal Deposit Insurance Corporation ("FDIC") is
the federal deposit insurance administrator for both
banks and savings associations. The FDIC has specific
authority to prescribe and enforce such regulations and
issue such orders as it deems necessary to prevent
actions or practices by financial institutions that
pose a serious threat to the Bank Insurance Fund
("BIF").
Pursuant to the Economic Growth and Paperwork Reduction
Act of 1996 (the "Act"), the FDIC imposed a special
assessment on Savings Association Insurance Fund
("SAIF") members to capitalize the SAIF to a designated
reserve level. Prior to the Bank's conversion to a
state chartered bank, it was a member of SAIF and
therefore, subject to the SAIF special assessment.
Based on the Bank's deposits as of March 31, 1995, the
date for measuring the special assessment, the Bank was
assessed approximately $347,000 during the six months
ended December 31, 1996.
Principles of The consolidated financial statements include the
Consolidation accounts of Guaranty Financial Corporation and Guaranty
Bank, (a wholly-owned subsidiary), and GMSC, Inc. and
Guaranty Investment Corp., wholly-owned subsidiaries of
the Bank. All material intercompany accounts and
transactions have been eliminated in the consolidation.
Reorganization On December 29, 1995, the Bank and the Parent Company
consummated the reorganization of the Bank into a
unitary-thrift holding company structure whereby the
Bank became the wholly-owned subsidiary of the Parent
Company. Each outstanding share of the common stock of
the Bank became one share of the common stock of the
Parent Company. This transaction was accounted for as a
pooling of interests.
F-11
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
Investment Securities In May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities". The Corporation adopted
the provisions of SFAS 115 during the year ended June
30, 1995. The adoption of this Statement had no effect
on the operations of the Corporation. SFAS 115 requires
that investments in securities are to be classified as
either held-to-maturity, trading, or available for
sale.
Investments in debt securities classified as
held-to-maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts
using the level yield method. Management has a positive
intent and ability to hold these securities to maturity
and, accordingly, adjustments are not made for
temporary declines in their market value below
amortized cost. Investment in Federal Home Loan Bank
stock is stated at cost.
Investments in debt and equity securities classified as
available-for-sale are stated at market value with
unrealized holding gains and losses excluded from
earnings and reported as a separate component of
stockholders' equity, net of tax effect, until
realized.
Investments in debt and equity securities classified as
trading are stated at market value. Unrealized holding
gains and losses for trading securities are included in
the statement of operations.
Gains and losses on the sale of securities are
determined using the specific identification method.
Options Premiums received for writing put and call options are
recorded as a liability and are taken into income if
the option is closed prior to maturity or expires. Upon
exercise of the option, the premium is treated as an
adjustment to the basis of the underlying security.
Loans Held for Mortgage loans originated and intended for sale in the
Sale secondary market are carried at the lower of cost or
estimated market value in the aggregate. Net unrealized
losses are recognized through a valuation allowance by
charges to income.
The Corporation had approximately $9,200,000 of loans
held for sale at December 31, 1997. The estimated
market value of these loans exceeded the carrying cost
at December 31, 1997. The Corporation had no loans held
for sale at December 31, 1996.
F-12
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Loans Receivable Loans receivable that management has the intent and
ability to hold for the foreseeable future or until
maturity or pay-off are reported at their outstanding
principal adjusted for any charge-offs, the allowance
for loan losses, and any deferred fees or costs on
originated loans and unamortized premiums or discounts
on purchased loans.
Loans receivable consists primarily of long-term real
estate loans secured by first deeds of trust on single
family residences, other residential property,
commercial property, construction and land located
primarily in the state of Virginia. Interest income on
mortgage loans is recorded when earned and is
recognized based on the level yield method. The
Corporation provides an allowance for accrued interest
deemed to be uncollectible, which is netted against
accrued interest receivable in the consolidated balance
sheets.
The Corporation defers loan origination and commitment
fees, net of certain direct loan origination costs, and
the net deferred fees are amortized into interest
income over the lives of the related loans as yield
adjustments. Any unamortized net fees on loans fully
repaid or sold are recognized as income in the year of
repayment or sale.
Sale of Loans The Corporation is able to generate funds by selling
and Participation loans and participations in loans to the Federal Home
in Loans Loan Mortgage Corporation ("FHLMC") and to other
insured investors. Under participation servicing
agreements, the Corporation continues to service the
loans and the participant is paid its share of
principal and interest collections.
Effective July 1, 1995, the Corporation adopted
Statement of Financial Accounting Standards No. 122
("SFAS 122"), "Accounting for Mortgage Servicing Rights
an Amendment of FASB Statement No. 65". SFAS 122
requires entities to allocate the cost of acquiring or
originating mortgage loans between the mortgage
servicing rights and the loans, based on their relative
fair values, if the bank sells or securitizes the loans
and retains the mortgage servicing rights. In addition,
SFAS 122 requires entities to assess its capitalized
mortgage servicing rights for impairment based on the
fair value of those rights.
F-13
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Sale of Loans The cost of mortgage servicing rights is amortized in
and Participation proportion to, and over the period of, estimated net
in Loans servicing revenues. Impairment of mortgage servicing
(continued) rights is assessed based on the fair value of those
rights. Fair values are estimated using discounted cash
flows based on a current market interest rate. For
purposes of measuring impairment, the rights are
stratified based on the predominant risk
characteristics of the underlying loans. The amount of
impairment recognized is the amount by which the
capitalized mortgage servicing rights for a stratum
exceed their fair value.
Allowance for The allowance for loan losses is maintained at a level
Possible Loan considered by management to be adequate to absorb
Losses future loan losses currently inherent in the loan
portfolio. Management's assessment of the adequacy of
the allowance is based upon type and volume of the loan
portfolio, past loan loss experience, existing and
anticipated economic conditions, and other factors
which deserve current recognition in estimating future
loan losses. Additions to the allowance are charged to
operations. Loans are charged-off partially or wholly
at the time management determines collectibility is not
probable. Management's assessment of the adequacy of
the allowance is subject to evaluation and adjustment
by the Corporation's regulators.
Loans are generally placed on nonaccrual status when
the collection of principal or interest is 90 days or
more past due, or earlier if collection is uncertain
based upon an evaluation of the value of the underlying
collateral and the financial strength of the borrower.
Loans may be reinstated to accrual status when all
payments are brought current and, in the opinion of
management, collection of the remaining balance can be
reasonably expected. Loans greater than 90 days past
due may remain on accrual status if management
determines it has adequate collateral to cover the
principal and interest.
A loan is considered to be impaired when it is probable
that the Corporation will be unable to collect all
principal and interest amounts according to the
contractual terms of the loan agreement. A performing
loan may be considered impaired. The allowance for loan
losses related to loans identified as impaired is
primarily based on the excess of the loan's current
outstanding principal balance over the estimated fair
market value of the related collateral. For a loan that
is not collateral-dependent, the allowance is recorded
at the amount by which the outstanding principal
balance exceeds the current best estimate of the future
cash flows on the loan discounted at the loan's
original effective interest rate.
F-14
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Allowance for For impaired loans that are on nonaccrual status, cash
Possible Loan payments received are generally applied to reduce the
Losses outstanding principal balance. However, all or a
(continued) portion of a cash payment received on a nonaccrual loan
may be recognized as interest income to the extent
allowed by the loan contract, assuming management
expects to fully collect the remaining principal
balance on the loan.
Real Estate Real estate acquired through foreclosure is initially
Owned recorded at the lower of fair value, less selling
costs, or the balance of the loan on the property at
date of foreclosure. Costs relating to the development
and improvement of property are capitalized, whereas
those relating to holding the property are charged to
expense.
Valuations are periodically performed by management,
and an allowance for losses is established by a charge
to operations if the carrying value of a property
exceeds its estimated fair value, less selling costs.
Securities Sold The Corporation enters into sales of securities under
Under Agreements agreements to repurchase (reverse repurchase
to Repurchase agreements). Fixed-coupon reverse repurchase agreements
are treated as financings, and the obligations to
repurchase securities sold are reflected as a liability
in the consolidated statements of condition. The dollar
amount of securities underlying the agreements remain
in the asset accounts.
Office Properties Office properties and equipment are stated at cost less
and Equipment accumulated depreciation and amortization. Provisions
for depreciation and amortization are computed using
the straight-line method over the estimated useful
lives of the individual assets or the terms of the
related leases, if shorter, for leasehold improvements.
Expenditures for betterments and major renewals are
capitalized and ordinary maintenance and repairs are
charged to expense as incurred.
Income Taxes Deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years
to differences between the financial statement carrying
amounts and the tax bases of existing assets and
liabilities.
For tax years beginning prior to January 1, 1996,
savings banks that met certain definitional tests and
other conditions prescribed by the Internal Revenue
Code were allowed, within limitations, to deduct from
taxable income an allowance for bad debts using the
"percentage of taxable income" method. The cumulative
bad debt reserve, upon which no taxes have been paid,
was approximately $926,000 at December 31, 1997.
F-15
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Income Taxes Section 1616 of the Small Business Job Protection Act
(continued) of 1996 (the "Act") repealed the percentage of taxable
income method of computing bad debt reserve, and
requires the recapture into taxable income of "excess
reserves", on a ratable basis over the next six years.
Excess reserves are defined, in general, as the excess
of the balance of the tax bad debt reserve (using the
percentage of taxable income method) as of the close of
the last tax year beginning before January 1, 1996 over
the balance of the reserve as of the close of the last
tax year beginning before January 1, 1988. The
recapture of the reserves is deferred if the
Corporation meets the "residential loan requirement"
exception, during either or both of the first two years
beginning after December 31, 1995. The residential loan
requirement is met, in general, if the principal amount
of residential loans made by the Corporation during the
year is not less than the Corporation's "base amount".
The base amount is defined as the average of the
principal amounts of residential loans made during the
six most recent tax years beginning before January 1,
1996.
As a result of the Act, the Corporation must recapture
into taxable income approximately $354,000 ratably over
the next six years, beginning December 31, 1998, since
the Corporation met the residential loan requirement
exemption for the period ended December 31, 1997.
Basic and Diluted Basic earnings per share includes no dilution and is
Earnings Per Share computed by dividing income available to common
shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities
that could share in the earnings of an entity. The
weighted average number of shares of common stock
outstanding were 1,466,843 for the year ended December
31, 1997 and 920,681 for the six month period ended
December 31, 1996, and 917,668 and 541,768 for the
years ended June 30, 1996, and 1995, respectively.
Statements of Cash Cash and cash equivalents include Federal funds sold
Flows with original maturities of three months or less.
Interest paid was approximately $6,060,000 for the year
ended December 31, 1997 and $2,978,000 for the six
month period ended December 31, 1996, and $5,179,000
and $4,685,000 for the years ended June 30, 1996 and
1995, respectively. Cash paid for income taxes was
approximately $350,000 for the year ended December 31,
1997 and $277,000 for the six month period ended
December 31, 1996, and $180,000 and $42,000 for the
years ended June 30, 1996 and 1995, respectively. There
was no real estate acquired in settlement of loans for
the six month period ended December 31, 1996, and
approximately $64,000, $33,000 and $122,000 for the
years ended December 31, 1997 and June 30, 1996 and
1995, respectively.
F-16
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Summary of Accounting Policies
(continued)
Reclassifications Certain reclassifications have been made in the prior
year consolidated financial statements and notes to
conform to the December 31, 1997 presentation.
New Accounting In February 1997, the Financial Accounting Standards
Pronouncements Board issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share ("SFAS 128").
SFAS 128 is effective for financial statements,
including interim periods, issued for periods ending
after December 15, 1997. SFAS 128 provides a different
method for calculating earnings per share than is
currently used in accordance with APB 15, "Earnings per
Share." SFAS 128 provides for the calculation of Basic
and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing
income available to common shareholders by the weighted
average number of common shares outstanding for the
period. Diluted earnings per share reflects the
potential dilution of securities that could share in
earnings of an entity, similar to fully diluted
earnings per share.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS 130"), which
establishes standards for reporting and display of
comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include
all changes in equity except those resulting from
investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current
accounting standards as components of comprehensive
income be reported in a financial statement that is
displayed with the same prominence as other financial
statements. SFAS 130 is effective for financial
statements for periods beginning after December 15,
1997 and requires comparative information for earlier
years to be restated. Management does not expect the
application of this pronouncement to have a material
effect on the financisal statements of the Corporation.
F-17
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
1. Investment A summary of the carrying value and estimated market
Securities value of investment securities is as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
Mortgage-backed
securities $ 2,745,560 $ 13,440 $ - $ 2,759,000
Other 100,000 - - 100,000
-----------------------------------------------------------------------------------
2,845,560 13,440 - 2,859,000
-----------------------------------------------------------------------------------
Available for sale
Bonds 11,415,793 66,590 8,444 11,473,939
US Government
obligations 49,836 133 - 49,969
-----------------------------------------------------------------------------------
11,465,629 66,723 8,444 11,523,908
-----------------------------------------------------------------------------------
Trading
US Government
obligations 1,030,625 1,563 - 1,032,188
-----------------------------------------------------------------------------------
1,030,625 1,563 - 1,032,188
-----------------------------------------------------------------------------------
$15,341,814 $81,726 $8,444 $15,415,096
===================================================================================
</TABLE>
F-18
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
1. Investment December 31, 1996
Securities -----------------------------------------------------------------------------------
(continued) Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
Mortgage-backed
securities $ 3,156,857 $ 192,143 $ - $ 3,349,000
-----------------------------------------------------------------------------------
3,156,857 192,143 - 3,349,000
-----------------------------------------------------------------------------------
Trading
Mortgage-backed
securities 16,936,529 - 200,234 16,736,295
-----------------------------------------------------------------------------------
16,936,529 - 200,234 16,736,295
-----------------------------------------------------------------------------------
$20,093,386 $ 192,143 $ 200,234 $20,085,295
===================================================================================
</TABLE>
The amortized cost and estimated market value of
investment securities at December 31, 1997 by maturity
is as follows:
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
-----------------------------------------------------------------------------------
<S> <C> <C>
Held to Maturity
Mortgage-backed securities $ 2,745,560 $ 2,759,000
Other 100,000 100,000
-----------------------------------------------------------------------------------
2,845,560 2,859,000
-----------------------------------------------------------------------------------
Available for Sale
Due in one year or less 149,836 149,969
Due in one through five years 1,013,547 1,015,000
Due after five years 10,302,246 10,358,939
-----------------------------------------------------------------------------------
11,465,629 11,523,908
-----------------------------------------------------------------------------------
$14,311,189 $14,382,908
===================================================================================
</TABLE>
F-19
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
1. Investment Proceeds from sales of securities available for sale
Securities was approximately $21,930,000 for the year ended
(continued) December 31, 1997 and $18,508,000 for the year ended
June 30, 1996. The Corporation had no sales of
available for sale securities during the period ending
December 31, 1996. Gross gains of approximately
$147,400 and $101,700 were realized on those sales
during the years ended December 31, 1997 and June 30,
1996, respectively.
Proceeds from the sale of trading securities was
approximately $89,549,000 for the year ended December
31, 1997 and $35,306,000 for the six months ended
December 31, 1996, and $107,346,000,and $43,113,000 for
the years ended June 30, 1996, and 1995, respectively.
Gross gains of approximately $134,000 and gross losses
of approximately $128,000 were realized on those sales
for the year ended December 31, 1997. Gross gains of
approximately $9,900 and gross losses of approximately
$265,000 were realized on those sales for the six
months ended December 31, 1996. Gross gains of
approximately $209,000, and $142,600 and gross losses
of approximately $272,700, and $118,400 were realized
on those sales during the years ended June 30, 1996 and
1995, respectively.
Proceeds from the sale of mortgage backed securities
was approximately $24,991,000 for the year ended
December 31, 1997 and $17,845,000, and $5,416,000 and
for the six months ended December 31, 1996 and the year
ended June 30, 1995, respectively. Gross gains of
approximately $237,000 were realized on those sales for
the year ended December 31, 1997 and $111,000, and
$40,000 were realized on those sales for the six months
ended December 31, 1996 and the year ended June 30,
1995, respectively. Gross losses on the sales of
mortgage-backed securities were $0 for the year ended
December 31, 1997, $0 and $4,000 for the six months
ended December 31, 1996 and the years ended June 30,
1995, respectively. The Corporation had no sales of
mortgage backed securities during the year ended June
30, 1996.
Mortgage backed securities of approximately $2,838,000
and $3,157,000 at December 31, 1997 and 1996,
respectively, were pledged for bonds payable (Note 7).
At December 31, 1997 and 1996 investment securities
with a market value of approximately $3,141,000 and
$7,349,000, respectively were pledged as collateral
under repurchase agreements (Note 8).
F-20
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
2. Loans Receivable Loans receivable are summarized as follows:
December 31, 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Residential real estate $66,035,224 $67,015,734
Commercial real estate 16,641,057 8,485,966
Construction and land 18,263,062 5,219,979
Commercial non-real estate 503,002 -
Consumer 6,202,021 4,174,984
-----------------------------------------------------------------------
107,644,366 84,896,663
-----------------------------------------------------------------------
Less
Undisbursed loan funds 6,752,222 2,466,623
Deferred loan fees 282,618 290,016
Allowance for loan losses 934,977 869,851
-----------------------------------------------------------------------
7,969,817 3,626,490
-----------------------------------------------------------------------
$99,674,549 $81,270,173
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
The allowance for loan losses is summarized as follows:
<S> <C>
Balance at June 30, 1994 $753,586
Credit to operations (9,443)
Net recoveries 3,343
-----------------------------------------------------------------------
Balance at June 30, 1995 747,486
Provision charged to expense 56,665
Net charge-offs (16,005)
-----------------------------------------------------------------------
Balance at June 30, 1996 788,146
Provision charged to expense 91,850
Net charge-offs (10,145)
-----------------------------------------------------------------------
Balance at December 31, 1996 869,851
Provision charged to expense 122,320
Net charge-offs (57,194)
-----------------------------------------------------------------------
Balance at December 31, 1997 $934,977
=======================================================================
</TABLE>
F-21
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
2. Loans Receivable The Corporation serviced loans for others aggregating
(continued) approximately $123,834,000 and $172,771,000 at December
31, 1997 and 1996, respectively. Mortgage servicing
rights, included in other assets, was approximately
$904,000 and $974,000 at December 31, 1997 and 1996,
respectively. Mortgage servicing rights of
approximately $507,000 and $226,000 were capitalized
during the year ended December 31, 1997 and six months
ended December 31, 1996, respectively.
Gross gains and gross losses on the sale of loans
totalling approximately $520,000 and $1,000 were
realized during the year ended December 31, 1997,
$283,000 and $67,000 during the six months ended
December 31, 1996, and $205,000 and $0, and $51,000 and
$112,000 for the years ended June 30, 1996 and 1995
respectively. There were no loans classified as held
for sale at December 31, 1997 and 1996.
At December 31, 1997 and 1996, the Corporation had no
loans that were considered as impaired.
3. Office Properties Office properties and equipment are summarized as
and Equipment follows:
<TABLE>
<CAPTION>
December 31 1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Land $1,910,922 $1,880,950
Building and leasehold improvements 3,084,362 2,407,983
Furniture and fixtures 823,234 599,367
Equipment 1,147,688 821,606
Automobiles 55,362 -
-----------------------------------------------------------------------
7,021,568 5,709,906
Less accumulated depreciation
and amortization 1,021,790 763,753
-----------------------------------------------------------------------
Net office properties and equipment $5,999,778 $4,946,153
=======================================================================
</TABLE>
F-22
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
4. Deposits Deposits are summarized as follows:
December 31 1997 1996
-------------------------------------------------------------------------------------
Amount Percent Amount Percent
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Passbook, statement savings and
interest checking accounts
Non-interest bearing $ 2,771,114 2.4% $ 1,505,640 1.9%
1.00 to 2.00% 8,318,148 7.4 - -
2.01 to 3.00% 953,976 .9 5,400,365 6.6
3.01 to 4.00% 6,433,351 5.7 8,170,916 10.0
4.01 to 5.00% 3,994,110 3.5 - -
-------------------------------------------------------------------------------------
22,470,699 19.9 15,076,921 18.5
-------------------------------------------------------------------------------------
Certificates:
0 to 5.00% 65,962 .1 259,828 .3
5.01 to 6.00% 75,747,649 67.1 66,064,322 81.2
6.01 to 7.00% 14,662,702 12.9 - -
-------------------------------------------------------------------------------------
90,476,313 80.1 66,324,150 81.5
-------------------------------------------------------------------------------------
$112,947,012 100.0% $ 81,401,071 100.0%
=====================================================================================
</TABLE>
The aggregate amount of certificates of deposit with a
minimum denomination of $100,000 was approximately
$11,108,000 and $9,663,000 at December 31, 1997 and
1996, respectively.
Scheduled maturities of certificates are as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C>
Within one year $77,659,702 $57,305,347
One to two years 6,565,313 5,095,223
Two to three years 1,743,083 1,381,536
Three to four years 2,427,116 1,178,064
Five years and thereafter 2,081,099 1,363,980
-------------------------------------------------------------------------------------
$90,476,313 $66,324,150
=====================================================================================
</TABLE>
F-23
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
5. Fair Value of The estimated fair values of the Corporation's
Financial financial instruments are as follows:
Instruments
<TABLE>
<CAPTION>
December 31, 1997 1996
------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
Cash and short-term
investments $ 5,916,504 $ 5,917,000 $ 6,076,315 $ 6,076,000
Securities 15,566,382 15,587,000 19,984,374 20,085,000
Loans, net of allowance
for loan losses 99,674,549 100,595,000 81,270,173 80,858,000
Financial liabilities
Deposits 112,947,012 113,117,000 81,401,071 81,345,000
Advances from Federal
Home Loan Bank - - 17,500,000 17,500,000
Securities sold under
agreement to
repurchase 2,989,000 2,989,000 6,681,000 6,681,000
Bonds payable 2,360,083 N/A 2,705,813 N/A
Notional Fair Notional Fair
Amount Value Amount Value
------------------------------------------------------------------------------------------------
Unrecognized financial
instruments
Commitments to
extend credit $ 18,145,000 $18,145,000 $9,356,000 $9,356,000
Forward commitments
to purchase
mortgage-backed
securities - - 6,054,000 6,041,000
</TABLE>
F-24
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
5. Fair Value of The following methods and assumptions were used to
Financial estimate the fair value of each class of financial
Instruments instruments for which it is practicable to estimate
(continued) that value.
Cash and short-term investments
-------------------------------
For those short-term investments, the carrying amount
is a reasonable estimate of fair value.
Securities
----------
Fair values are based on quoted market prices or dealer
quotes. If a quoted market price is not available, fair
value is estimated using quoted market prices for
similar securities.
Loan receivables
----------------
The fair value of loans is estimated by discounting the
future cash flows using the current rates at which
similar loans would be made to borrowers with similar
remaining maturities. This calculation ignores loan
fees and certain factors affecting the interest rates
charged on various loans such as the borrower's
creditworthiness and compensating balances and
dissimilar types of real estate held as collateral.
Deposit liabilities
-------------------
The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable
on demand at the balance sheet date. The fair value of
fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of
similar remaining maturities.
Advances from Federal Home Loan Bank
------------------------------------
For advances that mature within one year of the balance
sheet date, carrying value is considered a reasonable
estimate of fair value.
The fair values of all other advances are estimated
using discounted cash flow analysis based on the
Corporation's current incremental borrowing rate for
similar types of advances.
F-25
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
5. Fair Value of Securities sold under agreement to repurchase
Financial ---------------------------------------------
Instruments
(continued) Fixed-coupon reverse repurchase agreements are treated
as short-term financings. The carrying value is
considered a reasonable estimate of fair value.
Bonds payable
-------------
Due to the nature and terms (Note 7) of the bonds
payable held by GMSC, Inc. at December 31, 1997 and
1996, it was not deemed practicable to estimate the
fair value.
Commitments to extend credit
----------------------------
The fair value of commitments is estimated using the
fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the
borrowers. For fixed-rate loan commitments, fair value
also considers the difference between current levels of
interest rates and the committed rates. Because of the
competitive nature of the marketplace loan fees vary
greatly with no fees charged in many cases.
Forward Commitments to purchase mortgage-backed
securities
-------------------------------------------------------
Fair values are based on quoted market prices or dealer
quotes.
6. Results of Unaudited results of operations of the Corporation for
Operations for the six months ended December 31, 1995 (unaudited) are
the Six Months as follows:
Ended December
31, 1995
Six month period ended December 31, 1995
-------------------------------------------------------
Net interest income $1,161,197
Income before income taxes 456,659
Provision for income taxes 157,838
Net income 298,821
F-26
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
7. Bonds Payable In October 1987, GMSC, Inc. issued serial bonds (the
"Bonds") collateralized by mortgage-backed securities
which are treated as a real estate mortgage investment
conduit ("REMIC") under the Internal Revenue Code of
1986 for federal tax purposes. The Bonds are secured by
an indenture between GMSC, Inc. and the Bank of New
York, acting as trustee for the bondholders. The Bonds
are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C>
Serial Bonds
Class A-2, maturing January 20,
2012, at 8.0% $ 285,701 $1,066,586
Class A-3, maturing January 20,
2019, at 8.0% 2,649,648 2,444,544
Unapplied payments (159,100) (326,479)
------------------------------------------------------------------------------
2,776,249 3,184,651
Less unamortized discount (416,166) (478,838)
------------------------------------------------------------------------------
$2,360,083 $2,705,813
==============================================================================
</TABLE>
The Bonds are repaid in conjunction with the net cash
flow from the mortgage-backed securities together with
the reinvestment income thereon. As a result, the
actual life of the Bonds is less than their stated
maturities. Interest is paid as incurred on the Class
A-2 Bonds and is accrued and added to the principal
amount due on the Class A-3 Bonds. The indenture also
provides for the establishment of two trust accounts to
insure the timely payment of interest, debt maturities,
trustee and accounting fees and other expenses. The
account established for payment of trustee and
accounting fees is included in cash on the statement of
condition. The account established for payment of
interest and debt maturities is netted with cash and
bonds payable on the statement of condition.
F-27
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
8. Securities Sold The following is a summary of certain information
Under Agreements regarding the Bank's repurchase agreements:
to Repurchase
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
---------------------------------------------------------------------------------------
<S> <C> <C>
Balance at end of period $2,989,000 $6,681,000
Weighted average interest rate
at end of period 6.29% 6.50%
Average amount outstanding
during the period $2,006,792 $6,321,040
Maximum amount outstanding
at any month end during the
period $5,867,000 $9,957,000
</TABLE>
9. Advances From Information related to borrowing activity from the
Federal Home Federal Home Loan Bank is as follows:
Loan Bank
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
---------------------------------------------------------------------------------------
<S> <C> <C>
Maximum amount
outstanding
during the
period $17,500,000 $22,500,000
=======================================================================================
Average amount
outstanding
during the period $10,956,000 $19,550,000
=======================================================================================
Average interest
rate during the
period 6.23% 5.79%
=======================================================================================
</TABLE>
F-28
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
10. Income Taxes The provision for income taxes as presented in the
consolidated statements of operations are as follows:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
---------------------------------------------------------------------------------------
<S> <C> <C>
Current income tax (benefit) $458,040 $(3,500)
Deferred income tax 28,000 -
---------------------------------------------------------------------------------------
$486,040 $(3,500)
=======================================================================================
Year Ended June 30 1996 1995
---------------------------------------------------------------------------------------
Current income tax $344,338 $187,885
Deferred income tax (benefit) - (87,377)
---------------------------------------------------------------------------------------
$344,338 $100,508
=======================================================================================
</TABLE>
Reconciliations of the provision for income taxes
computed at the federal statutory income tax rate to
the effective rate follows:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
---------------------------------------------------------------------------------------
<S> <C> <C>
Tax expense (benefit) at statutory rate $470,477 $(3,360)
Adjustments
Effect of state taxes 55,350 (395)
Other (39,787) 255
---------------------------------------------------------------------------------------
$486,040 $(3,500)
=======================================================================================
Year Ended June 30, 1996 1995
---------------------------------------------------------------------------------------
Tax expense at statutory rate $335,780 $162,096
Adjustments
Effect of state taxes 39,504 18,880
Other (30,946) (80,468)
---------------------------------------------------------------------------------------
$344,338 $100,508
=======================================================================================
</TABLE>
F-29
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
10. Income Taxes The components of deferred income taxes are as follows:
(continued)
<TABLE>
<CAPTION>
December 31, 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset
Bad debt reserves $243,000 $164,000
Deferred loan fees 43,000 54,000
Excess servicing 16,000 38,000
Trading securities - 90,000
Other 60,000 136,000
---------------------------------------------------------------------------------
Total deferred tax asset 362,000 482,000
---------------------------------------------------------------------------------
Deferred tax liability
GMSC REMIC 185,000 204,000
FHLB stock 118,000 187,000
Fixed Assets 42,000 -
Other 12,000 58,000
---------------------------------------------------------------------------------
Total deferred tax liability 357,000 449,000
---------------------------------------------------------------------------------
Net deferred tax asset $ 5,000 $ 33,000
=================================================================================
</TABLE>
11. Related Party In the normal course of business, the Corporation makes
Transactions loans to directors, officers and other related parties.
These loans are made on substantially the same terms as
those prevailing at the time for comparable
transactions with the other borrowers. The loans with
related parties outstanding at December 31, 1997 and
1996, are approximately $191,000 and $163,000,
respectively.
F-30
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
12. Commitments The Corporation leases office space under operating
and leases expiring at various dates through 2002 and has a
Contingencies contract for the performance of data processing
services whose initial term expires in May, 1999 and
requires minimum payments of $8,100 per month. Future
minimum rental and data processing payments required
that have initial or remaining noncancelable terms in
excess of one year as of December 31, 1997, are as
follows:
<TABLE>
<CAPTION>
Amount
-----------------------------
Data
Year Ending December 31, Leases Processing
---------------------------------------------------------------------------
<S> <C> <C>
1998 $ 49,700 $ 97,200
1999 50,000 40,500
2000 20,200 -
2001 20,200 -
Thereafter 10,700 -
---------------------------------------------------------------------------
$150,800 $137,700
===========================================================================
</TABLE>
Total rental expense amounted to approximately $47,000
for the year ended December 31, 1997 and $23,000 for
the six months ended December 31, 1996, and $168,000,
and $187,000 for the years ended June 30, 1996 and
1995, respectively.
The Corporation is defendant in various lawsuits
incidental to its business. Management is of the
opinion that its financial position will not be
materially affected by the ultimate resolution of any
pending or threatened litigation.
F-31
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
13. Stockholders' On June 28, 1995, the Corporation completed an initial
Equity public offering of its common stock through the sale of
180,000 shares of common stock at a price of $13.00 per
share. Proceeds to the Corporation from the offering
(net of offering expenses of approximately $312,000)
were approximately $2,028,000.
On November 30, 1995, the Board of Directors declared a
two-for-one stock split to be distributed on January
31, 1996, to all shareholders of record as of January
15, 1996.
On January 23, 1997, the Corporation completed a
secondary offering of its common stock through the sale
of 575,000 shares of common stock at a price of $8.50
per share. Proceeds to the Corporation from the
offering (net of offering expenses of approximately
$416,000) were approximately $4,471,000.
The following table represents the Bank's regulatory
capital levels at December 31, 1997 relative to the
Federal Reserve requirements.
<TABLE>
<CAPTION>
Amount Percent Actual Actual Excess
December 31, 1997 Required Required Amount Percent Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leverage $3,306,000 4.00% $ 7,911,000 9.57% $4,605,000
Tier 1 risk based 3,306,000 4.00 11,810,000 14.29 8,504,000
Total risk based
capital 6,613,000 8.00 12,745,000 15.42 6,132,000
</TABLE>
The following table presents the Bank's regulatory
capital levels at December 31, 1996, relative to the
OTS requirements applicable at that date:
<TABLE>
<CAPTION>
Amount Percent Actual Actual Excess
December 31, 1996 Required Required Amount Percent Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tangible capital $1,743,000 1.50% $ 6,639,000 5.70% $4,896,000
Core capital 3,490,000 3.00 6,639,000 5.70 3,149,000
Risk-based capital 4,519,000 8.00 7,345,000 13.00 2,826,000
</TABLE>
The Corporation may not declare or pay a cash dividend,
or repurchase any of its capital stock if the effect
thereof would cause the net worth of the Corporation to
be reduced below the net worth requirement imposed by
federal regulations.
F-32
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
14. Stock Option The Corporation has a noncompensatory stock option plan
Plan (the "Plan") designed to provide long-term incentives
to key employees. All options are exercisable upon date
of vesting.
The Corporation applies Accounting Principles Board
Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees, and related interpretations in accounting
for its plan. Accordingly, no compensation cost has
been recognized for this plan against earnings. For
those companies applying APB 25, FASB Statement No.
123, Accounting for Stock-Based Compensation, requires
certain proforma disclosures of net income and earnings
per share. Net income and earnings per share computed
under FASB Statement No. 123 do not materially differ
from the amounts reported in the consolidated financial
statements.
The following table summarizes options outstanding:
<TABLE>
<CAPTION>
Six months
Year Ending ending
December 31, 1997 December 31, 1996
------------------------------------------------------------------------------------------------
Weighted - Weighted -
average average
exercise exercise
Shares price Shares price
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of period 4,000 $ 4.88 14,000 $4.75
Granted 72,000 15.25 - -
Forfeited (800) 12.00 - -
Exercised (4,000) 4.88 (10,000) 4.70
------------------------------------------------------------------------------------------------
Options outstanding at end
of period 71,200 $15.25 4,000 $4.88
================================================================================================
Options exercisable at end
of period 9,600 4,000
================================================================================================
</TABLE>
The weighted average fair value of options granted
during the year ended December 31, 1997 was $1.14.
F-33
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
14. Stock Option Year Ending June 30, 1996 1995
Plan -----------------------------------------------------------------------------------------------
(continued) Weighted - Weighted -
average average
exercise exercise
Shares price Shares price
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of period 17,600 $4.65 36,000 $4.50
Granted - - - -
Forfeited - - - -
Exercised (3,600) 4.25 (18,400) 4.36
-----------------------------------------------------------------------------------------------
Options outstanding at end
of period 14,000 $4.75 17,600 $4.65
===============================================================================================
Options exercisable at end
of period 14,000 13,600
===============================================================================================
</TABLE>
The Corporation applies Accounting Principals Board
Opinion 25 in accounting for stock options granted to
employees. Had compensation expense been determined
based upon the fair value of the awards at the grant
date and consistent with the method under Statement of
Financial Accounting Standards 123, the Corporation's
net earnings and net earnings per share for the year
ended December 31, 1997 would have been decreased to
the pro forma amounts indicated in the following table:
<TABLE>
<CAPTION>
Net income
------------------------------------------------------------
<S> <C>
As reported $897,715
Pro forma 844,363
------------------------------------------------------------
Net income per share (basic and diluted)
------------------------------------------------------------
As reported $ 0.61
Pro forma 0.58
</TABLE>
F-34
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
14. Stock Option There were no options granted for the six months ended
Plan December 31, 1996 and for the years ended June 30, 1996
(continued) and 1995, therefore there are no pro forma effects on
net income and net income per share.
The fair value of each option granted is estimated on
the date of grant using the Black-Sholes option pricing
model with the following assumptions used for grants
for the year ended December 31, 1997: a risk free
interest rate of 5.85%, dividend yield of 1.00%,
expected weighted average term of 2.48 years, and a
volatility of 25.00%.
The follow table summarizes information about stock
options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------------------------
Weighted Weighted Weighted
average average average
remaining exercise exercise
Range of exercise Number of contractual price Number of price
prices Shares life (years) per share Shares per share
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$12.00 - 17.57 65,200 2.21 $14.87 9,600 $12.00
$19.33 - 21.26 6,000 5.83 20.29 - -
------------------------------------------------------------------------------------------------
71,200 2.48 $15.25 9,600 $12.00
================================================================================================
</TABLE>
15. Employee Benefit Effective February 16, 1989, the Corporation adopted a
Plans 401(k) profit-sharing plan in which all employees are
eligible to participate after one year of service and
are at least twenty-one years of age. Participants may
elect to contribute a percentage of their compensation
to the plan. The Corporation may make contributions to
the plan at its discretion. Corporation contributions
are allocated to employee accounts using a systematic
formula based on participant compensation. The
Corporation contributed approximately $10,300 for the
year ended December 31, 1997 and $4,600 and $5,800 for
the years ended June 30, 1996 and 1995, respectively,
and $5,500 for the six months ended December 31, 1996,
respectively.
F-35
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
16. Financial The Corporation is a party to financial instruments
Instruments With with off-balance-sheet risk in the normal course of
Off-Balance-Sheet business to meet the financing needs of its customers
Risk and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include
commitments to extend credit, options written and
purchased, forward commitments to purchase
mortgage-backed securities and standby letters of
credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of
the amount recognized in the statement of condition.
The contract or notional amounts of these instruments
reflect the extent of involvement the Corporation has
in particular classes of financial instruments.
The Corporation's exposure to credit loss in the event
of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit written is represented by the
contractual notional amount of those instruments. The
Corporation uses the same credit policies in making
commitments and conditional obligations as it does for
on-balance-sheet instruments. For options purchased,
the contract or notional amounts do not represent
exposure to credit loss.
Unless noted otherwise, the Corporation does not
require collateral or other security to support
financial instruments with credit risk.
<TABLE>
<CAPTION>
Contract
Notional Amount
December 31, 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk
Commitments to extend credit $18,145,000 $9,356,000
Standby letters of credit written 944,000 463,000
Financial instruments whose contract
amount represent interest rate risk
Forward commitment to purchase
mortgage-backed securities - 6,054,000
</TABLE>
F-36
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
16. Financial Commitments to extend credit are agreements to lend to
Instruments With a customer as long as there is no violation of any
Off-Balance-Sheet condition established in the contract. Commitments
Risk generally have fixed expiration dates or other
(continued) termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire
without being completely drawn upon, the total
commitment amounts do not necessarily represent future
cash requirements. The Corporation evaluates each
customer's creditworthiness on a case-by-case basis.
Standby letters of credit written are conditional
commitments issued by the Corporation to guarantee the
performance of a customer to a third party. The credit
risk involved in issuing letters of credit is
essentially the same as that involved in extending loan
facilities to customers.
Substantially all of the Corporation's loan activity
was with customers located in Charlottesville, Virginia
and surrounding counties, with approximately 81% of the
loans collateralized by one to four family residential
properties.
17. Condensed Condensed financial information is shown for the Parent
Financial Company only as follows:
Information of the
Corporation
(Parent Company Condensed Statements of Financial Condition
Only)
<TABLE>
<CAPTION>
December 31, 1997 1996
----------------------------------------------------------------------------------
Assets
<S> <C> <C>
Investment in the Bank, at equity $11,758,347 $6,657,155
Cash 10,000 10,000
Prepaid expenses and other assets 40,836 90,680
----------------------------------------------------------------------------------
$11,809,183 $6,757,835
==================================================================================
</TABLE>
F-37
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
17. Condensed December 31, 1997 1996
Financial ----------------------------------------------------------------------------------
Information of the
Corporation Liabilities and Stockholders' Equity
(Parent Company
Only) Liabilities $ - $ 182,086
(continued) ----------------------------------------------------------------------------------
Stockholders' Equity
Common stock 1,876,729 1,155,010
Additional paid-in capital 5,724,954 1,975,695
Retained earnings 4,207,500 3,445,044
----------------------------------------------------------------------------------
Total stockholders' equity 11,809,183 6,575,749
----------------------------------------------------------------------------------
$11,809,183 $6,757,835
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Operations
----------------------------------------------------------------------------------
Year Ended Six Months Ended
December 31, December 31,
1997 1996
----------------------------------------------------------------------------------
<S> <C> <C>
Income
Dividends received from Bank $135,259 $46,200
----------------------------------------------------------------------------------
Total income 135,259 46,200
----------------------------------------------------------------------------------
Noninterest expenses (7,028) (52,582)
----------------------------------------------------------------------------------
Income (loss) before undistributed
net income of the Bank 128,231 (6,382)
Undistributed net income 769,484 43,562
----------------------------------------------------------------------------------
Net income $897,715 $ 37,180
==================================================================================
</TABLE>
F-38
<PAGE>
Guaranty Financial Corporation
and Subsidiary
Notes to Consolidated Financial Statements
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
17. Condensed Condensed Statements of Cash Flows
Financial -----------------------------------------------------------------------------------------------
Information of the Year Ended Six Months Ended
Corporation December 31, December 31,
(Parent Company 1997 1996
Only) -----------------------------------------------------------------------------------------------
(continued)
Operating activities
Net income $ 897,715 $ 37,180
Adjustments
Undistributed earnings of the Bank (769,484) (43,562)
(Increase) decrease in prepaid and
other assets 49,844 (21,701)
(Decrease) increase in other liabilities (182,086) 37,686
Other 4,011 (9,603)
-----------------------------------------------------------------------------------------------
Net cash absorbed by operating
activities - -
-----------------------------------------------------------------------------------------------
Investing activities
Dividends received from Bank 135,259 46,200
Investment in the Bank (4,470,978) -
-----------------------------------------------------------------------------------------------
Net cash provided (absorbed) by
investing activities (4,335,719) 46,200
-----------------------------------------------------------------------------------------------
Financing activities
Cash dividends paid on common stock (135,259) (46,200)
Issuance of common stock 4,470,978 -
-----------------------------------------------------------------------------------------------
Net cash provided (absorbed) by financing
activities 4,335,719 (46,200)
-----------------------------------------------------------------------------------------------
Increase in cash - -
Cash, beginning of period 10,000 10,000
-----------------------------------------------------------------------------------------------
Cash, end of period $ 10,000 $ 10,000
===============================================================================================
</TABLE>
F-39
<TABLE>
<CAPTION>
======================================================== ========================================================
<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations in connection with the offer made
hereby except as contained in this Prospectus and, if
given or made, no such information or representations
should be relied upon as having been authorized by
the Corporation, the Trust, the Underwriter or any of
their respective agents. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under $6,000,000
any circumstances, create an implication that there GUARANTY CAPITAL TRUST I
has been no change in the information set forth 240,000
herein or in the affairs of the Corporation or the $ Convertible Preferred Securities
Trust since the date hereof. This Prospectus does not (Liquidation Amount $25.00
constitute an offer to sell, or a solicitation of an per Preferred Security)
offer to buy, the Preferred Securities by anyone in
any jurisdiction in which such offer or solicitation Fully and Unconditionally Guaranteed, as
is not authorized or in which the person making such described herein, by
offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer
or solicitation. GUARANTY FINANCIAL CORPORATION
--------------
TABLE OF CONTENTS
TABLE OF CONTENTS
Page
Available Information..................................1
Summary................................................2
Use of Proceeds........................................5 McKinnon & Company, Inc.
Risk Factors...........................................5
Ratio of Earnings to Fixed Charges.....................5
Summary Financial Information..........................6
Risk Factors...........................................7
Guaranty Capital Trust I..............................13
Selected Historical Financial Information.............15 Prospectus
The Corporation.......................................16
Management's Discussion and Analysis of Dated March , 1998
Financial Condition and Results of Operations.......18
Business..............................................43
Management............................................52
Capitalization........................................57
Accounting Treatment..................................57
Regulatory Treatment..................................58
Description of Preferred Securities...................58
Description of Junior Subordinated Debt Securities....77
Description of Guarantee..............................87
Relationship Among the Capital Securities, the
Junior Subordinated Debt Securities and
the Guarantee.......................................90
Description of Guaranty Financial Corporation
Capital Stock.......................................91
Certain ERISA Considerations..........................93
Certain United States Federal Income Tax
Consequences........................................94
Underwriting..........................................98
Validity of Securities................................99
Accountants...........................................99
======================================================== ========================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
Item 13. Other Expenses of Issuance and Distribution
<S> <C>
Securities and Exchange Commission Registration Fee $ 2,036*
National Association of Securities Dealers Examination Fee $ 1,190*
Printing Expenses $ 2,000
Accounting Fees and Expenses $ 10,000
Legal Fees and Expenses $ 60,000
Blue Sky Fees and Expenses $ 6,000
Miscellaneous Expenses $ 5,000
-------------
Total $ 86,226
=============
</TABLE>
________________________
* Represents actual expenses. All other expenses are estimates.
Item 14. Indemnification of Directors and Officers
Article 10 of Chapter 9 of Title 13.1 of the Code of Virginia, 1950, as
amended (the "Code"), permits a Virginia corporation to indemnify any director
or officer for reasonable expenses incurred in any legal proceeding in advance
of final disposition of the proceeding, if the director or officer furnishes the
corporation a written statement of his good faith belief that he has met the
standard of conduct prescribed by the Code, and a determination is made by the
board of directors that such standard has been met. In a proceeding by or in the
right of the corporation, no indemnification shall be made in respect of any
matter as to which an officer or director is adjudged to be liable to the
corporation, unless the court in which the proceeding took place determines
that, despite such liability, such person is reasonably entitled to
indemnification in view of all the relevant circumstances. In any other
proceeding, no indemnification shall be made if the director or officer is
adjudged liable to the corporation on the basis that personal benefit was
improperly received by him. Corporations are given the power to make any other
or further indemnity, including advance of expenses, to any director or officer
that may be authorized by the articles of incorporation or any bylaw made by the
shareholders, or any resolution adopted, before or after the event, by the
shareholders, except an indemnity against willful misconduct or a knowing
violation of the criminal law. Unless limited by its articles of incorporation,
indemnification of a director or officer is mandatory when he entirely prevails
in the defense of any proceeding to which he is a party because he is or was a
director or officer.
The Articles of Incorporation of the Corporation contain provisions
indemnifying the directors and officers of the Corporation against expenses and
liabilities incurred in legal proceedings and authorizing the Board of Directors
to advance and reimburse expenses to the fullest extent permitted by Virginia
law.
Under the Amended and Restated Declaration of Trust, the Corporation,
as depositor of the Trust, has agreed (i) to indemnify and hold harmless each
Administrative Trustee and any employee or agent of the Trust or its Affiliates
from and against any loss, damage, liability, tax, penalty, expense or claim of
any kind or nature whatsoever incurred by such person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such person in good faith on behalf of the Trust and in a manner such
person reasonably believes to be within the scope of authority conferred on such
person by the
II-1
<PAGE>
Declaration, except that no person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such person by reason of
negligence or willful misconduct with respect to such acts or omissions, and
(ii) to advance expenses (including legal fees) incurred by such person in
defending any claim, demand, action, suite or proceeding, from time to time,
prior to the final disposition of such claim, demand, action, suit or
proceeding.
Item 15. Recent Sale of Unregistered Securities
Not applicable.
Item 16. Exhibits
The following exhibits are filed on behalf of the Registrant as part of
this Registration Statement:
1.1 Form of Underwriting Agreement for offering of Convertible
Preferred Securities*
3.1 Articles of Incorporation of Guaranty Financial Corporation*
3.2 Bylaws of Guaranty Financial Corporation*
4.1 Certificate of Trust of Guaranty Capital Trust I*
4.2 Trust Agreement between Guaranty Financial Corporation and
Wilmington Trust Company*
4.3 Form of Amended and Restated Declaration of Trust for Guaranty
Capital Trust I
4.4 Form of Junior Subordinated Indenture between Guaranty Financial
Corporation and Wilmington Trust Company, as Trustee
4.5 Form of Convertible Preferred Security (included in Exhibit 4.3
above)
4.6 Form of Junior Subordinated Debt Security (included in Exhibit
4.4 above)
4.7 Form of Guarantee Agreement with respect to Trust Securities
issued by Guaranty Capital Trust I
4.8 Form of Escrow Agreement among McKinnon & Company, Inc., Guaranty
Capital Trust I, Guaranty Financial Corporation and Wilmington
Trust Company*
5.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C.*
5.2 Opinion of Richards, Layton & Finger*
8.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C. as to tax
matters*
12.1 Calculation of Ratio of Earnings to Fixed Charges*
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Williams, Mullen, Christian & Dobbins, P.C. (included
in Exhibit 5.1 above)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2
above)
24.1 Powers of Attorney (included on signature page)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Trustee under the
Junior Subordinated Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Property Trustee
under the Amended and Restated Declaration of Trust of Guaranty
Capital Trust I
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Guarantee Trustee
under the Guarantee Agreement for the benefit of holders of Trust
Securities of Guaranty Capital Trust I
27.1 Financial Data Schedule (filed electronically only)
* to be filed by amendment
II-2
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of a
Registrant pursuant to the foregoing provisions, or otherwise, each of the
Registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of a Registrant 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, such 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 Securities Act and will be governed by
the final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act, (i) the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A under the Securities Act and
contained in a form of prospectus filed by the Company pursuant to Rule 424(b)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective and (ii) each post-effective
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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Charlottesville, Commonwealth of Virginia, on March 27,
1998.
GUARANTY FINANCIAL CORPORATION
By: /s/ Thomas P. Baker
-------------------------------------
Thomas P. Baker
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints Thomas P. Baker as attorney and
agent for the undersigned, with full power of substitution, for and in the name,
place and stead of the undersigned, to sign and file with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, any and all
amendments and exhibits to the Registration Statement and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of securities covered
hereby with full power and authority to do and perform any and all acts and
things whatsoever requisite or desirable.
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Thomas P. Baker President, Chief Executive Officer March 27, 1998
- ------------------------------------------- and Director
Thomas P. Baker (Principal Executive Officer)
/s/ Vincent B. McNelley Senior Vice President, March 27, 1998
- ------------------------------------------- Chief Financial Officer and
Vincent B. McNelley Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Douglas E. Caton Chairman of the Board March 27, 1998
- -------------------------------------------
Douglas E. Caton
<PAGE>
/s/ Henry J. Browne Director March 27, 1998
- -------------------------------------------
Henry J. Browne
/s/ Robert P. Englander Director March 27, 1998
- -------------------------------------------
Robert P. Englander
Director March __, 1998
- -------------------------------------------
Harry N. Lewis
/s/ John R. Metz Director March 27, 1998
- -------------------------------------------
John R. Metz
/s/ James R. Sipe, Jr. Director March 27, 1998
- -------------------------------------------
James R. Sipe, Jr.
/s/ Oscar W. Smith, Jr. Director March 27, 1998
- -------------------------------------------
Oscar W. Smith, Jr.
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Charlottesville, Commonwealth of Virginia, on March 27,
1998.
GUARANTY CAPITAL TRUST I
By: Guaranty Financial Corporation
as Depositor
By: /s/ Thomas P. Baker
----------------------------------
Thomas P. Baker
President, Chief Executive Officer
and Director
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
1.1 Form of Underwriting Agreement for offering of Convertible
Preferred Securities*
3.1 Articles of Incorporation of Guaranty Financial Corporation*
3.2 Bylaws of Guaranty Financial Corporation*
4.1 Certificate of Trust of Guaranty Capital Trust I*
4.2 Trust Agreement between Guaranty Financial Corporation and
Wilmington Trust Company*
4.3 Form of Amended and Restated Declaration of Trust for Guaranty
Capital Trust I
4.4 Form of Junior Subordinated Indenture between Guaranty Financial
Corporation and Wilmington Trust Company, as Trustee
4.5 Form of Convertible Preferred Security (included in Exhibit 4.3
above)
4.6 Form of Junior Subordinated Debt Security (included in Exhibit
4.4 above)
4.7 Form of Guarantee Agreement with respect to Trust Securities
issued by Guaranty Capital Trust I
4.8 Form of Escrow Agreement among McKinnon & Company, Inc., Guaranty
Capital Trust I, Guaranty Financial Corporation and Wilmington
Trust Company*
5.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C.*
5.2 Opinion of Richards, Layton & Finger*
8.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C. as to tax
matters*
12.1 Calculation of Ratio of Earnings to Fixed Charges*
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Williams, Mullen, Christian & Dobbins, P.C. (included
in Exhibit 5.1 above)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2
above)
24.1 Powers of Attorney (included on signature page)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Trustee under the
Junior Subordinated Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Property Trustee
under the Amended and Restated Declaration of Trust of Guaranty
Capital Trust I
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Guarantee Trustee
under the Guarantee Agreement for the benefit of holders of Trust
Securities of Guaranty Capital Trust I
27.1 Financial Data Schedule (filed electronically only)
* to be filed by amendment
Exhibit 4.3
EXECUTION COPY
================================================================================
AMENDED AND RESTATED
DECLARATION OF TRUST
between
GUARANTY FINANCIAL CORPORATION, as Depositor,
WILMINGTON TRUST COMPANY,
as Property Trustee,
WILMINGTON TRUST COMPANY,
as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of ________ __, 1998
GUARANTY CAPITAL TRUST I
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I -- Defined Terms........................................................................................2
SECTION 1.01. Definitions......................................................................................2
ARTICLE II -- Continuation of the Trust..........................................................................12
SECTION 2.01. Name............................................................................................12
SECTION 2.02. Office of the Delaware Trustee; Principal Place of Business.....................................12
SECTION 2.03. Organizational Expenses.........................................................................13
SECTION 2.04. Issuance of the Capital Securities..............................................................13
SECTION 2.05. Issuance of the Common Securities; Subscription and Purchase of Junior Subordinated Debt
Securities....................................................................................................13
SECTION 2.06. Declaration of Trust............................................................................14
SECTION 2.07. Authorization to Enter into Certain Transactions................................................14
SECTION 2.08. Assets of Trust.................................................................................19
SECTION 2.09. Title to Trust Property.........................................................................19
ARTICLE III -- Payment Account...................................................................................19
SECTION 3.01. Payment Account.................................................................................19
ARTICLE IV -- Distributions; Redemption; Conversion..............................................................19
SECTION 4.01. Distributions...................................................................................19
SECTION 4.02. Redemption......................................................................................21
SECTION 4.03. Subordination of Common Securities..............................................................23
SECTION 4.04. Payment Procedures..............................................................................24
SECTION 4.05. Tax Returns and Reports.........................................................................24
SECTION 4.06. Payment of Taxes; Duties of the Trust...........................................................25
SECTION 4.07. Payments Under Indenture........................................................................25
SECTION 4.08. Conversion Rights...............................................................................25
ARTICLE V -- Trust Securities Certificates.......................................................................30
SECTION 5.01. Initial Ownership...............................................................................30
SECTION 5.02. Trust Securities Certificates...................................................................31
SECTION 5.03. Execution and Delivery of Trust Securities Certificates.........................................31
SECTION 5.04. Global Capital Security.........................................................................31
SECTION 5.05. Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Capital
Securities Certificates.......................................................................................33
SECTION 5.06. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates..............................35
SECTION 5.07. Persons Deemed Securityholders..................................................................36
SECTION 5.08. Access to List of Securityholders' Names and Addresses..........................................36
SECTION 5.09. Maintenance of Office or Agency; Transfer Agent.................................................36
SECTION 5.10. Appointment of Paying Agent.....................................................................37
SECTION 5.11. Ownership of Common Securities by Depositor.....................................................37
SECTION 5.12. Notices to Clearing Agency......................................................................38
SECTION 5.13. Rights of Securityholders.......................................................................38
ARTICLE VI -- Acts of Securityholders; Meetings; Voting..........................................................41
SECTION 6.01. Limitations on Capital Securityholder's Voting Rights...........................................41
SECTION 6.02. Notice of Meeting...............................................................................42
SECTION 6.03. Meetings of Securityholders.....................................................................42
SECTION 6.04. Voting Rights...................................................................................42
SECTION 6.05. Proxies.........................................................................................43
SECTION 6.06. Securityholder Action by Written Consent........................................................43
SECTION 6.07. Record Date for Voting and Other Purposes.......................................................43
SECTION 6.08. Acts of Securityholders.........................................................................43
SECTION 6.09. Inspection of Records...........................................................................45
ARTICLE VII -- Representations and Warranties....................................................................45
SECTION 7.01 Representations and Warranties of the Property Trustee and the Delaware Trustee.................45
<PAGE>
SECTION 7.02. Representations and Warranties of Depositor.....................................................46
ARTICLE VIII -- The Trustees.....................................................................................47
SECTION 8.01. Certain Duties and Responsibilities.............................................................47
SECTION 8.02. Events of Default Notices; Deferral of Interest Payment Notices.................................48
SECTION 8.03. Certain Rights of Property Trustee..............................................................49
SECTION 8.04. Not Responsible for Recitals....................................................................52
SECTION 8.05. May Hold Securities.............................................................................52
SECTION 8.06. Compensation, Indemnity, Fees...................................................................52
SECTION 8.07. Corporate Property Trustee Required; Eligibility of Trustees....................................54
SECTION 8.08. Conflicting Interests...........................................................................54
SECTION 8.09. Co-Trustees and Separate Trustee................................................................54
SECTION 8.10. Resignation and Removal; Appointment of Successor...............................................56
SECTION 8.11. Acceptance of Appointment by Successor..........................................................58
SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business.....................................59
SECTION 8.13. Preferential Collection of Claims Against Depositor or Trust....................................59
SECTION 8.14. Reports by Property Trustee.....................................................................60
SECTION 8.15. Reports to the Property Trustee.................................................................60
SECTION 8.16. Evidence of Compliance with Conditions Precedent................................................61
SECTION 8.17. Number of Trustees..............................................................................61
SECTION 8.18. Delegation of Power.............................................................................61
ARTICLE IX -- Termination, Liquidation and Merger................................................................62
SECTION 9.01. Termination Upon Expiration Date; Termination Upon Special Event................................62
SECTION 9.02. Early Termination...............................................................................62
SECTION 9.03. Termination.....................................................................................62
SECTION 9.04. Liquidation.....................................................................................63
SECTION 9.05. Mergers, Consolidations, Amalgamations or Replacements of the Trust.............................64
ARTICLE X -- Miscellaneous Provisions............................................................................66
SECTION 10.01. Limitation of Rights of Securityholders........................................................66
SECTION 10.02. Liability of the Depositor.....................................................................66
SECTION 10.03. Amendment......................................................................................66
SECTION 10.04. Separability...................................................................................68
SECTION 10.05. Governing Law..................................................................................68
SECTION 10.06. Payments Due on Non-Business Day...............................................................68
SECTION 10.07. Successors.....................................................................................68
SECTION 10.08. Headings.......................................................................................68
SECTION 10.09. Reports, Notices and Demands...................................................................68
SECTION 10.10. Agreement Not to Petition......................................................................69
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture Act.........................................69
SECTION 10.12. Acceptance of Terms of Declaration of Trust, Guarantee and Indenture...........................70
SECTION 10.13. Execution in Counterparts......................................................................70
</TABLE>
2
<PAGE>
GUARANTY CAPITAL TRUST I
Certain Sections of this Declaration of Trust relating to Sections 310
through 318 of the Trust Indenture Act of 1939:
Trust Indenture Declaration of
Act Section Trust Section
- --------------- -------------
ss.310 (a)(1)........................................ 8.07
(a)(2)...................................... 8.07
(a)(3)...................................... 8.09
(a)(4)...................................... 2.07(a)(ii)
(b)......................................... 8.08
ss.311 (a)......................................... 8.13
(b)......................................... 8.13
ss.312 (a)......................................... 5.08
(b)......................................... 5.08
(c)......................................... 5.08
ss.313 (a)......................................... 8.14(a)
(a)(4)...................................... 8.14(b)
(b)(1)...................................... 8.14(a)
(b)(2)...................................... 8.14(b)
(c)......................................... 10.09
(d)......................................... 8.14(c)
ss.314 (a)......................................... 8.15
(b)......................................... Not Applicable
(c)(1)...................................... 8.16
(c)(2)...................................... 8.16
(c)(3)...................................... Not Applicable
(d)......................................... Not Applicable
(e)......................................... 1.01, 8.16
ss.315 (a)......................................... 8.01(a), 8.03(a)
(b)......................................... 8.02
(c)......................................... 8.01(a)
(d)......................................... 8.01, 8.03
(e)......................................... Not Applicable
ss.316 (a)......................................... Not Applicable
(a)(1)(A)................................... Not Applicable
(a)(1)(B)................................... Not Applicable
(a)(2)...................................... Not Applicable
(b)......................................... 5.13
(c)......................................... 6.07
ss.317 (a)(1)...................................... Not Applicable
(a)(2)...................................... Not Applicable
(b)......................................... 5.10
ss.318 (a)......................................... 10.11
- -----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Declaration of Trust.
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST,
dated as of __________ __, 1998, between (i) GUARANTY
FINANCIAL CORPORATION, a Virginia corporation
(including any successors or assigns, the
"Depositor"), (ii) WILMINGTON TRUST COMPANY, a
Delaware 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 "Trust Company"), (iii)
WILMINGTON TRUST COMPANY, a Delaware corporation, as
Delaware trustee (the "Delaware Trustee"), (iv)
THOMAS P. BAKER, an individual, and VINCENT B.
MCNELLEY, an individual, each of whose address is c/o
Guaranty Financial Corporation (each an
"Administrative Trustee" and, collectively, the
"Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees are
referred to collectively herein as the "Trustees")
and (v) the several Holders, as hereafter defined.
W I T N E S S E T H :
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees have heretofore duly declared and established a business trust pursuant
to the Delaware Business Trust Act by entering into a certain Declaration of
Trust, dated as of ____________ (the "Original Declaration of Trust"), and by
the execution and filing by the Delaware Trustee and the Administrative Trustees
with the Secretary of State of the State of Delaware of the Certificate of
Trust, filed on ____________ (the "Certificate of Trust"); and attached as
Exhibit A; and
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees desire to amend and restate the Original Declaration of Trust in its
entirety as set forth herein to provide for, among other things (i) the issuance
and sale of the Common Securities by the Trust to the Depositor, (ii) the
issuance and sale of the Capital Securities (the "Capital Securities") by the
Trust pursuant to the Underwriting Agreement, as hereafter defined, (iii) the
acquisition by the Trust from the Depositor of all of the right, title and
interest in the Junior Subordinated Debt Securities, as hereafter defined, and
(iv) the appointment of Wilmington Trust Company, a Delaware corporation (in
such capacity, the "Property Trustee" and, in its separate corporate capacity
and not in its capacity as Property Trustee, the "Trust Company");
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, as hereafter defined, hereby
<PAGE>
amends and restates the Original Declaration of Trust in its entirety and agrees
as follows:
ARTICLE I
Defined Terms
SECTION 1.01. Definitions. For all purposes of this Declaration of
Trust, except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article 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) unless the context otherwise requires, any reference to
an "Article" or a "Section" refers to an Article or a Section, as the
case may be, of this Declaration of Trust; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Declaration of Trust as a whole
and not to any particular Article, Section or other subdivision; and
"Act" has the meaning specified in Section 6.08.
"Additional Distribution" has the meaning specified in Section
4.01(c).
"Administrative Action" has the meaning specified in the
definition of "Tax Event" in this Section 1.01.
"Administrative Trustee" means each of Thomas P. Baker and
Vincent B. McNelley, solely in such Person's capacity as Administrative Trustee
of the Trust continued hereunder and not in such Person's individual capacity,
or such Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
2
<PAGE>
"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.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having
jurisdiction in the premises adjudging such Person a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjudication or composition of or in
respect of such Person under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of such Person or of any substantial part of
its property or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
b) the institution by such Person of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or similar official) of such Person or
of any substantial part of its property or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by such Person in furtherance of any such action.
"Board Resolution" means a copy of a resolution certified by
the Secretary 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 Trustees.
"Business Day" means a day other than (a) a Saturday or
Sunday, (b) a day on which banking institutions in the City of Richmond,
Virginia are authorized or required by law or executive order to remain closed
or (c) a day on which the Property
3
<PAGE>
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Capital Securities" means each of the $______ Convertible
Preferred Securities to be issued on the date hereof, each representing an
undivided beneficial interest in the assets of the Trust, having a Liquidation
Amount of $25.00 per Capital Security and having the rights provided therefor in
this Declaration of Trust, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Capital Securities Certificate" means a certificate
evidencing ownership of Capital Securities, substantially in the form attached
as Exhibit B.
"Capital Securityholder" means a Person in whose name a
Capital Security or Capital Securities is registered in the Securities Register;
and any such Person shall be deemed to be a beneficial owner within the meaning
of the Delaware Business Trust Act.
"Capital Treatment Event" has the meaning specified in Section
1.01 of the Indenture.
"Cede" has the meaning specified in Section 5.04(a).
"Certificate of Trust" has the meaning specified in the
preamble to this Declaration of Trust.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934. The Depository Trust Company shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" has the meaning specified in the Underwriting
Agreement.
"Closing Price" shall have the meaning specified in Section
4.08(h)(iv).
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Securities" means the Common Securities, each
representing an undivided beneficial interest in the assets of
4
<PAGE>
the Trust, having a Liquidation Amount of $25.00 and having the rights provided
therefor in this Declaration of Trust, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Common Stock" means the common stock, par value $1.25 per
share, of the Depositor.
"Conversion Agent" has the meaning specified in Section
4.08(c).
"Conversion Date" has the meaning specified in Section
4.08(b).
"Conversion Price" has the meaning specified in Section
4.08(a).
"Conversion Request" has the meaning specified in Section
4.08(b).
"Conversion Termination Date" has the meaning specified in
Section 4.08(h)(ii).
"Corporate Trust Office" means the principal office of the
Property Trustee located in Wilmington, Delaware which, at the time of the
execution of this Declaration of Trust, is located at 1100 N. Market Street,
Attention: Corporate Trust Administration, Wilmington, Delaware 19890.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
corporation and any successor.
"Declaration of Trust" means this Amended and Restated
Declaration of Trust, as the same may be modified, amended or supplemented in
accordance with the applicable provisions hereof, including all exhibits hereto,
including, for all purposes of this Amended and Restated Declaration of Trust,
the provisions of the Trust Indenture Act that are deemed to be a part of and
govern this Amended and Restated Declaration of Trust and any modification,
amendment or supplement of either, respectively.
"Definitive Capital Securities Certificate" means Capital
Securities Certificates issued in certificated, fully registered form.
5
<PAGE>
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. ss.ss. 3801, et seq., as it may be amended from
time to time.
"Delaware Trustee" means the corporation identified as the
"Delaware Trustee" in the preamble to this Declaration of Trust solely in its
capacity as Delaware Trustee of the Trust continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this
Declaration of Trust.
"Distribution Date" has the meaning specified in Section
4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Early Termination Event" has the meaning specified in Section
9.02.
"Escrow Agent" means Wilmington Trust Company.
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(c) default by the Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in this
Declaration of Trust (other than a covenant or warranty, a default in
the performance or breach of which is addressed in clause (b) or (c)
above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to
the defaulting Trustee or Trustees by the Holders of at least 25% in
aggregate Liquidation Amount of the Outstanding Capital Securities, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
6
<PAGE>
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a
successor Property Trustee within 60 days thereof.
"Expiration Date" has the meaning specified in Section 9.01.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Global Capital Securities" means a beneficial interest in the
Capital Securities, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 5.11.
"Global Capital Securities Certificate" means a certificate
evidencing ownership of Global Capital Securities, substantially in the form
attached as Exhibit B.
"Guarantee" means the Guarantee Agreement executed and
delivered by the Depositor and Wilmington Trust Company, as trustee,
contemporaneously with the execution and delivery of this Declaration of Trust,
for the benefit of the Holders of the Trust Securities, as amended from time to
time.
"Holder" or "Securityholder" 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 of such Trust Securities
within the meaning of the Delaware Business Trust Act; provided, however, that
in determining whether the Holders of the requisite amount of Capital Securities
have voted on any matter provided for in this Declaration of Trust, then for the
purpose of any such determination, so long as Definitive Capital Securities
Certificates have not been issued, the term Securityholders or Holders as used
herein shall refer to the Owners.
"Indenture" means the Junior Subordinated Indenture, dated as
of ________ __, 1998, between the Depositor and the Debenture Trustee, as
trustee, (as amended or supplemented from time to time) relating to the issuance
of the Junior Subordinated Debt Securities.
"Investment Company Event" has the meaning specified in
Section 1.01 of the Indenture.
"Junior Subordinated Debt Securities" means $6,180,000.00 in
aggregate principal amount of the Depositor's Junior Subordinated Debt
Securities due ________ __, 2028, issued pursuant to the Indenture.
7
<PAGE>
"Junior Subordinated Debt Securities Redemption Date" means,
with respect to any Junior Subordinated Debt Securities to be redeemed under the
Indenture, the date fixed for redemption under the Indenture or pursuant to an
Officers' Certificate in accordance with the terms of the Indenture.
"Letter of Representations" means the agreement between the
Trust, the Property Trustee and The Depository Trust Company ("DTC"), as the
initial Clearing Agency, dated as of the Closing Date.
"Lien" means any lien, pledge, charge, encumbrance, mortgage,
deed of trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to that portion
of the principal amount of Junior Subordinated Debt Securities to be
contemporaneously redeemed in accordance with the Indenture allocated to the
Trust Securities based upon their relative Liquidation Amounts and the proceeds
of which will be used to pay the Redemption Price of such Trust Securities, and
(b) with respect to a distribution of Junior Subordinated Debt Securities to
Holders in connection with a dissolution or liquidation of the Trust, Junior
Subordinated Debt Securities having a principal amount equal to the Liquidation
Amount of the Trust Securities of the Holder to whom such Junior Subordinated
Debt Securities are distributed.
"Liquidation Amount" means the stated amount of $25.00 per
Trust Security.
"Liquidation Date" means the date on which Junior Subordinated
Debt Securities are to be distributed to Holders of Trust Securities in
connection with a termination and liquidation of the Trust pursuant to Section
9.04(a).
"Liquidation Distribution" has the meaning specified in
Section 9.04(d).
"1940 Act" means the Investment Company Act of 1940.
"Notice of Conversion Termination" has the meaning specified
in Section 4.08(h)(iii).
"NYSE" means the New York Stock Exchange.
"Officers' Certificate" means 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 Controller, the
Secretary or an Assistant Secretary, of the Depositor, and delivered to the
8
<PAGE>
appropriate Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 8.16 shall be the principal executive, financial or
accounting officer of the Depositor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration of Trust shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Trust, the Property Trustee or the Depositor, but not an
employee of any thereof, and which opinion shall be reasonably acceptable to the
Property Trustee.
"Original Declaration of Trust" has the meaning specified in
the preamble to this Declaration of Trust.
"Other Capital Securities" means Capital Securities that are
not Global Capital Securities.
"Outstanding", with respect to Capital Securities, means, as
of the date of determination, all Capital Securities theretofore executed and
delivered under this Declaration of Trust, except;
(a) Capital Securities theretofore canceled by the Property
Trustee, delivered to the Property Trustee for cancellation, or
exchanged by the Conversion Agent in accordance with Section 4.08;
(b) Capital Securities for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Property Trustee or any Paying Agent for the benefit of the Holders of
such Capital Securities; provided that, if such Capital Securities are
to be redeemed, notice of such redemption has been duly given pursuant
to this Declaration of Trust; and
9
<PAGE>
(c) Capital Securities that have been paid or in exchange for
or in lieu of which other Capital Securities have been executed and
delivered pursuant to Sections 5.02, 5.04, 5.05, 5.11 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
Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, only Capital Securities that a Responsible Officer of such
Trustee actually knows to be so owned shall be so disregarded and (b)
the foregoing shall not apply at any time when all of the outstanding
Capital Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Capital Securities so owned that
have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Administrative Trustees
the pledgee's right so to act with respect to such Capital Securities
and that the pledgee is not the Depositor or any Affiliate of the
Depositor.
"Owner" means each Person who is the beneficial owner of a
Global Capital Security as reflected in the records of the Clearing Agency or,
if a Clearing Agency Participant is not the Owner, then as reflected in the
records of a Person maintaining an account with such Clearing Agency (directly
or indirectly), in accordance with the rules of such Clearing Agency.
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.10 and shall initially be the Trust Company.
"Payment Account" means a segregated corporate trust account,
without interest, maintained by the Property Trustee with the Trust Company in
its trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Junior Subordinated Debt Securities will be held and from
which the Property Trustee shall make payments to the Securityholders in
accordance with Sections 4.01 and 4.02.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Press Release" has the meaning specified in Section
4.08(h)(ii).
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to
10
<PAGE>
this Declaration of Trust solely in its capacity as Property Trustee of the
Trust continued hereunder and not in its individual capacity, or its successor
in interest in such capacity, or any successor property trustee appointed as
herein provided.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, the date fixed for such redemption by or pursuant to this
Declaration of Trust, provided, however, that each Junior Subordinated Debt
Securities Redemption Date and the Stated Maturity of the Junior Subordinated
Debt Securities shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price," when used with respect to any Trust
Security to be redeemed or prepaid, means an amount in cash equal to one hundred
percent (100%) of the Liquidation Amount to be redeemed, together with
accumulated Distributions to but excluding the date fixed for such redemption.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer" means, when used with respect to the
Property 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 Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration for
this Declaration of Trust, 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.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.05.
"Securityholder" or "Holder" means a Person in whose name a
Trust Security or Trust Securities is registered in the Securities Register; any
such Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act; provided, however, that in determining whether the
Holders of the requisite amount of Capital Securities have voted on any matter
provided for in this Declaration of Trust, then for the purpose of any such
determination, so long as Definitive Capital Securities Certificates have not
been issued, the term Securityholders or Holders as used herein shall refer to
the Owners.
"Stated Maturity" has the meaning specified in Section 1.01 of
the Indenture.
11
<PAGE>
"Tax Event" has the meaning specified in Section 1.01 of the
Indenture.
"Transfer Agent" means the Trust Company as set forth in the
preamble to this Declaration of Trust.
"Trust" means Guaranty Capital Trust I.
"Trust Company" has the meaning specified in the preamble to
this Declaration of Trust.
"Trust Indenture Act" has the meaning specified in Section
1.01 of the Indenture.
"Trust Property" means (a) the Junior Subordinated Debt
Securities, (b) the rights of the Property Trustee under the Guarantee, (c) any
cash or deposit in, or owing to, the Payment Account and (d) all proceeds and
rights in respect of the foregoing.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Capital Securities Certificates.
"Trust Security" means any one of the Common Securities or the
Capital Securities.
"Trustees" means, collectively, the Property Trustee, the
Delaware Trustee and the Administrative Trustees.
"Underwriter" shall mean McKinnon & Company, Inc., a Virginia
corporation.
"Underwriting Agreement" means the Underwriting Agreement,
dated as of ________ __, 1998, between the Trust, the Depositor and the
Underwriter.
ARTICLE II
Continuation of the Trust
SECTION 2.01. Name. The Trust continued hereby shall be known
as "Guaranty Capital Trust I", as such name may be modified from time to time by
the Administrative Trustees following written notice to the Holders and the
other Trustees, in which name the Trustees may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.02. Office of the Delaware Trustee; Principal Place
of Business. The address of the Delaware Trustee in the State of Delaware is
Wilmington Trust Company, 1100 N.
12
<PAGE>
Market Street, Attention: Corporate Trust Administration, Wilmington, Delaware
19890, or such other address in the State of Delaware as the Delaware Trustee
may designate by written notice to the Securityholders and the Depositor. The
principal executive office of the Trust is in care of Guaranty Financial
Corporation, 1658 State Farm Boulevard, Charlottesville, Virginia 22911.
SECTION 2.03. Organizational Expenses. The Depositor, as
borrower on the Junior Subordinated Debt Securities, shall pay all expenses of
the Trust as they arise or shall, upon request of any Trustee, promptly
reimburse such Trustee for any such expenses paid by such Trustee. The Depositor
shall make no claim upon the Trust Property for the payment of such expenses.
SECTION 2.04. Issuance of the Capital Securities. The Capital
Securities to be issued will be limited to $6,000,000.00 aggregate Liquidation
Amount outstanding at any one time.
On ________ __, 1998, the Depositor, on behalf of the Trust,
and pursuant to the Original Declaration of Trust, and the Underwriter executed
and delivered the Underwriting Agreement. Contemporaneously with the execution
and delivery of this Declaration of Trust, an Administrative Trustee, on behalf
of the Trust, shall execute or cause to be executed in accordance with Section
5.02 and delivered to the Escrow Agent, a Definitive Capital Securities
Certificate, registered in the names of the purchasers thereof, in an aggregate
amount of Capital Securities having an aggregate Liquidation Amount of
$____________ against receipt of the aggregate purchase price of such Capital
Securities equal to 100% of the Liquidation Amount multiplied by the number of
Capital Securities being purchased, which amount the Administrative Trustee
shall promptly deliver to the Property Trustee.
SECTION 2.05. Issuance of the Common Securities; Subscription
and Purchase of Junior Subordinated Debt Securities. Contemporaneously with the
execution and delivery of this Declaration of Trust, an Administrative Trustee,
on behalf of the Trust, shall execute or cause to be executed in accordance with
Section 5.02(a) and delivered to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of _____ Common
Securities having an aggregate Liquidation Amount of $____________ against
payment by the Depositor of $____________ to the Trust. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to
and purchase from the Depositor Junior Subordinated Debt Securities, registered
in the name of the Property Trustee and held for the benefit of the Holders of
the Capital Securities having an aggregate principal amount equal to
$____________, and, in satisfaction of the purchase price for such Junior
Subordinated Debt Securities, the Trust shall deliver to the Depositor the sum
of $____________.
13
<PAGE>
SECTION 2.06. Declaration of Trust. The exclusive purposes and
functions of the Trust are to (a) issue and sell Trust Securities, (b) use the
proceeds from the sale of Trust Securities to acquire the Junior Subordinated
Debt Securities, (c) receive payments to be made with respect to the Junior
Subordinated Debt Securities, and (d) engage in only those other activities
necessary or incidental thereto such as registering the transfer of the Capital
Securities. The Depositor hereby appoints the Trustees as trustees of the Trust,
to have all the rights, powers and duties to the extent set forth herein, and
the Trustees hereby accept such appointment. The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION 2.07. Authorization to Enter into Certain
Transactions. (a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Declaration of Trust. Subject to the
limitations set forth in paragraph (b) of this Section and in accordance with
the following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Trustees under this Declaration of Trust, and to perform all acts in
furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the
Underwriting Agreement, the Letter of Representations and such
other agreements as may be necessary or desirable in
connection with the purposes and function of the Trust;
(C) assisting in the registration of the Capital
Securities under the Securities Act, and under state
securities or blue sky laws, and the qualification of
14
<PAGE>
this Declaration of Trust as a trust indenture under the Trust
Indenture Act;
(D) assisting in the listing, if any, of the Capital
Securities upon such securities exchange or exchanges as shall
be determined by the Depositor and the registration of the
Capital Securities under the Securities Exchange Act of 1934
(the "Exchange Act"), and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Junior Subordinated Debt Securities to the
Securityholders in accordance with this Declaration of Trust;
(F) the appointment of a Paying Agent, Transfer
Agent and Securities Registrar in accordance with this
Declaration of Trust;
(G) registering transfer of the Trust Securities in
accordance with this Declaration of Trust;
(H) to the extent provided in this Declaration of
Trust, the winding up of the affairs and liquidation of the
Trust and the preparation, execution and filing of the
certificate of cancellation with the Secretary of State of the
State of Delaware;
(I) unless otherwise determined by the Depositor,
the Property Trustee or the Administrative Trustees or as
otherwise required by the Delaware Business Trust Act or the
Trust Indenture Act, to execute on behalf of the Trust (either
acting alone or together with any or all of the Administrative
Trustees) any documents that the Administrative Trustees have
the power to execute pursuant to this Declaration of Trust;
and
(J) the taking of any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this
Declaration of Trust for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholders).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
15
<PAGE>
(B) the receipt of the Junior Subordinated Debt
Securities;
(C) the collection of interest, principal and any
other payments made in respect of the Junior Subordinated Debt
Securities in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Junior Subordinated Debt
Securities;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Junior
Subordinated Debt Securities to the Securityholders in
accordance with this Declaration of Trust;
(G) the distribution of the Trust Property in
accordance with the terms of this Declaration of Trust;
(H) to the extent provided in this Declaration of
Trust, the winding up of the affairs of and liquidation of the
Trust and the preparation, execution and filing of the
certificate of cancellation with the Secretary of State of the
State of Delaware;
(I) after an Event of Default (other than an Event
of Default pursuant to paragraph (b), (c), (d) or (e) of the
definition of such term if such Event of Default is by or with
respect to the Property Trustee) the taking of any action
incidental to the foregoing as the Property Trustee may from
time to time determine is necessary or advisable to give
effect to the terms of this Declaration of Trust and protect
and conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder); and
(J) except as otherwise provided in this Section
2.07(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or authority of the Administrative
Trustees set forth in Section 2.07(a)(i).
(b) So long as this Declaration of Trust remains in effect,
the Trust (or the Trustees acting on behalf of the Trust) shall not undertake
any business, activities or transactions except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Declaration of
Trust, (ii) sell, assign, transfer, exchange, mortgage, pledge,
16
<PAGE>
set-off or otherwise dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided herein, (iii)
intentionally take any action that would cause the Trust to fail or cease to
qualify as a "grantor trust" or as other than an association taxable as a
corporation for United States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt, (v) take or consent to
any action that would result in the placement of a Lien on any of the Trust
Property, (vi) invest any proceeds received by the Trust from holding the Junior
Subordinated Debt Securities, but shall distribute all such proceeds to Holders
pursuant to the terms of this Declaration of Trust and of the Trust Securities,
(vii) acquire any assets other than the Trust Property, (viii) possess any power
or otherwise act in such a way as to vary the Trust Property, (ix) possess any
power or otherwise act in such a way as to vary the terms of the Trust
Securities in any way whatsoever (except to the extent expressly authorized in
this Declaration of Trust or by the terms of the Trust Securities), (x) issue
any securities or other evidences of beneficial ownership of, or beneficial
interest in, the Trust other than the Trust Securities, or (xi) other than as
provided in this Declaration of Trust or by the terms of the Trust Securities,
so long as any Junior Subordinated Debt Securities are held by the Property
Trustee, (A) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Junior Subordinated
Debt Securities, (B) waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration that the
principal of all Junior Subordinated Debt Securities shall be due and payable,
or (D) consent to any amendment, modification, or termination of the Indenture
or the Junior Subordinated Debt Securities where such consent shall be required
unless the Trust shall have received an Opinion of Counsel of a independent law
firm to the effect that such amendment, modification or termination will not
cause more than an insubstantial risk that the Trust will be deemed an
Investment Company required to be registered under the 1940 Act, that the Trust
will not be classified as a grantor trust or will be classified as an
association taxable as a corporation for United States federal income tax
purposes or that the Junior Subordinated Debt Securities will not be classified
as indebtedness for such purposes. The Administrative Trustees shall defend all
claims and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders in
their capacity as Securityholders.
(c) In connection with the issuance and sale of the Trust
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Declaration of Trust are hereby ratified and confirmed in all respects):
17
<PAGE>
(i) the preparation by the Trust of a prospectus relating to
the Trust Securities and the preparation and filing by the Trust with
the Commission and the execution on behalf of the Trust of a
registration statement on the appropriate form in relation to the Trust
Securities, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Trust Securities and the determination of any and all such acts, other
than actions that must be taken by or on behalf of the Trust, and the
advice to the Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing of any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such states;
(iii) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Trust
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(iv) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Trust Securities and such other agreements as may be necessary or
desirable in connection with the consummation of the transactions
contemplated thereby, all in its capacity as Depositor and on behalf of
the Trust; and
(v) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, each
Administrative Trustee is authorized and directed to conduct the affairs of the
Trust and to operate the Trust so that the Trust will not (i) be deemed to be an
"investment company" required to be registered under the 1940 Act, or (ii) fail
to be classified as a grantor trust or as other than an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Depositor
for United States federal income tax purposes. In this connection, the Depositor
and each of the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this Declaration
of Trust, that each of the Depositor and each Administrative Trustee determines
in its discretion to be necessary or desirable for such purposes, as long as
such action does not adversely affect in any material respect the interests of
the Holders of the Trust Securities.
18
<PAGE>
SECTION 2.08. Assets of Trust. The assets of the Trust shall
consist solely of the Trust Property.
SECTION 2.09. Title to Trust Property. Legal title to all
Trust Property shall be vested at all times in the Property Trustee (in its
capacity as such) and shall be held and administered by the Property Trustee for
the benefit of the Trust and the Securityholders in accordance with this
Declaration of Trust.
ARTICLE III
Payment Account
SECTION 3.01. Payment Account. (a) On or prior to the Closing
Date, the Property Trustee shall establish the Payment Account. The Property
Trustee and any agent of the Property Trustee shall have exclusive control and
sole right of withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in accordance with
this Declaration of Trust. All moneys and other property deposited or held from
time to time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Securityholders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein or by applicable law.
(b) The Property Trustee shall deposit in the Payment
Account, promptly upon receipt, all payments of principal of or interest on, and
any other payments or proceeds with respect to, the Junior Subordinated Debt
Securities. Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.
ARTICLE IV
Distributions; Redemption; Conversion
SECTION 4.01. Distributions. (a) Distributions on the Trust
Securities shall be cumulative and will accumulate whether or not there are
funds of the Trust available for the payment of Distributions. Distributions
shall accrue from ________ __, 1998, and, except in the event (and to the
extent) that the Depositor exercises its right to defer the payment of interest
on the Junior Subordinated Debt Securities pursuant to the Indenture, shall be
payable quarterly in arrears on the 15th day of March, June, September and
December of each year, commencing on June 15, 1998. If any date on which a
Distribution is otherwise payable is not a Business Day, then the payment of
such Distribution shall be made on the next succeeding day that is a Business
Day (and without any interest or other payment in
19
<PAGE>
respect of any such delay), in each case with the same force and effect as if
made on such date (each date on which distributions are payable in accordance
with this Section 4.01(a), a "Distribution Date"). Accrued Distributions that
are not paid on the applicable Distribution Date will bear interest on the
amount thereof (to the extent permitted by law) at a fixed annual rate equal to
_____%, compounded quarterly from the relevant Distribution Date in accordance
with Section 2.02 of the Indenture.
(b) The Trust Securities represent undivided beneficial
ownership interests in the Trust Property, and, assuming payments of interest on
the Junior Subordinated Debt Securities are made when due (and before giving
effect to Additional Distributions, defined below, if applicable), Distributions
on each of the Trust Securities shall be payable at a fixed annual rate equal to
$______ (which is _____% of the Liquidation Amount of each of the Trust
Securities) in accordance with Section 2.02 of the Indenture. The amount of
Distributions payable for any period shall be computed on the basis of the
actual number of days elapsed in a year of twelve 30-day months; except that the
amount of interest payable for any partial period shall be computed on the basis
of the actual number of days elapsed in a 360-day year. The amount of
Distributions payable for any period shall include the Additional Distributions,
if any.
(c) So long as no Debenture Event of Default has occurred and
is continuing, the Depositor has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debt Securities at any time and
from time to time for a period not exceeding 20 consecutive quarterly periods
(an "Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debt Securities. As a consequence of
any such deferral, quarterly Distributions on the Trust Securities by the Trust
will also be deferred during any Extension Period (and the amount of
Distributions to which Holders are entitled will accumulate additional
Distributions thereon at a fixed annual rate equal to _____% thereof, compounded
quarterly from the relevant payment date for such Distributions during any such
Extension Period, to the extent permitted by applicable law, but not exceeding
the interest rate then accruing on the Junior Subordinated Debt Securities (each
such increase in Distribution, as described in this Section 4.01(c), an
"Additional Distribution"). No interest or other amounts shall be due and
payable during an Extension Period except at the end thereof.
(d) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on-hand and
available in the Payment Account for the payment of such Distributions.
20
<PAGE>
(e) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders of record as they appear on
the Securities Register for the Trust Securities at the close of business on the
Business Day next preceding each 1st day of March, June, September and December.
SECTION 4.02. Redemption. (a) On each Junior Subordinated Debt
Securities Redemption Date and on the Stated Maturity of the Junior Subordinated
Debt Securities, the Trust will be required to redeem a Like Amount of Trust
Securities at the applicable Redemption Price.
(b) Other than on the Stated Maturity, notice of redemption
shall be given by the Property Trustee by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date to
each Holder of Trust Securities to be redeemed, at such Holder's address
appearing in the Security Register. All notices of redemption shall identify the
Trust Securities to be redeemed (including CUSIP numbers) and shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price, 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; and
(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
accrue on and after such date.
The Trust in issuing the Trust Securities may use "CUSIP",
and/or "private placement" numbers (if then generally in use), and, if so, the
Property Trustee shall indicate the "CUSIP" or "private placement" numbers of
the Trust Securities in notices of redemption and related materials as a
convenience to
21
<PAGE>
Securityholders; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the Trust
Securities or as contained in any notice of redemption and related material. The
Depositor shall promptly notify the Property Trustee of any change in such
numbers.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous redemption of Junior Subordinated Debt Securities. Redemptions
of the Trust Securities shall be made and the applicable Redemption Price shall
be payable on each Redemption Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Trust Securities, then, by 12:00 noon, Richmond, Virginia time,
on the Redemption Date, subject to Section 4.02(c), the Property Trustee will,
so long as the Capital Securities are in book-entry-only form, irrevocably
deposit with the Clearing Agency for the Capital Securities funds sufficient to
pay the applicable Redemption Price and will give such Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof. With respect to Capital Securities held in certificated form,
the Property Trustee, subject to Section 4.02(c), will irrevocably deposit with
the Paying Agent funds sufficient to pay the applicable Redemption Price and
will give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their Capital
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Securities Register on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Securityholders
holding Trust Securities so called for redemption will cease, except the right
of such Securityholders to exercise their conversion rights pursuant to Section
4.08 or to receive the applicable Redemption Price and any Distribution payable
on or prior to the Redemption Date, but without interest. In the event that any
date on which any applicable Redemption Price is payable is not a Business Day,
then payment of the applicable Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case, with the same force and effect
as if made on such date. In the event that payment of the applicable Redemption
Price in respect of any Trust Securities called for redemption is improperly
withheld or refused and not
22
<PAGE>
paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities will continue to accrue, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust Securities to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the applicable Redemption Price.
(e) Payment of the applicable Redemption Price on, and any
distributions of Junior Subordinated Debt Securities to Holders of, the Trust
Securities shall be made to the Holders thereof as they appear on the Securities
Register on the relevant record date, and, with respect to Trust Securities held
in certificated form, upon surrender of such certificated Trust Securities to
the Paying Agent.
(f) Subject to Section 4.03(a), if less than all the
Outstanding Trust Securities are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of Trust Securities to be redeemed shall be
allocated on a pro rata basis (based on Liquidation Amounts) among the Trust
Securities. The particular Trust Securities to be redeemed shall be selected on
a pro rata basis (based upon Liquidation Amounts) not more than 60 days prior to
the Redemption Date by the Property Trustee from the Outstanding Trust
Securities not previously called for redemption, by such method as the Property
Trustee shall deem fair and appropriate. The Property Trustee shall promptly
notify the Securities Registrar in writing of the Trust Securities selected for
redemption and, in the case of any Trust Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Declaration of Trust, unless the context otherwise requires, all provisions
relating to the redemption of Trust Securities shall relate, in the case of any
Trust Securities redeemed or to be redeemed only in part, to the portion of the
Liquidation Amount of Trust Securities that has been or is to be redeemed.
SECTION 4.03. Subordination of Common Securities. (a) Payment
of Distributions (including Additional Distributions, if applicable) on, and the
Redemption Price of the Trust Securities, as applicable, shall be made subject
to Section 4.02(f), pro rata to the Holders of the Trust Securities based on the
Liquidation Amount of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Debenture Event of Default (or other
event that, with notice or the passage of time or both, would become such an
Event of Default) or an Event of Default shall have occurred and be continuing,
no payment of any Distribution (including Additional Distributions, if
applicable) on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions (including Additional Distributions, if
applicable)
23
<PAGE>
on all outstanding Capital Securities for all Distribution Dates occurring on or
prior thereto, or, in the case of payment of the applicable Redemption Price the
full amount of such Redemption Price on all outstanding Capital Securities,
shall have been made or provided for, and all funds immediately available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Distributions, if applicable) on, or the
Redemption Price of, Capital Securities then due and payable.
(b) In the case of the occurrence of any Event of Default
resulting from any Debenture Event of Default, the Holder of Common Securities
will be deemed to have waived any right to act with respect to any such Event of
Default under this Declaration of Trust until all such Events of Default with
respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until all such Events of Default under this Declaration of Trust
with respect to the Capital Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Capital Securities and not on behalf of the Holder of the Common Securities,
and only the Holders of the Capital Securities will have the right to direct the
Property Trustee to act on their behalf.
SECTION 4.04. Payment Procedures. In the event Definitive
Capital Securities Certificates are issued, payments of Distributions (including
Additional Distributions, if applicable) in respect of the Capital Securities
shall be made by check mailed to the address of the Person entitled thereto at
such address as shall appear on the Securities Register. If the Capital
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.
SECTION 4.05. Tax Returns and Reports. The Administrative
Trustees shall prepare (or cause to be prepared), at the Depositor's expense,
and file all United States federal, state and local tax and information returns
and reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be prepared
and filed) the appropriate Internal Revenue Service forms required to be filed
in respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder all
Internal Revenue Service forms required to be provided by the Trust. The
Administrative Trustees shall provide the Depositor and the Property Trustee
with a copy of all such returns and reports promptly after such filing or
furnishing. The Administrative Trustees shall comply with United States federal
withholding and
24
<PAGE>
backup withholding tax laws and information reporting requirements with respect
to any payments to Securityholders.
SECTION 4.06. Payment of Taxes; Duties of the Trust. Pursuant
to Section 10.06 of the Indenture, the Depositor, as borrower on the Junior
Subordinated Debt Securities, has agreed to, and it shall, promptly pay any
taxes, duties or governmental charges of whatever nature (other than United
States withholding taxes) imposed on the Trust by the United States or any other
taxing authority.
SECTION 4.07. Payments Under Indenture. Any amount payable
hereunder to any Holder (and any Owner with respect thereto) shall be reduced by
the amount of any corresponding payment such Holder (and Owner) has directly
received pursuant to Section 5.08 of the Indenture or Section 5.13 of this
Declaration of Trust.
SECTION 4.08. Conversion Rights. Holders of Trust Securities
shall have the right at any time prior to 5:00 p.m. (Richmond, Virginia time) on
the earlier of (i) the Business Day immediately preceding the date of repayment
of such Trust Securities, whether at maturity or upon redemption, and (ii) the
Conversion Termination Date, if any, to cause the Conversion Agent to exchange
Trust Securities, on behalf of the converting Holders, for Junior Subordinated
Debt Securities, which Junior Subordinated Debt Securities will be converted
into shares of Common Stock in the manner described herein on and subject to the
following terms and conditions:
(a) The Trust Securities will be exchangeable for Junior
Subordinated Debt Securities which will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of Common Stock
pursuant to the Holder's direction to the Conversion Agent to exchange such
Trust Securities for a portion of the Junior Subordinated Debt Securities
theretofore held by the Trust on the basis of one Trust Security per $25
principal amount of Junior Subordinated Debt Securities, and immediately convert
such amount of Junior Subordinated Debt Securities into fully paid and
nonassessable shares of Common Stock at an initial per share conversion price of
$_____, subject to certain adjustments set forth in the terms of the Junior
Subordinated Debt Securities (as so adjusted, the "Conversion Price").
(b) To exchange the Trust Securities for Junior Subordinated
Debt Securities and to convert the Junior Subordinated Debt Securities into
Common Stock, the Holder shall submit to the Conversion Agent at the office
designated therefor an irrevocable request to convert Trust Securities on behalf
of such Holder (the "Conversion Request"), together, if the Trust Securities are
in certificated form, with such certificates. The Conversion Request shall (i)
set forth the number of Trust Securities to be exchanged and the name or names,
if other than
25
<PAGE>
the Holder, in which the shares of Common Stock should be issued and (ii) direct
the Conversion Agent (A) to exchange such Trust Securities for a portion of the
Junior Subordinated Debt Securities held by the Trust (at the rate of exchange
specified in the preceding paragraph) and (B) to immediately convert such Junior
Subordinated Debt Securities, on behalf of such Holder, into Common Stock at the
Conversion Price. The Conversion Agent shall notify the Trust of the Holder's
election to exchange Trust Securities for a portion of the Junior Subordinated
Debt Securities held by the Trust, and the Trust shall, upon receipt of such
notice, deliver to the Conversion Agent the appropriate principal amount of
Junior Subordinated Debt Securities for exchange in accordance with this Section
4.08. The Conversion Agent shall thereupon notify the Depositor of the Holder's
election to convert such Junior Subordinated Debt Securities into shares of
Common Stock.
Holders of Trust Securities at 5:00 p.m. (Richmond, Virginia
time) on a record date for a Distribution Date will be entitled to receive the
Distribution payable on such Trust Securities on the corresponding Distribution
Date notwithstanding the conversion of such Trust Securities following such
record date but on or prior to such Distribution Date. Except as provided in the
immediately preceding sentence, neither the Trust nor the Depositor will make,
or be required to make, any payment, allowance or adjustment for accumulated and
unpaid Distributions, whether or not in arrears, on converted Trust Securities;
provided, however, that if notice of redemption of Trust Securities is mailed or
otherwise given to Holders of Trust Securities or the Trust issues a Press
Release announcing a Conversion Termination Date, then, if any Holder of Trust
Securities converts any Trust Securities into Common Stock on any date on or
after the date on which such notice of redemption is mailed or otherwise given
or the date of such Press Release, as the case may be, and if such Conversion
Date falls on any day from and including the first day of an Extension Period
and on or prior to the Distribution Date upon which such Extension Period ends,
such converting holder shall be entitled to receive either (i) if the Conversion
Date falls after a record date and on or prior to the next succeeding
Distribution Date, all accrued and unpaid Distributions on such Trust Securities
(including interest thereon, if any, to the extent permitted by applicable law)
to such Distribution Date or (ii) if the Conversion Date does not fall on a date
described in clause (i) above, all accrued and unpaid Distributions on such
Trust Securities (including interest thereon, if any, to the extent permitted by
applicable law) to the most recent Distribution Date prior to the Conversion
Date, which Distributions shall, in either such case, be paid to such converting
holder unless the Conversion Date of such Trust Securities is on or prior to the
Distribution Date upon which such Extension Period ends and after the record
date for such Distribution Date, in which case such Distributions shall be paid
to the Person who was the Holder of such Trust Securities (or one
26
<PAGE>
or more predecessor Trust Securities) at 5:00 p.m. (Richmond, Virginia time) on
such record date.
The Depositor shall make no payment or allowance for
distributions on the shares of Common Stock issued upon such conversion, except
to the extent that such shares of Common Stock are held of record on the record
date for any such distributions. Trust Securities shall be deemed to have been
converted immediately prior to 5:00 p.m. (Richmond, Virginia time) on the day on
which a Conversion Request relating to such Trust Securities is received by the
Trust in accordance with the foregoing provision (the "Conversion Date"). The
Person or Persons entitled to receive Common Stock issuable upon conversion of
the Junior Subordinated Debt Securities shall be treated for all purposes as the
record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the Conversion Date, the Depositor shall issue and
deliver at the office of the Conversion Agent a certificate or certificates for
the number of full shares of Common Stock issuable upon such conversion,
together with the cash payment, if any, in lieu of any fraction of any share, to
the Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the Conversion Request, and the Conversion Agent shall distribute
such certificate or certificates to such Person or Persons.
(c) Each Holder of a Trust Security, by his acceptance
thereof, appoints Wilmington Trust Company as conversion agent (the "Conversion
Agent") for the purpose of effecting the exchange of Trust Securities and
conversion of Junior Subordinated Debt Securities in accordance with this
Section 4.08. In effecting the exchange and conversion transactions described in
this Section 4.08, the Conversion Agent shall be acting as agent of the Holders
of Trust Securities directing it to effect such transactions. The Conversion
Agent is hereby authorized (i) to exchange Trust Securities from time to time
for Junior Subordinated Debt Securities held by the Trust in connection with the
conversion of such Trust Securities in accordance with this Section 4.08 and
(ii) to convert all or a portion of the Junior Subordinated Debt Securities into
Common Stock and thereupon to deliver such shares of Common Stock in accordance
with the provisions of this Section 4.08 and to deliver to the Trust a new
Junior Subordinated Debt Security for any resulting unconverted principal
amount.
(d) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, such fractional interest will be paid
in cash (based on the Closing Price of Common Stock on the Conversion Date) by
the Depositor to the Trust, which in turn will make such payment to the Holder
or Holders of Trust Securities so exchanged.
(e) The Depositor shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for issuance
upon the conversion of the Junior Subordinated Debt
27
<PAGE>
Securities, free from any preemptive or other similar rights, such number of
such shares of Common Stock as shall from time to time be issuable upon the
conversion of all of the Junior Subordinated Debt Securities then outstanding.
Notwithstanding the foregoing, the Depositor shall be entitled to deliver, upon
conversion of Junior Subordinated Debt Securities, shares of Common Stock
reacquired and held in the treasury of the Depositor (in lieu of the issuance of
authorized and unissued shares of Common Stock), so long as any such treasury
shares are free and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock issued upon conversion of the Junior
Subordinated Debt Securities shall be duly authorized, validly issued, fully
paid and nonassessable. The Trust shall deliver the shares of Common Stock
received upon conversion of the Junior Subordinated Debt Securities to the
converting Holder free and clear of all liens, charges, security interests and
encumbrances, except for United States withholding taxes. Each of the Depositor
and the Trust shall prepare and shall use its best efforts to obtain and keep in
force such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of the Common Stock issuable upon conversion of
Junior Subordinated Debt Securities (and all requirements to list such Common
Stock on any national securities exchange or quotation system that are at the
time applicable), to enable the Depositor lawfully to issue Common Stock to the
Trust upon conversion of the Junior Subordinated Debt Securities and to enable
the Trust lawfully to deliver Common Stock to each Holder upon such conversion.
(f) The Depositor shall pay any and all taxes that may be
payable in respect of the issuance or delivery of shares of Common Stock on
conversion of Junior Subordinated Debt Securities and the delivery of shares of
Common Stock by the Trust to the Holder upon conversion. The Depositor shall
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of shares of Common Stock in a
name other than that in which the Trust Securities so converted were registered,
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Trust the amount of any such tax or has
established to the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Section 4.08(f) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the Trust
Securities or as set forth in this Declaration of Trust or otherwise require the
Property Trustee or the Trust to pay any amounts on account of such withholding.
(h) (i) On and after __________ __, 2001, the Depositor shall
have the right, at its option, to cause the conversion rights of holders of the
Junior Subordinated Debt Securities to convert the Junior Subordinated Debt
Securities
28
<PAGE>
into Common Stock to terminate, in which case the rights of Holders of the Trust
Securities to convert the Trust Securities into Common Stock pursuant to this
Section 4.08 will likewise terminate, if (x) the Trust is current in the payment
of Distributions on the Trust Securities (except to the extent that the payment
of Distributions may have been deferred as the result of an Extension Period)
and (y) for at least 20 trading days within any period of 30 consecutive trading
days ending on or after _________ __, 2001, including the last trading day of
such period, the Closing Price of the Common Stock on each of such 20 trading
days shall have exceeded 115% of the Conversion Price in effect on such trading
day.
(ii) To exercise its option to cause the conversion
rights of Holders of the Trust Securities to terminate, the Depositor must cause
the Trust to issue a press release for publication on the Dow Jones News Service
or on a comparable news service (the "Press Release") prior to the opening of
business on the second trading day after any period in which the conditions in
Section 4.08(h)(i) have been satisfied (which date shall not be prior to
________ __, 2001), which Press Release shall state that the Depositor has
elected to exercise its right to terminate the conversion rights of holders of
Junior Subordinated Debt Securities and Holders of Trust Securities, specify the
Conversion Termination Date and provide the current Conversion Price of the
Trust Securities and the Closing Price of the Capital Securities and the Common
Stock, in each case as of the close of business on the trading day next
preceding the date of the Press Release. If the Depositor exercises the option
described in this Section 4.08(h), the "Conversion Termination Date" shall be
the Business Day selected by the Depositor which shall not be less than 30 nor
more than 60 calendar days after the date on which the Trust issues the Press
Release. If the Depositor does not exercise the option described in this Section
4.08(h), and the Trust Securities are otherwise called for redemption, the Trust
Securities will be convertible until 5:00 p.m. (Richmond, Virginia time) on the
Business Day immediately preceding the date of such redemption.
(iii) In addition to the Press Release, notice of the
termination of conversion rights of Holders of the Trust Securities (a "Notice
of Conversion Termination") must be given by the Trust by first-class mail to
each Holder of Trust Securities not more than four Business Days after the Trust
issues the Press Release. Each such mailed Notice of Conversion Termination
shall state: (1) the Conversion Termination Date; (2) the Conversion Price of
the Trust Securities and the Closing Price of the Capital Securities and the
Common Stock, in each case as of the close of business on the trading day next
preceding the date of the Notice of Conversion Termination; (3) that Trust
Securities will be convertible until 5:00 p.m. (Richmond, Virginia time) on the
Conversion Termination Date and the place or places at which a Conversion
Request may be given and Trust Securities (if not in book-entry form) may be
29
<PAGE>
surrendered for conversion into shares of Common Stock; and (4) such other
information or instructions as the Trust deems necessary or advisable to enable
a Holder to exercise its conversion rights hereunder. For purposes of the
calculation of the Conversion Termination Date and the dates on which notices
are given pursuant to this Section 4.08(h)(iii), a Notice of Conversion
Termination shall be deemed to have been given on the day that such notice is
first mailed by first-class mail, postage prepaid, to each Holder of Trust
Securities at the address of such Holder appearing in the books and records of
the Trust (whether or not any such Holder receives the Notice of Conversion
Termination). No defect in the Notice of Conversion Termination or in the
mailing thereof with respect to any Trust Security shall affect the validity of
such notice with respect to any other Trust Security. As of 5:00 p.m. (Richmond,
Virginia time) on the Conversion Termination Date, the Trust Securities shall be
deemed to be non-convertible securities.
(iv) The term "Closing Price" of any security on any
day means the last reported sale price of such security on such day, regular
way, or, if no sale takes place on such day, the average of the reported closing
bid and asked prices of such security on such day, regular way, in either case
as reported on the NYSE Composite Tape, or, if such security is not listed or
admitted to trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted to trading, or, if such security is
not listed or admitted to trading on a national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.,
or, if such security is not quoted or admitted to trading on such quotation
system, on the principal quotation system on which such security may be listed
or admitted to trading or quoted, or, if not listed or admitted to trading or
quoted on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security in the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or, if not so
available in such manner, as furnished by any NYSE member firm selected from
time to time by the Board of Directors of the Depositor for that purpose or, if
not so available in such manner, as otherwise determined in good faith by the
Board of Directors of the Depositor.
ARTICLE V
Trust Securities Certificates
SECTION 5.01. Initial Ownership. Upon the formation of the
Trust and until the issuance of the Trust Securities, and at any time during
which no Trust Securities are outstanding, the Depositor shall be the sole
beneficial owner of the Trust.
30
<PAGE>
SECTION 5.02. Trust Securities Certificates. (a) The Capital
Securities Certificates shall be issued only in minimum denominations of $25.00
Liquidation Amount and multiples of $25.00 in excess thereof, and the Common
Securities Certificates shall be issued in denominations of $25.00 Liquidation
Amount. The Trust Securities Certificates shall be executed on behalf of the
Trust by the manual or facsimile signature of at least one Administrative
Trustee. Trust Securities Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of this Declaration of Trust, notwithstanding that
such individuals or any of them shall have ceased to be so authorized prior to
the delivery of such Trust Securities Certificates or did not hold such offices
at the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 5.04, 5.05 and 5.06.
(b) Upon their original issuance, Capital Securities
Certificates representing Other Capital Securities shall be issued in definitive
form and may not be represented by the Global Security.
(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 5.03. Execution and Delivery of Trust Securities
Certificates. At or prior to the Closing Date, the Administrative Trustees shall
cause Trust Securities Certificates, in an aggregate Liquidation Amount as
provided in Sections 2.04 and 2.05, to be executed on behalf of the Trust and
delivered to the Property Trustee and upon such delivery the Property Trustee
shall countersign such Trust Securities Certificates and make available for
delivery such Trust Securities Certificates upon the written order of the
Depositor, signed by its chairman of the board, president, any executive vice
president or any vice president, treasurer or assistant treasurer or controller
without further corporate action by the Depositor, in authorized denominations.
SECTION 5.04. Global Capital Security. (a) Any Global Capital
Security issued under this Declaration of Trust shall be registered in the name
of Cede & Co. ("Cede") as nominee of the Clearing Agency and delivered to its
custodian therefor, and such Global Capital Security shall constitute a single
Capital Security for all purposes of this Declaration of Trust.
31
<PAGE>
(b) Notwithstanding any other provision in this Declaration
of Trust, the Global Capital Security may not be exchanged in whole or in part
for Capital Securities registered, and no transfer of the Global Capital
Security in whole or in part may be registered, in the name of any Person other
than the Clearing Agency for such Global Capital Security, Cede, or other
nominee thereof unless (i) such Clearing Agency advises the Property Trustee in
writing that such Clearing Agency is no longer willing or able to properly
discharge its responsibilities as Clearing Agency with respect to such Global
Capital Security, and the Depositor is unable to locate a qualified successor,
(ii) the Trust at its sole option advises DTC in writing that it elects to
terminate the book-entry system through the Clearing Agency, or (iii) there
shall have occurred and be continuing a Debenture Event of Default. In addition,
beneficial interests in a Global Capital Security may be exchanged by or on
behalf of DTC for certificated Capital Securities upon request by DTC, but only
upon at least 20 days prior written notice given to the Property Trustee in
accordance with the Applicable Procedures.
(c) If a Global Capital Security is to be exchanged for Other
Capital Securities or canceled in whole, it shall be surrendered by or on behalf
of the Clearing Agency or its nominee to the Securities Registrar for exchange
or cancellation as provided in this Article V. If a Global Capital Security is
to be exchanged for Other Capital Securities or canceled in part, or if an Other
Capital Security is to be exchanged in whole or in part for a beneficial
interest in the Global Capital Security, then either (i) such Global Capital
Security shall be so surrendered for exchange or cancellation as provided in
this Article V or (ii) the aggregate Liquidation Amount thereof shall be
reduced, subject to Section 5.02, or increased by an amount equal to the portion
thereof to be so exchanged or canceled, or equal to the aggregate 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 Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency or
its authorized representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of the Global Capital Security by the
Clearing Agency and Clearing Agency Participants, accompanied by registration
instructions executed by an Administrative Trustee on behalf of the Trust, the
Property Trustee shall, subject to this Article V, countersign and make
available for delivery any executed Capital Securities delivered to it issuable
in exchange for such Global Capital Security (or any portion thereof) in
accordance with the instructions of the Clearing Agency. The Property Trustee
shall not be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions.
(d) The Clearing Agency or its nominee, as the registered
owner of the Global Capital Security, shall be
32
<PAGE>
considered the Holder of the Capital Securities represented by the Global
Capital Security for all purposes under this Declaration of Trust and the
Capital Securities, and owners of beneficial interests in the Global Capital
Security shall hold such interests pursuant to the Applicable Procedures and,
except as otherwise provided herein, shall not be entitled to have any of the
individual Capital Securities represented by the Global Capital Security
registered in their names, shall not receive or be entitled to receive physical
delivery of any such Capital Securities in definitive form and shall not be
considered the Holders thereof under this Declaration of Trust. Accordingly, any
such owner's beneficial interest in the Global Capital Security shall be shown
only on, and the transfer of such interest shall be effected only through,
records maintained by the Clearing Agency or its nominee. The Securities
Registrar and the Trustees shall be entitled to deal with the Clearing Agency
for all purposes of this Declaration of Trust relating to the Global Capital
Securities (including the payment of the Liquidation Amount of and Distributions
on the Global Capital Securities and the giving of instructions or directions to
Owners of Global Capital Securities) as the sole Holder of Global Capital
Securities and shall have no obligations to the Owners thereof. Neither the
Property Trustee nor the Securities Registrar shall have any liability in
respect of any transfers effected by the Clearing Agency.
(e) The rights of Owners of beneficial interests in the
Global Capital Security shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between such owners
and the Clearing Agency. Neither the Clearing Agency nor its nominee will
consent or vote with respect to the Capital Securities. Under its usual
procedures, the Clearing Agency or its nominee would mail an Omnibus Proxy to
the Trust as soon as possible after the relevant record date. The Omnibus Proxy
assigns the consenting or voting rights of the Clearing Agency or its nominee to
those Clearing Agency Participants, identified in a listing attached to such
Omnibus Proxy, to whose accounts the Capital Securities are credited on such
record date.
SECTION 5.05. 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 Common Securities Certificates and transfers and exchanges of
Capital Securities Certificates and Common Securities Certificates in which the
registrar and transfer agent with respect to the Capital Securities (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Capital Securities Certificates
and Common Securities Certificates (subject to Section 5.11 in the case of
Common Securities Certificates) and registration of transfers and exchanges of
Capital Securities Certificates and
33
<PAGE>
Common Securities Certificates as herein provided. Such register is herein
sometimes referred to as the "Securities Register." The Property Trustee is
hereby appointed "Securities Registrar" for the purpose of registering Capital
Securities and transfers of Capital Securities as herein provided. The
provisions of Sections 8.01, 8.03 and 8.06 shall apply to the Property Trustee
also in its role as Securities Registrar.
Upon surrender for registration of transfer of any Capital
Security at the offices or agencies of the Property Trustee designated for that
purpose, the Administrative Trustees shall execute, and the Property Trustee
shall countersign and make available for delivery, in the name of the designated
transferee or transferees, one or more new Capital Securities of any authorized
denominations of like tenor and aggregate liquidation amount and bearing such
restrictive legends as may be required by this Declaration of Trust.
At the option of the Holder, Capital Securities may be
exchanged for other Capital Securities of any authorized denominations, of like
tenor and aggregate Liquidation Amount and bearing such restrictive legends as
may be required by this Declaration of Trust, upon surrender of the Capital
Securities to be exchanged at such office or agency. Whenever any securities are
so surrendered for exchange, an Administrative Trustee shall execute and the
Property Trustee shall countersign and make available for delivery 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 Trust, entitled to the
same benefits under this Declaration of Trust 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 or the Securities
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Capital Securities.
Neither the Trust nor the Property Trustee shall be required,
pursuant to the provisions of this Section, (i) to issue, register the transfer
of or exchange any Capital Security during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of Capital
34
<PAGE>
Securities pursuant to Article IV and ending at the close of business on the day
of such mailing of the notice of redemption, or (ii) to register the transfer of
or exchange any Capital Security so selected for redemption in whole or in part,
except, in the case of any such Capital Security to be redeemed in part, any
portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Subject to Section
5.04(c), but notwithstanding any other provision of this Declaration of Trust,
transfers and exchanges of Capital Securities and beneficial interests in a
Global Capital Security shall be made only in accordance with this Section
5.05(b) and Section 5.04(c).
(i) Non-Global Capital Security to Global Capital Security.
If the Holder of an Other Capital Security (other than the Global
Capital Security) wishes at any time to transfer all or any portion of
such Other Capital Security to a Person who wishes to take delivery
thereof in the form of a beneficial interest in the Global Capital
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 Other
Capital Security as provided in Section 5.05(a) and instructions
satisfactory to the Securities Registrar directing that a beneficial
interest in the Global Capital Security in a specified liquidation
amount not greater than the liquidation amount of such Other Capital
Security be credited to a specified Clearing Agency Participant's
account and (B) a Capital Securities Certificate duly executed by such
Holder or such Holder's attorney duly authorized in writing, then the
Securities Registrar shall cancel such Other Capital Security (and
issue a new Other Capital Security in respect of any untransferred
portion thereof) as provided in Section 5.01(a) and increase the
aggregate liquidation amount of the Global Capital Security by the
specified liquidation amount as provided in Section 5.04(c).
(ii) Non-Global Capital Security to Non-Global Capital
Security. A Capital Security that is not a Global Capital Security may
be transferred, in whole or in part, to a Person who takes delivery in
the form of another Capital Security that is not a Global Capital
Security as provided in Section 5.05(a).
(iii) Exchanges Between Global Capital Security and Non-Global
Capital Security. A beneficial interest in the Global Capital Security
may be exchanged for a Capital Security that is not a Global Capital
Security as provided in Section 5.04.
SECTION 5.06. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates. Provided Definitive Capital
35
<PAGE>
Securities Certificates are issued, if (a) any mutilated Trust Securities
Certificate shall be surrendered to the Securities Registrar, or if the
Securities Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Trust Securities Certificate and (b) there
shall be delivered to the Securities Registrar and the Administrative Trustees
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Trust Securities Certificate
shall have been acquired by a bona fide purchaser, the Administrative Trustees,
or any one of them, on behalf of the Trust shall execute and make available for
delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Trust Securities Certificate, a new Trust Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new Trust
Securities Certificate under this Section, the Administrative Trustees or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to this Section shall
constitute conclusive evidence of an undivided beneficial interest in the assets
of the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Securities Certificate shall be found at any time.
SECTION 5.07. Persons Deemed Securityholders. The Trustees or
the Securities Registrar shall treat the Person in whose name any Trust
Securities are issued as the owner of such Trust Securities for the purpose of
receiving Distributions and for all other purposes whatsoever, and neither the
Trustees nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 5.08. Access to List of Securityholders' Names and
Addresses. Each Owner of Trust Securities acknowledges that the Depositor, the
Property Trustee, the Delaware Trustee or the Administrative Trustees may from
time to time make reasonable use of information consisting of such Owner's name
and address, including the furnishing of a list of such names and addresses as
contemplated hereunder, and each Owner shall be deemed to have agreed not to
hold the Depositor, the Property Trustee or the Administrative Trustees
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 5.09. Maintenance of Office or Agency; Transfer Agent.
The Administrative Trustees shall maintain an office or offices or agency or
agencies where Definitive Capital Securities Certificates, if issued, may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustees in respect of the Trust Securities may be
served. The Administrative Trustees initially designate Wilmington Trust
Company, 1100 N. Market Street, Attention: Corporate Trust Administration,
Wilmington, Delaware
36
<PAGE>
19890, as its corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency. The Trust Company shall act as initial transfer agent for
the Trust Securities.
SECTION 5.10. Appointment of Paying Agent. The Paying Agent
shall make Distributions to Securityholders from the Payment Account and shall
report the amounts of such Distributions to the Property Trustee and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
distributions referred to above. The Administrative Trustees may revoke such
power and remove any Paying Agent if such Administrative Trustees determine in
their sole discretion that such Paying Agent shall have failed to perform its
obligations under this Declaration of Trust in any material respect. The Paying
Agent shall initially be the Trust Company, and any co-paying agent chosen by
the Trust Company and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Trust Company shall no
longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that, as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and, upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.01, 8.03 and 8.06 herein
shall apply to the Trust Company also in its role as Paying Agent, for so long
as the Trust Company shall act as Paying Agent and to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Declaration of
Trust to the Paying Agent shall include any co-paying agent, unless the context
requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor. The
Depositor shall acquire and retain beneficial and record ownership of the Common
Securities. To the fullest extent permitted by law, other than a transfer in
connection with a consolidation or merger of the Depositor into another
37
<PAGE>
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 8.01 of the Indenture, any attempted transfer of the Common Securities
shall be void. The Administrative Trustees shall cause each Common Securities
Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE".
SECTION 5.12. Notices to Clearing Agency. To the extent that a
notice or other communication to the Owners is required under this Declaration
of Trust, for so long as Capital Securities are represented by a Global
Securities Certificate, the Trustees shall give all such notices and
communications specified herein to be given to Owners to the Clearing Agency,
and shall have no obligations to give duplicates thereof to the Owners.
SECTION 5.13. Rights of Securityholders. (a) The legal title
to the Trust Property is vested exclusively in the Property Trustee (in its
capacity as such) in accordance with Section 2.09, and the Securityholders shall
not have any right or title therein other than the undivided beneficial
ownership interest in the assets of the Trust conferred by their Trust
Securities, and they shall have no right to call for any partition or division
of property, profits or rights of the Trust, except as described below. The
Trust Securities shall be personal property giving only the rights specifically
set forth therein and in this Declaration of Trust. The Trust Securities shall
have no preemptive or singular rights and, when issued and delivered to
Securityholders against payment of the purchase price therefor will be fully
paid and nonassessable. The Holders, in their capacities as such, shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
(b) For so long as any Capital Securities remain Outstanding,
if, upon a Debenture Event of Default, the Debenture Trustee fails, or the
Holders of not less than 25% in principal amount of the outstanding Junior
Subordinated Debt Securities fail, to declare the principal amount of all of the
Junior Subordinated Debt Securities to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Capital Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee with a copy to the Property Trustee; and upon any such
declaration such principal amount of and the accrued interest on all of the
Junior Subordinated Debt Securities shall become immediately due and payable;
provided that the payment of principal and interest on such Junior Subordinated
Debt Securities shall remain subordinated to the extent provided in the
Indenture.
At any time after such a declaration of acceleration with
respect to the Junior Subordinated Debt Securities has been
38
<PAGE>
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 principal amount of the outstanding Junior Subordinated Debt
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of
the Junior Subordinated Debt Securities,
(B) the principal of any Junior Subordinated Debt
Securities that have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Junior Subordinated Debt Securities, and
(C) all sums paid or advanced by the Debenture Trustee
under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee, its
agents and counsel; and
(ii) all Events of Default with respect to the Junior
Subordinated Debt Securities, other than the nonpayment of the
principal of the Junior Subordinated Debt Securities that has become
due solely by such acceleration, have been cured or waived as provided
in Section 5.13 of the Indenture.
If such holders of the Junior Subordinated Debt Securities
fail to annul any such declaration and waive such default, the Holders of
Capital Securities representing a majority in aggregate Liquidation Amount of
all the Outstanding Capital Securities shall also have the right to rescind and
annul such declaration and its consequences by written notice to the Depositor,
the Property Trustee and the Debenture Trustee, subject to the satisfaction of
the conditions set forth in Clause (i) and (ii) of this Section 5.13(b).
Should the holders of a majority in aggregate principal amount
of the outstanding Junior Subordinated Debt Securities fail to take such
actions, the Holders of a majority in aggregate Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default under the Indenture, except a default in the payment of
principal or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant
39
<PAGE>
or provision that, under the Indenture, cannot be modified or amended without
the consent of the holder of each outstanding Junior Subordinated Debt Security.
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 that is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90 day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice that has been
canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section
5.13(b).
(c) For so long as any Capital Securities remain Outstanding,
to the fullest extent permitted by law and subject to the terms of this
Declaration of Trust and the Indenture, upon a Debenture Event of Default
specified in Section 5.01(1) or 5.01(2) of the Indenture, any Holder of Capital
Securities shall have the right to institute a proceeding directly against the
Depositor, pursuant to Section 5.08 of the Indenture, for enforcement of payment
to such Holder of the principal amount of or interest (including any Additional
Interest) on Junior Subordinated Debt Securities having a principal amount equal
to the aggregate Liquidation Amount of the Capital Securities held by such
Holder (a "Direct Action"). Except as set forth in Sections 5.13(b) and 5.13(c)
hereof, the Holders of Capital Securities shall have no right to exercise
directly any right or remedy available to the Holders of, or in respect of, the
Junior Subordinated Debt Securities.
(d) A Securityholder may institute a legal proceeding
directly against the Guarantor under the Guarantee to enforce its rights under
the Guarantee without first instituting a legal proceeding against the Trust or
any person or entity.
40
<PAGE>
ARTICLE VI
Acts of Securityholders; Meetings; Voting
SECTION 6.01. Limitations on Capital Securityholder's Voting
Rights. (a) Except as provided in this Declaration of Trust and in the Indenture
and as otherwise required by law, no Holder of Capital Securities shall have any
right to vote or in any manner otherwise control the administration, operation
and management of the Trust or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Trust Securities
Certificates, be construed so as to constitute the Capital Securityholders from
time to time as partners or members of an association. Unless a Debenture Event
of Default shall have occurred and be continuing, any Trustee may be removed at
any time by the vote of the Common Securityholder. The right to vote to appoint,
remove or replace the Administrative Trustees is vested exclusively in the
Depositor as the Holder of the Common Securities.
(b) So long as any Junior Subordinated Debt Securities are
held by the Property Trustee, the Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Junior Subordinated Debt Securities, (ii) waive any past default
that is waivable under Section 5.13 of the Indenture, (iii) exercise any right
to rescind or annul a declaration that the principal of all the Junior
Subordinated Debt Securities shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of at least a majority in
aggregate Liquidation Amount of all Outstanding Capital Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debt Securities affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each Holder of Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of Capital
Securities, except by a subsequent vote of the Holders of Capital Securities.
The Property Trustee shall notify all Holders of the Capital Securities of any
notice of default received from the Debenture Trustee with respect to the Junior
Subordinated Debt Securities. In addition to obtaining the foregoing approvals
of the Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes as a result of such
41
<PAGE>
action and that such action would not cause the Trust to be classified as other
than a grantor trust.
(c) If any proposed amendment to this Declaration of Trust
provides for, or the Trustees otherwise propose to effect, (i) any action that
would adversely affect in any material respect the interests, powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to this Declaration of Trust or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the terms of this
Declaration of Trust, then the Holders of Outstanding Trust Securities as a
class will be entitled to vote on such amendment or proposal.
SECTION 6.02. Notice of Meeting. Notice of all meetings of the
Securityholders, stating the time, place and purpose of the meeting, shall be
given by the Property Trustee pursuant to Section 10.09 to each Securityholder
of record, at his registered address, at least 15 days and not more than 90 days
before the meeting. At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
SECTION 6.03. Meetings of Securityholders. No annual meeting
of Securityholders is required to be held. The Administrative Trustees, however,
shall call a meeting of Securityholders to vote on any matter upon the written
request of the Securityholders of record of 25% of the Securities (based upon
their Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Securityholders
to vote on any matters as to which Securityholders are entitled to vote.
Securityholders of record of 50% of the Outstanding Securities
(based upon their Liquidation Amount), present in person or represented by
proxy, shall constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by
the Securityholders of record present, in person or by proxy, holding more than
a majority of the Securities (based upon their Liquidation Amount) held by the
Securityholders of record present, either in person or by proxy, at such meeting
shall constitute the action of the Securityholders, unless this Declaration of
Trust requires a greater number of affirmative votes.
SECTION 6.04. Voting Rights. Securityholders shall be entitled
to one vote for each $25.00 of Liquidation Amount represented by their
Outstanding Trust Securities in respect of any matter as to which such
Securityholders are entitled to vote.
42
<PAGE>
SECTION 6.05. Proxies. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy; provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. Proxies may be solicited in the name of
the Property Trustee or one or more officers of the Property Trustee. Only
Securityholders of record shall be entitled to vote. When Trust Securities are
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such 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 Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 6.06. Securityholder Action by Written Consent. Any
action that may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding
Securities (based upon their Liquidation Amount) entitled to vote in respect of
such action (or such larger proportion thereof as shall be required by any
express provision of this Declaration of Trust) shall consent to the action in
writing.
SECTION 6.07. Record Date for Voting and Other Purposes. For
the purposes of determining the Securityholders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
Distribution in respect of which a record date is not otherwise provided for in
this Declaration of Trust, or for the purpose of any other action, the
Administrative Trustees may from time to time fix a date, not more than 90 days
prior to the date of any meeting of Securityholders or the payment of a
Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.08. Acts of Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Declaration of Trust to be given, made or taken by
Securityholders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders or
Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
43
<PAGE>
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Declaration of Trust and (subject to Section 8.01) conclusive in
favor of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be provided by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that any Trustee receiving the same deems sufficient.
The ownership of Trust Securities shall be proved by the
Securities Registrar.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustees or the Trust in reliance thereon,
whether or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Amount of
such Trust Security or by one or more duly appointed agents each of which may do
so pursuant to such appointment with regard to all or any part of such
Liquidation Amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding
44
<PAGE>
against the Guarantee Trustee (as defined in the Guarantee), the Trust, any
Trustee or any person or entity.
SECTION 6.09. Inspection of Records. Upon reasonable notice to
the Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
Representations and Warranties
SECTION 7.01. 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 Securityholders that:
(a) The Property Trustee is a corporation with trust powers,
duly organized, validly existing and in good standing under the laws of
the State of Delaware, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms
of this Declaration of Trust.
(b) the execution, delivery and performance by the Property
Trustee of this Declaration of Trust have been duly authorized by all
necessary corporate action on the part of the Property Trustee; and
this Declaration of Trust has been duly executed and delivered by the
Property Trustee, and constitutes a legal, valid and binding obligation
of the Property Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of this
Declaration of Trust by the Property Trustee does not conflict with or
constitute a breach of the certificate of incorporation or by-laws of
the Property Trustee.
(d) At the Closing Date, the Property Trustee has not
knowingly created any liens or encumbrances on such Trust Securities.
(e) No consent, approval or authorization of, or registration
with or notice to, any state or federal authority is required for the
execution, delivery or
45
<PAGE>
performance by the Property Trustee of this Declaration of Trust.
(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, this Declaration of Trust.
(g) The execution, delivery and performance by the Delaware
Trustee of this Declaration of Trust have been duly authorized by all
necessary corporate action on the part of the Delaware Trustee; and
this Declaration of Trust 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
Declaration of Trust by the Delaware Trustee do 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 Declaration of Trust.
(j) The Delaware Trustee is an entity that has its principal
place of business in the State of Delaware.
SECTION 7.02. Representations and Warranties of Depositor. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that the Trust Securities Certificates issued at the Closing Date on behalf of
the Trust have been duly authorized and will have been duly and validly
executed, issued and delivered by an Administrative Trustee pursuant to the
terms and provisions of, and in accordance with the requirements of, this
Declaration of Trust, and the Securityholders will be, as of each such date,
entitled to the benefits of this Declaration of Trust.
46
<PAGE>
ARTICLE VIII
The Trustees
SECTION 8.01. Certain Duties and Responsibilities. (a) The
duties and responsibilities of the Trustees shall be as provided by this
Declaration of Trust and, in the case of the Property Trustee, by the Trust
Indenture Act; provided, however, that the Property Trustee shall not be subject
to the provisions of the Trust Indenture Act until such time as this Declaration
of Trust becomes qualified under the Trust Indenture Act. Notwithstanding the
foregoing, no provisions of this Declaration of Trust shall require the Trustees
to expend or risk their own funds or otherwise incur any financial liability in
the performance of any of their duties hereunder, or in the exercise of any of
their rights or powers, if they shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it against such risk or
liability is not reasonably assured to it. Whether or not herein expressly so
provided, every provision of this Declaration of Trust relating to the conduct
or affecting the liability of, or affording protection to, the Trustees shall be
subject to the provisions of this Article. Nothing in this Declaration of Trust
shall be construed to release an Administrative Trustee from liability for his
own grossly negligent action, his own grossly negligent failure to act, or his
own willful misconduct. To the extent that, at law or in equity, an
Administrative Trustee has duties (including fiduciary duties) and liabilities
relating to the Trust or to the Securityholders, such Administrative Trustee
shall not be liable to the Trust or to any Securityholder for such Trustee's
good faith reliance on the provisions of this Declaration of Trust. The
provisions of this Declaration of Trust, to the extent that they restrict the
duties and liabilities of the Administrative Trustees otherwise existing at law
or in equity, are agreed by the Depositor and the Securityholders to replace
such other duties and liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.01(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Declaration of Trust or, in the case of
the Property Trustee, in the Trust Indenture Act, if applicable.
47
<PAGE>
(c) No provision of this Declaration of Trust shall be
construed to relieve the Property Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer
of the Property Trustee, unless it shall be proved that the
Property Trustee was negligent in ascertaining the pertinent
facts;
(ii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of
not less than a majority in Liquidation Amount of the Trust
Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration of Trust;
(iii) the Property Trustee's sole duty with respect to
the custody, safekeeping and physical preservation of the
Junior Subordinated Debt Securities and the Payment Account
shall be to deal with such Property in a similar manner as the
Property Trustee deals with similar property for its own
account, subject to the protections and limitations on
liability afforded to the Property Trustee under this
Declaration of Trust and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may
otherwise agree 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 3.01 and except to
the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or
the Depositor with their respective duties under this
Declaration of Trust nor shall the Property Trustee be liable
for the default or misconduct of the Administrative Trustees
or the Depositor.
SECTION 8.02. Events of Default Notices; Deferral of Interest
Payment Notices. Within 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 10.09, notice of such Event of Default to the
48
<PAGE>
Securityholders, the Administrative Trustees and the Depositor, unless such
Event of Default shall have been cured or waived. The Depositor and the
Administrative Trustees 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 this Declaration of Trust.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the Junior
Subordinated Debt Securities pursuant to the Indenture, the Administrative
Trustee shall transmit, in the manner and to the extent provided in Section
10.09, notice of such exercise to the Securityholders and the Property Trustee,
unless such exercise shall have been revoked.
SECTION 8.03. Certain Rights of Property Trustee. Subject to
the provisions of Section 8.01:
(a) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting in good faith upon
any resolution, opinion of Counsel, certificate, written representation
of a Holder or transferee, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration of
Trust the Property Trustee is required to decide between alternative
courses of action or (ii) in construing any of the provisions of this
Declaration of Trust the Property Trustee finds the same ambiguous or
inconsistent with any other provisions contained herein or (iii) the
Property Trustee is unsure of the application of any provision of this
Declaration of Trust, then, except as to any matter as to which the
Securityholders are entitled to vote under the terms of this
Declaration of Trust, the Property Trustee shall deliver a notice to
the Depositor requesting written instructions of the Depositor as to
the course of action to be taken, and the Property Trustee shall take
such action, or refrain from taking such action, as the Property
Trustee shall be instructed in writing to take, or to refrain from
taking, by the Depositor; provided, however, that if the Property
Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably
shorter period of time set forth in such notice (which, to the extent
practicable, shall not be less than two Business Days), it may, but
shall be under no duty to, take or refrain from taking such action not
inconsistent with this Declaration of Trust as it shall deem advisable
and in the best interests of the Securityholders, in which event the
49
<PAGE>
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Depositor or the
Administrative Trustee contemplated by this Declaration of Trust shall
be sufficiently evidenced by an Officers' Certificate;
(d) whenever in the administration of this Declaration of
Trust, the Property Trustee shall deem it desirable that a matter be
established before undertaking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which, upon
receipt of such request, shall be promptly delivered by the Depositor
or the Administrative Trustees (which Officers' Certificate will be
evidence only for purposes of determining entitlement to
indemnification of the Property Trustee from the Depositor but not with
respect to any liability to Securityholders);
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any re-recording, re-filing or re-registration
thereof;
(f) the Property Trustee may consult with counsel of its
selection (which counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees), and the advice of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon, and, in accordance with such
advice, such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Declaration of Trust from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
of Trust at the request or direction of any of the Securityholders
pursuant to this Declaration of Trust, unless such Securityholders
shall have offered to the Property Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion,
50
<PAGE>
report, notice, request, consent, order, approval, bond, debenture,
note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders,
but the Property Trustee may make such further inquiry or investigation
into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of its trusts or
powers hereunder or perform any of its duties hereunder either directly
or by or through its agents or attorneys, and the Property Trustee
shall not be responsible for any misconduct or negligence on the part
of, or for the supervision of, any such agent or attorney appointed by
it with due care hereunder;
(j) whenever in the administration of this Declaration of
Trust the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Property Trustee (i) may request
instructions from the Holders of the Trust Securities, which
instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to
direct the Property Trustee under the terms of the Trust Securities in
respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting
in accordance with such instructions;
(k) except as otherwise expressly provided by this
Declaration of Trust, the Property Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration of Trust;
(l) when the Property Trustee incurs expenses or renders
services in connection with a Bankruptcy Event, such expenses
(including the fees and expenses of its counsel) and the compensation
for such services are intended to constitute expenses of administration
under any bankruptcy law or law relating to creditors' rights
generally; and
(m) the Property Trustee shall not be charged with knowledge
of an Event of Default unless a Responsible Officer of the Property
Trustee obtains actual knowledge of such event or the Property Trustee
receives written notice of such event from Securityholders holding at
least 25% of the Outstanding Trust Securities (based upon Liquidation
Amount).
No provision of this Declaration of Trust shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or acts
or exercise any right, power, duty or
51
<PAGE>
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Property Trustee shall be construed to be a duty.
SECTION 8.04. Not Responsible for Recitals. The recitals
contained herein and in the Trust Securities Certificates shall be taken as the
statements of Trust, and the Trustees do not assume any responsibility for their
correctness. The Trustees shall not be accountable for the use or application by
the Depositor of the proceeds of the Junior Subordinated Debt Securities.
SECTION 8.05. May Hold Securities. Except as provided in the
definition of the term "Outstanding" in Article I, any Trustee or any other
agent of any Trustee or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, subject to Sections 8.08
and 8.13, may otherwise deal with the Trust with the same rights that it would
have if it were not a Trustee or such other agent.
SECTION 8.06. Compensation, Indemnity, Fees. Pursuant to
Section 10.06 of the Indenture, the Depositor, as borrower on the Junior
Subordinated Debt Securities, agrees:
(a) to pay to the Trustees from time to time such
compensation as shall from time to time be agreed to in writing by the
Depositor and the respective Trustees 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 the fullest extent permitted by applicable law and
except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any
provision of this Declaration of Trust (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable (i) to the negligence or willful misconduct of the
Property Trustee, and (ii) to the gross negligence or willful
misconduct of any of the other Trustees;
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless each Trustee and any employee or agent of
the Trust or its Affiliates (each 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
52
<PAGE>
Person by reason of the creation, operation or termination of the Trust
or any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration of Trust,
except that (i) the Property Trustee shall not be entitled to be
indemnified in respect of any loss, damage or claim incurred by the
Property Trustee by reason of negligence or willful misconduct with
respect to such acts or omissions, and (ii) no other Indemnified Person
shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of gross negligence
or willful misconduct with respect to such acts or omissions; and
(d) to the fullest extent permitted by applicable law, to
advance expenses (including legal fees) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding, from
time to time, prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Depositor of (i) a
written affirmation by or on behalf of the Indemnified Person of its or
his good faith belief that it or he has met the standard of conduct set
forth in this Section 8.06 and (ii) an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined
that the Indemnified Person is not entitled to be indemnified as
authorized in the preceding subsection.
The provisions of this Section 8.06 shall survive the
termination of this Declaration of Trust or the earlier resignation or removal
of any Trustee.
No Trustee may claim any lien or charge on any Trust Property
as a result of any amount due pursuant to this Section 8.06.
The Depositor and any Trustee (in the case of the Property
Trustee, subject to Section 8.08 hereof) may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and none of the
Trust, the Holders, the Depositor or any such Trustee shall have any rights by
virtue of this Declaration of Trust in and to such independent ventures or the
income or profits derived therefrom, and the pursuit of any such venture, even
if competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Depositor, nor any Trustee, shall be obligated to present
any particular investment or other opportunity to the Trust, even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and the Depositor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to
53
<PAGE>
recommend to others any such particular investment or other opportunity. Any
Trustee may engage or be interested in any financial or other transaction with
the Depositor or any Affiliate of the Depositor, or may act as depository for,
trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Depositor or its Affiliates.
SECTION 8.07. Corporate Property Trustee Required; Eligibility
of Trustees. (a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
a national or state chartered bank or trust company and eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50 million. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be 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 hereafter specified in this
Article; provided, however, that the Property Trustee need not qualify under the
Trust Indenture Act until such time as this Declaration of Trust is qualified
under the Trust Indenture Act.
(b) There shall at all times be one or more Administrative
Trustees hereunder. Each Administrative Trustee shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee. The
Delaware Trustee shall either be (i) a natural person who is at least 21 years
of age and a resident of the State of Delaware or (ii) a legal entity with its
principal place of business in the State of Delaware, and that otherwise meets
the requirements of applicable Delaware law, that shall act through one or more
persons authorized to bind such entity.
SECTION 8.08. Conflicting Interests. If the Property Trustee
has or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Declaration of Trust.
SECTION 8.09. Co-Trustees and Separate Trustee. Unless an
Event of Default shall have occurred and be continuing, at any time or times,
for the purpose of meeting the legal requirements of the Trust Indenture Act or
of any jurisdiction in which any part of the Trust Property may at the time be
located, the
54
<PAGE>
Depositor and the Administrative Trustees, by agreed action of the majority of
such Trustees, shall have power to appoint, and upon the written request of the
Administrative Trustees, the Depositor shall for such purpose join with the
Administrative Trustees in the execution, delivery, and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to the extent
required by law to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section. If the Depositor does not join in such appointment within 15 days
after the receipt by it of a request so to do, or in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment. Any co-trustee or separate trustee appointed
pursuant to this Section shall either be (i) a natural person who is at least 21
years of age and a resident of the United States or (ii) a legal entity with its
principal place of business in the United States that shall act through one or
more persons authorized to bind such entity.
Should any written instrument from the Depositor be required
by any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:
(a) The Trust Securities shall be executed and made available
for delivery, and all rights, powers, duties, and obligations hereunder in
respect of the custody of securities, cash and other personal property held by,
or required to be deposited or pledged with, the Trustees specified hereunder
shall be exercised solely by such Trustees and not by such co-trustee or
separate trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such co-trustee
or separate trustee jointly, as shall be provided in the instrument appointing
such co-trustee or separate trustee, except to the extent that under any law of
any jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
55
<PAGE>
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee appointed
under this Section, and, in case a Debenture Event of Default has occurred and
is continuing, the Property Trustee shall have power to accept the resignation
of, or remove, any such co-trustee or separate trustee without the concurrence
of the Depositor. Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to effectuate
such resignation or removal. A successor to any co-trustee or separate trustee
so resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property Trustee or
any other trustee hereunder.
(e) The Property Trustee shall not be required to supervise
any co-trustee or separate trustee, nor shall it be liable by reason of any act
of a co-trustee or separate trustee or any employees or agents of a co-trustee
or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee and separate
trustee.
SECTION 8.10. Resignation and Removal; Appointment of
Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, a Relevant
Trustee may resign at any time by giving written notice thereof to the
Securityholders. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after the giving of such notice of resignation or removal, the
Relevant Trustee may petition, at the expense of the Trust, any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of
56
<PAGE>
the Outstanding Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by Act of the Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Capital Securityholders of a majority in Liquidation Amount of the
Capital Securities then outstanding delivered to the retiring Relevant Trustee,
shall promptly appoint a successor Relevant Trustee or Trustees, and such
successor Trustee shall comply with the applicable requirements of Section 8.11.
If an Administrative Trustee shall resign, be removed or become incapable of
acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder, by Act of the
Common Securityholder delivered to such Administrative Trustee, shall promptly
appoint a successor Administrative Trustee or Administrative Trustees and such
successor Administrative Trustee or Trustees shall comply with the applicable
requirements of Section 8.11. If no successor Relevant Trustee shall have been
so appointed by the Common Securityholder or the Capital Securityholders and
accepted appointment in the manner required by Section 8.11, any Securityholder
who has been a Securityholder of Trust Securities for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.08 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this
Declaration of Trust, in the event any Administrative Trustee or a Delaware
Trustee who is a natural person dies, or becomes, in the opinion of the
Depositor, incompetent or incapacitated, or, in the case of an Administrative
Trustee, ceases to be an employee of the Depositor, the vacancy created by such
death, incompetence, incapacity or ceasing to be an employee
57
<PAGE>
of the Depositor may be filled by (a) the unanimous act of remaining
Administrative Trustees if there are at least two of them or (b) otherwise by
the Depositor (with the successor in each case being a Person who satisfies the
eligibility requirement for Administrative Trustees or Delaware Trustee, as the
case may be, set forth in Section 8.07).
Section 8.11. Acceptance of Appointment by Successor. In the
case of the appointment hereunder of a successor Trustee, such successor Trustee
so appointed shall execute, acknowledge and deliver to the Trust and to the
retiring Trustee any instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective, and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with the rights, powers, trusts and duties of the retiring Trustee, but,
on the request of the Depositor or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and, if the Property Trustee is the resigning Trustee, the
Property Trustee shall duly assign, transfer and deliver to the successor
Property Trustee all Trust Property and money held by such retiring Property
Trustee hereunder.
In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Trust Securities shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
(a) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Declaration of Trust as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees of the same trust and that each such Relevant
Trustee shall be Trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Relevant Trustee;
and, upon the execution and delivery of such amendment, the resignation or
removal of the retiring Relevant Trustee shall become effective to the extent
provided therein, and each such successor Relevant Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Relevant Trustee; but, on request of the Trust or any
successor Relevant Trustee, such retiring Relevant Trustee shall duly assign,
transfer and deliver to such successor Relevant Trustee all Trust Property, all
proceeds thereof and money held by such retiring Relevant Trustee hereunder with
respect to the Trust Securities and the Trust.
58
<PAGE>
Upon written request of any such successor Relevant Trustee,
the Trust shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Relevant Trustee all such rights,
powers and trusts referred to in the first or second preceding paragraph, as the
case may be.
No successor Relevant Trustee shall accept its appointment
unless, at the time of such acceptance, such successor Relevant Trustee shall be
qualified and eligible under this Article.
SECTION 8.12. Merger, Conversion, Consolidation or Succession
to Business. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Relevant Trustee
shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against
Depositor or Trust. In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other similar judicial proceeding relative to the Trust or any other obligor
upon the Trust Securities or the property of the Trust or of such other obligor
or their creditors, the Property Trustee (irrespective of whether any
Distributions on the Trust Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Property Trustee shall have made any demand on the Trust for the payment of any
past due Distributions) shall be entitled and empowered, to the fullest extent
permitted by law, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Property Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Property Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute same;
59
<PAGE>
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.
Nothing herein contained shall be deemed to authorize the
Property Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or compensation
affecting the Trust Securities or the rights of any Holder thereof or to
authorize the Property Trustee to vote in respect of the claim of any Holder in
any such proceeding.
SECTION 8.14. Reports by Property Trustee. Upon qualification
of this Declaration of Trust under the Trust Indenture Act,
(a) Not later than the last calendar day in February of each
year commencing with the last calendar day in February of 1999, the Property
Trustee shall transmit to all Securityholders in accordance with Section 10.09,
and to the Depositor, a brief report dated as of the prior December 31 with
respect to:
(i) its eligibility under Section 8.07 or, in lieu
thereof, if to the best of its knowledge it has continued to
be eligible under such 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 that it has not previously
reported and that in its opinion materially affects the Trust
Securities.
(b) In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Declaration of Trust as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to the Holders, be filed with the Commission and with the
Depositor.
SECTION 8.15. Reports to the Property Trustee. Upon
qualification of this Declaration of Trust under the Trust Indenture Act, the
Depositor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such documents,
60
<PAGE>
reports and information as required by Section 314 of the Trust Indenture Act
(if any) and the compliance certificate required by Section 314(a) of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 8.16. Evidence of Compliance with Conditions
Precedent. Upon qualification of this Declaration of Trust under the Trust
Indenture Act, each of the Depositor and the Administrative Trustees on behalf
of the Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Declaration of Trust
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the
form of an Officers' Certificate.
SECTION 8.17. Number of Trustees. (a) The number of Trustees
shall be four (4); provided that the Holder of all of the Common Securities by
written instrument may increase or decrease the number of Administrative
Trustees. The Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or
if the number of Trustees is increased pursuant to Section 8.17(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Declaration of Trust.
SECTION 8.18. Delegation of Power. (a) Any Administrative
Trustee may, by power of attorney consistent with applicable law, delegate to
any other natural person over the age of 21 his or her power for the purpose of
executing any documents contemplated in Section 2.07(a), including any
registration statement or amendment thereto filed with the Commission, or making
any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate
from time to time to such of their number or to the Depositor the doing of such
things and the execution of such
61
<PAGE>
instruments either in the name of the Trust or the names of the Administrative
Trustees or otherwise as the Administrative Trustees may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary to the
provisions of this Declaration of Trust, as set forth herein.
ARTICLE IX
Termination, Liquidation and Merger
SECTION 9.01. Termination Upon Expiration Date; Termination
Upon Special Event. Unless earlier terminated, the Trust shall automatically
terminate on ________ __, 2038 (the "Expiration Date"), following the
distribution of the Trust Property in accordance with Section 9.04.
SECTION 9.02. Early Termination. The first to occur of any of
the following events is an "Early Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or
the dissolution or liquidation of, the Depositor or the Holder of the
Common Securities;
(b) the written direction to the Property Trustee from the
Depositor, as borrower with respect to the Junior Subordinated Debt
Securities, at any time (which direction is optional and wholly within
the discretion of the Depositor, subject to receipt of prior approval
of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve (including upon the
occurrence and continuation of a Tax Event or a Capital Treatment Event
in respect of the Trust)) to terminate the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, distribute a Like Amount of the Junior Subordinated
Debt Securities to Securityholders;
(c) the redemption or conversion of all of the Trust
Securities in connection with the redemption or conversion of all of
the Junior Subordinated Debt Securities (including upon the occurrence
and continuation of a Tax Event or a Capital Treatment Event pursuant
to Section 11.07(b) of the Indenture); and
(d) the entry of an order for dissolution of the Trust by a
court of competent jurisdiction.
SECTION 9.03. Termination. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the payment of
any expenses owed by the Trust, (b) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or
upon
62
<PAGE>
the redemption of all of the Trust Securities pursuant to Section 4.02, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities, and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
SECTION 9.04. Liquidation. (a) If an Early Termination Event
specified in clause (a), (b) or (d) of Section 9.02 occurs or upon the
Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously
as the Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to each
Securityholder a Like Amount of Junior Subordinated Debt Securities, subject to
Section 9.04(d). Notice of liquidation shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not later than 30 nor more than 90
days prior to the Liquidation Date to each Holder at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date (which, in the case of any
liquidation following the occurrence of a Special Event, shall not be
more than 90 days following such occurrence);
(ii) state that, from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debt
Securities; and
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for Junior
Subordinated Debt Securities, or, if Section 9.04(d) applies, receive a
Liquidation Distribution, as the Administrative Trustees or the
Property Trustee shall deem appropriate.
(b) Except where Section 9.02(c) or 9.04(d) applies, in order
to effect the liquidation of the Trust and distribution of the Junior
Subordinated Debt Securities to Securityholders, the Property Trustee shall
establish a record date for such distribution (which shall be not more than 45
days prior to the Liquidation Date) and, either itself acting as exchange agent
or through the appointment of a separate exchange agent, shall establish such
procedures as it shall deem appropriate to effect the distribution of Junior
Subordinated Debt Securities in exchange for the outstanding Trust Securities
Certificates.
(c) Except where Section 9.02(c) or 9.04(d) applies, after
the Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Junior Subordinated
Debt Securities will be issued to Holders, upon surrender of such certificates
to
63
<PAGE>
the Administrative Trustees or their agent for exchange, (iii) any Trust
Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debt Securities accruing interest
at the rate provided for in the Junior Subordinated Debt Securities from the
last Distribution Date on which a Distribution was made on such Trust Securities
Certificates until such certificates are so surrendered (or until such
certificates are so surrendered, no payments of interest or principal will be
made to the Holders of Trust Securities Certificates with respect to such Junior
Subordinated Debt Securities) and (iv) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
Junior Subordinated Debt Securities upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions
of this Section 9.04, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Junior
Subordinated Debt Securities in the manner provided herein is determined by the
Property Trustee not to be practical, the Trust Property shall be liquidated,
and the Trust shall be dissolved, wound-up or terminated, by the Property
Trustee in such manner as the Property Trustee determines. In such event, on the
date of the dissolution, winding-up or other termination of the Trust,
Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). Holders of the Common Securities will be entitled to
receive Liquidation Distributions upon any such dissolution, winding-up or
termination pro rata (determined as aforesaid) with Holders of Capital
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities, and no payments shall be made with respect to the Common Securities
until Holders of Capital Securities have been paid in full. Any such
determination and liquidation by the Property Trustee shall be conclusive upon
the Securityholders and the Property Trustee shall have no liability in
connection therewith.
Section 9.05. Mergers, Consolidations, Amalgamations or
Replacements of the Trust. The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety
64
<PAGE>
to any corporation or other Person, except pursuant to this Section 9.05. At the
request of the Depositor, with the consent of the Administrative Trustees and
without the consent of the Holders of the Capital Securities, the Property
Trustee or the Delaware Trustee, the Trust may merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State; provided, however, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
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 rank the same as the
Capital Securities rank in priority with respect to Distributions and payments
upon liquidation, redemption and otherwise, (ii) the Depositor expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Junior Subordinated Debt
Securities, (iii) the Successor Securities (if Capital Securities) are listed or
traded, or any Successor Securities will be listed or traded upon notification
of issuance, on any national securities exchange or other organization on which
the Capital Securities are then listed or traded, if any, (iv) 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, (v)
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, (vi) such successor entity has a purpose identical and limited
to that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Capital
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be required
to register as an investment company under the 1940 Act and (viii) the Depositor
or any permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
Holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets 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,
65
<PAGE>
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as an association taxable as a
corporation or as other than a grantor trust for United States federal income
tax purposes.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Limitation of Rights of Securityholders. The
death, incapacity, liquidation, dissolution, termination or bankruptcy of any
Person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Declaration of Trust, or entitle the legal
representatives or heirs of such person, or any Securityholder for such person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding-up of the arrangements contemplated hereby, or otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
SECTION 10.02. Liability of the Depositor. The Depositor, as
borrower with respect to the Junior Subordinated Debt Securities, shall be
liable for all the debts and obligations of the Trust (other than with respect
to payments of principal, interest, or premium, if any, on the Trust Securities)
to the extent not satisfied out of the Trust's assets.
SECTION 10.03. Amendment. (a) This Declaration of Trust may be
amended from time to time by the Property Trustee, the Administrative Trustees
and the Depositor, without the consent of any Securityholders (i) to cure any
ambiguity, correct or supplement any provision herein that may be inconsistent
with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Declaration of Trust that shall not be
inconsistent with the other provisions of this Declaration of Trust; or (ii) to
modify, eliminate or add to any provisions of this Declaration of Trust to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust or as other than an
association taxable as a corporation at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Declaration of Trust
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.02(c), any provision of
this Declaration of Trust may be amended by the Trustees and the Depositor with
(i) the consent of Securityholders representing not less than a majority (based
upon
66
<PAGE>
Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt
by the Trustees of an Opinion of Counsel to the effect that such amendment or
the exercise of any power granted to the Trustees in accordance with such
amendment will not affect the Trust's status as a grantor trust or as other than
an association taxable as a corporation for United States federal income tax
purposes or the Trust's exemption from the status of an investment company under
the 1940 Act.
(c) In addition to and notwithstanding any other provision in
this Declaration of Trust, without the consent of each affected Securityholder
(such consent being obtained in accordance with Section 6.03 or 6.08), this
Declaration of Trust may not be amended to (i) change the amount or timing of
any Distribution on the Trust Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a Securityholder
to institute suit for the enforcement of any such payment on or after such date.
Notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.03 or
6.08), this paragraph (c) of this Section 10.02 may not be amended.
(d) Notwithstanding any other provisions of this Declaration
of Trust, no Trustee shall enter into or consent to any amendment to this
Declaration of Trust that would cause the Trust to fail or cease to qualify for
the exemption from status of an investment company under the 1940 Act or fail or
cease to be classified as a grantor trust or as other than an association
taxable as a corporation for United States federal income tax purposes.
(e) Notwithstanding anything in this Declaration of Trust to
the contrary, without the consent of the Depositor this Declaration of Trust may
not be amended in a manner that imposes any additional obligation on the
Depositor.
(f) Notwithstanding any other provision of this Declaration
of Trust, no amendment to this Declaration of Trust may be made if, as a result
of such amendment, it would cause the Trust to fail to be classified as a
grantor trust or as other than an association taxable as a corporation for
United States federal income tax purposes.
(g) In the event that any amendment to this Declaration of
Trust is made, the Administrative Trustees shall promptly provide to the
Depositor a copy of such amendment.
(h) Neither the Property Trustee nor the Delaware Trustee
shall be required to enter into any amendment to this Declaration of Trust that
affects its own rights, duties or immunities under this Declaration of Trust or
would otherwise expose the Property Trustee to any liability or be contrary to
67
<PAGE>
applicable law. The Property Trustee shall be entitled to receive an Officers'
Certificate stating that any amendment to this Declaration of Trust is in
compliance with this Declaration of Trust.
SECTION 10.04. Separability. In case any provision in this
Declaration of Trust or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.05. Governing Law. This Declaration of Trust and
the rights and obligations of each of the Securityholders, the Trust and the
Trustees with respect to this Declaration of Trust and the Trust Securities
shall be construed in accordance with and governed by the laws of the State of
Delaware without regard to its conflict of laws principles. The provisions of
Sections 3540 and 3561 of Title 12 of the Delaware Code shall not apply to this
Trust.
SECTION 10.06. Payments Due on Non-Business Day. If the date
fixed for any payment on any Trust Security shall be a day that is not a
Business Day, then such payment need not be made on such date but may be made on
the next succeeding day that is a Business Day (except as otherwise provided in
Section 4.02(d)), with the same force and effect as though made on the date
fixed for such payment, and no interest shall accrue thereon for the period
after such date.
SECTION 10.07. Successors. This Declaration of Trust shall be
binding upon and shall inure to the benefit of any successor to the Depositor,
the Trust or the Relevant Trustee, including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving the
Depositor that is permitted under Article VI of the Indenture and pursuant to
which the assignee agrees in writing to perform the Depositor's obligations
hereunder, the Depositor shall not assign its obligations hereunder.
SECTION 10.08. Headings. The Article and Section headings are
for convenience only and shall not affect the construction of this Declaration
of Trust.
SECTION 10.09. Reports, Notices and Demands. Any report,
notice, demand or other communication that, by any provision of this Declaration
of Trust, is required or permitted to be given or served to or upon any
Securityholder or the Depositor may be given or served in writing by deposit
thereof, first class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a Capital
Securityholder, to such Capital Securityholder as such Securityholder's name and
address may appear on the Securities Register, and (b) in the case of the Common
Securityholder or the Depositor, to Guaranty Financial
68
<PAGE>
Corporation, 1658 State Farm Boulevard, Charlottesville, Virginia 22911,
facsimile no.: (804) 970-1422. Any notice to Capital Securityholders may also be
given to such owners as have, within two years preceding the giving of such
notice, filed their names and addresses with the Property Trustee for that
purpose. Such notice, demand or other communication to or upon a Securityholder
shall be deemed to have been sufficiently given or made, for all purposes, upon
hand delivery, mailing or transmission.
Any notice, demand or other communication that by any
provision of this Declaration of Trust is required or permitted to be given or
served to or upon the Trust, the Property Trustee, the Delaware Trustee or the
Administrative Trustees shall be given in writing addressed (until another
address is published by the Trust) as follows: (a) with respect to the Property
Trustee to Wilmington Trust Company, 1100 N. Market Street, Attention: Corporate
Trust Administration, Wilmington, Delaware 19890, facsimile no.: (302) 651-8882;
(b) with respect to the Delaware Trustee to Wilmington Trust Company, 1100 N.
Market Street, Attention: Corporate Trust Administration, Wilmington, Delaware
19890, facsimile no.: (302) 651-8882; and (c) with respect to the Administrative
Trustees, to them at the address above for notices to the Depositor, marked
"Attention: Administrative Trustees of Guaranty Capital Trust I". Such notice,
demand or other communication to or upon the Trust or the Property Trustee shall
be deemed to have been sufficiently given or made only upon actual receipt of
the writing by the Trust or the Property Trustee.
SECTION 10.10. Agreement Not to Petition. Each of the Trustees
and the Depositor agree for the benefit of the Securityholders that, until at
least one year and one day after the Trust has been terminated in accordance
with Article IX, they shall not file, or join in the filing of, a petition
against the Trust under any bankruptcy, insolvency, reorganization or other
similar law (including, without limitation, the United States Bankruptcy Code)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Laws. In the event the
Depositor takes action in violation of this Section 10.10, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.10 shall survive the
termination of this Declaration of Trust.
SECTION 10.11. Trust Indenture Act; Conflict with Trust
Indenture Act. This Declaration of Trust will be qualified under
69
<PAGE>
the Trust Indenture Act. By its terms, this Declaration of Trust incorporates
certain provisions of the Trust Indenture Act.
(a) This Declaration of Trust is subject to the provisions of
the Trust Indenture Act that are required to be part of this Declaration of
Trust and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof that is required to be included in this
Declaration of Trust by any of the provisions of the Trust Indenture Act, such
required provision shall control. If any provision of this Declaration of Trust
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Declaration of Trust as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this
Declaration of Trust shall not affect the nature of the Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 10.12. Acceptance of Terms of Declaration of Trust,
Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY
INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER,
WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL OF THE TERMS AND PROVISIONS OF
THIS DECLARATION OF TRUST AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND
OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE
AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS DECLARATION OF TRUST SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
SECTION 10.13. Execution in 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.
70
<PAGE>
WITNESS the following signatures:
GUARANTY FINANCIAL CORPORATION,
as Depositor
By:
Name:_________________________
Title:________________________
WILMINGTON TRUST COMPANY
(as Delaware Trustee and not in its
individual capacity)
By:
Name:_________________________
Title:________________________
_____________________________
Thomas P. Baker, as
Administrative Trustee
_____________________________
Vincent B. McNelley, as
Administrative Trustee
71
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
GUARANTY CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Guaranty Capital Trust I (the
"Trust"), dated as of ____________, is being duly executed and filed by
Wilmington Trust Company, a Delaware corporation, as trustee, Thomas P. Baker,
an individual, as trustee, and Vincent B. McNelley, an individual, as trustee,
to form a business trust under the Delaware Business Trust Act (12 Del. C.
Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is
Guaranty Capital Trust I.
2. Delaware Trustee. The name and business address of the
trustee of the Trust with a principal place of business in the State of Delaware
are as follows: Wilmington Trust Company, 1100 N. Market Street, Attention:
Corporate Trust Administration, Wilmington, Delaware 19890.
3. Effective Date. This Certificate of Trust shall be
effective upon filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the trustees of the
Trust, have executed this Certificate of Trust as of the date first written
above.
WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as trustee
By:
Name: ________________________
Title: _______________________
______________________________
Thomas P. Baker,
as Trustee
______________________________
Vincent B. McNelley,
as Trustee
<PAGE>
EXHIBIT B
IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE A GLOBAL
SECURITIES CERTIFICATE, INSERT--[This Convertible Preferred Securities
Certificate is a Global Capital Securities Certificate within the meaning of the
Declaration of Trust hereafter referred to and is registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the Depositary. This
Convertible Preferred Securities Certificate is exchangeable for Convertible
Preferred Securities Certificates registered in the name of a person other than
the Depositary or its nominee only in the limited circumstances described in the
Declaration of Trust, and no transfer of this Convertible Preferred Securities
Certificate (other than a transfer of this Convertible Preferred Securities
Certificate as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in the limited circumstances described in
the Declaration of Trust.
Unless this Convertible Preferred Securities Certificate is
presented by an authorized representative of The Depository Trust Company (55
Water Street, New York) to Guaranty Capital Trust I or its agent for
registration of transfer, exchange or payment, and any Convertible Preferred
Securities Certificate issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"),
NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THIS CONVERTIBLE PREFERRED SECURITIES
CERTIFICATE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE
FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS CONVERTIBLE
PREFERRED SECURITIES CERTIFICATE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN
OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR
WITH "PLAN ASSETS" OF ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH
PURCHASE OR HOLDING.
<PAGE>
Liquidation Amount of
Certificate Number Convertible Preferred Securities
$_______________________
CUSIP NO. [ ]
Certificate Evidencing Guaranty Capital Trust I
$______ Convertible Preferred Securities
(Liquidation Amount $25.00 per Convertible Preferred Security)
Guaranty Capital Trust I, a statutory business trust formed
under the laws of the state of Delaware (the "Trust"), hereby certifies that
___________________ (the "Holder") is the registered owner of ____________
(______) Convertible Preferred Securities of the Trust in an aggregate
liquidation amount of $______________, representing an undivided beneficial
interest in the assets of the Trust and designated Guaranty Capital Trust I
Convertible Preferred Trust Securities (Liquidation Amount $25.00 per
Convertible Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 5.05 of the Declaration
of Trust (as defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Declaration of Trust of the Trust, dated as of ________
__, 1998, as the same may be amended from time to time (the "Declaration of
Trust"), between Guaranty Financial Corporation, as Depositor, Wilmington Trust
Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee, and
the Administrative Trustees named therein, including the designation of the
terms of the Preferred Securities as set forth therein. The Holder is entitled
to the benefits of the Guarantee Agreement entered into by Guaranty Financial
Corporation, a Virginia corporation, and Wilmington Trust Company, as Guarantee
Trustee, dated as of ________ __, 1998 (the "Guarantee"), to the extent provided
therein. The Trust will furnish a copy of the Declaration of Trust and the
Guarantee to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Terms used but not defined herein have the meanings set forth
in the Declaration of Trust. The Declaration of Trust and this Preferred
Security shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to conflicts of laws principles thereof.
The Preferred Securities shall be convertible into shares of
Common Stock, through (a) the exchange of Preferred Securities for an
appropriate principal amount of Junior Subordinated Debt
2
<PAGE>
Securities and (b) the immediate conversion of such Junior Subordinated Debt
Securities into shares of Common Stock, in the manner and according to the terms
set forth in the Declaration of Trust and in the Indenture. The conversion
rights of the Holders of Preferred Securities are subject to termination at the
option of Guaranty Financial Corporation on and after ________ __, 2001, subject
to and upon satisfaction of certain conditions set forth in the Declaration of
Trust and in the Indenture.
Upon receipt of this certificate, the Holder is bound by the
Declaration of Trust and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this Certificate this ____ day of _____________.
GUARANTY CAPITAL TRUST I
by ___________________________
Name:_________________________
Title: Administrative Trustee
COUNTERSIGNED AND REGISTERED:
WILMINGTON TRUST COMPANY, as
Property Trustee
by ___________________________
Authorized Signatory
Dated:
3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred 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 Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:___________________
Signature __________________________________
(Sign exactly as your name appears on the
other side of this Preferred 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 SEC Rule 17Ad-15.
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Liquidation Amount of
Certificate Number Common Securities
$_________________
Certificate Evidencing Convertible Common Securities
of
Guaranty Capital Trust I
Common Securities
(Liquidation Amount $25.00 per Common Security)
Guaranty Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Guaranty Financial Corporation (the "Holder") is the registered owner of
____________________________ (______) common securities of the Trust
representing beneficial interests of the Trust and designated the Convertible
Common Securities (Liquidation Amount $25.00 per Common Security) (the "Common
Securities"). Except as provided in Section 5.11 of the Declaration of Trust (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Declaration of Trust of the Trust,
dated as of ________ __, 1998, as the same may be amended from time to time (the
"Declaration of Trust"), between Guaranty Financial Corporation, as Depositor,
Wilmington Trust Company, as Property Trustee, Wilmington Trust Company as
Delaware Trustee, and the Administrative Trustees named therein, including the
designation of the terms of the Common Securities as set forth therein. The
Trust will furnish a copy of the Declaration of Trust to the Holder without
charge upon written request to the Trust at its principal place of business or
registered office.
Terms used but not defined herein have the meanings set forth
in the Declaration of Trust. The Declaration of Trust and this Common Security
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to conflicts of laws principles thereof.
The Common Securities shall be convertible into shares of
Common Stock, through (a) the exchange of Common Securities for an appropriate
principal amount of Junior Subordinated Debt Securities and (b) the immediate
conversion of such Junior Subordinated Debt Securities into shares of Common
Stock, in the
<PAGE>
manner and according to the terms set forth in the Declaration of Trust and in
the Indenture. The conversion rights of the Holders of Common Securities are
subject to termination at the option of Guaranty Financial Corporation on and
after ________ __, 2001, subject to and upon satisfaction of certain conditions
set forth in the Declaration of Trust and in the Indenture.
Upon receipt of this certificate, the Holder is bound by the
Declaration of Trust and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this certificate this _____ day of _________________.
GUARANTY CAPITAL TRUST I
By ___________________________
Name:_________________________
Title: Administrative Trustee
COUNTERSIGNED AND REGISTERED:
WILMINGTON TRUST COMPANY, as
Property Trustee
By ___________________________
Authorized Signatory
Dated:
Exhibit 4.4
EXECUTION COPY
================================================================================
GUARANTY FINANCIAL CORPORATION
to
WILMINGTON TRUST COMPANY
Trustee
-----------------------------
JUNIOR SUBORDINATED INDENTURE
Dated as of ________ __, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I -- Definitions and Other Provisions of General Application..............................................1
SECTION 1.01. Definitions......................................................................................1
SECTION 1.02. Compliance Certificate and Opinions.............................................................13
SECTION 1.03. Forms of Documents Delivered to Trustee.........................................................13
SECTION 1.04. Acts of Holders.................................................................................14
SECTION 1.05. Notices to Trustee and Company..................................................................15
SECTION 1.06. Notice to Holders: Waiver.......................................................................16
SECTION 1.07. Conflict with Trust Indenture Act...............................................................16
SECTION 1.08. Effect of Headings and Table of Contents........................................................16
SECTION 1.09. Successors and Assigns..........................................................................16
SECTION 1.10. Separability Clause.............................................................................17
SECTION 1.11. Benefits of Indenture...........................................................................17
SECTION 1.12. Governing Law...................................................................................17
SECTION 1.13. Non-Business Day................................................................................17
ARTICLE II -- Security Forms.....................................................................................17
SECTION 2.01. Forms Generally.................................................................................17
SECTION 2.02. Form of Face of Security........................................................................18
SECTION 2.03. Form of Reverse of Security.....................................................................22
SECTION 2.04. Additional Provisions Required in Global Security...............................................25
SECTION 2.05. Form of Trustee's Certificate of Authentication.................................................26
ARTICLE III -- The Securities....................................................................................26
SECTION 3.01. Title and Terms.................................................................................26
SECTION 3.02. Denominations...................................................................................29
SECTION 3.03. Execution, Authentication, Delivery and Dating..................................................29
SECTION 3.04. Temporary Securities............................................................................31
SECTION 3.05. Global Securities...............................................................................32
SECTION 3.06. Registration, Transfer and Exchange Generally: Certain Transfers and Exchanges: Restricted
Securities Legends............................................................................................33
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities................................................37
SECTION 3.08. Payment of Interest; Interest Rights Preserved..................................................38
SECTION 3.09. Persons Deemed Owners...........................................................................39
SECTION 3.10. Cancellation....................................................................................40
SECTION 3.11. Computation of Interest.........................................................................40
SECTION 3.12. Deferrals of Interest Payment Dates.............................................................40
SECTION 3.13. CUSIP Numbers...................................................................................42
ARTICLE IV -- Satisfaction and Discharge.........................................................................42
SECTION 4.01. Satisfaction and Discharge of Indenture.........................................................42
SECTION 4.02. Application of Trust Money......................................................................43
ARTICLE V -- Remedies............................................................................................44
SECTION 5.01. Events of Default...............................................................................44
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment..............................................45
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.................................47
SECTION 5.04. Trustee May File Proofs of Claim................................................................48
SECTION 5.05. Trustee May Enforce Claim Without Possession of Securities......................................49
SECTION 5.06. Application of Money Collected..................................................................49
SECTION 5.07. Limitation on Suits.............................................................................50
SECTION 5.08. Unconditional Right of Holders to Receive Principal and Interest................................51
SECTION 5.09. Restoration of Rights and Remedies..............................................................51
SECTION 5.10. Rights and Remedies Cumulate....................................................................51
SECTION 5.11. Delay or Omission Not Waiver....................................................................52
SECTION 5.12. Control by Holders..............................................................................52
<PAGE>
SECTION 5.13. Waiver of Past Defaults.........................................................................53
SECTION 5.14. Undertaking for Costs...........................................................................53
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.........................................................54
ARTICLE VI -- The Trustee........................................................................................54
SECTION 6.01. Certain Duties and Responsibilities.............................................................54
SECTION 6.02. Notice of Defaults..............................................................................55
SECTION 6.03. Certain Rights of Trustee.......................................................................56
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities..........................................57
SECTION 6.05. May Hold Securities.............................................................................57
SECTION 6.06. Money Held in Trust.............................................................................58
SECTION 6.07. Compensation and Reimbursement..................................................................58
SECTION 6.08. Disqualification; Conflicting Interests.........................................................59
SECTION 6.09. Corporate Trustee Required; Eligibility.........................................................59
SECTION 6.10. Resignation and Removal, Appointment of Successor...............................................60
SECTION 6.11. Acceptance of Appointment Successor.............................................................61
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.....................................62
SECTION 6.13. Preferential Collection of Claims Against Company...............................................63
SECTION 6.14. Appointment of Authenticating Agent.............................................................63
SECTION 6.15. Trustee's Rights and Obligations................................................................65
ARTICLE VII -- Holder's Lists and Reports by Trustee and Company.................................................65
SECTION 7.01. Company to Furnish Trustee Names and Addresses of Holders.......................................65
SECTION 7.02. Preservation of Information, Communications to Holders..........................................65
SECTION 7.03. Reports by Trustee..............................................................................66
SECTION 7.04. Reports by Company..............................................................................66
ARTICLE VIII -- Consolidation, Merger, Conveyance, Transfer or Lease.............................................67
SECTION 8.01. Company May Consolidate Only on Certain Terms...................................................67
SECTION 8.02. Successor Company Substituted...................................................................68
ARTICLE IX -- Supplemental Indentures............................................................................69
SECTION 9.01. Supplemental Indentures without Consent of Holders..............................................69
SECTION 9.02. Supplemental Indentures with Consent of Holders.................................................70
SECTION 9.03. Execution of Supplemental Indentures............................................................72
SECTION 9.04. Effect of Supplemental Indentures...............................................................72
SECTION 9.05. Conformity with Trust Indenture Act.............................................................72
SECTION 9.06. Reference in Securities to Supplemental Indentures..............................................72
ARTICLE X -- Covenants...........................................................................................73
SECTION 10.01. Payment of Principal and Interest..............................................................73
SECTION 10.02. Maintenance of Office or Agency................................................................73
SECTION 10.03. Money for Security Payments to be Held in Trust................................................73
SECTION 10.04. Statement as to Compliance.....................................................................75
SECTION 10.05. Waiver of Certain Covenants....................................................................75
SECTION 10.06. Payment of the Trusts' Costs and Expenses......................................................75
SECTION 10.07. Additional Covenants...........................................................................76
SECTION 10.08. Information Returns............................................................................77
SECTION 10.09. Statement by Officers as to Default............................................................77
SECTION 10.10 Delivery of Certain Information................................................................78
ARTICLE XI -- Redemption or Prepayment of Securities.............................................................78
SECTION 11.01. Applicability of This Article..................................................................78
SECTION 11.02. Election To Redeem: Notice to Trustee..........................................................78
SECTION 11.03. Selection of Securities to be Redeemed.........................................................79
SECTION 11.04. Notice of Redemption...........................................................................79
SECTION 11.05. Deposit of Redemption Price....................................................................80
SECTION 11.06. Payment of Securities Called for Redemption....................................................81
SECTION 11.07. Company's Right of Redemption..................................................................81
<PAGE>
ARTICLE XII -- Sinking Funds.....................................................................................82
SECTION 12.01. Applicability of Article.......................................................................82
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities..........................................82
SECTION 12.03. Redemption of Securities Sinking Fund..........................................................82
ARTICLE XIII -- Subordination of Securities......................................................................84
SECTION 13.01. Securities Subordinate to Senior Debt..........................................................84
SECTION 13.02. Payment Over of Proceeds upon Dissolution......................................................85
SECTION 13.03. Prior Payment to Senior Debt Upon Acceleration of Securities...................................86
SECTION 13.04. No Payment When Senior Debt in Default.........................................................87
SECTION 13.05. Payment Permitted If No Default................................................................88
SECTION 13.06. Subrogation to Rights of Holders of Senior Debt................................................88
SECTION 13.07. Provisions Solely to Define Relative Rights....................................................88
SECTION 13.08. Trustee to Effectuate Subordination............................................................89
SECTION 13.09. No Waiver of Subordination Provisions..........................................................89
SECTION 13.10. Notice to Trustee..............................................................................89
SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent.................................90
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt...............................................90
SECTION 13.13. Rights of Trustee as Holder of Senior Debt: Preservation of Trustee's Rights...................90
SECTION 13.14. Article Applicable to Paying Agents............................................................90
SECTION 13.15. Certain Conversions or Exchanges Deemed Payment................................................91
ARTICLE XIV -- Conversion of Securities..........................................................................91
SECTION 14.01. Conversion Rights..............................................................................91
SECTION 14.02. Conversion Procedures..........................................................................92
SECTION 14.03. Conversion Price Adjustments...................................................................94
SECTION 14.04. Reclassification, Consolidation, Merger or Sale of Assets......................................99
SECTION 14.05. Notice of Adjustments of Conversion Price......................................... ............100
SECTION 14.06. Prior Notice of Certain Events.................................................................100
SECTION 14.07. Certain Defined Terms..........................................................................101
SECTION 14.08. Dividend or Interest Reinvestment Plans........................................................102
SECTION 14.09. Certain Additional Rights......................................................................102
SECTION 14.10. Trustee Not Responsible for Determining Conversion Price or Adjustments........................103
SECTION 14.11. Termination of Conversion Rights...............................................................103
</TABLE>
<PAGE>
GUARANTY FINANCIAL CORPORATION
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of ________ __, 1998.
Indenture
Trust Indenture Act Section Section
- --------------------------- -------
ss.310(a)(1), (2) and (5)................................... 6.09
ss.310(a)(3)................................................ Not Applicable
ss.310(a)(4)................................................ Not Applicable
ss.310(b)................................................... 6.08, 6.10
ss.310(c)................................................... Not Applicable
ss.311(a)................................................... 6.13
ss.311(b)................................................... 6.13
ss.311(c)................................................... Not Applicable
ss.312(a)................................................... 7.01, 7.02(a)
ss.312(b)................................................... 7.02(b)
ss.312(c)................................................... 7.02(c)
ss.313(a)................................................... 7.03(a)
ss.313(b)................................................... 7.03(b)
ss.313(c)................................................... 7.03(a), 7.03(b)
ss.313(d)................................................... 7.03(c)
ss.314(a)(1), (2) and (3)................................... 7.04
ss.314(a)(4)................................................ 10.04
ss.314(b)................................................... Not Applicable
ss.314(c)(1)................................................ 1.02
ss.314(c)(2)................................................ 1.02
ss.314(c)(3)................................................ Not Applicable
ss.314(d)................................................... Not Applicable
ss.314(e)................................................... 1.02
ss.314(f)................................................... Not Applicable
ss.315(a)................................................... 6.01(a)
ss.315(b)................................................... 6.02, 7.03(a)
ss.315(c)................................................... 6.01(b)
ss.315(d)................................................... 6.01(c)
ss.315(d)(1)................................................ 6.01(c)(1)
ss.315(d)(2)................................................ 6.01(c)(2)
ss.315(d)(3)................................................ 6.01(c)(3)
ss.315(e)................................................... 5.14
ss.316(a)................................................... 5.12
ss.316(a)(1)(A)............................................. 5.12
ss.316(a)(1)(B)............................................. 5.13
ss.316(a)(2)................................................ Not Applicable
ss.316(b)................................................... 5.08
ss.316(c)................................................... 1.04(f)
ss.317(a)(1)................................................ 5.03
ss.317(a)(2)................................................ 5.04
ss.317(b)................................................... 10.03
<PAGE>
ss.318(a)................................................... 1.07
- ------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Junior Subordinated Indenture.
2
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of
________ __, 1998, between GUARANTY FINANCIAL
CORPORATION, a bank holding company established under
the laws of the Commonwealth of Virginia (hereafter
called the "Company") having its principal office at
1658 State Farm Boulevard, Charlottesville, Virginia
22911, and WILMINGTON TRUST COMPANY, a Delaware
corporation, as Trustee (hereafter called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereafter called the "Securities") of
substantially the tenor hereafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "Guaranty
Capital Trust" and, collectively, the "Guaranty Capital Trusts") of preferred
trust interests in such Guaranty Capital Trusts (the "Capital Securities") and
common interests in such Guaranty Capital Trusts (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
Definitions and Other Provisions of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular.
(2) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein.
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with respect
to any computation required
<PAGE>
or permitted hereunder shall mean such accounting principles that are generally
accepted at the date or time of such computation; provided, that when two or
more principles are so generally accepted, it shall mean that set of principles
consistent with those in use by the Company.
(4) The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
(5) Unless otherwise specified herein, any reference to an "Article"
or Section" refers to an Article or a Section, as the case may be, of this
Indenture.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and that shall accrue at the rate
per annum specified or determined as specified in any Officers' Certificate
delivered pursuant to Section 3.01.
"Additional Sums" has the meaning specified in Section 10.06.
"Administrative Action" has the meaning specified in the definition of
"Tax Event" in this Section 1.01.
"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.
"Amended and Restated Declaration of Trust" for each series of
Securities has the meaning specified in the Officers' Certificate for such
series delivered pursuant to Section 3.01.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.
-2-
<PAGE>
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in the City of Richmond, Virginia are
authorized or required by law or executive order to remain closed, or (iii) a
day on which the Corporate Trust Office of the Trustee, or, with respect to the
Securities of a series issued to a Guaranty Capital Trust, the Corporate Trust
Office of the Property Trustee under the related Trust Agreement, is closed for
business.
"Capital Securities" has the meaning specified in the first recital of
this Indenture.
"Capital Securities Register" means the securities register or
registers to be kept or caused to be kept by the Property Trustee pursuant to
the applicable Trust Agreement.
"Capital Treatment Event" means the Company shall have received an
opinion of independent bank regulatory counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any rules or regulations
thereunder) of the United States or any political subdivision thereof or therein
or any rules, guidelines or policies of the Federal Reserve or (b) 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 original
Issue Date of the Capital Securities, the Company will not be entitled to treat
the Capital Securities as "Tier I Capital" (or the equivalent thereof) (except
to the extent that the Capital Securities would otherwise constitute more than
25% of the Company's Tier I Capital (or the equivalent thereof)) for purposes of
the risk-based capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company; provided, however, that the distribution
of the Securities in connection with the liquidation of a Guaranty Capital Trust
by the Company shall not in and of itself constitute a Capital Treatment Event.
"Closing" has the meaning specified in Section 14.07(a).
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing
-3-
<PAGE>
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, $1.25 par value, of the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Guarantee" means the guarantee by the Company of the
distributions on the Trust Securities of a Guaranty Capital Trust to the extent
of the Guarantee Agreement.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman, Chief
Executive Officer, President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee.
"Conversion Agent" means the Person appointed to act on behalf of the
holders of Trust Securities in effecting the conversion of Trust Securities to
Securities and of Securities to Common Stock as and in the manner set forth in
the related Trust Agreement and in this Indenture.
"Conversion Date" has the meaning specified in Section 14.02(c).
"Conversion Price" has the meaning specified in Section 14.01.
"Conversion Request" means (a) the irrevocable request to be given by a
Holder of Securities to the Conversion Agent directing the Conversion Agent to
convert such Securities into Common Stock and (b) the irrevocable request to be
given by a holder of Trust Securities to the Conversion Agent directing the
Conversion Agent to exchange such Trust Security for Securities and to convert
such Securities into Common Stock on behalf of such holder.
"Conversion Termination Date" has the meaning specified in Section
14.11(d).
"Conversion Termination Date of the Securities" has the meaning
specified in Section 14.11(d).
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust
-4-
<PAGE>
business shall be administered, which office as of the date of this Indenture is
located at 1100 N. Market Street, Attention: Corporate Trust Administration,
Wilmington, Delaware 19890.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Current Market Price" has the meaning specified in Section 14.03(f).
"Declaration of Trust" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.
"Defaulted Interest" has the meaning specified in Section 3.08.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.01 with respect to such series (or any successor thereto (a "Successor
Depositary")).
"Determination Date" has the meaning specified in Section 2.02.
"Dissolution Event" means the liquidation of a Guaranty Capital Trust
pursuant to the related Trust Agreement, and the distribution of the Securities
held by the Property Trustee to the holders of the Trust Securities issued by
such Guaranty Capital Trust pro rata in accordance with such Trust Agreement.
"Dissolution Event Distribution" has the meaning specified in Section
14.11(b).
"Dollar" means the currency of the United States of America that, as at
the time of payment, is legal tender for the payment of public and private
debts.
"DTC" means The Depository Trust Company.
"Event of Default", unless otherwise specified in the supplemental
indenture creating a series of Securities, has the meaning specified in Article
V.
"Expiration Time" has the meaning specified in Section 14.03(e).
"Extension Period" has the meaning specified in Section 3.12.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
-5-
<PAGE>
"Foreign Currency" means any currency issued by the government of one
or more countries other than the United States of America or by any recognized
confederation or association of such governments.
"Global Security" means a Security in the form prescribed in Section
2.04 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.
"Guaranty Capital Trust" has the meaning specified in the first recital
of this Indenture.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of each particular series of Securities established
as contemplated by Section 3.01.
"Institutional Accredited Investor" means an accredited investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Interest Payment Date" means as to each series of Securities the
Stated Maturity of an installment of interest on such Securities.
"Interest Rate" means the rate of interest specified or determined as
specified in each Security as being the rate of interest payable on such
Security.
"Investment Company Event" means the receipt by a Guaranty Capital
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
such Guaranty Capital Trust is or will be considered an "investment company"
that is required to be registered under the 1940 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 of such
Guaranty Capital Trust.
-6-
<PAGE>
"Junior Subordinated Payment" has the meaning specified in Section
13.02.
"Lien" means any mortgage, pledge, lien, security interest or other
encumbrance.
"Liquidation Amount" has the meaning specified in Section 1.01 of the
Trust Agreement.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether as the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"1940 Act" means the Investment Company Act of 1940.
"Notice of Conversion" has the meaning specified in Section 14.02(a).
"Notice of Conversion Request" has the meaning specified in Section
14.02(a).
"Notice of Conversion Termination" has the meaning specified in Section
14.11(c).
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President, or Vice President, and by the Treasurer, the
Controller, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Other Debentures" means, with respect to any series of Securities, all
junior subordinated debt securities to be issued by the Company pursuant to this
Indenture, other than such series of Securities, with substantially similar
subordination terms, and that will be issued and sold (if at all) to any
Guaranty Capital Trust established by the Company (if any), and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in this Indenture to all Senior Debt of the Company.
"Other Guarantees" means, with respect to any series of Securities, all
guarantees (if any) to be issued by the Company with respect to Capital
Securities (if any) to be issued by any Guaranty Capital Trust to be established
by the Company (if any), other than the guarantee related to such series of
Securities.
-7-
<PAGE>
"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, delivered
to the Trustee for cancellation, or exchanged by the Conversion Agent
in accordance with Article XIV;
(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 3.07, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands
such Securities are valid, binding and legal obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that a Responsible Officer actually 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 of such other obligor. Upon the
written request of the Trustee, the Company shall furnish the Trustee promptly
an Officers' Certificate listing and identifying all Securities, if any, known
by the Company to be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company or such obligor,
and, subject to the provisions of Section 6.01, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Securities not listed therein are outstanding
for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Securities on behalf of the
Company.
-8-
<PAGE>
"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 interest on the Securities of
such series are payable pursuant to Sections 3.01 and 3.08.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Proceeding" has the meaning specified in Section 13.02.
"Property Trustee" means, in respect of any Guaranty Capital Trust, the
commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of such
Guaranty Capital 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.
"Purchased Shares" has the meaning specified in Section 14.03(e).
"Redemption Price", when used with respect to any Security to be
redeemed or prepaid means an amount in cash equal to one hundred percent (100%)
of the principal amount to be redeemed or prepaid, plus any accrued and unpaid
interest thereon, including Additional Interest and Additional Sums, if any, to
the date of such redemption.
"Reference Date" has the meaning specified in Section 14.03(c).
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.01 with respect to Securities of a series, the date that
is the Business Day next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the 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
-9-
<PAGE>
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
3.06(c) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Exhibit A to this Indenture.
"Restricted Securities Legend" means a legend substantially in the form
of the legend required in the form of Security set forth in Section 2.02 to be
placed on a Restricted Security.
"Securities" has the meaning specified in the first recital of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Certificate" means a certificate evidencing ownership of
Securities.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.06.
"Senior Debt" with respect to any series of Securities means (a) the
principal of, and premium, if any, and interest on all indebtedness of the
Company for money borrowed, whether outstanding on the date of execution of this
Indenture or thereafter created, assumed or incurred, (b) all obligations to
make payment pursuant to the terms of financial instruments, such as (i)
securities contracts and foreign currency exchange contracts, (ii) derivative
instruments, such as swap agreements (including interest rate and foreign
exchange note swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (iii) similar
financial instruments; except, in the case of both (a) and (b) above, such
indebtedness and obligations that are expressly stated to rank junior in right
of payment to, or pari passu in right of payment with, the Securities, (c) any
indebtedness or obligations of others of the kind described in both (a) and (b)
above for the payment of which the Company is responsible or liable as guarantor
or otherwise, and (d) any deferrals, renewals or extensions of any such Senior
Debt; provided, however, that Senior Debt shall not be deemed to include (a) any
debt of the Company that, when incurred and without respect to any election
under Section 1111(b) of the U.S. Bankruptcy Code of 1978, as amended, was
without recourse to the Company; (b) any debt of the Company to any of its
Subsidiaries; (c) debt to any employee of the Company; (d) debt that by its
terms is subordinated to trade accounts payable or accrued
-10-
<PAGE>
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such debt by the Holders as a result of the
subordination provisions of this Indenture would be greater than such payments
otherwise would have been as a result of any obligation of such holders of such
debt to pay amounts over to the obligees on such trade accounts payable or
accrued liabilities arising in the ordinary course of business as a result of
the subordination provisions to which such debt is subject; (e) trade accounts
payable or accrued liabilities arising in the ordinary course of business; and
(f) any other debt securities issued pursuant to this Indenture.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock 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 3.07 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Successor Trustee" has the meaning specified in the definition of
"Trustee" in this Section 1.01.
"Tax Event" means the receipt by the Trust or the Company of an opinion
of an independent tax counsel to the Company experienced in such matters to the
effect that, as a result of (a) any amendment to or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any judicial decision or official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
-11-
<PAGE>
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (c) any amendment to or change in the administrative
position or interpretation of any Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case, by
any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made known,
which amendment or change is effective or such Administrative Action or decision
is announced, in each case, on or after the Original Issue Date of the
applicable series of Securities or the issue date of the applicable Capital
Securities issued by the affected Guaranty Capital Trust, there is more than an
insubstantial risk that (x) if the Securities are held by or on behalf of the
affected Guaranty Capital Trust, (i) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to interest accrued or received on the Securities or subject to more
than a de minimis amount of other taxes, duties or other governmental charges as
determined by such counsel, or (ii) any portion of interest payable by the
Company to the affected Guaranty Capital Trust on the Securities is not, or
within 90 days of the date of such opinion will not be, deductible by the
Company in whole or in part for United States federal income tax purposes or (y)
with respect to Securities that are no longer held by or on behalf of the
affected Guaranty Capital Trust, any portion of interest payable by the Company
on the Securities is not, or within 90 days of the date of such opinion will not
be, deductible by the Company in whole or in part for United States federal
income tax purposes.
"Trading Day" has the meaning specified in Section 14.07(b).
"Trust Agreement" with respect to each series of Securities means the
Declaration of Trust with respect to such series, as amended and restated by the
Amended and Restated Declaration of Trust with respect to such series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Sections 1.07 and 9.05.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee (a "Successor Trustee")
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Trustee" shall mean or include each Person who is then a Trustee
hereunder and, if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series shall mean the Trustee with
respect to Securities of that series.
-12-
<PAGE>
"Vice President", when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 1.02. Compliance Certificate and Opinions. Upon any application
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any, provided for
in this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent (including covenants compliance with which constitute a
condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided regarding conditions or covenants waived by the Holders
pursuant to Section 10.05) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Forms of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
-13-
<PAGE>
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given to or taken by Holders, may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee, and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
-14-
<PAGE>
(d) The ownership of Securities shall be proved by the
Securities Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(f) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to take any
action under this Indenture by vote or consent. Except as otherwise provided
herein, such record date shall be the later of 30 days prior to the first
solicitation of such consent or vote or the date of the most recent list of
Security Holders furnished to the Trustee pursuant to Section 7.01 prior to such
solicitation. If a record date is fixed, those persons who were Security Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to take such action by vote or consent or to revoke any vote
or consent previously given, whether or not such persons continue to be Holders
after such record date, provided, however, that unless such vote or consent is
obtained from the Holders (or their duly designated proxies) of the requisite
principal amount of Outstanding Securities prior to the date that is the 120th
day after such record date, any such vote or consent previously given shall
automatically and without further action by any Holder be canceled and of no
further effect.
SECTION 1.05. Notices to Trustee and Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with:
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose (except as otherwise provided in Section
5.01 hereof) hereunder if in writing and mailed, first class, postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 1.06. Notice to Holders: Waiver. Where this Indenture provides
for notice to Holders of any event, such
-15-
<PAGE>
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. In case, by reason of
the suspension of or irregularities in regular mail service or for any other
reason, it shall be impossible or impracticable to mail notice of any event to
Holders when such 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. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
SECTION 1.07. Conflict with Trust Indenture Act. If any provision of
this Indenture limits, qualifies or conflicts with the duties imposed by any of
Section 310 to 317, inclusive, of the Trust Indenture Act through operation of
Section 318(c) thereof, such imposed duties shall control.
SECTION 1.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent and their successors and assigns, the holders
of Senior Debt and the Holders of the Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture and the Securities shall be
governed by and construed in accordance with
-16-
<PAGE>
the laws of the Commonwealth of Virginia, without regard to principles of
conflicts of laws.
SECTION 1.13. Non-Business Day. In any case where any Interest Payment
Date, Redemption Date or Stated Maturity of any Security shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or the
Securities) payment of interest or principal need not be made on such date, but
may be made on the next succeeding Business Day (and no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, until such next succeeding Business Day)
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity, as the case may be.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities of each series and the
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently herewith,
be determined by the officers executing such securities, as evidenced by their
execution of the Securities. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.03 with respect to
the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules 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.
-17-
<PAGE>
Securities distributed to holders of book-entry Capital Securities
shall be distributed in the form of one or more Global Securities registered in
the name of a Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or held by such Depositary for
credit by the Depositary to the respective accounts of the beneficial owners of
the Securities represented thereby (or such other accounts they may direct).
Securities distributed to holders of Capital Securities other than book-entry
Capital Securities shall not be issued in the form of a Global Security or any
other form intended to facilitate book-entry trading in beneficial interests in
such Securities.
SECTION 2.02. Form of Face of Security.
GUARANTY FINANCIAL CORPORATION
(Title of Security)
CUSIP No.
$
GUARANTY FINANCIAL CORPORATION, a Virginia corporation (hereafter
called the "Company", which term includes any successor corporation under the
Indenture hereafter referred to), for value received, hereby promises to pay to
_________________________, or its registered assigns, the principal sum of
____________________ Dollars on (the "Stated Maturity"). The Company further
promises to pay interest on such principal sum from _______________, or from the
most recent interest payment date (each such date, an "Interest Payment Date")
on which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein)], in arrears on March 15, June 15, September 15
and December 15 of each year, commencing June 15, 1998, at the annual rate of
___%, until the principal hereof shall have become due and payable, plus
Additional Interest, if any, until the principal hereof is paid or duly provided
for or made available for payment and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the annual rate of
___% compounded quarterly as Additional Interest.
The amount of interest payable for any period shall be computed on the
basis of the actual number of days elapsed in a year of twelve 30-day months;
except that the amount of interest payable for any partial period shall be
computed on the basis of the actual number of days elapsed in a 360-day year. In
the event that any date on which interest is payable on this Security 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 (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date on which the payment
-18-
<PAGE>
was originally payable. A "Business Day" shall mean any day other than (i) a
Saturday or Sunday, (ii) a day on which banking institutions in the City of
Richmond, Virginia are authorized or required by law or executive order to
remain closed or (iii) a day on which the Corporate Trust Office of the Trustee
or the Corporate Trust Office of the Property Trustee under the Trust Agreement
hereafter referred to for the related Guaranty Capital Trust is closed for
business. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in the Indenture) is registered at the close of business
on the Regular Record Date for such interest installment, which shall be the
first day of the calendar month in which the relevant Interest Payment Date
occurs. Any such interest installment not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular Record
Date and may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in such Indenture.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right at any time during the term of this Security, from
time to time, to defer payment of interest on such Security for up to twenty
(20) consecutive quarterly interest payment periods with respect to each
deferral period (each an "Extension Period"), during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date, and at the end of which the Company shall pay all
interest then accrued and unpaid on the Securities (together with Additional
Interest thereon to the extent permitted by applicable law); provided, however,
that no Extension Period may extend beyond the Stated Maturity of this Security.
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 (which includes
common and preferred stock) or (ii) make any payment of principal of, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company (including any Other Debentures) that rank pari passu with or junior in
interest to this Security or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to this Security (other than (a) dividends or distributions
in Common
-19-
<PAGE>
Stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the applicable Company Guarantee, (d)
purchases or acquisitions of shares of the Company's Common Stock in connection
with the satisfaction by the Company of its obligations under any employee
benefit plan or other contractual obligation of the Company (other than a
contractual obligation ranking pari passu with or junior to this Security), (e)
as a result of a reclassification of the Company's capital stock or the exchange
or conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock or (f) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period, provided, however, that such extension
does not cause such Extension Period to exceed twenty (20) consecutive quarterly
interest payment periods or extend beyond the Stated Maturity of this Security.
Upon the termination of any such Extension Period and the payment of all accrued
and unpaid interest and any Additional Interest then due, and, subject to the
foregoing limitations, 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 shall give the Trustee notice of its election to begin any
Extension Period at least three Business Days prior to the Interest Payment
Date, or, with respect to the Securities issued to a Guaranty Capital Trust,
prior to the earlier of (i) the date on which the Distributions on the Capital
Securities would have been payable except for the election to begin or extend
such Extension Period or (ii) the date on which the Administrative Trustees are
required to give notice to any automated quotation system or to holders of such
Capital Securities of the record date or the date on which such Distributions
are payable, but in any event not less than three Business Days prior to such
record date. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Trustee in the City of Wilmington, Delaware or at
the office of such Paying Agents in the United States as the Company may
designate from time to time, 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; provided, however, that, at the option of the Company, payment of
any interest may be made (except in the case of Global Securities) (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be
-20-
<PAGE>
designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate such subordination and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt, whether ,now outstanding or hereafter incurred, and waives reliance
by each such holder upon such provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Date: GUARANTY FINANCIAL CORPORATION
[Seal]
by_________________________________
[Chairman and Chief Executive
Officer, President or
Vice President]
Attest:
__________________________
[Secretary or Assistant
Secretary]
SECTION 2.03. Form of Reverse of Security. This Security is one of a
duly authorized issue of securities of the Company (herein called the
"Securities"), issued and to be issued in one or more series under a Junior
Subordinated Indenture, dated as of ________ __, 1998, as supplemented by an
Officers' Certificate dated as of ____________ (herein called the "Indenture"),
between
-21-
<PAGE>
the Company and Wilmington 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 Trustee, the Company and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof[, limited in aggregate principal amount to $------------].
All terms used in this Security that are defined in the Indenture and
in the Amended and Restated Declaration of Trust of Guaranty Capital Trust I,
dated as of ________ __, 1998, as amended (the "Amended and Restated Declaration
of Trust"), among Guaranty Financial Corporation, as Depositor, and the Trustees
named therein, shall have the meanings assigned to them in the Indenture or, to
the extent not defined in the Indenture, the Amended and Restated Declaration of
Trust, as the case may be.
The Company has the right to redeem this Security (i) on or after
________ __, 2003, 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, an Investment Company Event or a Capital
Treatment Event, in each case at the Redemption Price, and subject to possible
regulatory approval.
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.
On the terms and subject to the conditions set forth in the Indenture,
the Holder of any Security has the right, exercisable at any time on or before
5:00 p.m. (Richmond, Virginia time) on the earlier of (i) the Business Day
immediately preceding the date of redemption of such Security, whether at
maturity or upon prepayment, and (ii) the Conversion Termination Date of the
Securities, if any, to convert the principal amount thereof (or any portion
thereof that is a multiple of $25.00) into fully paid and nonassessable shares
of Common Stock of the Company at the Conversion Price described in the
Indenture. The number of shares issuable upon conversion of a Security is
determined by dividing the principal amount of the Security converted by the
Conversion Price in effect on the date of conversion. No fractional shares will
be issued upon conversion, but a cash adjustment will be made for any fractional
interest. The outstanding principal amount of any Security shall be reduced by
the portion of the principal amount thereof converted into shares of Common
Stock. The conversion right and the Conversion Price are subject to adjustment
as provided in the Indenture, to which reference is hereby made. Under certain
circumstances specified in the Indenture, Holders converting Securities may be
entitled
-22-
<PAGE>
to accrued and unpaid interest (including Additional Interest and Additional
Sums, if any, to the extent permitted by applicable law) on such Securities.
The conversion rights of the Holders of Securities are subject to
termination at the option of the Company on and after __________ __, 2001,
subject to and upon the satisfaction of certain conditions set forth in the
Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of this Security may be declared due and
payable in the manner, with the effect and subject to the conditions provided in
the Indenture.
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.
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 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), provided,
however, that, in the case of the Securities of this series issued to a Guaranty
Capital Trust, if upon an Event of Default, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities of
this series fail to declare the principal of all of the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the corresponding series of Capital Securities
then outstanding shall have such right by a notice in writing to the Company and
the Trustee with a copy to the Property Trustee. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of this series may
-23-
<PAGE>
annul such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities that has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee. Should the Holders of the Securities of this
series fail to annul such declaration and waive such default, the holders of a
majority in aggregate Liquidation Amount of the Capital Securities shall have
such right. Upon any such declaration such principal amount and the accrued
interest (including any Additional Interest) on all of the Securities of this
series shall become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained pursuant to Section 10.02 of the
Indenture duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Securities Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities of this series, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee shall treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities of this series are issuable in registered form without
coupons. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of such series of a different authorized
denomination, as requested by the Holder surrendering the same.
-24-
<PAGE>
The Company and, by its acceptance of this Security or a beneficial
interest herein, the Holder of, and any Person that acquires a beneficial
interest in, this Security intend that such Security constitute indebtedness and
agree to treat such Security as indebtedness for all United States Federal,
state and local tax purposes.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 2.04. Additional Provisions Required in Global Security. Any
Global Security issued hereunder shall, in addition to the provisions contained
in Sections 2.02 and 2.03, bear a legend in substantially the following form:
"This Security is a Global Security within the meaning of the Indenture
hereafter referred to and is registered in the name of The Depository
Trust Company (the "Depositary") or a nominee of the Depositary. This
Security is exchangeable for Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may
be registered except in limited circumstances.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to Guaranty
Financial Corporation or its agent for registration of transfer,
exchange or payment, and any Security issued is registered in the name
of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & CO., has an interest herein."
SECTION 2.05. Form of Trustee's Certificate of Authentication. This is
one of the Securities referred to in the within mentioned Indenture:
___________________________________
as Trustee
Dated:
By:________________________________
Authorized Signatory
-25-
<PAGE>
ARTICLE III
The Securities
SECTION 3.01. 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 set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of
the Securities of such series that may be authenticated and made
available for delivery under this Indenture (except for Securities
authenticated and made available for delivery upon registration of,
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.04, 3.06, 3.07, 9.06 or 11.06); provided,
however, that the authorized aggregate principal amount of such series
may be increased above such amount by a Board Resolution to such
effect;
(c) the Stated Maturity or Maturities on which the principal
of the Securities of such series is payable or the method of
determination thereof;
(d) the rate or rates, if any, at which the Securities of
such series shall bear interest, if any, the rate or rates and extent
to which Additional Interest, if any, shall be payable in respect of
any Securities of such series, the Interest Payment Dates on which such
interest shall be payable, the right, pursuant to Section 3.12 or as
otherwise set forth therein, of the Company to defer or extend an
Interest Payment Date, and the Regular Record Date for the interest
payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined;
(e) the place or places where the principal of and interest
on the Securities of such series shall be payable, the place or places
where the Securities of such series may be presented for registration
of transfer or exchange, and the place or places where notices and
demands to or upon the Company in respect of the Securities of such
series may be made;
-26-
<PAGE>
(f) 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;
(g) the obligation or the right, if any, of the Company to
redeem, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of
a Holder thereof, and the period or periods within which, the prices or
prices at which, the currency or currencies (including currency unit or
units) in which and the other terms and conditions upon which
Securities of the series shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligations;
(h) the denominations in which any Securities of such series
shall be issuable, if other than in blocks having aggregate principal
amounts of not less than $25.00 and multiples of $25.00 in excess
thereof;
(i) if other than Dollars, the currency or currencies
(including currency unit or units) in which the principal of and
interest, if any, on the Securities of the series shall be payable, or
in which the Securities of the series shall be denominated and the
manner of determining the equivalent thereof in Dollars for purposes of
the definition of the term "Outstanding";
(j) the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Company set forth herein with
respect to the Securities of such series;
(k) if other than the principal amount thereof, the portion
of the principal amount of Securities of such series that shall be
payable upon declaration of acceleration of the Maturity thereof;
(l) the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to
permit or facilitate the issuance of the Securities of such series in
bearer form, registrable or not registrable as to principal, and with
or without interest coupons;
(m) any index or indices used to determine the amount of
payments of principal on the Securities of such series or the manner in
which such amounts will be determined;
(n) the issuance of a temporary Global Security representing
all of the Securities of such series and
-27-
<PAGE>
exchange of such temporary Global Security for definitive Securities of
such series;
(o) whether the Securities of the series shall be issued in
whole or in part in the form of one or more Global Securities and, in
such case, the Depositary for such Global Securities, which Depositary
shall be a clearing agency registered under the Securities Exchange Act
of 1934;
(p) the appointment of any Paying Agent or Agents for the
Securities of such series;
(q) the terms of any right to convert or exchange Securities
of such series into any other securities or property of the Company,
and the additions or changes, if any, to this Indenture with respect to
the Securities of such series to permit or facilitate such conversion
or exchange;
(r) the transfer restrictions and legends required to be on
the Securities;
(s) the definitions of Amended and Restated Declaration of
Trust, Declaration of Trust and Guarantee Agreement for each series;
(t) the relative degree, if any, to which the Securities of
the series shall be senior to or be subordinated to other series of
Securities in right of payment, whether such other series of Securities
are Outstanding or not; and
(u) any other terms of the Securities of such series (which
terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any series,
at the option of the Company, interest on the Securities of any series that
bears interest may be paid (except in the case of Securities in Global form) (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Securities Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register.
SECTION 3.02. Denominations. The Securities of each series shall be in
registered form without coupons and shall be issuable
-28-
<PAGE>
initially in blocks having aggregate principal amounts of not less than $25.00
and multiples of $25.00 in excess thereof, unless otherwise specified as
contemplated by Section 3.01.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its corporate seal
reproduced or impressed thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for authentication. Securities
may be authenticated on original issuance from time to time and delivered
pursuant to such procedures acceptable to the Trustee ("Procedures") as may be
specified from time to time by Company Order. Procedures may authorize
authentication and delivery pursuant to oral instructions of the Company or a
duly authorized agent, which instructions shall be promptly confirmed in
writing. The Trustee shall authenticate and deliver such Securities in
accordance with such instructions and as provided in this Indenture.
Prior to the delivery of a Security in any such form to the Trustee for
authentication, the Company shall deliver to the Trustee the following:
(a) a Company Order requesting the Trustee's authentication
and delivery of all or a portion of the Securities of such series, and
if less than all, setting forth procedures for such authentication;
(b) the Board Resolution by or pursuant to which such form of
Security has been approved, and the Board Resolution, if any, by or
pursuant to which the terms of the Securities of such series have been
approved, and, if pursuant to a Board Resolution, an Officers'
Certificate describing the action taken;
(c) an Officers' Certificate dated the date such certificate
is delivered to the Trustee, stating that all conditions precedent
provided for in this Indenture relating to the authentication and
delivery of Securities in such form and with such terms have been
complied with; and
-29-
<PAGE>
(d) an Opinion of Counsel or Opinions of Counsel
substantially to the effect that (i) the form of such Securities has
been duly authorized and approved in conformity with the provisions of
this Indenture; (ii) the terms of such Securities have been duly
authorized and determined in conformity with the provisions of this
Indenture, or, if such terms are to be determined pursuant to
Procedures, when so determined such terms shall have been duly
authorized and determined in conformity with the provisions of this
Indenture; and (iii) Securities in such form when completed by
appropriate insertions and executed and delivered by the Company to the
Trustee for authentication in accordance with this Indenture,
authenticated and made available for delivery by the Trustee in
accordance with this Indenture within the authorization as to aggregate
principal amount established from time to time by the Board of
Directors and sold in the manner specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the Company
entitled to the benefits of this Indenture, subject to bankruptcy,
reorganization, insolvency, fraudulent transfer, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles, and except as enforcement
thereof may be limited by (A) requirements that a claim with respect to
any Securities denominated other than in Dollars (or a Foreign Currency
or currency unit judgment in respect of such claim) be converted into
Dollars at a rate of exchange prevailing on a date determined pursuant
to applicable law or (B) governmental authority to limit, delay or
prohibit the making of payments in Foreign Currencies or currency units
or payments outside the United States, and subject to such other
qualifications as such counsel shall conclude do not materially affect
the rights of Holders of such Securities.
The Trustee shall be entitled to receive the documents referred to in
clauses (b) and (d) above only at or prior to the first request of the Company
to the Trustee to authenticate Securities of such series.
Each Security shall be dated the date of its authentication.
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 made
available for delivery hereunder.
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company
-30-
<PAGE>
may execute, and upon 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 make available for delivery in exchange therefor a like
principal amount of definitive Securities of the same series of authorized
denominations having the same original Issue Date and Stated Maturity and having
the same terms as such temporary Securities. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 3.05. Global Securities. (a) Each Global Security issued under
this Indenture shall be registered in the name of the Depositary designated by
the Company for such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) such Depositary advises the Trustee in writing that
such Depositary is no longer willing or able to continue as a Depositary with
respect to such Global Security, and no successor depositary shall have been
appointed, or if at any time the Depositary ceases to be a "clearing agency"
registered under the Securities Exchange Act of 1934, as amended, at a time when
the Depositary is required to be so registered to act as such depositary, (ii)
the Company in its sole discretion determines that such Global Security shall be
so exchangeable, (iii) there shall have occurred and be continuing an Event of
Default or (iv) pursuant to the following sentence. All or any portion of a
Global Security may be exchanged for a Security that has a like aggregate
principal amount and is not a Global Security upon 20 days' prior request made
by the Depositary or its Agent Member to the Securities Registrar.
-31-
<PAGE>
(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Securities Registrar for exchange or
cancellation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, then either (i) such Global Security shall be so surrendered for
exchange or cancellation as provided in this Article III or (ii) the principal
amount thereof shall be reduced, subject to Section 3.06(b)(iv), or increased by
an amount equal to the portion thereof to be so exchanged or canceled, or equal
to the principal amount of such other Security to be so exchanged for a
beneficial interest therein, as the case may be, by means of an appropriate
adjustment made on the records of the Securities Registrar, whereupon the
Trustee shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security by the Depositary, accompanied by registration instructions
and, to the extent required by Section 3.06, a Restricted Securities
Certificate, the Trustee shall, subject to Section 3.05(b) and as otherwise
provided in this Article III, authenticate and make available for delivery any
Securities issuable in exchange for such Global Security (or any portion
thereof) in accordance with the instructions of the Depositary. The Trustee
shall not be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions.
(d) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary. Accordingly, any such owner's beneficial interests in a Global
Security shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members. Neither the Trustee nor the Securities Registrar shall have
any liability in respect of any transfers effected by the Depositary.
(e) The rights of the 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 3.06. Registration, Transfer and Exchange Generally: Certain
Transfers and Exchanges: Restricted Securities Legends. (a) The Company shall
cause to be kept at the Corporate Trust Office of the Trustee a register in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of the Securities and of transfers
-32-
<PAGE>
of Securities. Such register is herein sometimes referred to as the "Securities
Register". The Trustee is hereby appointed "Securities Registrar" for the
purpose of registering the Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the
office of the agent of the Company designated for that purpose, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, in the name of the designated transferee or transferees, one or more
new Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms 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 a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms and 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 make available
for delivery, 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 Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any 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, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of Securities pursuant to Article
XI and ending at the close of business on the day of mailing of notice of
redemption or (ii) to transfer or exchange any Security so selected for
redemption in whole or in part,
-33-
<PAGE>
except, in the case of any Security to be redeemed in part, any portion thereof
not to be redeemed.
(b) Certain Transfers and Exchanges. Notwithstanding any
other provision of this Indenture, transfers and exchanges of Securities and
beneficial interests in a Global Capital Security of the kinds specified in this
Section 3.06(b) shall be made only in accordance with this Section 3.06(b).
(i) Non-Global Security to Global Security. If the
Holder of a Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Global Security, such
transfer may be effected only in accordance with the provisions of this clause
(b)(i) and subject to the rules and procedures of the Depositary. Upon receipt
by the Securities Registrar of (A) such Security as provided in Section 3.06(a)
and instructions satisfactory to the Securities Registrar directing that a
beneficial interest in the Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a specified
Agent Member's account and (B) a Securities Certificate duly executed by such
Holder or such Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Security (and issue a new Security in respect of the
untransferred portion thereof) as provided in Section 3.06(a) and increase the
aggregate principal amount of the Global Security by the specified principal
amount as provided in Section 3.05(c).
(ii) Non-Global Security to Non-Global Security. A
Security that is not a Global Security may be transferred, in whole or in part,
to a Person who takes delivery in the form of another Security that is not a
Global Security as provided in Section 3.06(a); provided, that if such 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 3.05.
(c) Restricted Securities Legend. (i) Except as set forth
below, all Securities shall bear a Restricted Securities Legend, substantially
in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
-34-
<PAGE>
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE
DATE THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH GUARANTY FINANCIAL CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE
RESTRICTIONS TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER
OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION
OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER
THE RESALE RESTRICTIONS TERMINATION DATE.
(ii) Subject to the following clauses of this Section 3.06(c),
a Security (other than a Global Security) that does not bear a
Restricted Securities Legend may be issued in exchange for or in lieu
of a Restricted Security or any portion thereof that bears such legend
if, in the Company's judgment, placing such a legend upon such new
Security is not necessary to ensure compliance with the registration
requirements of the Securities Act, and the Trustee, at the written
direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver such a new Security as provided in this Article
III.
(iii) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless
the Company has reasonable cause to believe that such successor
Security is a "restricted security" within the meaning of Rule 144
under the Securities Act, in which case the Trustee, at the written
-35-
<PAGE>
direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver a new Security bearing a Restricted Securities
Legend in exchange for such successor Security as provided in this
Article III.
(iv) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented by a Global Security)
pursuant to an effective registration statement under the Securities
Act or pursuant to Rule 144 under the Securities Act after such
registration ceases to be effective: (A) in the case of any Restricted
Security that is a definitive Security, the Securities Registrar shall
permit the Holder thereof to exchange such Restricted Security for a
definitive Security that does not bear the Restricted Securities Legend
and rescind any restriction on the transfer of such Restricted
Security; and (B) in the case of any Restricted Security that is
represented by a Global Security, the Securities Registrar shall permit
the Holder of such Global Security to exchange such Global Security for
another Global Security that does not bear the Restricted Securities
Legend.
(v) If Restricted Securities are being presented or
surrendered for transfer or exchange then there shall be (if so
required by the Trustee), (A) if such Restricted Securities are being
delivered to the Securities Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification from such
Holder to that effect; or (B) if such Restricted Securities are being
transferred, (i) a certification from the transferor in a form
substantially similar to that attached as Exhibit A, and (ii) if the
Company or Securities Registrar so requests, evidence reasonably
satisfactory to them as to the compliance with the restrictions set
forth in the Restricted Securities Legend.
(vi) If the Securities are issued pursuant to an effective
registration statement, no Restricted Securities Legend shall be
required.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities. If any
mutilated Security is surrendered to the Trustee together with such security or
indemnity as may be required by the Company or the Trustee to hold each of them
harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same issue and series of like
tenor and principal amount, having the same Original Issue Date and Stated
Maturity and bearing the same Interest Rate as such mutilated Security, and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or
-36-
<PAGE>
indemnity as may be required by them to hold 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 shall execute, and, upon its
request, the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same issue and series
of like tenor and principal amount, having the same Original Issue Date and
Stated Maturity and bearing the same Interest Rate as such destroyed, lost or
stolen Security, and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.08. Payment of Interest; Interest Rights Preserved. Interest
on any Security of any series 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 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 3.01 with respect to the
related series of Securities.
Any interest on any Security that is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted
-37-
<PAGE>
Interest"), shall forthwith cease to be payable to the registered Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series in respect
of which interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall not be more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class, postage prepaid, to each Holder of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date. The
Trustee may, in its discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the Borough of Manhattan, the City of New York, but such
publication shall not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the Securities of
such series (or their respective Predecessor Securities) are registered on such
Special Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed
-38-
<PAGE>
payment pursuant to this Clause, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Security. Any interest on any Security
that is deferred or extended pursuant to Section 3.12 shall not constitute
Defaulted Interest for purposes of this Section 3.08.
SECTION 3.09. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary. No holder of any
beneficial interest in any Global Security held on its behalf by a Depositary
shall have any rights under this Indenture with respect to such Global Security,
and such Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Trustee from giving effect to any written certification, proxy,
or other authorization furnished by a Depositary or impair, as between the
Depositary and such holders of beneficial interests, the operation of customary
practices 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, conversion, transfer or exchange shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee, and any such Securities and
Securities surrendered directly to the Trustee for any such purpose shall be
promptly canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and made available for
delivery 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 delivered to the Company.
SECTION 3.11. Computation of Interest. Except as otherwise specified as
contemplated by Section 3.01 for Securities of any series, interest on the
Securities of each series for any period shall be computed on the basis of a
360-day year of twelve 30-day months, and interest on the Securities of each
series for any
-39-
<PAGE>
partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months.
SECTION 3.12. Deferrals of Interest Payment Dates. If specified as
contemplated by Section 3.01 with respect to the Securities of a particular
series, provided that no Event of Default has occurred and is continuing with
respect to such Securities, the Company shall have the right, at any time or
from time to time during the term of such series, to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.01 (each, an "Extension Period") during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date. No Extension Period shall end on a date
other than an Interest Payment Date. At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Securities
(together with Additional Interest thereon, if any, at the rate specified for
the Securities of such series to the extent permitted by applicable law),
provided, however, that no Extension Period may extend beyond the Stated
Maturity of these Securities. During any such Extension Period, the Company
shall not (i) declare or pay dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred stock), or (ii) make any
payment of principal, interest, or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including Other Debentures) that rank
pari passu with or junior in interest to the Securities of such series or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any Subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in interest to the Securities of
such series (other than (a) dividends or distributions in common stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the applicable Company Guarantee, (d) purchases or
acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior to these Securities, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, or (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period; provided, however, that no
Extension Period shall exceed the period or periods specified in
-40-
<PAGE>
such Securities or extend beyond the Stated Maturity of such Securities. Upon
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, and subject to the foregoing limitations, 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 shall give the Trustee and the
Property Trustee notice of its election to begin any such Extension Period (or
an extension thereof) at least three Business Days prior to the Interest Payment
Date or, with respect to the Securities of a series issued to a Guaranty Capital
Trust, prior to the earlier of (i) the date the Distributions on the Trust
Securities of such Guaranty Capital Trust would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees or such Guaranty Capital Trust are required to give
notice to any automated quotation system or to holders of Trust Securities of
the record date or the date such Distributions are payable, but in any event not
less than three Business Days prior to such record date. There is no limitation
on the number of times that the Company may elect to begin an Extension Period.
SECTION 3.13. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption or other related material as a
convenience to Holders; provided, however, that any such notice or other related
material may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption or other related material and that reliance may be placed only on the
other identification numbers printed on the Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers.
So long as the Securities are held by or on behalf of a Guaranty
Capital Trust, notwithstanding anything to the contrary herein, the Company
shall have the right to set off any payment it is otherwise required to make
hereunder in respect of any Security with and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, any
payment under a Company Guarantee used to satisfy the related payment of
indebtedness hereunder.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture,
upon Company Request, shall cease to be of further effect (except as to (i) any
surviving rights of transfer, substitution and exchange of Securities, (ii)
rights hereunder of Holders to receive payments of principal of and interest on
the Securities and other rights, duties and
-41-
<PAGE>
obligations of the Holders as beneficiaries hereof with respect to the amounts,
if any, deposited with the Trustee pursuant to this Article IV and (iii) the
rights and obligations of the Trustee hereunder), and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities that have been destroyed,
lost or stolen and that have been replaced or paid as provided
in Section 3.07 and (ii) Securities for whose payment money
has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 10.03)
have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year of the date of deposit, 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 Clause (B)(i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which
the Securities of such series are payable sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and 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 the date for redemption, 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.
-42-
<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture or the earlier
resignation or removal of the Trustee, the obligations of the Company to the
Trustee under Section 6.07 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall
survive.
SECTION 4.02. Application of Trust Money. Subject to the provisions of
the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for the payment of which such
money or obligations have been deposited with or received by the Trustee;
provided, however, that such moneys need not be segregated from other funds
except to the extent required by law.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default", wherever used
herein with respect to the Securities of any series, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
of that series, including any Additional Interest in respect thereof,
when it becomes due and payable, and continuance of such default for a
period of 30 days (subject to the deferral of any due date in the case
of an Extension Period); or
(2) default in the payment of the principal of any Security
of that series when due, whether at its Maturity, upon redemption, by
declaration of acceleration or otherwise; or
(3) default in the observance or performance in any material
respect, of any covenant of the Company in this Indenture (other than a
covenant a default in the performance of which or the breach of which
is elsewhere in this Section specifically dealt with), and continuance
of such default for a period of 90 days after there has been
-43-
<PAGE>
given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
aggregate outstanding principal amount of the Securities of that series
a written notice specifying such default and requiring it to be
remedied; or
(4) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(5) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become
due and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by the Company in furtherance of any such action; or
(6) in respect of a series issued to a Guaranty Capital
Trust, the voluntary or involuntary dissolution, winding-up or
termination of a Guaranty Capital Trust, except in connection with the
distribution of the Securities of such series to the holders of Trust
Securities in liquidation of such Guaranty Capital Trust, the
redemption of all the Trust Securities of a Guaranty Capital Trust, or
certain mergers, consolidations or amalgamations, each as permitted by
the applicable Trust Agreement; or
(7) any other Event of Default with respect to Securities of
that series as set forth in the Board Resolution and the Officers'
Certificate, or established in a supplemental indenture hereto, prior
to the issuance of the series of such Securities as contemplated by
Section 3.01.
-44-
<PAGE>
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided,
however, that, in the case of the Securities of a series issued to a Guaranty
Capital Trust, if, upon an Event of Default, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities of
that series fail to declare the principal of all the Securities of that series
to be immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the corresponding series of Capital Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee with a copy to the Property Trustee. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of a series may annul
such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities that has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee. Should the Holders of the Securities of such a
series fail to annul such declaration and waive such default, the holders of a
majority in aggregate Liquidation Amount of the Capital Securities shall have
such right. Upon any such declaration such principal amount (or specified
amount) of and the accrued interest (including any Additional Interest) on all
the Securities of such series shall become immediately due and payable,
provided, however, that the payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIV.
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 hereafter 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 (including any
Additional Interest) on all Securities of that series,
-45-
<PAGE>
(B) the principal of any Securities of that series that
has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the
Securities, and
(C) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of Securities of
that series that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.13.
The Company is required to file annually with the Trustee a certificate
as to whether or not the Company is in compliance with all the conditions and
covenants applicable to it under this Indenture.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities of
a series all or part of which is represented by a Global Security, a record date
shall be established for determining Holders of Outstanding Securities of such
series entitled to join in such notice, which record date shall be at the close
of business on the day the Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, however, that, unless such declaration of
acceleration, or rescission and annulment, as the case may be, shall have become
effective by virtue of the requisite percentage having joined in such notice
prior to the day that is 90 days after such record date, such notice of
declaration of acceleration, or rescission and annulment, as the case may be,
shall automatically and without further action by any Holder be canceled and of
no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy
of a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice that has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.02.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if:
-46-
<PAGE>
(1) default is made in the payment of any installment of
interest (including any Additional Interest) on any Security when such
interest becomes due and payable, and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations and interest (including any Additional Interest); and, in
addition thereto, all amounts owing to the Trustee under Section 6.07 and
Section 10.06.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company for the payment
of overdue principal 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 interest (including any
-47-
<PAGE>
Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may
be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to have
the claims of the Holders and any predecessor to the Trustee
under Section 6.07 and of the Holders allowed in any such
judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.06; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial
proceeding is hereby authorized by each Holder to make such payments to
the Trustee for distribution in accordance with Section 5.06, and in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it and
any predecessor Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any proceeding; provided, however, that
the Trustee may, on behalf of the Holders, vote for the election of a trustee in
bankruptcy or similar official and be a member of a creditors' or other similar
committee.
SECTION 5.05. Trustee May Enforce Claim Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing to the Trustee and any
predecessor Trustee under Section 6.07, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06. Application of Money Collected. Any money or property
collected or to be applied by the Trustee with respect to a series of Securities
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money or
property on account of principal or interest (including any Additional
Interest), upon presentation of the Securities and the
-48-
<PAGE>
notation thereon of the payment, if only partially paid, and upon surrender
thereof, if fully paid:
First: to the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.07;
Second: to the payment of the amounts then due and unpaid upon
such series of Securities for principal and 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 interest (including any Additional
Interest), respectively; and
Third: the balance, if any, to the Person or Persons entitled
thereto.
SECTION 5.07. Limitation on Suits. No Holder of any Securities of any
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture or for the appointment of a receiver, assignee,
trustee, liquidator, sequestrator (or other similar official) or for any other
remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right
-49-
<PAGE>
under this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all such Holders.
SECTION 5.08. Unconditional Right of Holders to Receive Principal and
Interest. Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right that is absolute and unconditional to receive
payment of the principal of and (subject to Section 3.08) interest (including
any Additional Interest) on such Security on the respective Stated Maturities
expressed in such Security and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a Guaranty Capital
Trust, any holder of the corresponding series of Capital Securities shall have
the right, upon the occurrence of an Event of Default described in Section
5.01(1) or 5.01(2) hereof, to institute a suit directly against the Company for
enforcement of payment to such Holder of principal of and (subject to Section
3.08) interest (including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount of the Capital
Securities of the corresponding series held by such Holder. Notwithstanding any
payments made to a holder of Capital Securities by the Company in connection
with a suit directly against the Company, the Company shall remain obligated to
pay the principal of or interest on the Securities, and the Company shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the Capital Securities to the extent of any payments made by the
Company to such holder in any suit directly against the Company.
The holders of the Capital Securities will not be able to exercise
directly any remedies, other than those set forth in this Section 5.08,
available to the holders of the Securities unless there shall have been an Event
of Default under the related Trust Agreement.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 5.10. Rights and Remedies Cumulate. Except as otherwise
provided in the last paragraph of Section 3.07, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every right
-50-
<PAGE>
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. Except as otherwise
provided in the last paragraph of Section 3.07, no delay or omission of the
Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(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 6.01, the Trustee
shall have the right to decline to follow such direction if the Trustee
in good faith shall, by a Responsible Officer or Officers of the
Trustee, 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.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities of a series all or part of which is
represented by a Global Security, a record date shall be established for
determining Holders of outstanding Securities of such series entitled to join in
such notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, however, that, unless the Holders of a majority in principal amount of
the Outstanding Securities of such series
-51-
<PAGE>
shall have joined in such notice prior to the day that is 90 days after such
record date, such notice shall automatically and without further action by any
Holder be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new written notice identical to a written notice that has been
canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section
5.12.
SECTION 5.13. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of a series affected
thereby may, on behalf of the Holders of all the Securities of such series,
waive any past default, except a default in the payment of principal of or
interest (including any Additional Interest) (unless such default has been cured
and a sum sufficient to pay all overdue installments of interest and principal
due otherwise than by acceleration has been deposited with the Trustee) on any
Security of such series or a default in respect of a covenant or provision that,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security of such series and, in the case of
Securities of a series issued to a Guaranty Capital Trust, should the Holders of
such Securities fail to annul such declaration and waive such default, the
holders of a majority in aggregate Liquidation Amount of the related series of
Capital Securities shall have such right.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10% in principal amount of the
outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of or interest (including
any Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
-52-
<PAGE>
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, that 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 6.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
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 (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct except that:
(i) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
-53-
<PAGE>
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of Holders pursuant to Section 5.12 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 such 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 indemnity satisfactory to it against such risk or
liability is not assured to it.
(e) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 6.02. Notice of Defaults. Within 90 days after actual knowledge
by a Responsible officer of the Trustee of the occurrence of any default
hereunder with respect to the Securities of any series, the Trustee shall
transmit by mail to all Holders of Securities of such series, as their names and
addresses appear in the Securities Register, notice of such default hereunder
known to a Responsible Officer of the Trustee, unless such default shall have
been cured or waived; provided, however, that, except in the case of a default
in the payment of the principal of or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be fully protected
in withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of Securities of such series; and
provided, further, however, that, in the case of any default of the character
specified in Section 5.01(3), no such notice to Holders of Securities of such
series shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event 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 6.03. Certain Rights of Trustee. Subject to the provisions of
Section 6.01:
-54-
<PAGE>
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, Security or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(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 is herein specifically prescribed) shall
be entitled to receive and may, in the absence of bad faith on its
part, conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities 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, 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 at the reasonable cost of the
Company upon giving reasonable notice to the Company and shall incur no
liability or additional liability of any kind by reason of such inquiry
or investigation;
-55-
<PAGE>
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Indenture;
(i) the Trustee shall not be charged with knowledge of any
Event of Default unless either (1) a Responsible Officer of the Trustee
shall have actual knowledge or (2) the Trustee shall have received
notice thereof in accordance with Section 1.05(1) hereof from the
Company or a Holder;
(j) no permissive power or authority available to the Trustee
shall be construed as a duty; and
(k) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities or any offering or disclosure materials prepared in connection
therewith. The Trustee shall not be accountable for the use or application by
the Company of the Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any Paying Agent,
Securities Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Securities Registrar or such
other agent.
SECTION 6.06. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company, as borrower
on the Securities, agrees:
-56-
<PAGE>
(1) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree in writing
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense (other than taxes based upon,
measured by or determined by the income of the Trustee) (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel) incurred without negligence or bad faith, arising
out of or in connection with the acceptance or administration of this
trust or the performance of its duties hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The obligations of the Company under this Section 6.07 shall survive
the termination of this Indenture or the earlier resignation or removal of the
Trustee.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee.
Such lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code of 1978, as amended, or any successor
statute.
The provisions of this Section 6.07 shall survive the termination of
this Indenture.
SECTION 6.08. Disqualification; Conflicting Interests. The Trustee for
the Securities of any series issued hereunder shall be subject to the provisions
of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the
Trustee from filing with the Commission the application referred to in the
second-to-last paragraph of Section 310(b) of the Trust Indenture Act.
-57-
<PAGE>
SECTION 6.09. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder that shall be:
(a) a corporation organized and doing business under the laws
of the United States of America or of any state, territory or the
District of Columbia, authorized under such laws to exercise corporate
trust powers and subject to supervision or examination by Federal,
state, territorial or District of Columbia authority, or
(b) a corporation or other Person organized and doing
business under the laws of a foreign government that is permitted to
act as Trustee pursuant to a rule, regulation or order of the
Commission, authorized under such laws to exercise corporate trust
powers, and subject to supervision or examination by authority of such
foreign government or a political subdivision thereof substantially
equivalent to the supervision or examination applicable to United
States institutional trustees, in either case having a combined capital
and surplus of at least $50,000,000, subject to supervision of
examination by Federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority,
then, for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereafter specified in
this Article. Neither the Company nor any Person directly or indirectly
controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued
hereunder.
SECTION 6.10. Resignation and Removal, Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a Successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the Successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a Successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a Successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to
the Securities of any series by Act of the Holders of
-58-
<PAGE>
a majority in principal amount of the Outstanding Securities of such series,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(x) the Company, acting pursuant to the authority of a Board
Resolution, may remove the Trustee, or (y) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a Successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause with respect to the Securities of one or more series, the Company, by
a Board Resolution, shall promptly appoint a Successor Trustee with respect to
the Securities of that or those series. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
Successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the Successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the Successor Trustee with respect to the Securities
of such series and supersede the Successor Trustee appointed by the Company. If
no Successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner hereafter provided, within 30 days of such resignation or removal the
Trustee or any Holder who has been a bona fide Holder of a Security for at least
six months, subject to Section 5.14, on behalf of himself and all others
similarly situated, may 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
-59-
<PAGE>
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 Successor. (a) In case of the
appointment hereunder of a Successor Trustee with respect to all Securities,
every such Successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such Successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
Successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such Successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such Successor Trustee all property and money held by
such retiring Trustee hereunder.
(b) In case of the appointment hereunder of the Successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each Successor Trustee with respect to the
Securities of one or more series shall execute and deliver a written instrument
or an indenture supplemental hereto wherein each Successor Trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
Successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such Successor Trustee relates, (2) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such written instrument or supplemental
indenture shall constitute such Trustees as 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 written instrument or
supplemental indenture, the resignation or removal of the retiring Trustee shall
become effective to the
-60-
<PAGE>
extent provided therein, and each such Successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts, and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such Successor Trustee relates;
but, on request of the Company or any Successor Trustee, such retiring Trustee
shall duly assign, transfer and deliver to such Successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the Securities
of that or those series to which the appointment of such Successor Trustee
relates.
(c) Upon request of any such Successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such Successor Trustee all rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No Successor Trustee shall accept its appointment unless
at the time of such acceptance such Successor Trustee shall be qualified and
eligible under this Article. In the event that the Trust Indenture Act applies
to this Indenture at the time that any Successor Trustee is appointed, such
Successor Trustee shall qualify under such Act.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article (including qualification under the Trust Indenture Act, if applicable),
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such Successor Trustee, and in all cases the certificate of
authentication shall have the full force that 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).
-61-
<PAGE>
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may
appoint an authenticating agent or agents (each, an "Authenticating Agent") with
respect to one or more series of Securities that shall be authorized to act on
behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer or partial redemption
thereof, and Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Where reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any state, Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of such supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent that shall be acceptable to the Company and shall give notice of such
appointment in the
-62-
<PAGE>
manner provided in Section 1.06 to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of each series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: ___________________________________
Agent Trustee
by_________________________________
As Authenticating Agent
by_________________________________
Authorized Signatory
SECTION 6.15. Trustee's Rights and Obligations. The Trustee shall have
and be subject to all the duties and responsibilities specified with respect to
an indenture trustee under the Trust Indenture Act. Subject to such provisions,
the Trustee is under no obligation to exercise any of the powers vested in it by
this Indenture at the request of any holder of the Securities, unless offered
indemnity to its satisfaction by such holder against the costs, expenses and
liabilities that might be incurred thereby. The Trustee will not be required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it. Notwithstanding the
foregoing, nothing in this Section 6.15 shall be deemed to abrogate any of the
rights, indemnities or protections otherwise provided to the Trustee under this
Indenture.
-63-
<PAGE>
ARTICLE VII
Holder's Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee:
(a) quarterly, not more than 15 days after each Regular
Record Date 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 Regular Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished, excluding from any
such list names and addresses received by the Trustee in its capacity
as Securities Registrar.
SECTION 7.02. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and privileges of the Trustee, shall be as provided in
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee. (a) The Trustee shall transmit to
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act, at the times and in the
manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals
of not more than 12 months shall be transmitted no later than the last calendar
day in February of each calendar year, commencing with the last calendar day in
February of the year following the Original Issue Date.
-64-
<PAGE>
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which the Securities are listed and also with the Commission. The Company
will notify the Trustee whenever the Securities are listed on any securities
exchange.
SECTION 7.04. Reports by Company. The Company shall file with the
Trustee and with the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided in
the Trust Indenture Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, shall be filed
with the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the information,
documents and other reports that are specified in Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended. The Company also shall comply with
the other provisions of Trust Indenture Act Section 314(a). Delivery of such
reports, information and documents to the Trustee is for informational purposes
only, and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate Only on Certain Terms. The
Company shall not consolidate with or merge with or into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge with or into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge with
or into another Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the corporation
formed by such consolidation or into which the Company is merged or the
Person that acquires by conveyance or transfer, or that leases, the
properties and assets of the Company substantially as an entirety shall
be a corporation, partnership or trust
-65-
<PAGE>
organized and existing under the laws of the United States of America
or any State or the District of Columbia, and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and interest (including any Additional
Interest) on all the Securities and the performance of every covenant
and every obligation of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event that, after notice or lapse of time, or
both, would become an Event of Default, shall have occurred and be
continuing;
(3) if at such time Securities of a series issued to a
Guaranty Capital Trust are Outstanding, such consolidation, merger,
conveyance, transfer or lease is permitted under the related Trust
Agreement and Company Guarantee and does not give rise to any breach or
violation of the related Trust Agreement or Company Guarantee; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture complies with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with; and the Trustee, subject to Section 6.01, may
rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section
8.01.
SECTION 8.02. Successor 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 8.01, the successor
corporation 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 and may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder 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
-66-
<PAGE>
in this Indenture prescribed, the Trustee shall authenticate and shall make
available for delivery 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 signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following:
(1) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the covenants of
the Company herein and in the Securities contained;
(2) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee or to surrender any right or power
herein conferred upon the Company;
(3) to establish the form or terms of Securities of any
series as permitted by Sections 2.01 or 3.01;
(4) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company;
(5) to add any additional Events of Default;
(6) to change or eliminate any of the provisions of this
Indenture; provided that any such change or elimination (a) shall
become effective only when there is no Security
-67-
<PAGE>
Outstanding of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such
provision or (b) shall not apply to any Outstanding Securities;
(7) to cure any ambiguity, to correct or supplement any
provision herein that may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action
pursuant to this clause (7) shall not materially adversely affect the
interest of (a) the Holders of Securities of any series or, (b) in the
case of the Securities of a series issued to a Guaranty Capital Trust
and for so long as any of the corresponding series of Capital
Securities shall remain outstanding, the holders of such Capital
Securities;
(8) to evidence and provide for the acceptance of appointment
hereunder by a Successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the Trust Indenture Act.
SECTION 9.02. Supplemental Indentures with Consent of Holders. With the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series affected by such supplemental indenture,
by Act of such Holders delivered to the Company and the Trustee, the Company,
when authorized by a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) except to the extent permitted by Section 3.12 or as
otherwise specified as contemplated by Section 3.01 with respect to the
extension of the interest payment period of the Securities of any
series, change the Stated Maturity of the principal of, or any
installment of interest (including any Additional Interest) on, any
Security, or reduce the principal amount thereof or the rate of
interest thereon, or reduce 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 5.02, or
change the place of payment where, or the coin or currency in
-68-
<PAGE>
which, any Security or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after
the date fixed for redemption thereof);
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture;
(3) modify any of the provisions of this Section, Section
5.13 or Section 10.05, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Security
affected thereby; or
(4) modify the provisions in Article XIII of this Indenture
with respect to the subordination of outstanding Securities of any
series in a manner adverse to the Holders thereof;
provided that, in the case of the Securities of a series issued to a Guaranty
Capital Trust, so long as any of the corresponding series of Capital Securities
remain outstanding, 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 of such Capital Securities then outstanding unless and until
the principal of the Securities of such series and all accrued and, subject to
Section 3.08, unpaid interest (including any Additional Interest) thereon have
been paid in full; and provided further, however, that in the case of the
securities of a series issued to a Guaranty Capital Trust, so long as any of the
corresponding series of Capital Securities remain outstanding, no amendment
shall be made to Section 5.08 of this Indenture that would impair the rights of
the holders of such Capital Securities provided herein without the prior consent
of the holders of each Capital Security then outstanding unless and until the
principal of the Securities of such series and all accrued and (subject to
Section 3.08) unpaid interest (including any Additional Interest) thereon have
been paid in full.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated Proxies, and only such Persons, shall be entitled to
-69-
<PAGE>
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date that is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
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 that modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In executing or
accepting the additional trusts created by any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in conclusively relying upon, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, or
that may subject it to liability or be contrary to applicable law.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act. No supplemental
indenture will be qualified or executed pursuant to the Trust Indenture Act
unless this Indenture is so qualified, or in connection with Capital Securities
that are registered under the Securities Exchange Act of 1934, as amended, upon
the effectiveness of a registration statement. Every supplemental indenture so
qualified or executed shall conform to the requirements of the Trust Indenture
Act as then in effect.
-70-
<PAGE>
SECTION 9.06. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Company,
bear a notation in form approved by the Company as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such Series.
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal 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 interest on the Securities of that series in
accordance with the terms of such Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company will
maintain in each Place of Payment for any series, an office or agency where
Securities of that series may be presented or surrendered for payment and an
office or agency where Securities may be surrendered for transfer or exchange
and where notices and demand to or upon the Company in respect of the Securities
and this Indenture may be served. The Company initially appoints the Trustee,
acting through its Corporate Trust Office, as its agent for such 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 fall to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
SECTION 10.03. Money for Security Payments to be Held in Trust. If the
Company shall at any time act as its own Paying
-71-
<PAGE>
Agent with respect to any series of Securities, it will, on or before each due
date of the principal of or interest on any of the Securities of such series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. Richmond, Virginia time on each due date of the principal of
or interest on any Securities, deposit with a Paying Agent a sum sufficient to
pay the principal or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal or interest, and (unless
such Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and make available for delivery 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 or interest on Securities in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the
Company (or any other obligor upon the Securities) in the making of any
payment of principal or interest;
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the
-72-
<PAGE>
principal of or interest on any Security and remaining unclaimed for two years
after such principal or interest has become due and payable shall (unless
otherwise required by mandatory provision of applicable escheat or abandoned or
unclaimed property law) be paid on Company Request to the Company, or (if then
held by the Company) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, the City of New York, notice that such money remains unclaimed and
that, after a date specified therein, that shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 10.04. Statement as to Compliance. The Company shall deliver to
the Trustee, within 120 days after the end of such calendar year of the Company
commencing after the date hereof, an Officers' Certificate executed by
authorized officers at least one of whom shall be the principal executive,
financial or accounting officer of the Company covering the preceding calendar
year, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance, observance or fulfillment of or
compliance with any of the material terms, provisions covenants and conditions
of this Indenture, and if the Company shall be in such default, specifying all
such defaults and the nature and status thereof of which they may have
knowledge. For the purpose of this Section 10.04, compliance shall be determined
without regard to any grace period (other than an Extension Period) or
requirement of notice provided pursuant to the terms of this Indenture.
SECTION 10.05. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any covenant or condition as specified as
contemplated by Section 3.01 with respect to the Securities of any series, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the outstanding Securities of such series shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company in respect of any such covenant or condition shall remain in full force
and effect.
-73-
<PAGE>
SECTION 10.06. Payment of the Trusts' Costs and Expenses. Since the
Guaranty Capital Trusts are being formed solely to facilitate the investment in
the Securities, the Company, as borrower on the Securities, hereby covenants to
pay all debts and obligations (other than with respect to the payment of
principal and interest on the Trust Securities) and all costs and expenses of
such Trusts (including, but not limited to, all costs and expenses relating to
the organization of such Trusts, the fees and expenses of the Trustees and all
costs and expenses relating to the operation of such Trusts) and to pay any and
all taxes, duties, assessments or other governmental charges of whatever nature
(other than United States withholding taxes) imposed on such Trusts by the
United States, or any other taxing authority (such payments of amounts in
connection with taxes being herein referred to as "Additional Sums"), so that
the net amounts received and retained by such Trusts and their respective
Property Trustees after paying such expenses or Additional Sums will be equal to
the amounts such Trusts and Property Trustees would have received had no such
costs, expenses or taxes, duties, assessments or other governmental charges been
incurred by or imposed on such Trusts. The foregoing obligations of the Company
are for the benefit of, and shall be enforceable by, any person to whom such
debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or
not such Creditor has received notice thereof. Any such Creditor may enforce
such obligations of the Company hereunder directly against the Company, and the
Company hereby irrevocably waives any right or remedy to require that any such
Creditor take any action against any Trust or any other person before proceeding
against the Company. The Company also agrees hereby to execute such additional
agreements as may be necessary or desirable to give full effect to the
foregoing.
SECTION 10.07. Additional Covenants. The Company covenants and agrees
with each Holder of Securities of a series issued to a Guaranty Capital Trust
that it will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
shares of the Company's capital stock (which includes common and preferred
stock), or (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company (including
Other Debentures) that rank pari passu with or junior in interest to the
Securities of such series or (iii) make any guarantee payments with respect to
any guarantee by the Company of debt securities of any subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in interest to the Securities (other than (a) dividends or distributions in
Common Stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Company Guarantee, (d) purchases
or acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee
-74-
<PAGE>
benefit plan or other contractual obligation of the Company (other than a
contractual obligation ranking pari passu with or junior in interest to these
Securities), (e) as a result of a reclassification of the Company's capital
Stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock or (f)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged), if at such time (i) there shall have
occurred an Event of Default, (ii) the Company shall be in default with respect
to its payment of any obligations under the related Company Guarantee or (iii)
the Company shall have given notice of its election to begin an Extension Period
as provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a Guaranty Capital Trust (i) to maintain directly, or indirectly
through a wholly owned Subsidiary, 100% ownership of the Common Securities of
such Guaranty Capital Trust; provided, however, that any permitted successor of
the Company hereunder may succeed to the Company's ownership of such Common
Securities, (ii) not to voluntarily terminate, wind-up or liquidate such
Guaranty Capital Trust, except (a) in connection with a distribution of the
Securities of such series to the holders of Capital Securities in liquidation of
such Guaranty Capital Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the related Trust Agreement and
(iii) to use its reasonable best efforts, consistent with the terms and
provisions of such Trust Agreement, (x) not to adversely affect such Guaranty
Capital Trust's status as a grantor trust and (y) not to cause such Guaranty
Capital Trust to be classified as an association taxable as a corporation for
United States Federal income tax purposes.
SECTION 10.08. Information Returns. For each year during which any
Securities are outstanding, the Company shall furnish to each Paying Agent on a
timely basis such information as may be reasonably requested by each Paying
Agent in order that such Paying Agent may prepare the information that it is
required to report for such year on Internal Revenue Service Forms 1096 and
1099. Such information shall include the amount of original issue discount, if
any, includible in income for each $1,000 of principal amount at Stated Maturity
of outstanding Securities during such year.
SECTION 10.09. Statement by Officers as to Default. The Company shall
deliver to the Trustee, within five days after the Company becomes aware of the
occurrence of any Event of Default, an Officers' Certificate setting forth the
details of such Event of Default and the action that the Company proposes to
take with respect thereto, if known at such time.
-75-
<PAGE>
SECTION 10.10 Delivery of Certain Information. If specified as
contemplated by Section 3.01 with respect to a series of Securities, at any time
when the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Security,
the Company will promptly furnish or cause to be furnished Rule 144A Information
(as defined below) to such Holder, to a prospective purchaser who is a
"qualified institutional buyer", within the meaning of Rule 144A under the
Securities Act, of such Security designated by such Holder in order to permit
compliance by such Holder with Rule 144A in connection with the resale of such
Security by such Holder; provided, however, that unless otherwise specified as
contemplated by Section 3.01, the Company shall not be required to furnish such
information in connection with any request made on or after the date that is two
years from the later of (i) the date such Security (or any predecessor Security)
was acquired from the Company or (ii) the date such Security (or any predecessor
Security) was last acquired from an "affiliate" of the Company within the
meaning of Rule 144 under the Securities Act. "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act as in effect on the date hereof.
ARTICLE XI
Redemption or Prepayment of Securities
SECTION 11.01. Applicability of This Article. Redemption of Securities
(whether by operation of a sinking fund or otherwise) as permitted or required
by any form of Security issued pursuant to this Indenture shall be made in
accordance with such form of Security and this Article; provided, however, that
if any provision of any such form of security shall conflict with any provision
of this Article, the provision of such form of Security shall govern.
SECTION 11.02. Election To Redeem: Notice to Trustee. The election of
the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
any Securities of any particular series and having the same terms, the Company
shall, not less than 30 nor more than 60 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and, in the case of Securities held by or on behalf of a
Guaranty Capital Trust, the Property Trustee of such date and of the principal
amount of Securities of that series to be redeemed. In the case of any
redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities, the Company shall furnish
the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing
compliance with such restriction. Any such notice given to the
-76-
<PAGE>
Trustee hereunder shall include the information required by Section 11.04
hereof.
SECTION 11.03. Selection of Securities to be Redeemed. If less than all
the Securities of any series are to be redeemed (unless all the Securities of
such series and of a specified tenor are to be redeemed or unless such
redemption affects only a single Security all as designated to the Trustee by
the Company), the particular Securities to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and that 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. If less
than all the Securities of such series and of a specified tenor are to be
redeemed (unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
and specified tenor not previously called for redemption in accordance with the
preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
SECTION 11.04. Notice of Redemption. Notice of redemption (other than
at the Stated Maturity) 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 date fixed for redemption, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
(a) the Redemption Date for Securities of such series;
(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
-77-
<PAGE>
provided pursuant to this 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 and having the same terms are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the particular Securities to be redeemed;
(d) that on the date fixed for redemption, the redemption
price at which such Securities are to be redeemed will become due and
payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after such date;
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the
case;
(g) such other provisions as may be required in respect of
the terms of a particular series of Securities; and
(h) the CUSIP number if any.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.05. Deposit of Redemption Price. Prior to 10:00 a.m.
Richmond, Virginia time on the Redemption Date specified in the notice of
redemption given as provided in Section 11.04, the Company will deposit with the
Trustee or with one or more Paying Agents an amount of money sufficient to
redeem on the Redemption Date all the Securities so called for redemption at the
applicable Redemption Price.
SECTION 11.06. Payment of Securities Called for Redemption. If any
notice of redemption has been given as provided in
-78-
<PAGE>
Section 11.04, 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. On
presentation and surrender of such Securities at a place of payment in such
notice specified, such Securities or the specified portions thereof shall be
paid and redeemed by the Company at the applicable Redemption Price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of that
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If the Global Security is so surrendered,
such new Security will (subject to Section 3.06) also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of such Security shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 11.07. Company's Right of Redemption. Unless otherwise
specified as contemplated by Section 3.01 with respect to the Securities of a
particular series and notwithstanding any additional redemption rights that may
be so specified, the Company, at its option, may redeem the Securities, subject
to the Company having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve,
(i) on or after the date specified in such Securities, 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 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 Securities, 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 Guaranty Capital Trust to which such
Securities were issued.
-79-
<PAGE>
ARTICLE XII
Sinking Funds
SECTION 12.01. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of any
series except as otherwise specified as contemplated by Section 3.01 for such
Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount that is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment". If provided
for by the terms of any Securities of any series, the case amount of any sinking
fund payment may be subject to reduction as provided in Section 13.02. Each
sinking fund payment shall be applied to the redemption (or purchase by tender
or otherwise) of Securities of any series as provided for by the terms of such
Securities.
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 45 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured Coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company Order instructing the Trustee to credit such
obligations and stating that the Securities of such series were originally
issued by the Company by way of bona fide sale or other negotiation for value;
provided that the Securities to be so credited have not been previously so
credited. The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the redemption price for such Securities, as
specified in the Securities so to be redeemed, for redemption through operation
of the sinking fund, and the amount of such sinking fund payment shall be
reduced accordingly.
SECTION 12.03. Redemption of Securities Sinking Fund. Not less than 45
days prior to each sinking fund payment date for any series of securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for such Securities pursuant to
the terms of such Securities, the portion thereof, if any, that is to be
satisfied by payment of cash in the currency in which the Securities of such
series are payable (except as provided pursuant to Section 3.01) and the portion
thereof, if any, that
-80-
<PAGE>
is to be satisfied by delivering and crediting Securities pursuant to Section
13.02 and will also deliver to the Trustee any Securities to be so delivered.
Such Certificate shall be irrevocable and upon its delivery the Company shall be
obligated to make the cash payment or payments therein referred to, if any, on
or before the succeeding sinking fund payment date. In the case of the failure
of the Company to deliver such Certificate (or, as required by this Indenture,
the Securities and coupons, if any, specified in such Certificate) by the due
date therefor, the sinking fund payment due on the succeeding sinking fund
payment date for such series shall be paid entirely in cash and shall be
sufficient to redeem the principal amount of the Securities of such series
subject to a mandatory sinking fund payment without the right to deliver or
credit securities as provided in Section 13.02 and without the right to make the
optional sinking fund payment with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the redemption price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or by the Company if the Company is acting as its own Paying Agent), in
which case such moneys shall be segregated and held in trust as provided in
Section 10.03) for such series and together with such payment (or such amount so
segregated) shall be applied in accordance with the provisions of this Section
12.03. Any and all sinking fund moneys with respect to the Securities of any
particular series held by the Trustee (or if the Company is acting as its own
Paying Agent, segregated and held in trust as provided in Section 10.03) on the
last sinking fund payment date with respect to Securities of such series and not
held for the payment or redemption of particular Securities of such series shall
be applied by the Trustee (or by the Company if the Company is acting as its own
Paying Agent), together with other moneys, if necessary, to be deposited (or
segregated) sufficient for the purpose, to the payment of the principal of the
Securities of such series at Maturity. The Trustee shall select the Securities
to be redeemed upon such sinking fund payment date in the manner specified in
Section 11.03 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 11.04.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Section 11.06. On or before each
sinking fund payment date, the Company shall pay to the Trustee (or, if the
Company is acting as its own Paying Agent,
-81-
<PAGE>
the Company shall segregate and hold in trust as provided in Section 10.03) in
cash a sum in the currency in which Securities of such series are payable
(except as provided pursuant to Section 3.01) equal to the principal and any
interest accrued to the redemption date for Securities or portions thereof to be
redeemed on such sinking fund payment date pursuant to this Section 12.03.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company if the
Company is then acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article XII. Except as aforesaid, any moneys in the sinking fund for such series
at the time when any such default or Event of Default shall occur and any moneys
thereafter paid into such sinking fund shall, during the continuance of such
default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.03.
ARTICLE XIII
Subordination of Securities
SECTION 13.01. Securities Subordinate to Senior Debt. The Company
covenants and agrees, and each Holder of a Security, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereafter
set forth in this Article, the payment of the principal of and interest
(including any Additional Interest) on each and all of the Securities are hereby
expressly made subordinate and junior in right of payment to the prior payment
in full of all amounts then due and payable in respect of all Senior Debt.
SECTION 13.02. Payment Over of Proceeds upon Dissolution. In the event
of (a) any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company, its creditors or its property, (b) any proceeding for the
-82-
<PAGE>
liquidation, dissolution, or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
any assignment by the Company for the benefit of creditors or (d) any other
marshaling of the assets of the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior Debt shall
be entitled to receive payment in full of principal of and interest, if any, on
such Senior Debt, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt,
before the Holders of the Securities are entitled to receive or retain any
payment or distribution of any kind or character, whether in cash, property or
securities (including any payment by distribution that may be payable or
deliverable by reason of the payment of any other debt of the Company (including
any series of the Securities) subordinated to the payment of the Securities,
such payment or distribution being hereafter referred to as a "Junior
Subordinated Payment"), on account of principal of or interest (including any
Additional Interest) on the Securities or on account of the purchase or other
acquisition of Securities by the Company or any Subsidiary and to that end the
holders of Senior Debt shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, including any Junior Subordinated Payment, that
may be payable or deliverable in respect of the Securities in any such
Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Debt remaining unpaid, to the extent necessary to
pay all Senior Debt in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan or reorganization or readjustment, in each case, which securities are
subordinated in right of payment to all then outstanding Senior Debt to
substantially the same extent as, or to a greater
-83-
<PAGE>
extent than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article VIII shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person that
acquires by sale such properties and assets substantially as an entirety, as the
case may be, shall, as a part of such consolidation, merger, or sale comply with
the conditions set forth in Article VIII.
SECTION 13.03. Prior Payment to Senior Debt Upon Acceleration of
Securities. In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall first be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (including any amounts due upon acceleration), or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the Securities
will be entitled to receive or retain any payment or distribution of any kind or
character, whether in cash, property or securities (including any Junior
Subordinated Payment) by the Company on account of the principal of or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section shall prevent the satisfaction
of any sinking fund payment in accordance with this Indenture or as otherwise
specified as contemplated by Section 3.01 for the Securities of any series by
delivering and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such declaration of
acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.02 would be applicable.
-84-
<PAGE>
SECTION 13.04. No Payment When Senior Debt in Default. (a) In the event
and during the continuation of any default by the Company in the payment of
principal of or interest, if any, on any Senior Debt, or in the event that any
event of default with respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and such acceleration shall have
been rescinded or annulled, or (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then no
direct or indirect payment or distribution of any kind or character, whether in
cash, property or securities (including any Junior Subordinated Payment), by
set-off or otherwise, shall be made or agreed to be made by the Company on
account of principal or interest (including any Additional Interest) on the
Securities or on account of any redemption, repayment, retirement, purchase or
other acquisition of any Securities by the Company or any Subsidiary; provided,
however, that nothing in this Section shall prevent the satisfaction of any
sinking fund payment in accordance with this Indenture or as otherwise specified
as contemplated by Section 3.01 for the Securities of any series by delivering
and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such default in
payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.02 would be applicable.
SECTION 13.05. Payment Permitted If No Default. Nothing contained in
this Article or elsewhere in this Indenture or in any of the Securities shall
prevent (a) the Company, at any time except during the pendency of any
Proceeding referred to in Section 13.02 or under the conditions described in
Sections 13.03 and 13.04, from making payments at any time of principal of or
interest (including any Additional Interest) on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such payment by the Company or application by the
Trustee, as
-85-
<PAGE>
the case may be, it did not have knowledge that such payment or application, as
the case may be, would have been prohibited by the provisions of this Article.
SECTION 13.06. Subrogation to Rights of Holders of Senior Debt. Subject
to the payment in full of all amounts due on all Senior Debt to the extent
required under Sections 13.02 and 13.03 of this Indenture, or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, the Holders of the Securities shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Debt pursuant to the provisions of this Article (equally and ratably with
the holders of all indebtedness of the Company that by its express terms is
subordinated to Senior Debt of the Company to substantially the same extent as
the Securities are subordinated to the Senior Debt and is entitled to like
rights of subrogation by reason of any payments or distributions made to holders
of such Senior Debt) to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt until the principal of and interest on the Securities shall be paid
in full. For purposes of such subrogation or assignment, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt, and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 13.07. Provisions Solely to Define Relative Rights. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Debt on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as between the Company and the Holders of the Securities, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest (including any
Additional Interest) on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than their rights in relation to the holders of Senior Debt; or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this Indenture
including, without limitation, filing and voting claims in any Proceeding,
subject to the rights, if any, under this Article of the holders of Senior Debt
to receive cash, property and
-86-
<PAGE>
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 13.08. Trustee to Effectuate Subordination. Each Holder of a
Security by his or her acceptance thereof authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination provided in this Article and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 13.09. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof that any such holder may have or be otherwise charged with.
SECTION 13.10. Notice to Trustee. The Company shall give prompt written
notice to 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 Debt or from any
trustee, agent or representative therefor (whether or not the facts contained in
such notice are true); provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least two Business Days
prior to the date upon which by the terms hereof any monies may become payable
for any purpose (including, without limitation, the payment of the principal of
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.
SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Article VI, and the
Holders of the Securities shall be entitled to conclusively rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such
-87-
<PAGE>
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 Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt. The
Trustee, in its capacity as trustee under this Indenture, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt and shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt shall be entitled by virtue of
this Article or otherwise.
SECTION 13.13. Rights of Trustee as Holder of Senior Debt: Preservation
of Trustee's Rights. The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Debt that
may at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
SECTION 13.14. Article Applicable to Paying Agents. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in addition to
or in place of the Trustee.
SECTION 13.15. Certain Conversions or Exchanges Deemed Payment. For
purposes of this Article XIII only, (a) the issuance and delivery of junior
securities (as defined below) upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of or interest (including any Additional Interest) on the Securities
or on account of the purchase or other acquisition of Securities, and (b) the
payment, issuance or delivery of cash, property or securities (other than junior
securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such Security. For the
purposes of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company and (ii) securities of the Company that are
subordinated in right of payment to all Senior Debt 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.
-88-
<PAGE>
ARTICLE XIV
Conversion of Securities
SECTION 14.01. Conversion Rights. Subject to and upon compliance with
the provisions of this Article XIV, the Securities are convertible, at the
option of the Holder, at any time on or before 5:00 p.m. (Richmond, Virginia
time) on the earlier of (i) the Business Day immediately preceding the date of
repayment of such Securities, whether at maturity or upon prepayment, and (ii)
the Conversion Termination Date of the Securities, into fully paid and
nonassessable shares of Common Stock at a per share conversion price equal to
$_____, subject to adjustment as described in this Article XIV (as so adjusted,
the "Conversion Price"). A Holder of Securities may convert any portion of the
principal amount of such Securities into that number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) obtained by dividing the principal amount of the
Securities to be converted by the Conversion Price. In case a Security or
portion thereof is called for redemption or prepayment, such conversion right in
respect of the Security or portion so called shall expire at 5:00 p.m.
(Richmond, Virginia time) on the Business Day immediately preceding the
corresponding Redemption Date, unless the Company defaults in making the payment
due upon redemption or prepayment.
SECTION 14.02. Conversion Procedures. (a) To convert all or a portion
of the Securities, the Holder thereof shall deliver to the Conversion Agent an
irrevocable notice in the form of Exhibit B attached to this Indenture (each, a
"Notice of Conversion Request") setting forth the principal amount of Securities
to be converted, together with the name or names, if other than the Holder, in
which the shares of Common Stock should be issued upon conversion and, if such
Securities are definitive Securities, surrender to the Conversion Agent the
Securities to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Trust Securities may exercise its right under
the related Trust Agreement to exchange such Trust Securities for Securities
which will be converted into Common Stock by delivering to the Conversion Agent
an irrevocable request (each, a "Conversion Request") setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Trust Securities for a portion of the Securities held
by the related Guaranty Capital Trust (at an exchange rate of $25.00 principal
amount of Securities for each Trust Security) and (ii) immediately to convert
such Securities, on behalf of such holder, into Common Stock pursuant to this
Article XIV and, if such Trust Securities are in definitive form, surrendering
such Trust Securities, duly endorsed or assigned to the Company or in blank. So
long as any Trust Securities are outstanding, no Guaranty Capital Trust shall
convert any Securities except pursuant to a Conversion Request
-89-
<PAGE>
delivered to the Conversion Agent by a holder of Trust Securities.
Holders of Securities at 5:00 p.m. (Richmond, Virginia time) on a
record date for an Interest Payment Date will be entitled to receive the
interest payable on such Securities on the corresponding Interest Payment Date
notwithstanding the conversion of such Securities following such record date but
on or prior to such Interest Payment Date. Except as provided in the immediately
preceding sentence, the Company will not make, or be required to make, any
payment, allowance or adjustment for accumulated and unpaid interest, whether or
not in arrears, on converted Securities; provided, however, that if notice of
prepayment of Securities is mailed or otherwise given to Holders of Securities
or the related Guaranty Capital Trust issues a press release announcing a
Conversion Termination Date, then, if any Holder of Securities converts any
Securities into Common Stock on any date on or after the date on which such
notice of prepayment is mailed or otherwise given or the date of such press
release, as the case may be, and if such date of conversion falls on any day
from and including the first day of an Extension Period and on or prior to the
Interest Payment Date upon which such Extension Period ends, such converting
Holder shall be entitled to receive either (i) if the date of such conversion
falls after a record date and on or prior to the next succeeding Interest
Payment Date, all accrued and unpaid interest on such Securities (including
interest thereon, if any, to the extent permitted by applicable law) to such
Interest Payment Date or (ii) if the date of such conversion does not fall on a
date described in clause (i) above, all accrued and unpaid interest on such
Securities (including interest thereon, if any, to the extent permitted by
applicable law) to the most recent Interest Payment Date prior to the date of
such conversion, which interest shall, in either such case, be paid to such
converting Holder unless the date of conversion of such Securities is on or
prior to the Interest Payment Date upon which such Extension Period ends and
after the record date for such Interest Payment Date, in which case such
interest shall be paid to the person who was the Holder of such Securities (or
one or more predecessor Securities) at 5:00 p.m. (Richmond, Virginia time) on
such record date. Except as otherwise set forth above in this paragraph, in the
case of any Security that is converted, interest whose Stated Maturity is after
the date of conversion of such Security shall not be payable, and the Company
shall not make or be required to make any other payment, adjustment or allowance
with respect to accrued but unpaid interest (including Additional Interest and
Additional Sums, if any) on the Securities being converted, which shall be
deemed to be paid in full. If any Security called for prepayment is converted,
any money deposited with the Trustee or with any Paying Agent or so segregated
and held in trust for the prepayment of such Security shall (subject to any
right of the Holder of such Security or any Predecessor Security to receive
interest as provided in this Indenture) be paid to the Company
-90-
<PAGE>
upon a Company Request or, if then held by the Company, shall be discharged from
such trust.
Each conversion shall be deemed to have been effected immediately prior
to 5:00 p.m. (Richmond, Virginia time) on the day (the "Conversion Date") on
which the Notice of Conversion Request or the Notice of Conversion, as the case
may be, was received by the Conversion Agent from the Holder or from a holder of
the Trust Securities, as the case may be, effecting a conversion thereof
pursuant to its conversion rights under the related Trust Agreement. The Person
or Persons entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as a record holder or holders of such Common
Stock as of the Conversion Date. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion Request, a certificate or certificates for the number of full shares
of Common Stock issuable upon such conversion, together with the cash payment,
if any, in lieu of any fraction of any share, to the Person or Persons entitled
to receive the same. The Conversion Agent shall deliver such certificate or
certificates to each such Person or Persons.
(b) Subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in Section 14.02(a), the
Company's delivery upon conversion of the fixed number of shares of Common Stock
into which the Securities are convertible (together with the cash payment, if
any, in lieu of fractional shares) shall be deemed to satisfy the Company's
obligation to pay the principal amount at maturity of the portion of Securities
so converted and any unpaid interest (including Additional Interest and
Additional Sums, if any) accrued on such Securities at the time of such
conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but, in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the Closing Price as such fractional interest on the date on which the
Securities or Trust Securities, as the case may be, were duly surrendered to the
Conversion Agent for conversion, or, if such day is not a Trading Day, on the
next Trading Day, and the Conversion Agent in turn will make such payment, if
any, to the Holder of the Securities or the holder of the Trust Securities so
converted.
(d) In the event of the conversion of any Security in part
only, a new Security or Securities for the unconverted portion thereof will be
issued in the name of the Holder thereof upon the cancellation thereof.
(e) In effecting the conversion transactions described in
this Section, the Conversion Agent is acting as agent of the holders of Trust
Securities (in the exchange of Trust Securities
-91-
<PAGE>
for Securities) and as agent of the Holders of Securities (in the conversion of
Securities into Common Stock), as the case may be, directing it to effect such
conversion transactions. The Conversion Agent is hereby authorized (i) to
exchange Trust Securities for Securities held by the related Guaranty Capital
Trust from time to time in connection with the conversion of such Trust
Securities in accordance with this Article XIV and (ii) to convert all or a
portion of such Securities into Common Stock and thereupon to deliver such
shares of Common Stock in accordance with the provisions of this Article XIV and
to deliver to such Guaranty Capital Trust a new Security or Securities for any
resulting unconverted principal amount.
SECTION 14.03. Conversion Price Adjustments. The Conversion Price shall
be subject to adjustment (without duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the Conversion Price in
effect immediately prior to such action shall be adjusted so that the Holder of
any Securities thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company that he would have
owned immediately following such action had such Securities been converted
immediately prior thereto. An adjustment made pursuant to this Section 14.03(a)
shall become effective immediately after the record date in the case of a
dividend or other distribution and shall become effective immediately after the
effective date in case of a subdivision, combination or reclassification (or
immediately after the record date if a record date shall have been established
for such event). If, as a result of an adjustment made pursuant to this Section
14.03(a), the Holder of any Security thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes or series of capital
stock of the Company, the Board of Directors (whose determination shall be
conclusive and shall be described in a resolution of the Board of Directors
filed with the Trustee) shall determine the allocation of the adjusted
Conversion Price between or among shares of such classes or series of capital
stock.
(b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned in this Section 14.03(b)) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price per share
of Common Stock on such record date, the Conversion Price for the Securities
shall be adjusted so that the same shall equal
-92-
<PAGE>
the price determined by multiplying the Conversion Price in effect immediately
prior to the date of issuance of such rights or warrants by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares that the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such Current Market Price, and of
which the denominator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants. For the purposes of
this subsection, the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company shall
not issue any rights or warrants in respect of the shares of Common Stock held
in the treasury of the Company. In case any rights or warrants referred to in
this subsection in respect of which an adjustment shall have been made shall
expire unexercised within 45 days after the same shall have been distributed or
issued by the Company, the Conversion Price shall be readjusted at the time of
such expiration to the Conversion Price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(c) Subject to the last sentence of this Section 14.03(c), in
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness, shares of any class or series of
capital stock, cash or assets (including securities, but excluding any rights or
warrants referred to in Section 14.03(b), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in Section
14.03(a)), the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this Section 14.03(c) by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on the date fixed for the payment of
such distribution (the "Reference Date") less the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), on the
Reference Date, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share of Common
Stock, and the denominator shall be such Current Market Price per share of the
Common Stock, such reduction to become effective immediately prior to the
opening of business on the day following the Reference Date. In the event that
such dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price that would then be in effect if
such dividend or distribution had not occurred. If
-93-
<PAGE>
the Board of Directors determines the fair market value of any distribution for
purposes of this Section 14.03(c) by reference to the actual or when issued
trading market for any securities comprising such distribution, it must, in
doing so, consider the prices in such market over the same period used in
computing the Current Market Price per share of Common Stock. For purposes of
this Section 14.03(c), any dividend or distribution that includes shares of
Common Stock or rights or warrants to subscribe for or purchase shares of Common
Stock shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, shares of capital stock, cash or assets other than
such shares of Common Stock or such rights or warrants (making any Conversion
Price reduction required by this Section 14.03(c)) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (making any further Conversion Price reduction required by Section
14.03(a) or 14.03(b)), except (A) the Reference Date of such dividend or
distribution as defined in this Section 14.03(c) shall be substituted as (a)
"the record date in the case of a dividend or other distribution," and (b) "the
record date for the determination of stockholders entitled to receive such
rights or warrants" within the meaning of Sections 14.03(a) and 14.03(b),
respectively, and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of computing any
adjustment of the Conversion Price in Section 14.03(a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding all regular cash
dividends, if the annualized amount thereof per share of Common Stock does not
exceed 15% of the Current Market Price per share of the Common Stock on the
Trading Day immediately preceding the date of declaration of such dividend), the
Conversion Price shall be reduced to equal the price determined by multiplying
the Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this Section 14.03(d) by a fraction
of which the numerator shall be the Current Market Price per share of the Common
Stock on the date fixed for the payment of such dividend or distribution less
the amount of cash so distributed (and not excluded as herein provided) that is
allocable to one share of Common Stock, and the denominator shall be such
Current Market Price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following the
date fixed for the payment of such dividend or distribution; provided, however,
that in the event the portion of the cash so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market Price per share
of the Common Stock on the record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of Securities
shall have the right to receive upon conversion the amount of cash that such
Holder would have received had such Holder converted each Security immediately
prior to the record date for the distribution of the cash. In
-94-
<PAGE>
the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price that would
then be in effect if such dividend or distribution had not occurred.
(e) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any subsidiary of the Company for all or any
portion of the Common Stock shall expire and such tender or exchange offer shall
involve the payment by the Company or such subsidiary of consideration per share
of Common Stock having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration Time")
that tenders or exchanges may be made pursuant to such tender or exchange offer
(as it shall have been amended) that exceeds 110% of the Current Market Price
per share of Common Stock on the Trading Day next succeeding the Expiration
Time, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
Section 14.03(e) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
at the Expiration Time multiplied by the Current Market Price per share of the
Common Stock on the Trading Day next succeeding the Expiration Time, and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price per share of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time.
(f) For the purpose of any computation under Sections
14.03(b), (c), (d) or (e), the "Current Market Price" per share of Common Stock
on any date in question shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the Company commencing
not more than 20 Trading Days before, and ending not later than, the earlier of
the day in question or, if applicable, the day before the "ex" date with respect
to the issuance or distribution requiring such computation; provided, however,
that if another event occurs that would require an adjustment pursuant to any of
Sections 14.03(a) through (e), inclusive, the Board of Directors may make such
adjustments to the Closing Prices during such five Trading Day period as it
determines to be appropriate to effectuate the intent of the provisions of this
Section 14.03, in
-95-
<PAGE>
which case any such determination by the Board of Directors shall be set forth
in a resolution of the Board of Directors and shall be conclusive. For purposes
of this paragraph, the term "ex" date, (i) when used with respect to any
issuance or distribution, means the first date on which the Common Stock trades
regular way on the NYSE or on such successor securities exchange on which the
Common Stock may be listed or in the relevant market from which the Closing
Prices were obtained without the right to receive such issuance or distribution,
and (ii) when used with respect to any tender or exchange offer, means the first
date on which the Common Stock trades regular way on such securities exchange or
in such market after the Expiration Time of such offer.
(g) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 14.03(a) through (e), as it
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. The Company from time to time may reduce the
Conversion Price by any amount for any period of time if the period is at least
20 days, the reduction is irrevocable during the period, and the Board of
Directors of the Company shall have made a determination that such reduction
would be in the best interest of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to Holders of record of the Securities a notice
of the reduction at least 15 days prior to the date that the reduced Conversion
Price takes effect, and such notice shall state the reduced Conversion Price and
the period that it will be in effect.
(h) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Conversion Price; provided, however, that any adjustment that, by reason of
this Section 14.03(h), is not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(i) If any action would require adjustment of the Conversion
Price pursuant to more than one of the provisions described above, only one
adjustment shall be made, and such adjustment shall be the amount of adjustment
that has the highest absolute value to the Holder of the Securities.
SECTION 14.04. Reclassification, Consolidation, Merger or Sale of
Assets. In the event that the Company shall be a party to any transaction,
including without limitation (a) any recapitalization or reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the
-96-
<PAGE>
Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), (c) any sale, transfer or lease of all or
substantially all of the assets of the Company or (d) any compulsory share
exchange, in each case pursuant to which the Common Stock is converted into the
right to receive other securities, cash or other property, then lawful provision
shall be made as part of the terms of such transaction whereby the Holder of
each Security then outstanding shall have the right thereafter to convert each
Security only into the kind and amount of securities, cash or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock of the Company into which such Security could have been
converted immediately prior to such transaction.
The Company or the Person that is formed by such consolidation or that
results from such merger or that acquires such assets or the Company's shares,
as the case may be, shall make provision in its certificate or articles of
incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments that, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article XIV. The above provisions shall similarly apply to
successive transactions of the foregoing type.
SECTION 14.05. Notice of Adjustments of Conversion Price. Whenever the
Conversion Price is adjusted as herein provided:
(a) The Company shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted Conversion Price and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Capital Securities and the Securities; and
(b) Notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall, as soon as
practicable, be mailed by the Company to all record holders of Capital
Securities and all Holders of the Securities at their last addresses as they
appear upon the Capital Securities Register or the Securities Register, as the
case may be.
SECTION 14.06. Prior Notice of Certain Events. In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a
-97-
<PAGE>
dividend payable in shares of Common Stock or (B) a dividend payable in cash
that would not require an adjustment pursuant to Section 14.03(c) or (d), or
(ii) authorize a tender or exchange offer that would require an adjustment
pursuant to Section 14.03(e);
(b) the Company shall authorize the granting to all holders
of Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall (1) if any Capital Securities are Outstanding, cause to
be filed with the transfer agent for the Capital Securities, and cause to be
mailed to the holders of record of the Capital Securities, at their last
addresses as they shall appear in the Capital Securities Register or (2) cause
to be mailed to all Holders at their last addresses as they shall appear in the
Securities Register, at least 15 days prior to the applicable record or
effective date hereafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 14.07. Certain Defined Terms. The following definitions shall
apply to terms used in this Article XIV:
-98-
<PAGE>
(a) "Closing Price" of any security on any day shall mean the
last reported sale price of such security, regular way, on such day or, if no
sale takes place on such day, the average of the reported closing bid and asked
prices of such security on such day, regular way, in either case as reported on
the NYSE Composite Tape or, if the security is not listed or admitted to trading
on the NYSE, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if not listed or admitted to
trading on a national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc. or, if such security is not
quoted or admitted to trading on such quotation system, on the principal
quotation system on which such security is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of such security in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available in such manner, as
furnished by any NYSE member firm selected from time to time by the Board of
Directors for that purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.
(b) "Trading Day" shall mean a day on which securities are
traded on the national securities exchange or quotation system used to determine
the Closing Price.
SECTION 14.08. Dividend or Interest Reinvestment Plans. Notwithstanding
the foregoing provisions, the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Common Stock under any such plan, and the issuance of any shares of
Common Stock or options or rights to purchase such shares pursuant to any
employee benefit plan or program of the Company pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the
date that the Securities were first issued, shall not be deemed to constitute an
issuance of Common Stock or exercisable, exchangeable or convertible securities
by the Company to which any of the adjustment provisions described above
applies. There shall also be no adjustment of the Conversion Price in case of
the issuance of any stock (or securities convertible into or exchangeable for
stock) of the Company except as specifically described in this Article XIV.
SECTION 14.09. Certain Additional Rights. In case the Company shall, by
dividend or otherwise, declare or make a distribution on its Common Stock
referred to in Section 14.03(c) or (d) (including, without limitation, dividends
or distributions referred to in the last sentence of Section 14.03(c)), the
Holder of the Securities, upon the conversion thereof subsequent to 5:00 p.m.
(Richmond, Virginia time) on the date fixed for the
-99-
<PAGE>
determination of stockholders entitled to receive such distribution and prior to
the effectiveness of the Conversion Price adjustment in respect of such
distribution, shall also be entitled to receive, for each share of Common Stock
into which the Securities are converted, the portion of the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash and assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose election shall be
evidenced by a resolution of the Board of Directors) with respect to all Holders
so converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of Securities described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock that the Holder of Securities so converted is entitled
to receive in accordance with the immediately preceding sentence, the Company
may elect (such election to be evidenced by a resolution of the Board of
Directors) to distribute to such Holder a due bill for the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash or assets to which such Holder is so entitled, provided, that such due bill
(i) meets any applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then traded and (ii)
requires payment or delivery of such shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets no later than
the date of payment or delivery thereof to holders of shares of Common Stock
receiving such distribution.
SECTION 14.10. Trustee Not Responsible for Determining Conversion Price
or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time
be under any duty or responsibility to any Holder of any Security to determine
whether any facts exist that may require any adjustment of the Conversion Price,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making any such adjustment. Neither the Trustee nor
any Conversion Agent shall be accountable with respect to the validity or value
(or the kind of account) of any shares of Common Stock or of any securities or
property that may at any time be issued or delivered upon the conversion of any
Security; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any Security
for the purpose of conversion, or, except as expressly herein provided,
-100-
<PAGE>
to comply with any of the covenants of the Company contained in this Article
XIV.
SECTION 14.11. Termination of Conversion Rights. (a) Right of Company
to Terminate Conversion Rights. On and after _______ __, 2001, the Company may,
at its option, cause the conversion rights of holders of Securities to terminate
if (i) the Company is then current in the payment of interest on the Securities
(including Additional Interest and Additional Sums, if any) (except to the
extent that the payment of interest may have been deferred as a result of any
Extension Period) and (ii) for at least 20 Trading Days within any period of 30
consecutive Trading Days, including the last Trading Day of such period, the
Closing Price of the Common Stock shall have exceeded 115% of the Conversion
Price of the Securities then in effect.
(b) Exercise of Option Prior to a Dissolution Event
Distribution. To exercise its conversion expiration option prior to the
distribution of Securities from the related Guaranty Capital Trust to the
holders of the corresponding Trust Securities upon the occurrence of a
Dissolution Event (a "Dissolution Event Distribution"), the Company shall give
written notice to such Guaranty Capital Trust directing such Guaranty Capital
Trust to issue the "Press Release" (as defined in Section 4.08(h)(ii) of the
related Trust Agreement), to cause the conversion rights of the holders of Trust
Securities to terminate. The Company shall also furnish a copy of such notice to
the Trustee (and the Conversion Agent if the Trustee is not then serving as the
Conversion Agent). If such Guaranty Capital Trust fails to issue the Press
Release within two (2) Business Days after its receipt of such notice, the
Company may, on behalf of such Guaranty Capital Trust, issue the Press Release
in accordance with the provisions of Section 4.08(h) of the related Trust
Agreement. The conversion rights of the Holders of the Securities shall
terminate simultaneously with the termination of the conversion rights of the
holders of the Trust Securities.
(c) Exercise of Option After a Dissolution Event
Distribution. To exercise its conversion termination option after a Dissolution
Event Distribution, the Company shall issue a press release for publication on
the Dow Jones News Service or on a comparable news service announcing the
Conversion Termination Date of the Securities. Such press release must be issued
prior to the opening of business on the second Trading Day after a period in
which the conditions of Section 14.11(a) have been satisfied, but in no event
prior to _______ __, 2001. Such press release shall state that the Company has
elected to exercise its right to terminate the conversion privilege, specify the
Conversion Termination Date of the Securities (as determined in the manner set
forth below) and provide the Conversion Price and the Closing Price of the
Common Stock, in each case as of the close of business on the Trading Day next
preceding the date of the press release. Additionally, the Company shall cause a
notice of the termination of conversion rights (a "Notice of
-101-
<PAGE>
Conversion Termination") to be given by first-class mail to each Holder of
Securities, the Trustee (and the Conversion Agent if the Trustee is not then
serving as the Conversion Agent) not more than four Business Days after the
Company issues such press release. The Notice of Conversion Termination shall
state, as appropriate: (i) the Conversion Termination Date of the Securities;
(ii) the Conversion Price of the Securities and the Closing Price of the Common
Stock, in each case as of the close of business on the Trading Day next
preceding the date of the Notice of Conversion Termination; (iii) the place or
places at which a Notice of Conversion Request with respect to Securities may be
given to the Conversion Agent in accordance with Section 14.02 prior to the
Conversion Termination Date of the Securities; and (iv) such other information
or instructions as the Company deems necessary or advisable to enable each
Holder to exercise its conversion right hereunder. Notice of Conversion
Termination shall be deemed to have been given on the day that such notice is
first mailed by first-class mail, postage prepaid, to each Holder of Securities
at the address of such Holder appearing in the Securities Register (whether or
not such Holder receives the Notice of Conversion Termination). No defect in the
Notice of Conversion Termination or in the mailing thereof with respect to any
Securities shall affect the validity of the Company's exercise of its conversion
termination option if the press release referred to above shall have been
issued.
(d) Certain Definitions. The term "Conversion Termination
Date" has the meaning assigned to such term in Section 4.08(h)(ii) of the
related Trust Agreement. The "Conversion Termination Date of the Securities"
shall be the close of business on the Business Day selected by the Company that
is not less than 30 nor more than 60 calendar days after (1) the date on which
the related Guaranty Capital Trust (or the Company, as the case may be) issues
the Press Release as provided in Section 14.11(b) announcing the Company's
intention to terminate the conversion rights of the holders of the Trust
Securities or (2) the date on which the Company issues the press release
required by Section 14.11(c) announcing its intention to terminate the
conversion rights of the Holders of the Securities, as the case may be. If the
Company does not exercise its conversion termination option, the Conversion
Termination Date of the Securities (i) with respect to any principal amount of
Securities that is called for repayment shall be the close of business on the
Business Day prior to the scheduled date for such repayment and (ii) in any
other case shall be the close of business on the Business Day prior to the
Maturity Date of the Securities. As of the close of business on the earlier of
the Conversion Termination Date or the Conversion Termination Date of the
Securities, the Securities shall be deemed to be non-convertible securities.
This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to
-102-
<PAGE>
be an original, but all such counterparts shall together constitute 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 written above.
GUARANTY FINANCIAL CORPORATION
By:________________________________
Name:
Title:
[Seal]
WILMINGTON TRUST COMPANY,
as Trustee
By:________________________________
Name:
Title:
[Seal]
-103-
<PAGE>
[Form of Restricted Securities Certificate]
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 3.05 and Section 3.06
of the Junior Subordinated Indenture)
[__________________________],
as Security Registrar
[address]
Re: Junior Convertible Subordinated Debt Securities of Guaranty Financial
Corporation (the "Company") (the "Securities")
Reference is made to the Junior Subordinated Indenture, dated as of
________ __, 1998 (the "Indenture"), between Guaranty Financial Corporation and
Wilmington Trust Company, as trustee (the "Trustee"). Terms used herein and
defined in the Indenture or in Regulation D, Rule 144A or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein
as so defined.
This certificate relates to $____________ aggregate principal amount of
Securities, that are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). __________________________________________
CERTIFICATE No(s). ____________________________________
CURRENTLY IN BOOK-ENTRY FORM: __Yes __No (check one)
The person in whose name this certificate is executed below (the "undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary in the name of the Undersigned, as or on behalf of the
Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement
<PAGE>
under the Securities Act, it is being effected in accordance with one of the
following as indicated (check one):
___ (1) transferred to the Company; or
___ (2) exchanged for the undersigned's own account without transfer; or
___ (3) transferred pursuant to and in compliance with Rule 144A under the
Securities Act; or
___ (4) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring the Securities for its own
account, or for the account of such an institutional "accredited
investor," for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of
the Securities Act; or
___ (5) transferred pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless such transfer is being effected in accordance with one of the above, the
Securities Registrar will refuse to register any of the Securities evidenced by
this certificate in the name of any person other than the Holder thereof;
provided, however, that if (4) or (5) is applicable, the Securities Registrar
may require, prior to registering any such transfer of the Securities such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, such as the exemption provided by Rule 144 under such Act;
provided, further, that if box (3) is checked, the transferee must also certify
that it is a qualified institutional buyer as defined in Rule 144A.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: ______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:___________________________________
Name:
Title:
-2-
<PAGE>
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
-3-
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION REQUEST
To: Guaranty Financial Corporation
The undersigned owner of these Securities hereby irrevocably exercises
the option to convert these Securities, or the portion below designated, into
Common Stock of Guaranty Financial Corporation (the "Common Stock") in
accordance with the terms of the Indenture (the "Indenture"), dated as of
__________ __, 1998, between the Company and Wilmington Trust Company, as
Trustee. Pursuant to the aforementioned exercise of the options to convert these
Capital Securities, the undersigned hereby directs the Conversion Agent (as that
term is defined in the Indenture) to convert such Securities on behalf of the
undersigned, into Common Stock (at the conversion price specified in the
Indenture).
The undersigned also hereby directs the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date:
------------------------
Principal Amount of Securities to be converted ($25 or integral multiples
thereof):
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
(Sign exactly as your name appears on the other side of this Security) (for
conversion only)
Please Print or Type Name and Address,
Including Zip Code, and Social Security
or Other Identifying Number
- --------------------------------------
-4-
<PAGE>
- --------------------------------------
- --------------------------------------
- --------------------------------------
Signature Guarantee:*
---------------------------------------------
- ----------------
* Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
-5-
Exhibit 4.7
EXECUTION COPY
================================================================================
GUARANTEE AGREEMENT
Between
GUARANTY FINANCIAL CORPORATION
(as Guarantor)
WILMINGTON TRUST COMPANY
(as Trustee)
Dated as of
________ __, 1998
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Indenture Section of
Act of 1939, as amended Guarantee Agreement
- ----------------------- -------------------
310(a) ....................................... 4.01(a)
310(b) ....................................... 4.01(c), 208
310(c) ....................................... Inapplicable
311(a) ....................................... 2.02(b)
311(b) ....................................... 2.02(b)
311(c) ....................................... Inapplicable
312(a) ....................................... 2.02(a)
312(b) ....................................... 2.02(b)
313(a) ....................................... 2.03
313(b) ....................................... 2.03
313(c) ....................................... 2.03
313(d) ....................................... 2.03
314(a) ....................................... 2.04
314(b) ....................................... Inapplicable
314(c) ....................................... 2.05
314(d) ....................................... Inapplicable
314(e) ....................................... 1.01, 2.05, 3.02
314(f) ....................................... 2.01, 3.02
315(a) ....................................... 3.01(d)
315(b) ....................................... 2.07
315(c) ....................................... 3.01(c)
315(d) ....................................... 3.01(d)
316(a) ....................................... 1.01, 2.06, 5.04
316(b) ....................................... 5.03, 5.04
316(c) ....................................... 8.02
317(a) ....................................... Inapplicable
317(b) ....................................... Inapplicable
318(a) ....................................... 2.01(b)
- ------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I -- Definitions.......................................................................................... 2
SECTION 1.01. Definitions...................................................................................... 2
ARTICLE II -- Trust Indenture Act................................................................................. 5
SECTION 2.01. Trust Indenture Act; Application................................................................. 5
SECTION 2.02. List of Holders.................................................................................. 5
SECTION 2.03. Reports by the Guarantee Trustee................................................................. 6
SECTION 2.04. Periodic Reports to the Guarantee Trustee........................................................ 6
SECTION 2.05. Evidence of Compliance with Conditions Precedent................................................. 6
SECTION 2.06. Events of Default; Waiver........................................................................ 6
SECTION 2.07. Event of Default; Notice......................................................................... 6
SECTION 2.08. Conflicting Interests............................................................................ 7
ARTICLE III -- Powers, Duties and Rights of the Guarantee Trustee................................................. 7
SECTION 3.01. Powers and Duties of the Guarantee Trustee....................................................... 7
SECTION 3.02. Certain Rights of Guarantee Trustee.............................................................. 9
SECTION 3.03. Indemnity........................................................................................ 11
SECTION 3.04. Expenses......................................................................................... 11
ARTICLE IV -- Guarantee Trustee................................................................................... 11
SECTION 4.01. Guarantee Trustee: Eligibility................................................................... 11
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee Trustee.................................... 12
ARTICLE V -- Guarantee............................................................................................ 13
SECTION 5.01. Guarantee........................................................................................ 13
SECTION 5.02. Waiver of Notice and Demand...................................................................... 13
SECTION 5.03. Obligations Not Affected......................................................................... 13
SECTION 5.04. Rights of Holders................................................................................ 14
SECTION 5.05. Guarantee of Payment............................................................................. 14
SECTION 5.06. Subrogation...................................................................................... 15
SECTION 5.07. Independent Obligations.......................................................................... 15
ARTICLE VI -- Covenants and Subordination......................................................................... 15
SECTION 6.01. Subordination.................................................................................... 15
SECTION 6.02. Pari Passu Guaranty.............................................................................. 15
ARTICLE VII -- Termination........................................................................................ 16
SECTION 7.01. Termination...................................................................................... 16
ARTICLE VIII -- Miscellaneous..................................................................................... 16
SECTION 8.01. Successors and Assigns........................................................................... 16
SECTION 8.02. Amendments....................................................................................... 16
SECTION 8.03. Notices.......................................................................................... 16
SECTION 8.04. Benefit.......................................................................................... 18
SECTION 8.05. Interpretation................................................................................... 18
SECTION 8.06. Governing Law.................................................................................... 18
</TABLE>
<PAGE>
GUARANTEE AGREEMENT (this "Guarantee
Agreement"), dated as of ________ __, 1998, executed
and delivered by GUARANTY FINANCIAL CORPORATION, a
bank holding company (the "Guarantor") having its
principal office at 1658 State Farm Boulevard,
Charlottesville, Virginia 22911, and WILMINGTON TRUST
COMPANY, a Delaware corporation (the "Guarantee
Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Trust Securities (as
defined herein) of GUARANTY CAPITAL TRUST I, a
Delaware statutory business trust (the "Issuer").
WHEREAS pursuant to an Amended and Restated Declaration of Trust (the
"Declaration of Trust"), dated as of ________ __, 1998, among the Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial ownership interests in the assets of the Issuer, the Issuer
is issuing $_______________ aggregate Liquidation Amount of its Capital Trust
Securities, Liquidation Amount $25.00 per security (the "Capital Securities"),
and $_______________ aggregate Liquidation Amount of its Common Securities,
Liquidation Amount $25.00 per security (the "Common Securities" and collectively
with the Capital Securities, the "Trust Securities"), representing undivided
beneficial ownership interests in the assets of the Issuer and having the terms
set forth in the Declaration of Trust;
WHEREAS the Trust Securities will be issued by the Issuer and the
proceeds thereof will be used by the Issuer to purchase the Junior Subordinated
Debt Securities due ________ __, 2028 (as defined in the Declaration of Trust)
(the "Junior Subordinated Debt Securities") of the Guarantor, which will be held
by Wilmington Trust Company, as Property Trustee under the Declaration of Trust,
as trust assets; and
WHEREAS, as incentive for the Holders to purchase Trust Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase of Trust Securities by
each Holder, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Trust Securities.
<PAGE>
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Guarantee Agreement, the
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration of Trust as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Capital Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Common Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Declaration of Trust" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice; provided, further, that no
Event of Default shall occur unless an Event of Default (as defined in the
Indenture or the Declaration of Trust) shall have occurred and be continuing.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions required to be paid on the Trust Securities, to the extent that
the Issuer shall have funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), with respect
2
<PAGE>
to the Trust Securities called for redemption by the Issuer to the extent that
the Issuer shall have funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary termination, winding-up or liquidation of the
Issuer, unless Junior Subordinated Debt Securities are distributed to the
Holders or all of the Capital Securities are redeemed, the lesser of (a) the
aggregate of the Liquidation Amount of $1,000 per Trust Security plus accrued
and unpaid Distributions on the Trust Securities to the date of payment to the
extent that the Issuer shall have funds on hand available to make such payment
at such time and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer after satisfaction of
liabilities to creditors of the Issuer as required by applicable law (in either
case, the "Liquidation Distribution"). If an Event of Default under the
Declaration of Trust has occurred and is continuing, no Guarantee Payments with
respect to the Common Securities or any guarantee payment under any Other
Guarantees (as defined in the Indenture) with respect to Common Securities of
any other Guaranty Capital Trust (as defined in the Indenture), if any, shall be
made until the Holders of Capital Securities shall be paid in full the Guarantee
Payments to which they are entitled under this Guarantee Agreement.
Subordination of Guarantee Payments on the Common Securities following such an
Event of Default under the Declaration of Trust shall be analogous to the
subordination of the Common Securities provided for in Section 4.03 of the
Declaration of Trust.
"Guarantee Trustee" means Wilmington 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 recital of
this Guarantee Agreement.
"Holder" means a person in whose name a Trust Security or Trust
Securities is registered on the books and records of the Issuer; provided,
however, that in determining whether the holders of the requisite percentage of
Trust Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
________ __, 1998, as supplemented and amended between the Guarantor and
Wilmington Trust Company, as trustee, relating to the issuance of the Junior
Subordinated Debt Securities.
3
<PAGE>
"Issuer" shall have the meaning specified in the first recital of this
Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in Liquidation Amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the aggregate Liquidation Amount of all then
Outstanding Capital Securities.
"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 Controller, 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 that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
officer, such condition or covenant has been complied with.
"Responsible Officer" when used with respect to the Guarantee 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 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
Guarantee Agreement, 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.
4
<PAGE>
"Senior Debt" shall have the meaning specified in the Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" has the meaning specified in Section 1.01 of the
Indenture.
"Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
Agreement will not be qualified under the Trust Indenture Act except upon the
effectiveness of a registration statement with respect to this Guarantee
Agreement.
(b) Upon qualification under the Trust Indenture Act as
contemplated in clause (a) above, if and to the extent that any provision of
this Guarantee Agreement limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.02. List of Holders. (a) The Guarantor shall furnish or cause
to be furnished to the Guarantee Trustee (i) semiannually, not more than 15 days
after January 15 and July 15 of each year, a list, in such form as the Guarantee
Trustee may reasonably require, of the names and addresses of the Holders ("List
of Holders") as of a date not more than 15 days prior to the delivery thereof,
and (ii) at such other times as the Guarantee Trustee may request in writing,
within 30 days after the receipt by the Guarantor of any such request, a List of
Holders as of a date not more than 15 days prior to the time such list is
furnished, in each case to the extent such information is in the possession or
control of the Guarantor and is not identical to a previously supplied list of
Holders or has not otherwise been received by the Guarantee Trustee in its
capacity as such. The Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
5
<PAGE>
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.03. Reports by the Guarantee Trustee. Not later than the last
calendar day in August of each calendar year, commencing with the last calendar
day in August, 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 2.04. Periodic Reports to the Guarantee Trustee. The Guarantor
shall provide to the Guarantee Trustee, the Securities and Exchange Commission
and the Holders such documents, reports and information, if any, as required by
Section 314 of the Trust Indenture Act and the compliance certificate required
by Section 314 of the Trust Indenture Act, in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by any officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
Liquidation Amount of the Securities may, by vote, on behalf of the Holders,
waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any 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 2.07. 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
6
<PAGE>
trust committee of directors and/or a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless a Responsible Officer charged with the
administration of the Declaration of Trust shall have received written notice of
such Event of Default.
SECTION 2.08. Conflicting Interests. The Declaration of Trust shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of
the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
7
<PAGE>
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee Agreement; but in the case
of any such certificates or opinions that by any provision
hereof or of the Trust Indenture Act are specifically required
to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
8
<PAGE>
(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 indemnity satisfactory to it
against such risk or liability is not reasonably assured to it.
SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject to the
provisions of Section 3.01:
(i) The Guarantee Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document reasonably
believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and 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
9
<PAGE>
of this Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such Holder
shall have provided to the Guarantee Trustee such security and
indemnity reasonably satisfactory to it, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided, that nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested
in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received and (C) shall be fully protected in acting in accordance with
such instructions.
(ix) the Guarantee 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 Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
10
<PAGE>
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee, and to hold it harmless against, any loss, liability or
expense including taxes (other than taxes based upon, measured by or determined
by the income of the Guarantee Trustee) incurred without negligence or bad faith
on the part of the Guarantee Trustee, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Guarantee Trustee will not claim or exact any lien or charge on any Guarantee
Payments as a result of any amount due to it under this Guarantee Agreement.
This indemnity shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
SECTION 3.04. Expenses. The Guarantor, as obligor on the Junior
Subordinated Debt Securities, shall from time to time reimburse the Guarantee
Trustee for such expenses and costs incurred in connection with the performance
of its duties hereunder as shall be agreed to in writing from time to time by
the Guarantor and the Guarantee Trustee.
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee: Eligibility. (a) There shall at all
times be a Guarantee Trustee that shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(c) of the Trust Indenture Act. If such
corporation publishes reports of
11
<PAGE>
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority, then, for the purposes of this
Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report
of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.10(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee. (a) Subject to Section 4.02(b), in the absence of the existence of an
Event of Default, the Guarantee Trustee may be appointed or removed without
cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
by written instrument executed by such Successor Guarantee Trustee and delivered
to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 30
days after delivery to the Guarantor of an instrument of resignation, the
resigning Guarantee Trustee may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.
12
<PAGE>
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Issuer), as and when due,
regardless of any defense, right of set-off or counterclaim that the Issuer may
have or assert. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders. The
Guarantor shall give written notice to the Guarantee Trustee as promptly as
practicable in the event it makes any direct payment hereunder.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of the Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Guarantee Trustee, Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Trust
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions (other than any extension of
time for payment of Distributions that results from the extension of
any interest payment period on the Junior Subordinated Debt Securities
as so provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Trust
Securities or the extension of time for the performance of any other
obligation arising under, out of or in connection with the Trust
Securities;
13
<PAGE>
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Trust Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Trust
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the
Holders of a Majority in Liquidation Amount of the Trust Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of this Guarantee Agreement
or exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Issuer or
any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts
14
<PAGE>
theretofore paid by the Issuer) or upon distribution of Junior Subordinated Debt
Securities to Holders as provided in the Declaration of Trust.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Issuer pursuant to Section 5.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Trust Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03.
ARTICLE VI
Covenants and Subordination
SECTION 6.01. 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 Debt of the Guarantor, to the same extent and in
the same manner that the Junior Subordinated Debt Securities are subordinated to
Senior Debt pursuant to the Indenture, it being understood that the terms of
Article XIII of the Indenture shall apply to the obligations of the Guarantor
under this Guarantee Agreement as if (x) such Article XIII were set forth herein
in full and (y) such obligations were substituted for the term "Securities"
appearing in such Article XIII.
SECTION 6.02. Pari Passu Guaranty. This Guarantee Agreement shall rank
pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of
15
<PAGE>
trust securities issued by a trust created by the Guarantor similar to Guaranty
Capital Trust I.
ARTICLE VII
Termination
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and
be of no further force and effect upon (i) full payment of the Redemption Price
of all Trust Securities, (ii) the distribution of Junior Subordinated Debt
Securities to the Holders in exchange for all of the Trust Securities or (iii)
full payment of the amounts payable in accordance with the Declaration of Trust
upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must repay any sums paid with respect to Trust
Securities or this Guarantee Agreement.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, the Guarantor shall
not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes that do
not adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Securities. The provisions of Article VI
of the Declaration of Trust concerning meetings of the Holders shall apply to
the giving of such approval.
SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed by delivery
of the original) or mailed by first class mail as follows:
16
<PAGE>
(a) if given to the Guarantor, to the address set forth below
or such other address, facsimile number or to the attention of such
other Person as the Guarantor may give notice to the Holders:
GUARANTY FINANCIAL CORPORATION
1658 State Farm Boulevard
Charlottesville, Virginia 22911
Facsimile No.: (804) 970-1422
(b) if given to the Issuer, in care of the Guarantee Trustee,
at the Issuer's (and the Guarantee Trustee's) address set forth below
or such other address as the Guarantee Trustee on behalf of the Issuer
may give notice to the Holders:
GUARANTY CAPITAL TRUST I
c/o Guaranty Financial Corporation
1658 State Farm Boulevard
Charlottesville, Virginia 22911
Facsimile No.: (804) 970-1422
with a copy to:
WILMINGTON TRUST COMPANY
1100 N. Market Street
Attention: Corporate Trust Administration
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
(c) if given to the Guarantee Trustee:
WILMINGTON TRUST COMPANY
1100 N. Market Street
Attention: Corporate Trust Administration
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
(d) if given to any Holder, at the address set forth on the
books and records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
17
<PAGE>
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the Trust
Securities.
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(b) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(c) all references in this Guarantee Agreement to Articles
and Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(d) 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;
(e) a reference to the singular includes the plural and vice
versa; and
(f) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF VIRGINIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
18
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
WILMINGTON TRUST COMPANY, as
Guarantee Trustee
By:_____________________________
Name:___________________________
Title:__________________________
GUARANTY FINANCIAL CORPORATION,
as Guarantor
By:_____________________________
Name:___________________________
Title:__________________________
19
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Guaranty Financial Corporation
Charlottesville, VA
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated January 30, 1998, relating to the
consolidated financial statements and schedules of Guaranty Financial
Corporation, which is contained in that Prospectus.
We also consent to the reference to us under the caption "Accountants" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
Richmond, Virginia
March 27, 1998
Exhibit 25.1
Registration No.
================================================================================
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) ____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GUARANTY FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
Virginia 54-1786496
(State of incorporation) (I.R.S. employer identification no.)
1658 State Farm Blvd.
Charlottesville, Virginia 22911
(Address of principal executive offices) (Zip Code)
Junior Subordinated Debt Securities
of Guaranty Financial Corporation
(Title of the indenture securities)
================================================================================
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
--------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
H:\...\trinact\t1\guarnty2.jsd
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE>
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
11
<PAGE>
such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
12
<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 23, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------- ----------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
-------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............................................ 236,646
Interest-bearing balances............................................................................ 0
Held-to-maturity securities................................................................................ 331,880
Available-for-sale securities............................................................................ 1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,822,320
LESS: Allowance for loan and lease losses........... 59,373
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve............................. 3,762,947
Assets held in trading accounts.................................................................................. 0
Premises and fixed assets (including capitalized leases)................................................... 129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................. 22
Customers' liability to this bank on acceptances outstanding..................................................... 0
Intangible assets............................................................................................ 4,905
Other assets............................................................................................... 100,799
Total assets............................................................................................. 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................................................... 4,034,633
Noninterest-bearing................ 839,928
Interest-bearing................... 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.................................................................... 61,290
Trading liabilities (from Schedule RC-D)......................................................................... 0
Other borrowed money:...................................................................................... ///////
With original maturity of one year or less..................................................... 673,000
With original maturity of more than one year.................................................... 43,000
Bank's liability on acceptances executed and outstanding......................................................... 0
Subordinated notes and debentures................................................................................ 0
Other liabilities (from Schedule RC-G)...................................................................... 76,458
Total liabilities........................................................................................ 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.................................................................... 0
Common Stock................................................................................................... 500
Surplus (exclude all surplus related to preferred stock).................................................... 62,118
Undivided profits and capital reserves..................................................................... 385,018
Net unrealized holding gains (losses) on available-for-sale securities....................................... 7,362
Total equity capital....................................................................................... 454,998
Total liabilities, limited-life preferred stock, and equity capital...................................... 5,919,206
</TABLE>
2
Exhibit 25.2
Registration No.
================================================================================
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) _____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GUARANTY FINANCIAL CORPORATION
GUARANTY CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Virginia 54-1786496
Delaware 54-6422391
(State of incorporation) (I.R.S. employer identification no.)
1658 State Farm Blvd.
Charlottesville, Virginia 22911
(Address of principal executive offices) (Zip Code)
Convertible Preferred Securities of Guaranty Capital Trust I
(Title of the indenture securities)
================================================================================
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------ ---------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
H:\...\trinact\t1\guarnty2.cap
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE>
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
11
<PAGE>
such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
12
<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 23, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------- --------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
-------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins...................................... 236,646
Interest-bearing balances...................................................................... 0
Held-to-maturity securities.......................................................................... 331,880
Available-for-sale securities...................................................................... 1,258,661
Federal funds sold and securities purchased under agreements to resell................................ 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,822,320
LESS: Allowance for loan and lease losses........... 59,373
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve....................... 3,762,947
Assets held in trading accounts............................................................................ 0
Premises and fixed assets (including capitalized leases)............................................. 129,740
Other real estate owned................................................................................ 2,106
Investments in unconsolidated subsidiaries and associated companies....................................... 22
Customers' liability to this bank on acceptances outstanding............................................... 0
Intangible assets...................................................................................... 4,905
Other assets......................................................................................... 100,799
Total assets....................................................................................... 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices................................................................................ 4,034,633
Noninterest-bearing.................. 839,928
Interest-bearing..................... 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase........................... 575,827
Demand notes issued to the U.S. Treasury...............................................................61,290
Trading liabilities (from Schedule RC-D)................................................................... 0
Other borrowed money:................................................................................ ///////
With original maturity of one year or less............................................... 673,000
With original maturity of more than one year.............................................. 43,000
Bank's liability on acceptances executed and outstanding................................................... 0
Subordinated notes and debentures.......................................................................... 0
Other liabilities (from Schedule RC-G)................................................................ 76,458
Total liabilities.................................................................................. 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.............................................................. 0
Common Stock............................................................................................. 500
Surplus (exclude all surplus related to preferred stock).............................................. 62,118
Undivided profits and capital reserves............................................................... 385,018
Net unrealized holding gains (losses) on available-for-sale securities................................. 7,362
Total equity capital................................................................................. 454,998
Total liabilities, limited-life preferred stock, and equity capital................................ 5,919,206
</TABLE>
2
Exhibit 25.3
Registration No.
================================================================================
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) _____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
GUARANTY FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
Virginia 54-1786496
(State of incorporation) (I.R.S. employer identification no.)
1658 State Farm Blvd.
Charlottesville, Virginia 22911
(Address of principal executive offices) (Zip Code)
Guarantee of Guaranty Financial Corporation
as to the Convertible Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------- ----------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
H:\...\trinact\t1\guarnty2.gte
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE>
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
11
<PAGE>
such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
12
<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 23, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
-------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............................................ 236,646
Interest-bearing balances............................................................................ 0
Held-to-maturity securities................................................................................ 331,880
Available-for-sale securities............................................................................ 1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,822,320
LESS: Allowance for loan and lease losses........... 59,373
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve............................. 3,762,947
Assets held in trading accounts.................................................................................. 0
Premises and fixed assets (including capitalized leases)................................................... 129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................. 22
Customers' liability to this bank on acceptances outstanding..................................................... 0
Intangible assets............................................................................................ 4,905
Other assets............................................................................................... 100,799
Total assets............................................................................................. 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...................................................................................... 4,034,633
Noninterest-bearing................ 839,928
Interest-bearing................... 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.................................................................... 61,290
Trading liabilities (from Schedule RC-D)......................................................................... 0
Other borrowed money:...................................................................................... ///////
With original maturity of one year or less..................................................... 673,000
With original maturity of more than one year.................................................... 43,000
Bank's liability on acceptances executed and outstanding......................................................... 0
Subordinated notes and debentures................................................................................ 0
Other liabilities (from Schedule RC-G)...................................................................... 76,458
Total liabilities........................................................................................ 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,290
<INT-BEARING-DEPOSITS> 2,619
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 1,032
<INVESTMENTS-HELD-FOR-SALE> 11,624
<INVESTMENTS-CARRYING> 2,840
<INVESTMENTS-MARKET> 3,752
<LOANS> 100,892
<ALLOWANCE> 935
<TOTAL-ASSETS> 130,708
<DEPOSITS> 112,947
<SHORT-TERM> 2,989
<LIABILITIES-OTHER> 552
<LONG-TERM> 2,360
0
0
<COMMON> 1,877
<OTHER-SE> 9,987
<TOTAL-LIABILITIES-AND-EQUITY> 130,708
<INTEREST-LOAN> 7,584
<INTEREST-INVEST> 1,590
<INTEREST-OTHER> 346
<INTEREST-TOTAL> 9,520
<INTEREST-DEPOSIT> 4,922
<INTEREST-EXPENSE> 6,038
<INTEREST-INCOME-NET> 3,482
<LOAN-LOSSES> 122
<SECURITIES-GAINS> 390
<EXPENSE-OTHER> 3,849
<INCOME-PRETAX> 1,384
<INCOME-PRE-EXTRAORDINARY> 1,384
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 8.10
<LOANS-NON> 1,436
<LOANS-PAST> 189
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 186
<ALLOWANCE-OPEN> 870
<CHARGE-OFFS> 57
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 935
<ALLOWANCE-DOMESTIC> 820
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 115
</TABLE>
