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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
JUNE 30, 1996
Commission file number: 1-10853
SOUTHERN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina 27101
(Address of Principal Executive Offices) (Zip Code)
(910) 733-2000
(Registrant's Telephone Number, Including Area Code)
---------
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [CHECK MARK HERE] No
----------------- ---
At July 31, 1996, 102,969,985 shares of the registrant's common stock, $5 par
value, were outstanding.
---------
This Form 10-Q has 25 pages. The Exhibit Index is included on page 23.
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<PAGE>
SOUTHERN NATIONAL CORPORATION
FORM 10-Q
June 30, 1996
INDEX
Page No.
- --------------------------------------------------------------------------------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 1
Consolidated Financial Statements 1
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Analysis of Financial Condition 8
Asset/Liability Management 10
Capital Adequacy and Resources 13
Analysis of Results of Operations 15
Part II. OTHER INFORMATION 23
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote
of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES
EXHIBIT 4.1 Senior Indenture (including form of
Senior Debt Security), between Southern National
Corporation and State Street Bank and Trust Company,
as Trustee, dated as of May 24, 1996.
EXHIBIT 4.2 Subordinated Indenture (including form of
Subordinated Debt Security), between Southern National
Corporation and State Street Bank and Trust Company,
as Trustee, dated as of May 24, 1996.
EXHIBIT 11 Computation of Earnings Per Share
EXHIBIT 27 Financial Data Schedule - Included with
electronically-filed document only.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Assets
Cash and due from banks $ 571,872 $ 582,612
Interest-bearing deposits with banks 599 1,172
Federal funds sold and securities purchased under resale agreements or
similiar arrangements 21,610 118,977
Securities available for sale 5,127,899 5,201,344
Securities held to maturity (market value: $137,087 at June 30, 1996,
and $159,886 at December 31, 1995) 133,953 153,969
Loans held for sale 293,814 245,280
Loans and leases, net of unearned income 13,687,664 13,567,205
Allowance for loan and lease losses (177,195) (172,158)
------------ --------------
Loans and leases, net 13,510,469 13,395,047
------------ --------------
Premises and equipment, net 321,151 312,002
Other assets 574,770 482,526
------------ --------------
Total assets $ 20,556,137 $ 20,492,929
============ ==============
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits $ 1,946,849 $ 1,885,725
Savings and interest checking 1,476,271 1,591,488
Money rate savings 3,046,621 3,049,810
Other time deposits 8,520,943 8,157,033
------------ --------------
Total deposits 14,990,684 14,684,056
Short-term borrowed funds 1,785,553 2,491,285
Long-term debt 1,955,559 1,383,935
Accounts payable and other liabilities 247,090 259,590
------------ --------------
Total liabilities 18,978,886 18,818,866
------------ --------------
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares authorized, none issued and
outstanding at June 30, 1996, 733,869 issued and outstanding at December 31, 1995 -- 3,669
Common stock, $5 par, 300,000,000 shares authorized, 103,430,150
issued and outstanding at June 30, 1996, and 103,357,440 at
December 31, 1995 517,151 516,787
Paid-in capital 158,572 279,204
Retained earnings 938,708 847,550
Loan to employee stock ownership plan and unvested restricted stock (3,566) (4,314)
Net unrealized (depreciation) appreciation on securities available for sale (33,614) 31,167
------------ --------------
Total shareholders' equity 1,577,251 1,674,063
------------ --------------
Total liabilities and shareholders' equity $ 20,556,137 $ 20,492,929
============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------------- --------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans and leases $ 312,355 $ 309,680 $ 620,964 $ 603,059
Interest and dividends on securities 76,380 79,684 151,321 154,286
Interest on short-term investments 144 733 376 1,389
-------------- -------------- -------------- --------------
Total interest income 388,879 390,097 772,661 758,734
-------------- -------------- -------------- --------------
Interest Expense
Interest on deposits 136,870 142,180 277,358 272,314
Interest on short-term borrowed funds 25,409 48,194 52,986 89,253
Interest on long-term debt 25,762 14,761 47,836 29,384
-------------- -------------- -------------- --------------
Total interest expense 188,041 205,135 378,180 390,951
-------------- -------------- -------------- --------------
Net Interest Income 200,838 184,962 394,481 367,783
Provision for loan and lease losses 12,000 7,000 22,500 14,000
-------------- -------------- -------------- --------------
Net Interest Income After Provision
for Loan and Lease Losses 188,838 177,962 371,981 353,783
-------------- -------------- -------------- --------------
Noninterest Income
Service charges on deposit accounts 26,804 22,511 52,018 43,781
Mortgage banking activities 8,542 4,367 17,842 9,957
Trust income 6,166 4,715 10,840 8,995
General insurance commissions 4,577 4,163 10,766 8,278
Other nondeposit fees and commissions 18,779 14,632 35,689 30,419
Securities losses, net (154) -- (162) (19,845)
Other noninterest income 7,089 16,989 12,477 22,769
-------------- -------------- -------------- --------------
Total noninterest income 71,803 67,377 139,470 104,354
-------------- -------------- -------------- --------------
Noninterest Expense
Personnel expense 74,542 75,343 148,208 199,576
Occupancy and equipment expense 24,870 27,729 49,833 57,284
Foreclosed property expense 348 1,034 1,092 1,734
Federal deposit insurance expense 3,172 7,975 6,527 15,980
Other noninterest expense 47,532 47,822 91,750 114,680
-------------- -------------- -------------- --------------
Total noninterest expense 150,464 159,903 297,410 389,254
-------------- -------------- -------------- --------------
Earnings
Income before income taxes 110,177 85,436 214,041 68,883
Income tax expense 36,260 27,528 70,514 23,320
-------------- -------------- -------------- --------------
Net income 73,917 57,908 143,527 45,563
Preferred dividend requirements -- 1,289 610 2,588
-------------- -------------- -------------- --------------
Income applicable to common shares $ 73,917 $ 56,619 $ 142,917 $ 42,975
============== ============== ============== ==============
Per Common Share
Net income:
Primary $ .70 $ .55 $ 1.38 $ .42
============== ============== ============== ==============
Fully diluted $ .70 $ .53 $ 1.35 $ .42
============== ============== ============== ==============
Cash dividends declared $ .23 $ .20 $ .46 $ .40
============== ============== ============== ==============
Average Shares Outstanding
Primary 105,150,050 103,523,801 103,840,916 103,342,418
============== ============== ============== ==============
Fully diluted 105,436,287 108,774,906 106,038,145 108,665,929
============== ============== ============== ==============
- ----------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Shares of
Common Preferred Common Paid-In
Stock Stock Stock Capital
-------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 102,215,032 $ 3,850 $ 511,075 $ 285,599
Add (Deduct)
Net income -- -- -- --
Common stock issued 1,154,024 -- 5,770 13,319
Redemption of common stock (659,750) -- (3,299) (10,561)
Net appreciation on securities available for sale -- -- -- --
Preferred stock cancellations and conversions -- (91) -- (2,267)
Cash dividends declared:
Common stock -- -- -- --
Preferred stock -- -- -- --
Amortization of unearned stock compensation -- -- -- --
-------------- ----------- --------- -----------
Balance, June 30, 1995 102,709,306 $ 3,759 $ 513,546 $ 286,090
============== =========== ========= ===========
Balance, December 31, 1995 103,357,440 $ 3,669 $ 516,787 $ 279,204
Add (Deduct)
Net income -- -- -- --
Common stock issued 1,189,018 -- 5,945 22,679
Redemption of common stock (5,451,000) -- (27,255) (125,306)
Net depreciation on securities available for sale -- -- -- --
Preferred stock cancellations and conversions 4,334,692 (3,669) 21,674 (18,005)
Cash dividends declared:
Common stock -- -- -- --
Preferred stock -- -- -- --
Amortization of unearned stock compensation -- -- -- --
-------------- ----------- --------- -----------
Balance, June 30, 1996 103,430,150 $ -- $ 517,151 $ 158,572
============== =========== ========= ===========
<CAPTION>
Retained
Earnings
and Other* Total
------------ ------------
Balance, December 31, 1994 $ 695,953 $ 1,496,477
Add (Deduct)
Net income 45,563 45,563
Common stock issued -- 19,089
Redemption of common stock -- (13,860)
Net appreciation on securities available for sale 81,639 81,639
Preferred stock cancellations and conversions -- (2,358)
Cash dividends declared:
Common stock (53,948) (53,948)
Preferred stock (2,552) (2,552)
Amortization of unearned stock compensation 919 919
------------ ------------
Balance, June 30, 1995 $ 767,574 $ 1,570,969
============ ============
Balance, December 31, 1995 $ 874,403 $ 1,674,063
Add (Deduct)
Net income 143,527 143,527
Common stock issued -- 28,624
Redemption of common stock -- (152,561)
Net depreciation on securities available for sale (64,781) (64,781)
Preferred stock cancellations and conversions -- --
Cash dividends declared:
Common stock (51,759) (51,759)
Preferred stock (610) (610)
Amortization of unearned stock compensation 748 748
------------ ------------
Balance, June 30, 1996 $ 901,528 $ 1,577,251
============ ============
</TABLE>
- ----------------------
* Includes net unrealized appreciation (depreciation) on securities available
for sale, unvested restricted stock and loan to employee stock ownership plan.
See accompanying notes to consolidated financial statements.
3
<PAGE>
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ........................................................................ $ 143,527 $ 45,563
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan and lease losses........................................... 22,500 14,000
Depreciation of premises and equipment........................................ 18,135 15,357
Amortization of intangibles................................................... 6,022 4,801
Accretion of negative goodwill................................................ (3,119) (3,191)
Amortization of unearned stock compensation................................... 748 919
Discount accretion and premium amortization on securities, net................ 1,520 2,038
Loss (gain) on sales of trading account securities, net....................... 5 (38)
Loss (gain) on sales of securities, net....................................... 162 19,845
Loss (gain) on sales of loans and mortgage loan servicing rights, net......... 1,175 470
Loss (gain) on disposals of premises and equipment, net....................... (279) (8,516)
Loss (gain) on foreclosed property and other real estate, net................. 493 927
Proceeds from sales of trading account securities, net of purchases........... (5) 38
Proceeds from sales of loans held for sale.................................... 738,369 186,924
Purchases of loans held for sale.............................................. (233,994) (76,390)
Origination of loans held for sale, net of principal collected................ (554,084) (177,976)
Decrease (increase) in:
Accrued interest receivable................................................ 13,028 (38,967)
Other assets............................................................... (102,059) 102,979
Increase (decrease) in:
Accrued interest payable................................................... 3,405 11,512
Accounts payable and other liabilities..................................... 19,269 64,719
------------- ------------
Net cash provided by operating activities................................ 74,818 165,014
------------- ------------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale .............................. 265,477 977,827
Proceeds from maturities of securities available for sale.......................... 1,116,494 529,885
Purchases of securities available for sale......................................... (907,827) (1,591,094)
Proceeds from maturities of securities held to maturity............................ 21,279 125,469
Purchases of securities held to maturity........................................... (1,350) (42,550)
Leases made to customers........................................................... (24,475) (22,219)
Principal collected on leases...................................................... 10,499 23,378
Loan originations, net of principal collected...................................... (586,565) (631,652)
Purchases of loans................................................................. (52,609) (94,686)
Proceeds from disposals of premises and equipment.................................. 1,298 7,632
Purchases of premises and equipment................................................ (28,303) (35,552)
Proceeds from sales of foreclosed property......................................... 6,519 5,439
Proceeds from sales of other real estate held for development or sale.............. 3,123 2,947
Other, net......................................................................... (6,836) (8,216)
------------- ------------
Net cash used in investing activities.................................... (183,276) (753,392)
------------- ------------
Cash Flows From Financing Activities:
Net increase in deposits........................................................... 306,628 22,402
Net (decrease) increase in short-term borrowed funds............................... (705,732) 244,685
Proceeds from long-term debt....................................................... 960,059 521,181
Repayments of long-term debt....................................................... (388,435) (119,472)
Net proceeds from common stock issued.............................................. 28,624 19,089
Redemption of common stock......................................................... (152,561) (13,860)
Preferred stock cancellations and conversions...................................... - (2,358)
Cash dividends paid on common and preferred stock.................................. (48,805) (44,681)
------------- ------------
Net cash (used in) provided by financing activities...................... (222) 626,986
------------- ------------
Net (Decrease) Increase in Cash and Cash Equivalents................................. (108,680) 38,608
Cash and Cash Equivalents at Beginning of Period..................................... 702,761 671,777
------------- ------------
Cash and Cash Equivalents at End of Period........................................... $ 594,081 $ 710,385
============= ============
See accompanying notes to consolidated financial statements.
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 374,775 $ 379,439
Income taxes 64,656 70,121
Noncash financing and investing activities:
Transfer of loans to foreclosed property 5,068 4,101
Common stock issued upon conversion of debentures - 35
Restricted stock issued 85 -
Securitization of mortgage loans 510,160 53,540
</TABLE>
4
<PAGE>
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
A. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the consolidated balance
sheets of Southern National Corporation and subsidiaries ("Southern National"
or "SNC") as of June 30, 1996 and December 31, 1995; the consolidated
statements of income for the three months and six months ended June 30, 1996
and 1995; the consolidated statements of changes in shareholders' equity for
the six months ended June 30, 1996 and 1995; and the consolidated statements
of cash flows for the six months ended June 30, 1996 and 1995.
The consolidated financial statements and notes are presented in accordance
with the instructions for Form 10-Q. The information contained in the
footnotes included in Southern National's latest annual report on Form 10-K
should be referred to in connection with the reading of these unaudited
interim consolidated financial statements.
Certain 1995 amounts have been reclassified to conform with statement
presentations for 1996. The reclassifications have no effect on shareholders'
equity or net income as previously reported. The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
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.
B. Nature of Operations
Southern National is a multi-bank holding company headquartered in Winston-
Salem, North Carolina. Southern National conducts its operations in North
Carolina, South Carolina and Virginia primarily through its commercial
banking subsidiaries and, to a lesser extent, through its other subsidiaries.
The commercial banking subsidiaries provide a wide range of traditional
banking services for retail and commercial customers, including small and
mid-size businesses, public agencies and local governments, trust companies
and individuals. Substantially all of Southern National's loans are to
businesses and individuals in the Carolinas and Virginia. Subsidiaries of the
commercial banks offer lease financing to commercial businesses and municipal
governments; investment alternatives, including discount brokerage services,
annuities, mutual funds and government and municipal bonds; life and property
and casualty insurance on an agency basis; and insurance premium financing.
5
<PAGE>
C. New Accounting Pronouncements
During 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This statement establishes accounting standards for long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and to be disposed of. The statement requires such assets to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Any resulting impairment
loss is required to be reported in the period in which the recognition
criteria are first applied and met. Southern National adopted the provisions
of the statement on January 1, 1996. The implementation did not have a
material impact on the consolidated financial position or consolidated
results of operations.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights," which amends SFAS No. 65, "Accounting for Certain Mortgage Banking
Activities." SFAS No. 122 requires that mortgage banking enterprises
recognize, as separate assets, rights to service mortgage loans for others,
however those servicing rights are acquired. The statement further requires
mortgage banking enterprises to assess their capitalized mortgage servicing
rights for impairment based on the fair value of those rights. Southern
National elected, in the third quarter of 1995, to adopt this statement
effective as of January 1, 1995. The impact of the adoption of this statement
resulted in additional mortgage banking income of $1.8 million, before taxes,
or $.01 per fully diluted share, after taxes, during 1995. SFAS No. 122
prohibits retroactive application to prior years.
In October of 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting standards
for stock-based compensation plans. The statement defines a fair value based
method of accounting for an employee stock option or similar equity
instrument and encourages the adoption of that method of accounting. However,
the statement also allows entities to continue to account for such plans
under Accounting Principles Board ("APB") Opinion No. 25. Entities electing
to account for such plans in accordance with APB Opinion No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting defined in the statement had been applied.
Southern National adopted the statement effective January 1, 1996 and elected
to continue to account for stock-based compensation plans under the
provisions of Opinion No. 25. Therefore, the implementation of the statement
did not have an impact on Southern National's consolidated financial position
or consolidated results of operations. Southern National will make the
required pro forma disclosures of net income and earnings per share using
accounting methods prescribed by SFAS No. 123 in the Form 10-K for the year
ending December 31, 1996.
In June of 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The
statement, which becomes effective for transactions occurring after December
31, 1996, provides accounting and
6
<PAGE>
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on the financial components approach
that focuses on control. Under this approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes all assets it does not
control and derecognizes liabilities when extinguished. The statement also
provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. Management
does not anticipate that the implementation of the statement will have a
material impact on the consolidated financial position or consolidated
results of operations of Southern National.
D. Mergers and Acquisitions
On March 29, 1996, Southern National announced plans to acquire Regional
Acceptance Corporation of Greenville, N.C., ("Regional") in a stock
transaction to be accounted for under the pooling-of-interests method of
accounting. Regional's shareholders will receive .3929 shares of Southern
National stock for each share of Regional stock held. The exchange ratio is
fixed between Southern National stock prices of $26 and $30, with an
adjustment provision within an outer collar of $24 and $32. Pursuant to the
acquisition, Southern National will issue approximately 6.0 million shares of
common stock. Regional, which specializes in indirect financing for consumer
purchases of mid-model and late-model used automobiles, operates 28 branch
offices in North Carolina, South Carolina, Tennessee and Virginia.
E. Supplemental Cash Flow Information
During the first quarter of 1996, Southern National redeemed all outstanding
shares of Convertible Preferred Stock. This transaction, a noncash financing
activity, resulted in the conversion of 733,869 shares of preferred stock
into 4,334,692 shares of common stock.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ANALYSIS OF FINANCIAL CONDITION
Southern National's total assets at June 30, 1996 were $20.6 billion, a
$63.2 million increase from the balance at December 31, 1995. The primary
component of the increase was loans and leases, which grew $169.0 million, or
2.5% on an annualized basis. This increase was offset by declines in securities
holdings of $93.5 million, or 3.5% on an annualized basis.
Growth in loans was affected by a securitization program Southern National
implemented during 1995. During the second quarter of 1996, Southern National
securitized $510.2 million of loans. This program is designed to provide
Southern National with additional liquidity and flexibility in managing mortgage
loan assets. The resulting mortgage-backed securities are being used to replace
lower-yielding U.S. Treasuries in the securities portfolio as they mature.
Annualized loan growth, excluding the impact of this securitization program, was
9.6% comparing end of period loans at June 30, 1996 and December 31, 1995.
Average loans, excluding the impact of $503.2 million of securitized loans,
increased at an annualized rate of 7.5% comparing the quarters ended June 30,
1996 and 1995, respectively. This loan growth has primarily resulted from a
14.1% increase in average mortgage loans excluding the impact of the loan
securitizations. However, Southern National has also seen growth in average
commercial loans of 4.6% and average consumer loans of 5.1%. The strong increase
in mortgage loans resulted from a special incentive program which began during
the first quarter of 1996.
At June 30, 1996, securities available for sale had unrealized depreciation,
after tax, of $33.6 million compared to unrealized appreciation, after tax, of
$31.2 million at December 31, 1995. The taxable equivalent yield on the
securities portfolio during the second quarter was 6.59%, up from 6.32% for the
fourth quarter of 1995 and up from 6.28% for the second quarter of the prior
year. During the fourth quarter of 1995, Southern National began to reshape the
balance sheet by changing the mix of investments held. The change in mix was
undertaken to improve the overall interest yield of the securities portfolio. As
previously discussed, this effort continued into the second quarter of 1996 and
has contributed to significantly improved margins.
On the liability side of the balance sheet, long-term debt rose $571.6
million compared to December 31, 1995, primarily as a result of the issuance of
$225.0 million of senior bank notes and $250.0 million of subordinated notes of
Southern National during 1996. This growth was more than offset by a $705.7
million reduction in short-term borrowed funds compared to the year end 1995.
Total deposits increased by $306.6 million from the balance at December 31,
1995. Southern National, as well as many other financial institutions, has been
experiencing a trend of slower deposit growth because of competition for
deposits from various non-financial institution sources.
8
<PAGE>
However, through an increased emphasis on demand deposits, Southern National has
experienced stronger growth during 1996. Noninterest-bearing demand deposits
increased $61.1 million, or 3.2% during the first six months of 1996. Slower
deposit growth during 1995 caused management to rely more heavily on nondeposit
funding sources, such as Federal Home Loan Bank advances and Federal funds
purchased. The improved deposit growth during 1996 also contributed to the
reduction in short-term borrowed funds. Less reliance on short-term borrowed
funds should provide more stability for the net interest margin.
Asset Quality
Nonperforming assets were $70.7 million at June 30, 1996, compared to $71.2
million at December 31, 1995. The allowance for losses as a percentage of loans
and leases was 1.27% compared to 1.25% six months earlier, and nonperforming
assets as a percentage of loan-related assets were .51% at both June 30, 1996
and December 31, 1995. Certain asset quality measures deteriorated somewhat
during the third quarter of 1995 and have remained steady through the second
quarter of 1996. This deterioration reflected a reorganization of the
collections function which resulted from the merger of Southern National and
BB&T Financial Corporation ("BB&T"). Also, for a number of quarters, Southern
National's asset quality ratios were unusually strong compared to historic
norms. Increases in net charge-offs to a more normalized level have been
expected by management as segments of the overall economy softened during 1995.
Management does not anticipate a material change in asset quality levels during
the remainder of 1996.
Loans 90 days or more past due and still accruing interest totaled $18.0
million compared to a prior year-end balance of $29.1 million. This reduction
occurred principally in mortgage loans, as the mortgage banking function focused
a great deal of attention on past due situations during the second quarter.
The provision for loan and lease losses for the first six months of 1996 was
$22.5 million compared to $14.0 million in the first six months of 1995. The
increase in the provision reflects higher net charge-offs during 1996. Asset
quality statistics relevant to the last five calendar quarters are presented in
the accompanying table.
ASSET QUALITY ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
6/30/96 3/31/96 12/31/95 9/30/95 6/30/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Allowance For Loan & Lease Losses
Beginning balance $ 175,104 $ 172,158 $ 174,069 $ 176,175 $ 174,189
Provision for loan and lease losses 12,000 10,500 10,400 7,000 7,000
Net charge-offs (9,909) (7,554) (12,311) (9,106) (5,014)
----------- ----------- ----------- ----------- -----------
Ending balance $ 177,195 $ 175,104 $ 172,158 $ 174,069 $ 176,175
=========== =========== =========== =========== ===========
Risk Assets
Nonaccrual loans and leases $ 62,670 $ 64,796 $ 61,489 $ 62,763 $ 48,927
Foreclosed real estate 4,926 4,938 6,868 6,981 8,759
Other foreclosed property 3,115 2,662 2,817 2,717 1,518
----------- ----------- ----------- ----------- -----------
Nonperforming assets $ 70,711 $ 72,396 $ 71,174 $ 72,461 $ 59,204
=========== =========== =========== =========== ===========
Loans 90 days or more past due
and still accruing $ 18,025 $ 28,249 $ 29,094 $ 26,909 $ 30,335
=========== =========== =========== =========== ===========
Asset Quality Ratios
Nonaccrual loans and leases as a
percentage of total loans and leases .45 % .46 % .45 % .45 % .36 %
Nonperforming assets as a percentage of:
Total assets .34 .36 .35 .35 .29
Loans and leases plus
foreclosed property .51 .51 .51 .52 .43
Net charge-offs as a percentage of
average loans and leases .28 .22 .35 .26 .15
Allowance for loan and lease losses as a
percentage of loans and leases 1.27 1.25 1.25 1.24 1.28
Ratio of allowance for loan and lease losses to:
Net charge-offs 4.45 x 5.76 x 3.52 x 4.82 x 8.76 x
Nonaccrual loans and leases 2.83 2.70 2.80 2.77 3.60
</TABLE>
- ------------------------------------
All items referring to loans and leases include loans held for sale and are net
of unearned income.
The second quarter of 1995 has been adjusted to reflect the adoption of SFAS
No. 122, "Accounting for Mortgage Sevicing Rights."
Applicable ratios are annualized.
9
<PAGE>
ASSET/LIABILITY MANAGEMENT
Asset/liability management activities are designed to assure liquidity and,
through the management of Southern National's interest sensitivity position, to
manage the impact of interest rate fluctuations on net interest income. It is
the responsibility of the Asset/Liability Management Committee ("ALCO") to set
policy guidelines and to establish long-term strategies with respect to interest
rate exposure and liquidity. The ALCO meets regularly to review Southern
National's interest rate and liquidity risk exposures in relation to present and
prospective market and business conditions, and adopts funding and balance sheet
management strategies that are
10
<PAGE>
intended to assure that the potential impact on earnings and liquidity is within
established parameters.
A prime objective in interest rate risk management is the avoidance of wide
fluctuations in net interest income through balancing the impact of changes in
interest rates on interest-sensitive assets and interest-sensitive liabilities.
Management uses Interest Sensitivity Simulation Analysis to measure the interest
rate sensitivity of earnings.
Balance sheet repositioning is the most efficient and cost-effective means
of managing interest rate risk and is accomplished through strategic pricing of
asset and liability accounts. The expected result of strategic pricing is the
development of appropriate maturity and repricing streams in those accounts to
produce consistent net income during adverse interest rate environments. The
ALCO monitors loan, investment and liability portfolios to ensure comprehensive
management of interest rate risk on the balance sheet. These portfolios are
analyzed for proper fixed-rate and variable-rate "mixes" given a specific
interest rate outlook.
Management has established parameters for asset/liability management which
prescribe a maximum impact on net interest income of 3% for a 150 basis point
change over six months, for the most likely interest rate scenario, and a
maximum of 6% for a 300 basis point change over 12 months. It is management's
ongoing objective to effectively manage the impact of changes in interest rates
and minimize the resulting effect on earnings. At June 30, 1996, changes in
interest rates would not have a significant impact on Southern National's
earnings.
Derivatives and Off-Balance Sheet Financial Instruments
Interest rate volatility often increases to the point that balance sheet
repositioning through the use of account repricing and other on-balance sheet
strategies cannot occur rapidly enough to avoid adverse net income effects. At
those times, off-balance sheet or synthetic hedges are utilized. Management uses
interest rate swaps, caps and floors to supplement balance sheet repositioning.
Such products are designed to move the interest sensitivity of Southern National
toward a neutral position.
Interest rate swaps are contractual agreements between two parties to
exchange a series of cash flows representing interest payments. A swap allows
both parties to transform the repricing characteristics of an asset or liability
from a fixed to a floating rate, a floating rate to a fixed rate, or one
floating rate to another floating rate. The underlying principal positions are
not affected. Swap terms generally range from one year to ten years depending on
need. At June 30, 1996, interest rate swaps and floors with a total notional
value of $973.6 million, and terms of up to seven years, were outstanding.
The following tables set forth certain information concerning Southern
National's interest rate swaps at June 30, 1996:
11
<PAGE>
Interest Rate Swaps and Floors
June 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Notional Receive Pay Unrealized
Type Amount Rate Rate Gains (Losses)
- ---- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Receive fixed swaps $ 310,000 6.92 % 5.57 % $ 1,654
Pay fixed swaps 308,564 5.47 5.46 92
Basis swaps 250,000 5.53 5.51 (2,311)
Floors 105,000 -- -- 289
--------------- --------------- --------------- ---------------
Total $ 973,564 6.00 % 5.51 % $ (276)
=============== =============== =============== ===============
<CAPTION>
Receive Pay Fixed Basis Swaps
Year-to-date Activity Fixed Swaps Swaps and Floors Total
- --------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 140,000 $ 353,413 $ 250,000 $ 743,413
Additions 250,000 -- 105,000 355,000
Maturities/amortizations (80,000) (44,849) -- (124,849)
Terminations -- -- -- --
--------------- --------------- --------------- ---------------
Balance, June 30, 1996 $ 310,000 $ 308,564 $ 355,000 $ 973,564
=============== =============== =============== ===============
<CAPTION>
One Year One to Five After Five
Maturity Schedule* or Less Years Years Total
- ------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Receive fixed swaps $ 10,000 $ 50,000 $ 250,000 $ 310,000
Pay fixed swaps 14,965 289,118 4,481 308,564
Basis swaps -- 250,000 -- 250,000
Floors -- 105,000 -- 105,000
--------------- --------------- --------------- ---------------
Total $ 24,965 $ 694,118 $ 254,481 $ 973,564
=============== =============== =============== ===============
</TABLE>
* Maturities are based on full contract extensions.
12
<PAGE>
As of June 30, 1996, there was no unearned income or deferred premiums from
new swap transactions. Deferred losses from terminated swap transactions were
$363,000. The deferred losses will be recognized in the next year. The
combination of active and terminated transactions resulted in income of $745,000
during the first six months of 1996.
In addition to interest rate swaps, Southern National utilizes written
covered over-the-counter call options on specific securities in the available-
for-sale portfolio in order to enhance returns. Option fee income was $670,000
for the first six months of 1996. Unexercised options on securities with total
par values of $25.0 million were outstanding at June 30, 1996.
Southern National also utilizes purchased over-the-counter put options in
its mortgage banking activities to hedge the mortgage pipeline. During 1996,
options with a par value of $30.0 million were purchased and remained
outstanding at June 30, 1996.
CAPITAL ADEQUACY AND RESOURCES
The maintenance of appropriate levels of capital is a management priority.
Capital adequacy is monitored on an ongoing basis by management. Southern
National's principal capital planning goals are to provide an adequate return to
shareholders while retaining a sufficient base from which to provide future
growth and compliance with all regulatory standards.
Total shareholders' equity was $1.6 billion at June 30, 1996 and $1.7
billion at December 31, 1995. As a percentage of total assets, total
shareholders' equity was 7.7% at June 30, 1996, down from 8.2% at December 31,
1995. Southern National's book value per common share at June 30, 1996 was
$15.25, versus $15.52 at December 31, 1995. Average shareholders' equity as a
percentage of average assets was 7.9% for the quarter ended June 30, 1996 and
8.0% for the three months ended December 31, 1995.
Tier 1 and total risk-based capital ratios at June 30, 1996 were 11.7% and
14.9%, respectively. The leverage ratio was 7.8% at the end of the second
quarter. The comparable ratios at the end of 1995 were 13.0%, 14.3% and 7.8%,
respectively. These capital ratios measure the capital to risk-weighted assets
and off-balance sheet items as defined by Federal Reserve Board ("FRB")
guidelines. An 8.00% minimum of total capital to risk-weighted assets is
required. One-half of the 8.00% minimum must consist of tangible common
shareholders' equity (Tier 1 capital) under regulatory guidelines. The leverage
ratio, established by the FRB, measures Tier 1 capital to average total assets
less goodwill and must be maintained in conjunction with the risk-based capital
standards. The regulatory minimum for the leverage ratio is 3.00%.
The declines in certain capital ratios reflect the impact of a common stock
repurchase plan which was undertaken to facilitate the conversion of all of
Southern National's preferred stock outstanding. On January 11, 1996, Southern
National announced that these shares would be used in the anticipated conversion
of the preferred stock which was redeemed on March 29, 1996, at the price of
$104.05 per share. Each share of preferred stock was convertible into 5.9068
shares of common stock.
13
<PAGE>
CAPITAL ADEQUACY RATIOS
<TABLE>
<CAPTION>
1996 1995
------------------------ ----------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average equity to average assets 7.86 % 8.07 % 8.05 % 7.71 % 7.61 %
Equity to assets at period end 7.67 7.75 8.17 7.77 7.60
Risk-based capital ratios:
Tier 1 capital 11.7 12.1 13.0 12.0 11.3
Total capital 14.9 13.4 14.3 13.3 12.6
Leverage ratio 7.8 7.6 7.8 7.5 7.4
</TABLE>
14
<PAGE>
ANALYSIS OF RESULTS OF OPERATIONS
Southern National had net income for the first six months of 1996 totaling
$143.5 million, compared to $45.6 million during the first six months of 1995.
On a fully diluted per share basis, earnings for the six months ended June 30,
1996 were $1.35, compared to $.42 for the same period in 1995. The significant
increase from the prior year earnings results from $72.7 million in after-tax
nonrecurring charges and securities losses related to the merger between
Southern National and BB&T which were recorded in the first six months of 1995.
Excluding nonrecurring items from the prior year, Southern National's net income
would have increased 21.4%, or $25.3 million. For the second quarter, net income
totaled $73.9 million compared to $57.9 million recorded for the second quarter
of 1995, an increase of $16.0 million, or 27.6%. On a fully diluted per share
basis, net income for the quarter was $.70, a 32.1% increase over the $.53
earned in the second quarter of 1995. Southern National's significant growth in
recurring earnings results from three factors. First, net interest margin
improved from 4.10% for the first six months of 1995 to 4.34% for the first half
of 1996. Second, following the merger of Southern National and BB&T, management
targeted a growth rate in noninterest income of 20%. The 23.7% growth in
recurring noninterest income for the six months ended June 30, 1996 compared to
the same period in 1995 demonstrates progress in achieving the revenue
enhancements which were expected to be a strength of the combined bank. Third,
Southern National has controlled expenses following the merger, as shown by the
improvement in the efficiency ratio to 53.8% from 58.3% for the six months ended
June 30, 1996 and 1995, respectively.
Net Interest Income
Net interest income on a fully taxable equivalent ("FTE") basis was $394.5
million for the first six months of 1996 compared to $367.8 million for the same
period in 1995, a 7.3% increase. For the six months ended June 30, 1996 and
1995, average interest-earning assets increased $130.8 million, or .7%, to $19.0
billion, while average interest-bearing liabilities decreased by $115.2 million.
As discussed previously, Southern National also experienced substantial positive
development in the net interest margin. The 24 basis point increase in margin
was caused primarily by a 39 basis point increase in yields from securities,
combined with a 74 basis point decrease in rates paid on short-term borrowed
funds and a 68 basis point decrease in rates paid on long-term debt. These
fluctuations reflect the restructuring of the securities portfolio, as well as
other categories of the balance sheet, which has slowed growth in total assets,
thus reducing Southern National's dependence on costly nondeposit funding
sources. The improvement in margin also reflects a change in management focus
from pricing strategies to quality strategies. Loans and deposits were very
competitively priced following the merger of Southern National and BB&T to
protect current market positions and retain customer relationships.
15
<PAGE>
Net Interest Income and Rate/Volume Analysis
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Average Balances Yield / Rate
- ------------------------------------------------- ---------------------------- ----------------------------
Fully Taxable Equivalent - (Dollars in thousands) 1996 1995 1996 1995
- ------------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and other (5) $ 4,809,201 $ 5,248,737 6.46 % 6.02 %
States and political subdivisions 157,386 175,898 9.11 8.93
- ------------------------------------------------- ------------- ------------- ------------- -------------
Total securities (5) 4,966,587 5,424,635 6.55 6.16
Other earning assets (2) 14,170 47,188 5.65 5.92
Loans and leases, net
of unearned income (1)(3)(4)(5) 13,996,301 13,374,454 8.98 9.15
- ------------------------------------------------- ------------- ------------- ------------- -------------
Total earning assets 18,977,058 18,846,277 8.34 8.28
- ------------------------------------------------- ------------- ------------- ------------- -------------
Non-earning assets 1,146,869 1,171,269
- ------------------------------------------------- ------------- -------------
Total assets $ 20,123,927 $ 20,017,546
================================================= ============= =============
Liabilities and Shareholders' Equity
Interest-bearing deposits
Savings and interest checking deposits $ 3,159,031 $ 3,212,847 1.81 2.32
Money market deposits 1,379,319 1,695,203 3.51 3.58
Time deposits 8,185,337 7,684,996 5.52 5.39
- ------------------------------------------------- ------------- ------------- ------------- -------------
Total interest-bearing deposits 12,723,687 12,593,046 4.38 4.36
Short-term borrowed funds 2,060,851 3,044,118 5.17 5.91
Long-term debt 1,645,608 908,230 5.84 6.52
- ------------------------------------------------- ------------- ------------- ------------- -------------
Total interest-bearing liabilities 16,430,146 16,545,394 4.63 4.76
- ------------------------------------------------- ------------- ------------- ------------- -------------
Demand deposits 1,823,309 1,693,399
Other liabilities 267,203 256,619
Shareholders' equity 1,603,269 1,522,134
- ------------------------------------------------- ------------- -------------
Total Liabilities and
shareholders' equity $ 20,123,927 $ 20,017,546
================================================= ============= =============
Average interest rate spread 3.71 3.52
Net yield on earning assets 4.34% 4.10%
================================================= ============= =============
Taxable equivalent adjustment
=================================================
</TABLE>
<TABLE>
<CAPTION>
Income / Expenses Changes due to
- ------------------------------------------------- ---------------------------- Increase ----------------------------
Fully Taxable Equivalent - (Dollars in thousands) 1996 1995 (Decrease) Rate Volume
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and other (5) $ 155,395 $ 158,050 $ (2,655) $ 11,022 $ (13,677)
States and political subdivisions 7,167 7,787 (620) 213 (833)
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Total securities (5) 162,562 165,837 (3,275) 11,235 (14,510)
Other earning assets (2) 398 1,389 (991) (61) (930)
Loans and leases, net
of unearned income (1)(3)(4)(5) 626,215 606,918 19,297 (10,337) 29,634
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Total earning assets 789,175 774,144 15,031 837 14,194
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Non-earning assets
- -------------------------------------------------
Total assets
=================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits
Savings and interest checking deposits 28,415 36,886 (8,471) (7,964) (507)
Money market deposits 24,079 30,136 (6,057) (531) (5,526)
Time deposits 224,864 205,292 19,572 5,353 14,219
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Total interest-bearing deposits 277,358 272,314 5,044 (3,142) 8,186
Short-term borrowed funds 52,986 89,253 (36,267) (9,971) (26,296)
Long-term debt 47,836 29,384 18,452 (3,347) 21,799
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Total interest-bearing liabilities 378,180 390,951 (12,771) (16,460) 3,689
- ------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Demand deposits
Other liabilities
Shareholders' equity
- -------------------------------------------------
Total Liabilities and
shareholders' equity
=================================================
Average interest rate spread
Net yield on earning assets $ 410,995 $ 383,193 $ 27,802 $ 17,297 $ 10,505
================================================= ============= ============= ============= ============= =============
Taxable equivalent adjustment $ 16,514 $ 15,410
================================================= ============= =============
</TABLE>
(1) Yields related to securities, loans and leases exempt from both federal and
state income taxes, federal income taxes only or state income taxes only are
stated on a taxable equivalent basis using statutory tax rates in effect for
the periods presented.
(2) Includes federal funds sold and securities purchased under resale agreements
or similar arrangements.
(3) Loan data, which are not material for the periods shown, are included for
rate calculation purposes.
(4) Noaccrual loans have been included in the average balances.
(5) Includes assets which were held for sale or available for sale at amortized
cost.
- -------------------------------------------------------------------------------
Net interest income FTE for the second quarter of 1996 was $200.8 million,
up from $185.0 million for the second quarter of 1995. The higher level of net
interest income reflects a significant
16
<PAGE>
increase in the net interest margin, from 4.06% to 4.39% comparing the second
quarters. The average yield earned on earning assets decreased 3 basis points.
However, the rates paid on interest-bearing liabilities declined by 35 basis
points, with reductions in rates paid on deposits, short-term borrowed funds and
long-term debt.
Net Interest Income and Rate/Volume Analysis
For the Three Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Average Balances Yield/Rate
- --------------------------------------------------- ------------------------------ ------------------------------
Fully Taxable Equivalent - (Dollars in thousands) 1996 1995 1996 1995
- --------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and other (5) $ 4,821,477 $ 5,295,064 6.51 % 6.20 %
States and political subdivisions 153,754 171,520 9.01 8.85
- --------------------------------------------------- -------------- -------------- -------------- --------------
Total Securities (5) 4,975,231 5,466,584 6.59 6.28
Other earning assets (2) 10,780 47,557 5.75 6.18
Loans and leases, net
of unearned income (1)(3)(4)(5) 14,114,524 13,543,229 8.97 9.23
- --------------------------------------------------- -------------- -------------- -------------- --------------
Total earning assets 19,100,535 19,057,370 8.35 8.38
- --------------------------------------------------- -------------- -------------- -------------- --------------
Non-earning assets 1,141,222 1,192,916
- --------------------------------------------------- -------------- --------------
Total assets $ 20,241,757 $ 20,250,286
=================================================== ============== ==============
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Savings deposits $ 3,129,090 $ 3,252,568 1.69 2.31
Money market deposits 1,410,414 1,580,537 3.49 3.79
Time deposits 8,201,556 7,772,237 5.47 5.60
- --------------------------------------------------- -------------- -------------- -------------- --------------
Total interest-bearing deposits 12,741,060 12,605,342 4.32 4.52
Short-term borrowed funds 2,012,842 3,219,920 5.08 6.00
Long-term debt 1,779,639 910,946 5.82 6.50
- --------------------------------------------------- -------------- -------------- -------------- --------------
Total interest-bearing liabilities 16,533,541 16,736,208 4.57 4.92
- --------------------------------------------------- -------------- -------------- -------------- --------------
Demand deposits 1,848,295 1,700,458
Other liabilities 268,494 273,191
Shareholders' equity 1,591,427 1,540,429
- --------------------------------------------------- -------------- --------------
Total liabilities and
shareholders' equity $ 20,241,757 $ 20,250,286
=================================================== ============== ==============
Average interest rate spread 3.78 3.46
Net yield on earning assets 4.39 % 4.06 %
=================================================== ============== =============
Taxable equivalent adjustment
===================================================
<CAPTION>
Income/Expense Change due to
- --------------------------------------------------- ------------------------------ Increase ------------------------------
Fully Taxable Equivalent - (Dollars in thousands) 1996 1995 (Decrease) Rate Volume
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and other (5) $ 78,509 $ 81,813 $ (3,304) $ 4,239 $ (7,543)
States and political subdivisions 3,462 3,788 (326) 72 (398)
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Total Securities (5) 81,971 85,601 (3,630) 4,311 (7,941)
Other earning assets (2) 155 733 (578) (45) (533)
Loans and leases, net
of unearned income (1)(3)(4)(5) 315,199 311,721 3,478 (8,591) 12,069
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Total earning assets 397,325 398,055 (730) (4,325) 3,595
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Non-earning assets
- ---------------------------------------------------
Total assets
===================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Savings deposits 13,146 18,733 (5,587) (4,863) (724)
Money market deposits 12,250 14,932 (2,682) (1,148) (1,534)
Time deposits 111,474 108,515 2,959 (2,630) 5,589
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Total interest-bearing deposits 136,870 142,180 (5,310) (8,641) 3,331
Short-term borrowed funds 25,409 48,194 (22,785) (6,693) (16,092)
Long-term debt 25,762 14,761 11,001 (1,683) 12,684
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Total interest-bearing liabilities 188,041 205,135 (17,094) (17,017) (77)
- --------------------------------------------------- -------------- -------------- ------------ -------------- --------------
Demand deposits
Other liabilities
Shareholders' equity
- ---------------------------------------------------
Total liabilities and
shareholders' equity
===================================================
Average interest rate spread
Net yield on earning assets $ 209,284 $ 192,920 $ 16,364 $ 12,692 $ 3,672
=================================================== ============== ============== ============ ============== ==============
Taxable equivalent adjustment $ 8,446 $ 7,958
=================================================== ============== ==============
</TABLE>
(1) Yields related to securities, losses and leases exempt from both federal and
state income taxes, federal income taxes only or state income taxes only are
stated on a taxable equivalent basis using statutory tax rates in effect for
the periods presented.
(2) Includes federal funds sold and securities purchased under resale agreements
or similar arrangements.
(3) Loan fees, which are not material for the periods shown are included for
rate calculation purposes.
(4) Nonaccrued loans have been included in the average balances. Only the
interest collected on such loans is included as income.
(5) Includes assets held for sale or available for sale at amortized cost.
- --------------------------------------------------------------------------------
17
<PAGE>
Hedging strategies have been used in the past and will be utilized in the
future to reduce sensitivity to interest rate movements. See "ASSET/LIABILITY
MANAGEMENT" for additional discussion of hedging strategies.
Noninterest Income
Noninterest income for the six months ended June 30, 1996 was $139.5
million, compared to $104.4 million for the same period in 1995. Securities
losses of $19.8 million recorded in the first quarter of 1995 were a major
contributing factor to the increase in noninterest income. These securities
losses resulted from a restructuring of the securities portfolio done in
connection with the merger. However, Southern National also experienced positive
development in service charges on deposits, mortgage banking activities, general
insurance commissions and trust income. The percentage of total revenues,
calculated as net interest income plus noninterest income excluding securities
gains or losses, derived from noninterest (fee-based) income for the six months
ended June 30, 1996 was 26.1%, up from 25.2% for the first six months of 1995.
Management anticipates continued growth in noninterest income, with a target
ratio of noninterest income to total revenues of 30%.
Service charges on deposits grew for the first six months in 1996 compared
to 1995, increasing by $8.2 million, or 18.8%. The primary factor contributing
to the significant growth in service charges on deposits was increased fees
during 1996. For the second quarter, service charges increased $4.3 million, or
19.1%, over the same quarter last year. The greatest increases involved
commercial account analysis income and overdraft charges. Additionally, rising
interest rates during 1995 negatively affected service charges on deposit
accounts by increasing the earnings credit used in service charge computations.
Looking forward, management anticipates new fees on automated teller machines
("ATMs"), to provide an additional $6.0 million in fee income on an annual basis
with no additional expenses. As a component of Southern National's emphasis on
alternative delivery systems, management anticipates the addition of 75 new ATMs
in existing branches and an additional 200 ATMs in non-branch locations.
Trust income grew $1.8 million, or 20.5%, for the six months ended June
30,1996 compared to the same period in 1995. For the second quarter of 1996,
trust services income totaled $6.2 million, an increase of $1.5 million over the
second quarter of 1995. The significant second quarter growth results from fees
collected during the second quarter which are only collected annually,
principally administration fees for corporate benefit plans. The rate of growth
is expected to return to a more normalized level for the remainder of the year.
18
<PAGE>
Southern National also realized substantial growth in general insurance
commissions, up $2.5 million, or 30.1%, compared to the first six months of
1995. The growth in general insurance commissions resulted from unusually large
contingency commissions and earnings from sales of life insurance contracts.
Comparing the second quarters of 1996 and 1995, general insurance commissions
grew at a rate of 9.9%.
Mortgage banking activities increased 79.2%, or $7.9 million, for the six
months ended June 30, 1996 compared to the same period in 1995. For the second
quarter of 1996, mortgage banking activities increased $4.2 million, or 95.6%.
These increases resulted from significant gains on higher volumes of sales of
mortgage loans during the first six months of 1996.
Other nondeposit fees and commissions increased by $5.3 million to a level
of $35.7 million in 1996 compared with $30.4 million for the first six months of
1995. The primary component generating the increase in nondeposit fees and
commissions was investment services, which increased $4.9 million. For the
second quarter of 1996, other nondeposit fees and commissions increased $4.1
million compared to the prior year, also driven by investment services.
Other income decreased $10.3 million for the first six months of 1996
because of a premium totaling $11.9 million relating to a divestiture of
deposits in 1995. This divestiture was necessary in order to comply with anti-
trust laws following the merger of Southern National and BB&T.
Noninterest Expense
Noninterest expense was $297.4 million for the first six months of 1996
compared to $389.3 million for the same period a year ago. Merger-related
accruals and expenses led to an elevated level of noninterest expense in the
first six months of 1995. These items included $98.2 million of pretax
nonrecurring charges which primarily affected personnel expense, occupancy and
equipment expense and other noninterest expense.
Excluding nonrecurring charges, personnel expense, the largest component of
noninterest expense, increased from $144.3 million for the first six months of
1995 to $148.2 million for the same period in 1996. This relatively steady level
of personnel expense reflects efficiencies of scale accomplished as a result of
the Southern National / BB&T merger. The only component of personnel expense
currently increasing is the incentive compensation program because of increased
sales in many areas. The nonrecurring charges discussed above contributed $55.3
million to total personnel costs during the first six months of 1995 in the form
of severance pay, termination of employment contracts, early retirement packages
and related benefits. For the second quarter of 1996, personnel expense totaled
$74.5 million, a increase of $3.9 million from the $70.7 million recorded in the
second quarter of 1995 on recurring basis. This increase reflects additional
incentive compensation, as discussed above.
Occupancy and equipment expense, excluding nonrecurring charges, for the six
months ended June 30, 1996 increased $2.6 million, or 5.5%, compared to 1995.
On-going depreciation of property and equipment purchased in connection with
implementing the merger is a major
19
<PAGE>
component of the increase. The $10.1 million in nonrecurring charges relating to
branch closings and the consolidation of bank operations and systems associated
with the merger had a significant impact on the total occupancy and equipment
expense in the prior year. For the second quarter of 1996, occupancy and
equipment expense totaled $24.9 million, up slightly from the $24.5 million
incurred on a recurring basis in the prior year.
Federal deposit insurance expense decreased $9.5 million, or 59.2%, for the
six months ended June 30, 1996, compared to the same period in the prior year,
as a result of a reduction in insurance premiums charged by the FDIC for deposit
insurance. Because of the recapitalization of the Bank Insurance Fund ("BIF"),
the FDIC eliminated the insurance premium on FDIC-insured deposits. For the
first six months of last year, this premium was calculated as $.23 per $100 of
insured deposits. Southern National incurred Federal deposit insurance expense
of $3.2 million during the second quarter of 1996, down from $8.0 million
recorded in the prior year. Southern National continues to incur insurance
expense, despite the actions of the FDIC because of Southern National's
acquisitions of thrift institutions in prior years. Thrift deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which still assesses a
premium of $.23 per $100 for deposits held by Southern National.
In late 1995, proposed legislation was passed in Congress that contained
provisions to recapitalize the SAIF. However, the President vetoed the proposed
legislation on December 6, 1995, for reasons unrelated to the SAIF
recapitalization issue. The legislation included provisions for a one-time
special assessment, as determined by the FDIC, on SAIF-assessable deposits of
insured depository institutions in an amount adequate to cause the SAIF to
achieve its specific designated reserve ratio of 1.25%, which would have called
for a special assessment in the range of $.80 per $100 of insured deposits for
SAIF institutions.
Under the vetoed legislation, the special assessment would have been applied
to the amount of SAIF-assessable deposits held as of March 31, 1995. The SAIF-
assessable deposits of BB&T-NC and BB&T-SC as of March 31, 1995 totaled
approximately $4.3 billion and $1.5 billion, respectively. Under the vetoed
legislation, BB&T-NC would have received a 20% discount on the assessment,
because the bank's SAIF-assessable deposits were less than 50% of its total
assessable deposits as of June 30, 1995. The pretax impact on Southern National
of a one-time assessment of the type included in the vetoed legislation would
not have exceeded $41.0 million. The vetoed legislation contained additional
provisions that, among other things, would have required BIF member institutions
to share pro rata in the obligations of SAIF members for certain government
bonds.
Although the SAIF-recapitalization provisions discussed in the preceding
paragraphs were included in legislation that was vetoed and therefore have not
been enacted into law, similar provisions have already been considered in 1996,
and may be considered again and included in other legislation later in 1996. The
final form of the legislation, including whether the legislation will contain
some or all of the provisions discussed above, cannot be determined with
certainty at this time. Similarly, the date of passage of the final form of any
such legislation cannot be determined with certainty at this time. In the event
that the SAIF is recapitalized pursuant to any
20
<PAGE>
such legislation, it is expected that future assessment rates applicable to
SAIF-assessable deposits would be reduced.
Excluding $32.9 million in nonrecurring charges which were recorded in the
first six months of last year, other noninterest expenses increased $10.0
million, or 12.2%. This increase was driven by increases in advertising, up $2.2
million, loan and lease expenses, up $4.5 million and other charge-offs, up $2.8
million. The increased advertising costs are related to a marketing program to
increase BB&T brand identity. Additional loan and lease expenses result from a
home equity incentive program. For the second quarter, other expenses totaled
$47.5 million, up from the $40.8 million recorded in the second quarter of 1995
on a recurring basis. This increase reflects higher levels of advertising and
promotional expenditures made during the second quarter of 1996.
Southern National's efficiency ratio improved to 53.8% for the first six
months of 1996 compared to 58.3%, excluding nonrecurring charges, for the same
period in 1995.
Provision for Income Taxes
The provision for income taxes increased to $70.5 million for the first six
months of 1996 compared to $23.3 million recorded in the first six months of
1995. Excluding the impact of the nonrecurring charges recorded in 1995, the
income tax provision for the prior year totaled $57.3 million. Comparing the
recurring balances, the provision for income taxes increased $13.2 million, or
23.0%, because of higher pretax income. Effective tax rates were 32.9% and 32.6%
for the six months ended June 30, 1996 and 1995, respectively. For the second
quarter of 1996, the provision for income taxes totaled $36.3 million, up $8.7
million, or 31.7%, compared to the second quarter 1995 balance.
21
<PAGE>
PROFITABILITY MEASURES
<TABLE>
<CAPTION>
1996 1995
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Return on average assets 1.47 % 1.40 % 1.36 % 1.20 % 1.15 %
Return on average common equity 18.68 17.86 17.35 16.00 15.48
Net interest margin 4.39 4.28 4.07 3.95 4.06
Efficiency ratio (taxable equivalent)* 53.4 54.3 53.2 54.5 57.9
</TABLE>
- ----------------
* Excludes securities gains (losses) and foreclosed property expense for all
periods and nonrecurring items totaling $3,458 for the second quarter of
1995 and $6,117 for the third quarter of 1995.
22
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The nature of the business of Southern National's banking subsidiaries
ordinarily results in a certain amount of litigation. The subsidiaries of
Southern National are involved in various legal proceedings, all of which are
considered incidental to the normal conduct of business. Management believes
that the liabilities arising from these proceedings will not have a materially
adverse effect on the consolidated financial position or consolidated results of
operations of Southern National.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Southern National Corporation held its annual meeting of the shareholders on
April 23, 1996 to consider and vote upon the following matters:
(1) To elect eight Directors for three-year terms expiring in 1999. Of shares
represented by proxy, votes in favor were 71,565,720 and votes opposed were
538,760.
(2) To approve amendments to the Corporation's 1995 Omnibus Stock Incentive
Plan. Of shares represented by proxy, votes in favor were 63,737,006; votes
against were 7,103,930 and abstentions were 1,329,590.
(3) To approve the Corporation's Amended and Restated Short-Term Incentive Plan.
Of shares represented by proxy, votes in favor were 66,499,687; votes against
were 4,214,526 and abstentions were 1,466,343.
(4) To ratify the reappointment of Arthur Andersen LLP as the Corporation's
auditors for 1996. Of shares represented by proxy, votes in favor were
71,271,714; votes against were 383,279 and abstentions were 505,489.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 4.1 - Senior Indenture (including form of Senior Debt Security),
between Southern National Corporation and State Street Bank and Trust
Company, as Trustee, dated as of May 24, 1996 is included herein.
Exhibit 4.2 - Subordinated Indenture (including form of Subordinated Debt
Security), between Southern National Corporation and State Street Bank and
Trust Company, as Trustee, dated as of May 24, 1996 is included herein.
Exhibit 11 - "Computation of Earnings Per Share" is included herein.
23
<PAGE>
Exhibit 27 - "Financial Data Schedule" is included in the electronically-
filed document as required.
(b) Southern National filed a Form 8-K under Item 5 on April 15, 1996 to report
the results of operations and financial condition as of March 31, 1996.
Southern National filed a Form 8-K under Item 5 on May 3, 1996 to report the
plans to acquire Regional Acceptance Corporation. Southern National filed a
Form 8-K under Item 5 on July 12, 1996 to report the results of operations
and financial condition as of June 30, 1996.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHERN NATIONAL CORPORATION
(Registrant)
Date: August 14, 1996 By: /s/ Scott E. Reed
--------------- --------------------------------
Scott E. Reed, Senior Executive Vice President
and Chief Financial Officer
Date: August 14, 1996 By: /s/ Sherry A. Kellett
---------------- --------------------------------
Sherry A. Kellett, Executive Vice President and
Controller (Principal Accounting Officer)
25
<PAGE>
EXHIBIT 4.1
SOUTHERN NATIONAL CORPORATION
TO
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
INDENTURE
REGARDING SENIOR SECURITIES
DATED AS OF MAY 24, 1996
<PAGE>
Reconciliation and Tie Sheet*
between
Provisions of the Trust Indenture Act of 1939
and
Indenture, dated as of May 24, 1996
between
SOUTHERN NATIONAL CORPORATION
and
STATE STREET BANK AND TRUST COMPANY, Trustee
Section of Act Section of Indenture
- -------------- --------------------
310(a)(1), (2)............................ 5.08
310(a)(3), (4)............................ Inapplicable
310(a)(5)................................. 5.08
310(b).................................... **
310(c).................................... Inapplicable
311(a), (b)............................... **
311(c).................................... Inapplicable
312....................................... **
313(a).................................... **
313(b)(1)................................. Inapplicable
313(b)(2)................................. **
313(c), (d)............................... **
314(a).................................... **
314(b).................................... Inapplicable
314(c)(1) and (2)......................... 15.05
314(c)(3)................................. Inapplicable
314(d).................................... Inapplicable
314(e).................................... 15.05
314(f).................................... Inapplicable
315(a)(c) and (d)......................... 5.01
315(b).................................... 4.08
315(e).................................... 4.09
316(a)(1)................................. 4.01 and 4.07
316(a)(2)................................. Omitted
316(a) last sentence...................... 6.04
316(b).................................... 4.04
316(c).................................... 6.05
317(a).................................... 4.02
317(b).................................... 3.04(a)
318(a).................................... 15.07
_____________________
* This Reconciliation and Tie-sheet is not a part of the Indenture.
** Included pursuant to Section 318(c) of the Trust Indenture Act of 1939.
<PAGE>
TABLE OF CONTENTS*
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES............................................................. 1
RECITALS............................................................ 1
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions........................................ 1
<CAPTION>
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
<S> <C> <C>
SECTION 2.01. Amount Unlimited; Issuable in Series............... 8
SECTION 2.02. Form of Securities and of Trustee's Certificate
of Authentication.................................. 11
SECTION 2.03. Securities in Global Form.......................... 12
SECTION 2.04. Denomination, Authentication and Dating of
Securities......................................... 12
SECTION 2.05. Execution of Securities............................ 16
SECTION 2.06. Exchange and Registration of Transfer of
Securities......................................... 17
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities.....21
SECTION 2.08. Temporary Securities............................... 22
SECTION 2.09. Payment of Interest; Interest Rights................24
SECTION 2.10. Cancellation of Securities Paid, etc................26
<CAPTION>
ARTICLE THREE
PARTICULAR COVENANTS OF THE COMPANY
<S> <C> <C>
SECTION 3.01. Payment of Principal and Interest.................. 26
SECTION 3.02. Offices for Notices and Payments, etc...............26
SECTION 3.03. Provisions as to Paying Agent...................... 28
SECTION 3.04. Statement as to Compliance......................... 29
</TABLE>
__________________
* This table of contents is not part of the Indenture.
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.05. Notice of Defaults................................. 30
SECTION 3.06. Limitation on Certain Dispositions and on Merger
and Sale of Assets................................. 30
SECTION 3.07. Limitation on Creation of Liens.................... 31
SECTION 3.08. Corporate Existence................................ 31
<CAPTION>
ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
<S> <C> <C>
SECTION 4.01. Events of Default.................................. 31
SECTION 4.02. Payment of Securities on Default; Suit Therefor.... 35
SECTION 4.03. Application of Money Collected by Trustee.......... 37
SECTION 4.04. Proceedings by Securityholders..................... 38
SECTION 4.05. Proceedings by Trustee............................. 38
SECTION 4.06. Remedies Cumulative and Continuing; Delay or
Omission Not Waiver................................ 39
SECTION 4.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders........................ 39
SECTION 4.08. Notice of Defaults................................. 40
SECTION 4.09. Undertaking to Pay Costs........................... 40
<CAPTION>
ARTICLE FIVE
CONCERNING THE TRUSTEE
<S> <C> <C>
SECTION 5.01. Duties and Responsibilities of Trustee............. 41
SECTION 5.02. Reliance on Documents, Opinions, etc............... 42
SECTION 5.03. No Responsibility for Recitals, etc................ 44
SECTION 5.04. Trustee, Paying Agents or Registrar May Own
Securities......................................... 44
SECTION 5.05. Money to Be Held in Trust.......................... 44
SECTION 5.06. Compensation and Expenses of Trustee............... 44
SECTION 5.07. Officers' Certificate as Evidence.................. 45
SECTION 5.08. Eligibility of Trustee............................. 45
SECTION 5.09. Resignation or Removal of Trustee.................. 45
SECTION 5.10. Acceptance by Successor Trustee.................... 47
SECTION 5.11. Succession by Merger, etc.......................... 48
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS
<S> <C> <C>
SECTION 6.01. Action by Securityholders.......................... 49
SECTION 6.02. Proof of Execution by Securityholders.............. 50
SECTION 6.03. Who Are Deemed Absolute Owners..................... 50
SECTION 6.04. Company-Owned Securities Disregarded............... 51
SECTION 6.05. Revocation of Consents; Future Holders Bound....... 52
<CAPTION>
ARTICLE SEVEN
SECURITYHOLDERS' MEETINGS
<S> <C> <C>
SECTION 7.01. Purposes of Meetings............................... 52
SECTION 7.02. Call of Meetings by Trustee........................ 53
SECTION 7.03. Call of Meetings by Company or Securityholders..... 53
SECTION 7.04. Qualifications for Voting.......................... 54
SECTION 7.05. Regulations........................................ 54
SECTION 7.06. Quorum............................................. 55
SECTION 7.07. Voting............................................. 55
SECTION 7.08. No Delay of Rights by Meeting...................... 56
<CAPTION>
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
<S> <C> <C>
SECTION 8.01. Supplemental Indentures Without Consent of
Securityholders.................................... 56
SECTION 8.02. Supplemental Indentures with Consent of
Securityholders of a Series........................ 58
SECTION 8.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures............................ 59
SECTION 8.04. Notation on Securities............................. 59
SECTION 8.05. Evidence of Compliance of Supplemental Indenture
to Be Furnished Trustee............................ 60
<CAPTION>
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
<S> <C> <C>
SECTION 9.01. Company May Consolidate, etc., on Certain Terms.... 60
SECTION 9.02. Successor Corporation Substituted.................. 61
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE TEN
REDEMPTION OF SECURITIES
<S> <C> <C>
SECTION 10.01. Applicability of Article........................... 61
SECTION 10.02. Election to Redeem; Notice to Trustee.............. 62
SECTION 10.03. Selection by Trustee of Securities to Be Redeemed.. 62
SECTION 10.04. Notice of Redemption............................... 62
SECTION 10.05. Deposit of Redemption Price........................ 63
SECTION 10.06. Securities Payable on Redemption Date.............. 63
SECTION 10.07. Registered Securities Redeemed in Part............. 64
<CAPTION>
ARTICLE ELEVEN
SINKING FUNDS
<S> <C> <C>
SECTION 11.01. Applicability of Article........................... 65
SECTION 11.02. Satisfaction of Sinking Fund Payments with
Securities......................................... 65
SECTION 11.03. Redemption of Securities for Sinking Fund...........66
<CAPTION>
ARTICLE TWELVE
REPAYMENT AT THE OPTION OF HOLDERS
<S> <C> <C>
SECTION 12.01. Terms Set Forth in the Securities.................. 66
<CAPTION>
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
<S> <C> <C>
SECTION 13.01. Discharge of Indenture..............................66
SECTION 13.02. Deposited Money to Be Held in Trust by Trustee......68
SECTION 13.03. Paying Agent to Repay Money Held....................68
SECTION 13.04. Return of Unclaimed Money...........................68
SECTION 13.05. Discharge of Indenture as to Certain Series of
Securities..........................................69
SECTION 13.06. Repayment to Company of Deposits Made Pursuant
to Section 13.05....................................71
SECTION 13.07. Deposits Irrevocable................................71
SECTION 13.08. Reinstatement.......................................71
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
<S> <C> <C>
SECTION 14.01. Indenture and Securities Solely Corporate
Obligations.........................................72
<CAPTION>
ARTICLE FIFTEEN
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 15.01. Provisions Binding on Company's Successors......... 72
SECTION 15.02. Official Acts by Successor Corporation............. 72
SECTION 15.03. Addresses for Notices, etc......................... 73
SECTION 15.04. Governing Law...................................... 73
SECTION 15.05. Evidence of Compliance with Conditions Precedent... 73
SECTION 15.06. Legal Holidays..................................... 74
SECTION 15.07. Trust Indenture Act to Control..................... 74
SECTION 15.08. No Security Interest Created....................... 74
SECTION 15.09. Benefits of Indenture.............................. 74
SECTION 15.10. Payments to Be Made in U.S. Dollars................ 74
SECTION 15.11. Table of Contents, Headings, etc................... 74
SECTION 15.12. Execution in Counterparts.......................... 75
</TABLE>
v
<PAGE>
THIS INDENTURE, dated as of May 24, 1996, is executed and
delivered from SOUTHERN NATIONAL CORPORATION, a North Carolina corporation (such
corporation or, subject to Article Nine, its successors and assigns, the
"Company"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company (such corporation or, subject to Article Five, its successors and
assigns as Trustee under this Indenture, the "Trustee").
RECITAL 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 senior
debentures, notes or other evidences of indebtedness or warrants therefor to be
issued in one or more series (the "Securities"), as provided herein.
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, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01
-----------
(except to the extent the application of such definitions is expressly limited
to certain instances, and except as otherwise expressly provided in this
Indenture or unless the context otherwise requires) for all purposes of this
Indenture will have the respective meanings specified in this Section 1.01.
Except as otherwise expressly provided in this Indenture or unless the context
otherwise requires, all other terms used in this Indenture that are defined in
the Trust Indenture Act or that the Trust Indenture Act defines by reference to
the Securities Act of 1933 or by Commission rule under the Trust Indenture Act
will have the meanings assigned to such terms in the Trust Indenture Act, in
such rule thereunder or in such Securities Act as in force at the date of the
execution of this Indenture.
"Bank" means (i) any institution organized under the laws of the
United States, any State, the District of Columbia, Puerto Rico or any territory
of the United States that (a) accepts deposits that the depositor has a legal
right to withdraw on demand and (b) engages in the business
<PAGE>
of making commercial loans and (ii) any trust company organized under any of the
foregoing laws. Unless otherwise provided, for purposes of this Indenture a Bank
also will be considered a "corporation".
"BB&T-NC" shall mean Branch Banking and Trust Company, a North
Carolina Corporation, and any successor or successors thereto.
"Bearer Security" means any Security established pursuant to Section
2.02 that is payable to bearer.
"Bearer Security Tax Certificate" or "Certificate of non-U.S.
Ownership", when used with respect to a Bearer Security, means a certificate
satisfying the requirements of Treasury Regulation (S) 1.163-5(c)(2)(i)(D)(3),
as that provision may be amended or redesignated from time to time, which
certificate shall be in a form approved by the Company.
"Board of Directors" means the Board of Directors of the Company or,
with respect to any matter, any committee of the Board of Directors duly
authorized to act for the Board of Directors with respect to such matter.
"Business Day", with respect to each series of Securities, means any
day other than a Saturday or Sunday that is neither a legal holiday nor a day on
which banking institutions are authorized or obligated by law or regulation to
close in either The City of New York or, with respect to Registered Notes that
will bear interest based on a specified percentage of London interbank offered
quotations ("LIBOR"), in London, England, or, in the case of Bearer Securities,
in any Place of Payment.
"CEDEL, S.A." means Centrale de Livraison de Valeurs Mobilieres S.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 Indenture the Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Company" means the corporation identified as the Company in the first
paragraph of this Indenture until a successor corporation shall succeed to and
be substituted for the Company pursuant to the provisions of Article Nine, and
thereafter shall mean such successor corporation.
2
<PAGE>
"Company Order" means a written request or order signed in the name of
the Company by its Chairman of the Board, any Vice Chairman, its Chief Executive
Officer, its President, any Executive Vice President or any Senior Vice
President and its Treasurer, any Assistant Treasurer, its Secretary or any
Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Banking Assets" means all net assets owned directly
or indirectly by each Subsidiary that is a Bank as such net assets would be
reflected on a consolidated balance sheet of the Company prepared in accordance
with generally accepted accounting principles at the time.
"Constituent Bank" means any Subsidiary that is a Bank.
"Controlled Subsidiary" means any Subsidiary of which more than 80% of
the aggregate voting power of the outstanding shares of the Voting Stock at the
time is owned directly or indirectly by the Company or by one or more Controlled
Subsidiaries or by the Company and one or more Controlled Subsidiaries, after
giving effect to the issuance to any Person other than the Company or any
Controlled Subsidiary of Voting Stock of the Subsidiary issuable on exercise of
options, warrants or rights to subscribe for such Voting Stock or on conversion
of securities convertible into such Voting Stock.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Defaulted Interest" has the meaning specified in Section 2.09.
"Depositary", with respect to the Securities of any series issuable or
issued in the form of one or more Global Securities, means The Depository Trust
Company, New York, New York, or such other Person designated as Depositary by
the Company in the manner provided in Section 2.01, until a successor Depositary
shall have been appointed pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" means or includes each Person who is then
a Depositary hereunder, and if at any time there is more than one such Person,
"Depositary" as used with respect to the Global Securities of any such series
means the Depositary with respect to the Securities of that series.
3
<PAGE>
"Euro-clear" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euro-clear System.
"Event of Default" means any event specified in Section 4.01,
continued for the period of time, if any, and after the giving of the notice, if
any, designated in Section 4.01.
"Global Security" means a Security issued to evidence all or part of a
series of Securities in accordance with Section 2.03.
"Indenture" means this instrument as originally executed or, if
amended or supplemented as provided in this Indenture, as so amended or
supplemented.
"interest", when used with respect to an Original Issue Discount
Security that by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by the declaration of
acceleration, call for redemption, repayment at the option of the holder or
otherwise.
"Officers' Certificate", when used with respect to the Company, means
a certificate signed by the Chairman of the Board, any Vice Chairman, the Chief
Executive Officer, the President, any Executive Vice President or any Senior
Vice President and by the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company. Except as otherwise provided in this
Indenture, each such certificate shall include the statements provided for in
Section 15.05.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and who shall be
acceptable to the Trustee. Except as otherwise provided in this Indenture, each
such opinion shall include the statements provided for in Section 15.05.
"Original Issue Discount Security" means any Security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of
4
<PAGE>
acceleration of the Maturity thereof pursuant to Section 4.01. The term
"principal amount" or "aggregate principal amount", when used with respect to
Original Issue Discount Securities, has the meaning (or meanings) specified in
the manner contemplated by Section 2.01 for purposes of: determining the amount
due and payable in the event of an acceleration of Maturity as provided in
Section 4.01; the redemption provisions in Article Ten; determining whether the
holders of the requisite principal amount of Outstanding Securities of any
series have given any request, demand, authorization, direction, notice, consent
or waiver under this Indenture; and determining whether a quorum is present at a
meeting of Securityholders.
"Outstanding", when used with reference to Securities of any series or
the related coupons, subject to the provisions of Section 6.04, means, as of any
particular time, all Securities of such series or any related coupons
authenticated and delivered by the Trustee pursuant to this Indenture, except:
(a) such Securities and coupons theretofore canceled by the Trustee
or delivered to the Trustee for cancellation;
(b) such Securities and coupons, or portions thereof, for the payment
or redemption of which money in the necessary amount shall have been
deposited in trust with the Trustee or with any Paying Agent (other than
the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent), provided that
if such Securities are to be redeemed prior to the Maturity thereof, notice
of such redemption shall have been provided as specified in Article Eleven,
or provision satisfactory to the Trustee shall have been made for mailing
such notice; and
(c) such Securities or coupons in lieu of or in substitution for
which other Securities or coupons shall have been authenticated and
delivered pursuant to the terms of Section 2.07, except to the extent that
a bona fide holder in due course of any such Securities shall have
presented proof satisfactory to the Trustee that such holder is a bona fide
holder in due course of any such Securities or coupons.
"Paying Agent", when used with respect to Securities of any series,
means any Person authorized by the Company to pay the principal of and any
premium or interest on any Securities of that series on behalf of the Company.
5
<PAGE>
"Person" means a corporation, an association, a partnership, an
organization, a trust, an individual, a government or a political subdivision
thereof or a governmental agency.
"Place of Payment" has the meaning stated in Section 2.01(5).
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt that was evidenced by such
particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 2.07 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.
"Principal Constituent Bank" means BB&T-NC and, at any time, any other
Constituent Bank the total assets of which (as set forth in the most recent
statement of condition of such Constituent Bank) equal more than 30% of the
total assets of all Constituent Banks as determined from the most recent
statements of condition of the Constituent Banks.
"principal office of the Trustee" or any other similar term means the
principal office of the Trustee at which at any particular time its corporate
trust business shall be administered, which office, at the date of this
Indenture, is located at Two International Place, 4th Floor, Boston,
Massachusetts 02110.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" means any Security, in the form of registered
securities established pursuant to Section 2.02, that is registered in the
Security Register.
"Regular Record Date", with respect to the interest payable on any
Interest Payment Date on the Securities of any series, means the date specified
for that purpose as contemplated by Section 2.01.
"Responsible Officer", when used with respect to the Trustee, means
any officer of the principal office of the Trustee, the Chairman or Vice
Chairman of its board of directors, the Chairman or Vice Chairman of the
executive committee of the board of directors,
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or any other officer of the Trustee to whom any corporate trust matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Security" or "Securities" has the meaning stated in the recitals of
this Indenture and means any Security or Securities, as the case may be,
authenticated and delivered pursuant to this Indenture. Whenever this Indenture
refers to any interest on or with respect to any Security that is represented by
a coupon, such reference to the Security also shall include reference to a
coupon.
"Security Register", when used with respect to a Registered Security,
has the meaning specified in Section 2.06(b).
"Securityholder", "holder of Securities", "holder" or other similar
term, when used with respect to a Registered Security, means any Person in whose
name at the time a particular Registered Security is registered on the Security
Register and, when used with respect to a Bearer Security or coupon, the bearer
thereof.
"Special Record Date" has the meaning specified in Section 2.09.
"Stated Maturity", when used with respect to any Security or any
payment of premium or any installment of interest thereon, means the date
specified in such Security or a coupon representing such installment of interest
as the fixed date on which the principal of such Security or such payment of
premium or such installment of interest is due and payable.
"Subsidiary" means any corporation of which a majority of the
aggregate voting power of the outstanding Voting Stock at the time shall be
owned by the Company or by the Company and one or more Subsidiaries or by one or
more Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as it was
in force at the date of execution of this Indenture, except as provided in
Section 8.03.
"Trustee" means the Person identified as the Trustee in the first
paragraph of this Indenture until a successor shall succeed to the trusts
created by this
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Indenture pursuant to the provisions of Article Five, and thereafter shall mean
such successor.
"United States" means the United States of America (including the
District of Columbia) and its possessions.
"U.S. Government Obligations" has the meaning specified in Section
13.05(b).
"Vice President", when used with respect to the Company or the
Trustee, means any such officer whether or not designated by a number or a word
or words added before or after such title.
"Voting Stock" of a corporation or other entity means stock of the
class or classes having general voting power in an election of the board of
directors, managers or trustees of such corporation or other entity
(irrespective of whether, at the time, stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
SECTION 2.01. Amount Unlimited; Issuable in Series. The aggregate
------------------------------------
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited. Securities may be issued in one or more series.
The terms and conditions listed below, as applicable, of any series of
Securities shall be established either in an indenture supplemental hereto or in
or pursuant to a resolution of the Board of Directors:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of all other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, other
Securities of the series pursuant to Section 2.05, 2.06, 2.07, 8.04 or
10.07);
(3) the date or dates on which the principal of the Securities
of the series is payable;
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(4) the rate or rates (which may be fixed or variable) at which
the Securities of the series shall bear interest, if any, or the formula by
which interest shall be calculated by the Company or an agent designated
for such purpose, the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest shall be payable and the
Regular Record Date for the interest payable on any Registered Security on
any Interest Payment Date;
(5) the place or places, if any, in addition to those specified
herein, where the principal of and any premium or interest on Securities of
the series shall be payable (the "Place of Payment"), any Registered
Securities of the series may be surrendered for registration of transfer,
Securities of the series may be surrendered for exchange and notices and
demands to or upon the Company in respect of the Securities of the series
and this Indenture may be served and where notices to holders pursuant to
this Indenture will be published;
(6) the price or prices at which, the period or periods within
which and the terms and conditions upon which Securities of the series may
be redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase
or repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof and the price or prices at
which, the period or periods within which and the other terms and
conditions upon which Securities of the series shall be redeemed, purchased
or repaid, in whole or in part, pursuant to such obligation, which in the
case of Securities of any series that are repayable at the option of a
holder thereof shall be set forth in the form of such Security;
(8) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities or both, whether Securities of the
series are to be issuable with or without coupons or both and, in the case
of Bearer Securities, the date as of which such Bearer Securities shall be
dated if other than the date of original issuance of the first Security of
such series of like tenor and term to be issued;
(9) whether the Securities of the series shall be issued in
whole or in part in the form of a Global Security or Securities and, in
such case, the
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Depositary (if other than The Depository Trust Company) for such Global
Security or Securities and whether such global form shall be permanent or
temporary;
(10) if Securities of the series are to be issuable initially in
the form of one or more temporary Global Securities, the circumstances
under and the manner in which such temporary Global Securities can be
exchanged for definitive Securities of the series and whether such
definitive Securities will be Registered Securities, Bearer Securities or
both and will be in global form;
(11) the denominations in which Registered Securities of the
series shall be issuable, if other than denominations of $1,000 and any
integral multiple thereof, and the denominations in which Bearer Securities
of such series, if any, shall be issuable if other than the denomination of
$5,000;
(12) any Event of Default with respect to the Securities of such
series, if not set forth herein or if different from those set forth
herein;
(13) the form of Securities of such series;
(14) the Person or Persons who shall be Security registrar for
the Securities of such series if other than as provided for in this
Indenture, and the place or places where the Security Register for such
series shall be maintained and the Person or Persons who will be the
initial Paying Agent or Agents, if other than as provided for in this
Indenture;
(15) if warrants for Securities of any series are to be issued,
the form in which the warrants shall be issued, the circumstances under and
the manner in which the warrants may be exercised, any obligation of the
Company concerning any Securities underlying the warrants and any other
terms or conditions regarding the warrants and any Securities underlying
the warrants; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any series and the coupons appertaining to Bearer
Securities of such series, if any, issued under this Indenture in all respects
shall be equally and ratably entitled to the benefits hereof with respect to
such series without preference, priority or distinction on
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account of actual time or times of authentication and delivery or Maturity of
the Securities of such series. All Securities of the same series and the coupons
appertaining to Bearer Securities of such series, if any, shall be substantially
identical except as to denomination and except as may otherwise be provided
either in an indenture supplemental hereto or a resolution of the Board of
Directors.
SECTION 2.02. Form of Securities and of Trustee's Certificate of
--------------------------------------------------
Authentication. The Registered Securities, if any, and the Bearer Securities
- --------------
and related coupons, if any, of each series and the certificates of
authentication on the Securities shall be in substantially the form as shall be
established as provided in Section 2.01 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 any law or with any rules made pursuant thereto or with
any rules of any securities exchange or as may be determined consistently
herewith by the officers executing such Securities or coupons, as evidenced by
their execution of the Securities or coupons. If the form of Securities of any
series or coupons (including any Global Security) is established by action taken
pursuant to a resolution of the Board of Directors, a copy of an appropriate
record of such action shall be certified by the Secretary or any Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect as of the date of such certificate, and shall be
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 2.04(b) or the authentication and delivery of such
Securities.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange, all as determined by the officers executing
such Securities or coupons, as evidenced by their execution of such Securities
or coupons.
The form of Trustee's certificate of authentication for all Securities
shall be as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities issued under the within-mentioned
Indenture.
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STATE STREET BANK AND TRUST COMPANY,
as Trustee
By___________________________________
Authorized Signatory
SECTION 2.03. Securities in Global Form. (a) If Securities of a
-------------------------
series are issuable in whole or in part in global form, as specified in the
manner contemplated by Section 2.01, then, notwithstanding the provisions of
clause (11) of Section 2.01 or Section 2.04, such Global Security shall
represent such of the Outstanding Securities of such series as shall be
specified therein and may provide that it shall represent the aggregate amount
of Outstanding Securities from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities represented thereby from time to time
may be reduced to reflect exchanges. Any endorsement of a Global Security to
reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made in such manner and upon
instructions given by such Person or Persons as shall be specified in such
Global Security or in the Company Order to be delivered to the Trustee pursuant
to Section 2.04(b).
(b) The provisions of the last sentence of Section 2.05(b) shall
apply to any Securities represented by a Global Security if such Securities were
never issued and sold by the Company (whether because of failure of settlement
or otherwise) and the Company delivers to the Trustee the Global Security
together with written instructions with regard to the reduction in the principal
amount of Securities represented thereby, together with the written statement
contemplated by the last sentence of Section 2.05(b), notwithstanding the
absence of delivery of such Securities as contemplated thereby.
(c) Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form.
SECTION 2.04. Denomination, Authentication and Dating of Securities.
-----------------------------------------------------
(a) Securities of each series shall be issuable in such form and denominations
as shall be specified in the form of Security for such series approved or
established pursuant to Section 2.02. In the absence of any specification, as
provided in Section 2.01, with respect to the Securities of any series, the
Registered Securities of such series, if any, shall be issuable in denominations
of $1,000 and any integral multiple thereof and the Bearer Securities of such
series, if any, shall be issuable in the
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denomination of $5,000. Each Registered Security shall be dated as of the date
of its authentication. Each Bearer Security shall be dated as of the date
specified in the manner contemplated by Section 2.01.
(b) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication. Except as otherwise
provided in this Article Two, the Trustee thereupon shall authenticate and
deliver such Securities in accordance with a Company Order; provided, however,
that in connection with its original issuance a Bearer Security may be delivered
only outside the United States and, except in the case of a temporary Global
Security, only if the Company or its agent shall have received from the Person
entitled to receive the Bearer Security a Bearer Security Tax Certificate and
only if the Company and the Trustee have no reason to know that such certificate
is false.
(c) To the extent authorized in or pursuant to a resolution of the
Board of Directors or established in an indenture supplemental hereto, such
Company Order may be electronically transmitted and may provide instructions as
to registration of holders, principal amounts, rates of interest, Stated
Maturities and other matters contemplated by such resolution of the Board of
Directors or supplemental indenture to be so instructed in respect thereof.
(d) In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and, subject to Section 5.01, shall be
fully protected in relying upon:
(i) a copy of the resolution or resolutions of the Board of
Directors in or pursuant to which the terms and form of the Securities were
established, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in
full force and effect as of the date of such certificate;
(ii) an executed supplemental indenture, if any;
(iii) an Officers' Certificate delivered in accordance with
Section 15.05; and
(iv) an Opinion of Counsel which shall state:
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(A) that the form of such Securities and coupons, if any,
has been established by a supplemental indenture or by or pursuant to
a resolution of the Board of Directors in accordance with Sections
2.01 and 2.02 and in conformity with the provisions of this Indenture;
(B) that the terms of such Securities and coupons, if any,
have been established in accordance with Section 2.01 and in
conformity with the other provisions of this Indenture;
(C) that such Securities, when authenticated and delivered
by the Trustee and issued (with coupons attached, if applicable) by
the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization and moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(D) that all conditions precedent, if any, provided for in
this Indenture have been complied with; and
(E) that the execution and delivery by the Company of such
Securities and coupons, if any, do not conflict with any law,
administrative regulation or court decree known by legal counsel
furnishing the Opinion of Counsel to be applicable to the Company.
(e) If the Company shall establish pursuant to Section 2.01 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Global Securities, then the Company shall execute and the Trustee, in
accordance with this Section 2.04 and the Company Order with respect to such
series, shall authenticate and deliver one or more Global Securities in
permanent or temporary form that (i) shall represent and shall be denominated in
an aggregate amount equal to the aggregate principal amount of the Outstanding
Securities of such series to be represented by one or more Global Securities,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary and (iii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instruction.
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<PAGE>
(f) The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section 2.04 if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith by its board of directors or trustees, executive committee or a
trust committee of directors or trustees or vice presidents shall determine that
such action would expose the Trustee to personal liability to existing holders.
(g) Notwithstanding any contrary provision herein, if all Securities
of a series are not to be originally issued at one time, it shall not be
necessary for the Company to deliver to the Trustee a Company Order, Officers'
Certificate, resolution of the Board of Directors, supplemental indenture or
Opinion of Counsel otherwise required pursuant to Section 2.04(b) or Section
2.04(d) at or prior to the time of authentication of each Security of such
series if such documents are delivered to the Trustee or its agent at or prior
to the authentication upon original issuance of the first Security of such
series to be issued. In such event, any subsequent request by the Company to
the Trustee to authenticate Securities of such series upon original issuance
shall constitute a representation and warranty by the Company that, as of the
date of such request, the statements made in the Officers' Certificate or other
certificates delivered pursuant to Section 2.04(d) shall be true and correct as
if made on such date. A Company Order, Officers' Certificate, resolution of the
Board of Directors or supplemental indenture delivered by the Company to the
Trustee in the circumstances set forth in this Section 2.04(g) may provide that
Securities that are the subject thereof will be authenticated and delivered by
the Trustee or its agent on original issue from time to time in the aggregate
principal amount established for such series pursuant to such procedures
acceptable to the Trustee as may be specified from time to time by Company Order
upon the telephonic, electronic or written order of persons designated in such
Company Order, supplemental indenture or resolution of the Board of Directors
(any such telephonic or electronic instructions to be promptly confirmed in
writing by such persons) and that such persons are authorized to determine,
consistent with such Company Order, supplemental indenture or resolution of the
Board of Directors, such terms and conditions of said Securities as are
specified in such Company Order, supplemental indenture or resolution of the
Board of Directors.
(h) Each Depositary designated pursuant to clause (9) of Section 2.01
for a Global Security in registered form, at the time of its designation and at
all times while it serves as Depositary, shall be a clearing
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agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation.
SECTION 2.05. Execution of Securities. (a) The Securities and the
-----------------------
related coupons shall be signed in the name and on behalf of the Company by the
manual or facsimile signature of its Chairman of the Board, its Chief Executive
Officer or its President or, in lieu thereof, of any Senior Vice President or
its Treasurer and attested by its Secretary, under its corporate seal (which may
be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). For the purpose of any such signature or attestation, the Company
may adopt and use the facsimile signature of any person who has been or is or
shall be such officer.
(b) No Security or appurtenant coupon shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose unless such
security bears thereon a certificate of authentication substantially in the form
set forth in Section 2.02, manually executed by an authorized signatory of the
Trustee. Such certificate by the Trustee upon any Security executed by the
Company shall be conclusive evidence that the Security so authenticated has been
duly authenticated and delivered under this Indenture. Except as permitted by
Section 2.07, the Trustee shall not authenticate and deliver any Bearer Security
unless all appurtenant coupons for interest then matured have been detached and
canceled. Notwithstanding the foregoing, if any Security or portions thereof
shall have been duly authenticated and delivered hereunder but never issued and
sold by the Company (whether because of failure of settlement or otherwise), and
the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 2.10 together with a written statement stating that such
Security or portion thereof has never been issued and sold by the Company, for
all purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
(c) In case any officer of the Company whose manual or facsimile
signature appears on any of the Securities or coupons shall cease to be such
officer before the Securities or coupons so signed shall have been authenticated
and delivered by the Trustee, or disposed of by the Company, such Securities or
coupons nevertheless may be authenticated and delivered or disposed of as though
the person whose manual or facsimile signature appears on such Securities or
coupons had not ceased to be such officer of the Company; and any Security or
coupon may bear the manual or facsimile signature on behalf of the Company by
such
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persons as, at the actual date of the execution of such Security or coupon,
shall be the proper officers of the Company, although at the date of the
execution of this Indenture any such person was not such an officer.
SECTION 2.06. Exchange and Registration of Transfer of Securities.
---------------------------------------------------
(a) Registered Securities of any series may be exchanged for a like aggregate
principal amount of Registered Securities of other authorized denominations and
of like tenor and terms of the same series. Registered Securities to be
exchanged shall be surrendered at the office or agency to be maintained by the
Company pursuant to Section 3.02 in each Place of Payment for such series of
Registered Securities, and the Company shall execute and cause to be registered,
and the Trustee shall authenticate and deliver in exchange therefor, the
Registered Security or Securities which the Securityholder making the exchange
shall be entitled to receive.
(b) For each series of Registered Securities, the Company shall cause
to be kept in at least one such office or agency a Security register (the
"Security Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for registration of Registered Securities
and registration of transfer of Registered Securities as provided in this
Article Two. Each such Security Register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time. At all reasonable times such Security Registers shall be open for
inspection by the Trustee. Upon due presentment for registration of transfer of
any Registered Security of any series at any such office or agency, the Company
shall execute and register and the Trustee shall authenticate and deliver in the
name of the transferee or transferees a new Registered Security or Securities of
the same series and of like tenor and terms for an equal aggregate principal
amount. Unless otherwise provided (pursuant to Section 2.01 or otherwise), the
Company initially appoints BB&T-NC, at the office of BB&T-NC, 223 West Nash
Street, Wilson, North Carolina, as a Security registrar for each series of
Registered Securities.
(c) All Registered Securities presented for registration of transfer
or for exchange or payment, if so required by the Company or the Trustee, shall
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the holder or his attorney duly authorized in writing.
(d) To the extent specified in the manner provided by Section 2.01,
Registered Securities or Bearer
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Securities of any series may be issued in exchange for Bearer Securities (except
as otherwise specified in the manner contemplated by Section 2.01 with respect
to a Bearer Security in global form) of the same series, of any authorized
denomination and of like tenor and terms and aggregate principal amount, upon
surrender of the Bearer Securities to be exchanged at any office or agency
specified in the manner provided by Section 2.01, with all unmatured coupons and
all unpaid matured coupons thereto appertaining. If the holder of a Bearer
Security is unable to produce any such unmatured coupon or coupons or unpaid
matured coupon or coupons, such exchange may be effected if the Bearer
Securities are accompanied by payment in funds acceptable to the Company and the
Trustee in an amount equal to the amount represented by such missing coupon or
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there is furnished to them such security or indemnity
as they may require to hold harmless each of them and any Paying Agent. If
thereafter the holder of such Security shall surrender to any Paying Agent any
such missing coupon in respect of which such a payment shall have been made,
such holder shall be entitled to receive the amount of such payment; provided,
however, that, except as otherwise provided in Section 3.02, interest
represented by coupons shall be payable only upon presentation and surrender of
those coupons at an office or agency located outside the United States. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the holder
making the exchange is entitled to receive.
(e) If at any time the Depositary for the Global Securities of a
series notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Securities of such series or if at any time the
Depositary for the Registered Securities of such series shall no longer be
eligible under Section 2.03 because it no longer is a clearing agency registered
under the Securities Exchange Act of 1934 and any other applicable statute or
regulation, the Company shall appoint a successor Depositary with respect to the
Global Securities of such series. If a successor Depositary for the Global
Securities of such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such ineligibility, the
Company's election pursuant to Section 2.01(9) shall no longer be effective with
respect to the Securities of such series and the Company will execute, and the
Trustee, upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver Securities
of such series in definitive form in an aggregate principal amount equal to
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the principal amount of the Global Security or Securities representing such
series in exchange for such Global Security or Securities.
(f) The Company at any time and in its sole discretion may determine
that the Securities of any series issued in the form of one or more Global
Securities shall no longer be represented by such Global Security or Securities.
In such event the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver, Securities of such series in
definitive form and in an aggregate principal amount equal to the principal
amount of the Global Security or Securities representing such series in exchange
for such Global Security or Securities.
(g) If specified by the Company pursuant to Section 2.01 with respect
to a series of Securities, the Depositary for such series of Securities may
surrender a Global Security for such series of Securities in exchange in whole
or in part for Securities of such series of like tenor and terms and in
definitive form on such terms as are acceptable to the Company and such
Depositary. Thereupon the Company shall execute, and the Trustee shall
authenticate and deliver:
(i) to each Person specified by such Depositary a new Security
or new Securities of the same series, of like tenor and terms and of any
authorized denomination as requested by such Person in aggregate principal
amount equal to and in exchange for such Person's beneficial interest in
the Global Security; and
(ii) to such Depositary a new Global Security of like tenor and
terms and in a denomination equal to the difference, if any, between the
principal amount of the surrendered Global Security and the aggregate
principal amount of Securities delivered to holders thereof.
(h) In any exchange provided for in Section 2.06(e), Section 2.06(f)
or Section 2.06(g), the Company will execute and the Trustee will authenticate
and deliver Securities (i) in definitive registered form in authorized
denominations, if the Securities of such series are issuable as Registered
Securities, (ii) in definitive bearer form in authorized denominations, with
unmatured coupons attached, if the Securities of such series are issuable as
Bearer Securities or (iii) as either Registered or Bearer Securities, if the
Securities of such series are issuable in either form; provided, however, that
(A) no definitive Bearer Security shall be delivered in exchange
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for a temporary Global Security unless the Company or its agent shall have
received from the person entitled to receive the definitive Bearer Security a
Bearer Security Tax Certificate, (B) delivery of a Bearer Security shall occur
only outside the United States and (C) no definitive Bearer Security will be
issued if the Company or the Trustee has reason to know that such certificate is
false.
(i) Upon the exchange of all of a Global Security for Securities in
certificated form, such Global Security shall be canceled by the Trustee. The
exchange of any portion of a Global Security for Securities in certificated form
shall be subject to Section 2.03(a). Registered Securities issued in exchange
for all or part of a Global Security shall be registered in such names and in
such authorized denominations as the Depositary for such Global Security,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Registered
Securities to the persons in whose names such Securities are so registered. The
Trustee shall deliver Bearer Securities issued in exchange for all or part of a
Global Security to the persons, and in such authorized denominations, as the
Depositary for such Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee; provided,
however, that (A) no definitive Bearer Security shall be delivered in exchange
for all or part of a temporary Global Security unless the Company or its agent
shall have received from the person entitled to receive the definitive Bearer
Security a Bearer Security Tax Certificate, (B) delivery of a Bearer Security
shall occur only outside the United States and (C) no definitive Bearer Security
will be issued if the Company or the Trustee has reason to know that any such
certificate is false.
(j) No service charge shall be made to a holder for any exchange or
registration of transfer 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 such exchange or registration of transfer.
(k) The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any particular series during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Securities of such series selected for redemption under
Section 10.03 and ending at the close of business on the day of such mailing,
(ii) to register the transfer of or exchange any Registered Security so selected
for redemption in whole or in part, except the unredeemed
20
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portion of any Registered Security being redeemed in part or (iii) to exchange
any Bearer Security so selected for redemption except that such a Bearer
Security may be exchanged for a Registered Security of that series, provided
that such Registered Security shall be surrendered immediately for redemption
with written instruction for payment consistent with the provisions of this
Indenture.
(l) Notwithstanding anything herein to the contrary: the exchange of
Bearer Securities for Registered Securities shall be subject to applicable laws
and regulations in effect at the time of exchange; and neither the Company nor
the Trustee or any Security registrar shall exchange any Bearer Securities into
Registered Securities if it has received an Opinion of Counsel that as a result
of such exchanges the Company could suffer adverse consequences under the United
States Federal income tax laws and regulations then in effect and the Company
has delivered to the Trustee a Company Order directing the Trustee not to make
such exchanges thereafter unless and until the Trustee receives a subsequent
Company Order to the contrary. The Company shall deliver copies of such Company
Order to the Security registrar.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities.
-----------------------------------------------
(a) In case any temporary or definitive Security of any series or any related
coupon shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute, and upon its request and in the absence of notice to
the Company and the Trustee that such Security or coupon has been acquired by a
bona fide purchaser, the Trustee shall authenticate and deliver a new Security
of the same series or related coupon, of equal aggregate principal amount and of
like tenor and terms bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Security or coupon, or in lieu of
and in substitution for the Security or coupon so destroyed, lost or stolen. In
every case the applicant for a substituted Security or coupon shall furnish to
the Company and to the Trustee such security or indemnity as may be required by
them to hold each of them harmless, and, in every case of destruction, loss or
theft, the applicant also shall furnish to the Company and to the Trustee
evidence to their satisfaction of the destruction, loss or theft of such
security or coupon and of the ownership of such Security or coupon.
(b) The Trustee may authenticate any such substitute Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substitute Security or coupon, the Company
may require the payment of a sum sufficient to cover
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any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Trustee)
connected therewith. In case any Security or coupon which has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
Company, instead of issuing a substitute Security or coupon, may pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Security or coupon) if the applicant for such payment shall
furnish to the Company and to the Trustee such security or indemnity as may be
required by them to hold each of them harmless and, in case of destruction, loss
or theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Security or coupon and of the ownership of
such Security or coupon.
(c) Every substitute Security or coupon issued pursuant to the
provisions of this Section 2.07 by virtue of the fact that any Security or
coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
or coupon shall be found at any time, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
or coupons of the relevant series duly issued under this Indenture. All
Securities or coupons shall be held and owned by the holders upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities without
their surrender.
(d) Notwithstanding the foregoing, the payment of principal of and
any premium and interest on Bearer Securities, except as otherwise provided in
Section 3.02, shall be payable only at an office or an agency located outside of
the United States, and, with respect to any coupons, interest represented
thereby shall be payable only upon presentation and surrender of such coupons.
SECTION 2.08. Temporary Securities. (a) Pending the preparation
--------------------
of definitive Securities of any series, the Company may execute and the Trustee
shall authenticate and deliver temporary Securities (printed or lithographed).
Temporary Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Securities of such series (and of
like tenor and terms) in lieu of which they are issued in registered form or, if
authorized, in bearer form with one or more coupons
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or without coupons, but with such omissions, insertions and variations as may be
appropriate for temporary Securities, all as may be determined by the Company.
In the case of Securities of any series issuable as Bearer Securities, such
temporary Securities may be in global form, representing all or any part of the
Outstanding Securities of such series.
(b) Unless otherwise provided pursuant to Section 2.01:
(i) Except in the case of temporary Securities in global form,
every such temporary Security shall be authenticated by the Trustee in
substantially the same manner, and with the same effect, as the definitive
Securities. Without unreasonable delay the Company will execute and
deliver to the Trustee definitive Securities of such series and thereupon
any or all temporary Securities of such series (accompanied, if applicable,
by all unmatured coupons and all unpaid matured coupons appertaining
thereto) may be surrendered in exchange therefor at the principal office of
the Trustee, and the Trustee shall authenticate and deliver in exchange for
such temporary Securities an equal aggregate principal amount of definitive
Securities of such series of authorized denominations. Such exchange shall
be made at the Company's expense and without any charge to the holder.
Until so exchanged, the temporary Securities of any series in all respects
shall be entitled to the same benefits under this Indenture as definitive
Securities of such series authenticated and delivered under this Indenture.
Notwithstanding the foregoing, no Bearer Security shall be delivered in
exchange for a Registered Security, and a Bearer Security shall be
delivered in exchange for a Bearer Security only in compliance with the
conditions set forth in Section 2.06.
(ii) If Securities of any series are issued in temporary global
form, any such temporary Global Security, unless otherwise provided
pursuant to Section 2.01, shall be delivered to the Depositary for the
benefit of Euro-clear and CEDEL S.A. for credit to the respective accounts
of the beneficial owners of such Securities or to such other accounts as
they may direct.
(iii) Any such temporary Global Security shall be exchangeable,
on the terms and in the manner set forth therein, in whole or in part, for
an equal aggregate principal amount of definitive Securities of the same
series of authorized denominations and of like tenor
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and terms as the portions of such temporary Global Security to be
exchanged. Any definitive Bearer Security shall be delivered in exchange
for a portion of a temporary Global Security only upon receipt by the
Trustee from the Person entitled to receive such definitive Bearer Security
of a Bearer Security Tax Certificate.
(iv) Until exchanged in full as hereinabove provided, the
temporary Securities of any series shall be entitled in all respects to the
same benefits under this Indenture as definitive Securities of the same
series and of like tenor and terms authenticated and delivered hereunder,
except that any interest payable with respect to a temporary Global
Security will be paid as specified therein.
SECTION 2.09. Payment of Interest; Interest Rights. Interest on
------------------------------------
any Registered Security which 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 Registered Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest. In case a Bearer Security of any series is surrendered in exchange
for a Registered Security of such series after the close of business (at an
office or agency in a Place of Payment for such series) on any Regular Record
Date and before the opening of business (at such office or agency) on the next
succeeding Interest Payment Date, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date and interest will not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
holder of such coupon when due in accordance with the provisions of this
Indenture. Payment of interest on any Registered Security may be made as
provided in Section 3.02. Except as otherwise provided in the terms of any
particular series pursuant to Section 2.01. interest will be calculated on the
basis of a year consisting of twelve 30-day months.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date ("Defaulted Interest")
forthwith shall cease to be payable to the 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 (i) or
(ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names
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such Securities (or their respective Predecessor Securities) are registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each 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 provided in this clause (i).
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 nor fewer than ten
days prior to the date of the proposed payment and not fewer than ten days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee promptly shall 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 at his
address as it appears in the Security Register, not fewer than ten days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been given
as aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest on
any such Security in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of that
series may be listed, and upon such notice as may be required by any such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause (ii), such manner of payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.09, each
Security of any series delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security of such series
25
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shall carry the rights to interest accrued and unpaid, and to accrue, that were
carried by such other Security.
Subject to the limitations set forth in Section 3.02, the holder of
any coupon appertaining to a Bearer Security shall be entitled to receive the
interest payable on such coupon upon presentation and surrender of such coupon
on or after the Interest Payment Date of such coupon at an office or agency
maintained for such purpose pursuant to Section 3.02.
SECTION 2.10. Cancellation of Securities Paid, etc. All Securities
-------------------------------------
and coupons surrendered for the purpose of payment, exchange or registration of
transfer, if surrendered to the Company or any Paying Agent or any Security
registrar, shall be delivered to the Trustee and promptly canceled by the
Trustee or, if surrendered to the Trustee, promptly shall be canceled by it; and
no Securities or coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Trustee may destroy
canceled Securities or coupons and will deliver a certificate of such
destruction to the Company.
ARTICLE THREE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal and Interest. The Company duly
---------------------------------
and punctually will pay or cause to be paid the principal of and any premium and
interest on the Securities of each series at the places, at the respective times
and in the manner provided in this Indenture and in the Securities. Any
interest due on Bearer Securities on or before Maturity shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 3.02. Offices for Notices and Payments, etc. So long as any
--------------------------------------
Securities of a series remain Outstanding, the Company will maintain in each
Place of Payment for such series of Securities an office or agency where the
Securities of that series (but, except as otherwise provided below, unless such
Place of Payment is located outside the United States, not Bearer Securities)
may be presented for payment, for registration of transfer and for exchange as
provided in this Indenture and where notices and demands to or upon the Company
in respect of the Securities or of this Indenture may be served. If Securities
of a series are issuable as Bearer Securities,
26
<PAGE>
the Company will maintain, subject to any laws or regulations applicable
thereto, an office or agency in a Place of Payment for such series that is
located outside the United States where Securities of such series and the
related coupons may be presented for payment. The Company will give to the
Trustee prompt written notice of the location of each such office or agency and
of any change of location thereof. In case the Company shall fail to maintain
any such office or agency or shall fail to give such notice of the location or
of any change in the location thereof, presentations and demands may be made and
notices may be served at the principal office of the Trustee, and the Company
hereby initially appoints the Trustee its agent to receive all such
presentations and demands, except that Bearer Securities of that series and the
related coupons may be presented for payment at the place specified for that
purpose pursuant to Section 2.01(5). Unless otherwise provided pursuant to
Section 2.01, the Company hereby initially designates as the Place of Payment
for each series of Securities (other than Bearer Securities of that series and
the related coupons) Wilson, North Carolina and appoints BB&T-NC, at the office
of BB&T-NC, 223 West Nash Street, Wilson, North Carolina, as Paying
Agent in such city. Notwithstanding any other provisions to the contrary, the
Company at its option may make payment of principal and any premium and interest
--------- ------------------------
with respect to any Registered Security by check mailed to the Person entitled
thereto, as such address appears on the Security Register, except that a holder
of $10,000,000 or more in aggregate principal amount of Securities of such
series and of like tenor and terms will be entitled to receive payments by wire
transfer of immediately available funds if appropriate wire transfer
instructions shall have been received in writing by the Trustee not later than
ten Business Days prior to the applicable payment date.
No payment of principal of or any premium or interest on Bearer
Securities shall be made at any office or agency of the Company in the United
States or by check mailed to any address in the United States or by transfer to
an account maintained with a bank located in the United States; provided,
however, that payment of principal of and any premium and interest on any Bearer
Security may be made at an office or agency of, and designated by, the Company
located in the United States if (but only if) payment of the full amount of such
principal, premium or interest at all offices outside the United States
maintained for the purpose by the Company in accordance with this Indenture is
illegal or effectively precluded by exchange controls or other similar
restrictions and the Trustee receives an Opinion of Counsel that such payment
within the United States is legal. Unless otherwise provided as contemplated by
Section 2.01
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with respect to any series of Securities, at the option of the holder of any
Bearer Security or related coupon payment may be made by mailing a check to an
address outside the United States or by transfer to an account maintained by the
payee with a bank located outside the United States.
The Company also from time to time may designate one or more offices
or agencies (in or outside of such Place of Payment) where the Securities of one
or more series and any appurtenant coupons (subject to the preceding paragraph)
may be presented or surrendered for any and all such purposes, and from time to
time may rescind such designations. 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 3.03. Provisions as to Paying Agent. (a) The Company, with
-----------------------------
respect to the Securities of each series, prior to each due date of principal of
or any premium or interest on such Securities, will deposit with the Paying
Agent for such Securities a sum sufficient to pay the principal, premium or
interest so becoming due, such sum to be held in trust for the benefit of the
persons entitled to such principal, premium or interest. If the Company shall
appoint a Paying Agent other than the Trustee with respect to the Securities of
any series, the Company will notify the Trustee of its making, or failure to
make, any such payment; and the Company also shall cause any such Paying Agent
to execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 3.03, as
follows:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of or any premium or interest on such Securities
(whether such sums have been paid to it by the Company or by any other
obligor on such Securities) in trust for the benefit of the Persons
entitled thereto;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on such Securities) to make any payment of
the principal of or any premium or interest on such Securities when the
same shall be due and payable; and
(3) that it forthwith will pay to the Trustee, at any time
during the continuance of an Event of Default, upon the written request of
the Trustee, all sums so held by it as such agent.
(b) If the Company shall act as its own Paying Agent with respect to
the Securities of any series, on or
28
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before each due date of the principal of or any premium or interest on the
Securities of such series, it will set aside, segregate and hold in trust for
the benefit of the Persons entitled thereto a sum sufficient to pay such
principal, premium or interest so becoming due and will notify the Trustee of
any failure to take such action and of any failure by the Company (or by any
other obligor under such Securities) to make any payment of the principal of or
any premium or interest on such Securities when the same shall become due and
payable.
(c) Notwithstanding anything in this Section 3.03 to the contrary,
the Company, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture or for any other reason, may pay or by Company Order
direct any Paying Agent to pay to the Trustee all sums held in trust by the
Company or any Paying Agent under this Indenture, such sums to be held by the
Trustee upon the trusts contained in this Indenture.
(d) Notwithstanding anything in this Section 3.03 to the contrary,
the agreement to hold sums in trust as provided in this Section 3.03 is subject
to Section 13.03 and Section 13.04.
SECTION 3.04. Statement as to Compliance. The Company will deliver
--------------------------
to the Trustee, within 120 days after the end of each calendar year commencing
with the first calendar year following the issuance of Securities of any series
under this Indenture, a written certificate of the principal executive officer,
the principal financial officer or the principal accounting officer of the
Company, covering the period from the date of issuance of such Securities to the
end of the calendar year in which such Securities were issued, in the case of
the first such certificate, and covering the preceding calendar year, in the
case of each subsequent certificate, stating, as to each signer of such
certificate, that:
(1) a review of the activities of the Company during the year
and of performance under this Indenture has been made under his
supervision;
(2) to the best of his knowledge, based on such review, the
Company has fulfilled all its conditions and covenants under this Indenture
throughout such year, or, if there has been a default in the fulfillment of
any such condition or covenant, specifying each such default known to him
and the nature and status of such default; and
29
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(3) such certificate sets forth as of the end of such year a
list of all Principal Constituent Banks.
SECTION 3.05. Notice of Defaults. The Company will deliver to the
------------------
Trustee within five days after the occurrence thereof written notice of any
event which with the giving of notice or the lapse of time or both would be an
Event of Default under Section 4.01.
SECTION 3.06. Limitation on Certain Dispositions and on Merger and
----------------------------------------------------
Sale of Assets. Except as otherwise provided in Article Nine, the Company will
- --------------
not:
(a) sell, assign, transfer or otherwise dispose of any shares of, or
securities convertible into or options, warrants or rights to subscribe for
or purchase shares of, Voting Stock of a Principal Constituent Bank, and
will not permit a Principal Constituent Bank to issue any shares of, or
securities convertible into or options, warrants or rights to subscribe for
or purchase shares of, such Voting Stock if, in each case, after giving
effect to any such transaction, the Principal Constituent Bank would cease
to be a Controlled Subsidiary; or
(b) permit a Principal Constituent Bank to:
(i) merge or consolidate with any other corporation, unless
the surviving corporation is, or upon consummation of the merger or
consolidation will become, the Company or a Controlled Subsidiary; or
(ii) lease, sell or transfer all or substantially all its
properties and assets to any corporation or other Person, except to
the Company or a Controlled Subsidiary or a Person that, upon such
lease, sale or transfer, will become the Company or a Controlled
Subsidiary.
Notwithstanding the foregoing, any such sale, assignment, transfer or
other disposition of securities, any such merger or consolidation or any such
lease, sale or transfer of properties and assets shall not be prohibited if
required (i) by any law or any rule, regulation or order of any governmental
agency or authority or (ii) as a condition imposed by any law or any rule,
regulation or order of any governmental agency or authority with respect to the
acquisition by the Company or any Controlled Subsidiary, directly or indirectly,
through purchase of securities or assets, or a merger, consolidation or
otherwise, of any
30
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Person, provided that after giving effect to such acquisition (A) such Person
will be a Controlled Subsidiary, (B) the Consolidated Net Banking Assets of the
Company will be at least equal to the Consolidated Net Banking Assets of the
Company prior thereto and (C) BB&T-NC will be a Controlled Subsidiary.
SECTION 3.07. Limitation on Creation of Liens. So long as any of
-------------------------------
the Securities shall be outstanding, the Company will not create, assume, incur
or suffer to be created, assumed or incurred or to exist any pledge, encumbrance
or lien, as security for indebtedness for borrowed money, upon any shares of, or
securities convertible into or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of a Principal Constituent Bank now or
hereafter owned by the Company, directly or indirectly, if, treating such
pledge, encumbrance or lien as a transfer of the shares of, or securities
convertible into or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock subject thereto to the secured party, the Principal
Constituent Bank would not be a Controlled Subsidiary.
SECTION 3.08. Corporate Existence. Except as otherwise provided in
-------------------
Article Nine, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Securityholders.
ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 4.01. Events of Default. "Event of Default", when used with
-----------------
respect to Securities of any series, means each of the following events unless
it is either inapplicable to a particular series or is specifically deleted or
modified in the supplemental indenture or resolution of the Board of Directors
under which such series of Securities is issued or in the form of Security for
such series:
(a) default in the payment of any installment of interest upon any of
the Securities of that series as
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and when the same shall become due and payable, and continuance of such
default for a period of 30 days;
(b) default in the payment of the principal of or any premium on any
of the Securities of that series as and when the same shall become due and
payable at their Stated Maturity, upon redemption, by declaration or
otherwise;
(c) default in the payment of any sinking fund installment or
analogous obligation as and when the same shall become due and payable by
the terms of the Securities of that series;
(d) a default or event of default as defined or designated in any
mortgage, indenture, loan agreement or instrument under which there may be
issued or borrowed, or by which there is secured or evidenced, any
indebtedness of the Company (other than Securities of such series or
indebtedness owed by the Company to any Subsidiary) or any Subsidiary
(other than indebtedness of any Subsidiary owing to the Company or to
another Subsidiary), whether such indebtedness now exists or shall be
created hereafter, shall happen and (i) not less than $1,000,000 of such
indebtedness shall be past due under such mortgage, indenture, loan
agreement or instrument or such default or event of default shall result in
not less than $1,000,000 of such indebtedness becoming or being declared
due and payable and (ii) such indebtedness or such declaration, as the case
may be, shall not have been discharged or rescinded or annulled within 15
days after the date on which written notice thereof is given to the Company
by the Trustee or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the Securities of that series then
Outstanding;
(e) a final judgment or judgments or order or orders for the payment
of money in excess of $1,000,000 shall be entered against the Company or
one or more Principal Constituent Banks and within 90 days after entry
thereof such judgment or judgments or order or orders shall not have been
discharged or the execution thereof stayed pending appeal or within 90 days
after the expiration of any such stay such judgment or judgments or order
or orders shall not have been discharged;
(f) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Securities of such series or in this Indenture (other than a
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covenant or agreement a default in the performance of which or the breach
of which specifically is provided for elsewhere in this Section 4.01 or
which expressly has been included in this Indenture solely for the benefit
of one or more series of Securities other than such series), and
continuance of such failure for a period of 90 days after the date on which
written notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee, or to the Company and
the Trustee by the holders of at least 25% in aggregate principal amount of
the Securities of such series at the time Outstanding;
(g) a court or governmental authority having jurisdiction in the
premises shall enter a decree or order for relief in respect of the Company
or a Principal Constituent Bank in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or a Principal
Constituent Bank or for any substantial part of its property, or ordering
the winding up or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(h) the Company or a Principal Constituent Bank shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of the
Company or a Principal Constituent Bank or for substantially all of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due or
shall take any corporate action in furtherance of any of the foregoing.
If an Event of Default with respect to the Securities of any series at
the time Outstanding occurs and is continuing, then and in each such case,
unless the principal of all the Securities of such series already shall have
become due and payable, either the Trustee or the holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding,
by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the principal amount of all
33
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the Securities of that series to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately due and payable.
This provision, however, is subject to the condition that, at any time after
such a declaration of acceleration, and before any judgment or decree for the
payment of the money due shall have been obtained or entered as hereinafter
provided, the holders of a majority in aggregate principal amount of the
Securities of such series then Outstanding, by written notice to the Company and
to the Trustee, may waive all defaults and rescind and annul such declaration
and its consequences, if:
(1) the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay:
(A) all matured installments of interest on all the
Securities of that series and the principal of and any premium on any
and all Securities of that series that shall have become due otherwise
than by acceleration (with interest on overdue installments of
interest (to the extent that payment of such interest is enforceable
under applicable law) and on such principal and premium at the rate
borne by the Securities of that series, to the date of such payment or
deposit); and
(B) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(2) any and all defaults with respect to Securities of that
series under this Indenture, other than the nonpayment of principal of and
any premium and accrued interest on Securities that shall have become due
by acceleration, shall have been cured or waived as provided in Section
4.07.
No such waiver or rescission and annulment shall extend or shall affect any
subsequent default or shall impair any right consequent thereon.
In case the Trustee or any Securityholder shall have proceeded to
enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee or any
Securityholder, then and in every such case the Company, the Trustee and such
Securityholders, subject to any determination in such proceeding, shall be
restored
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respectively to their several positions and rights under this Indenture, and all
rights, remedies and powers of the Company, the Trustee and such Securityholders
shall continue as though no such proceeding had been taken.
SECTION 4.02. Payment of Securities on Default; Suit Therefor.
-----------------------------------------------
(a) In case default shall be made in the payment of (i) any installment of
interest upon any of the Securities as and when the same shall become due and
payable, and such default shall have continued for a period of 30 days, or (ii)
the principal of or any premium on any of the Securities as and when the same
shall have become due and payable whether at Maturity of the Securities, by
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Securities, the whole
amount that then shall have become due and payable on all such Securities for
principal, premium or interest, or any combination thereof, as the case may be,
with interest upon the overdue principal and premium and (to the extent that
payment of such interest is enforceable under applicable law) upon the overdue
installments of interest, at the rate borne by the Securities; and, in addition,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents, attorneys and counsel.
(b) In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor on the
Securities and coupons and collect in the manner provided by law out of the
property of the Company or any other obligor on the Securities and coupons,
wherever situated, the money adjudged or decreed to be payable.
(c) In case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Securities and
coupons under Title 11 of the United States Code or any other applicable law, or
in case a receiver or trustee shall have been appointed for the property of the
Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor on the Securities and
coupons, or to the creditors or property of the Company or such other obligor,
the Trustee, irrespective of whether the principal of the Securities shall then
be due
35
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and payable as expressed in the Securities or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 4.02, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal and any premium and interest owing and
unpaid in respect of the Securities, and, in case of any judicial proceedings,
(i) to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Securityholders allowed in such
judicial proceedings relative to the Company or any other obligor on the
Securities and coupons, its or their creditors, or its or their property, and
(ii) to collect and receive any money or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the Securityholders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to the Securityholders, to pay to the Trustee
any amount due it for reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel and any other amounts due
the Trustee under Section 5.06. To the extent that such payment of reasonable
compensation, expenses and counsel fees out of the trust estate in any such
proceedings shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other property which the holders of the Securities and
coupons may be entitled to receive in such proceedings, whether in liquidation
or under any plan of reorganization or arrangement or otherwise.
(d) Nothing contained in this Section 4.02 shall be deemed to
authorize the Trustee to authorize or consent to or adopt on behalf of any
Securityholder any plan of reorganization or arrangement affecting the
Securities or related coupons or the rights of any Securityholder, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
(e) All rights of action and of asserting claims under this
Indenture, or under any of the Securities or related coupons, may be enforced by
the Trustee without the possession of any of the Securities or coupons, or the
production thereof in any trial or other proceeding relative thereto, and any
such suit or proceeding instituted by the
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Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, shall be for the ratable benefit of the holders of the Securities
and related coupons.
SECTION 4.03. Application of Money Collected by Trustee. Any money
-----------------------------------------
collected by the Trustee with respect to any series of Securities or related
coupons pursuant to Section 4.02 shall be applied in the order following, at the
date or dates fixed by the Trustee for the distribution of such money, upon
presentation of the several Securities of such series or coupons, or both, as
the case may be, and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts then due the Trustee under
Section 5.06;
SECOND: In case the principal of the Outstanding Securities of that
series shall not have become due and be unpaid, to the payment of interest
on the Securities of that series in the order of the Maturity of the
installments of such interest, with interest (to the extent enforceable
under applicable law) upon the overdue installments of interest at the rate
borne by the Securities of that series, such payments to be made ratably to
the persons entitled thereto; and
THIRD: In case the principal of the Outstanding Securities of that
series shall have become due, by declaration or otherwise, to the payment
of the whole amount then owing and unpaid upon the Securities of that
series for principal and any premium and interest, with interest on the
overdue principal and any premium and (to the extent enforceable under
applicable law) upon overdue installments of interest at the rate borne by
the Securities of that series; and in case such money shall be insufficient
to pay in full the whole amounts so due and unpaid upon the Securities of
that series, then to the payment of such principal and any premium and
interest without preference or priority of principal over interest, or of
interest over principal, or of any premium over principal or interest, or
of principal or interest over any premium or of any installment of interest
over any other installment of interest, or of any Security of that series
over any other Security of that series, or of any coupon related to a
Security of a series over any other coupon related to a Security of the
same series, ratably to the
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aggregate of such principal and any premium and accrued and unpaid
interest.
SECTION 4.04. Proceedings by Securityholders. No holder of any
------------------------------
Security of any series or any related coupon shall have any right to institute
any suit, action or proceeding in equity or at law upon or under or with respect
to this Indenture or for the appointment of a receiver or trustee, or for any
other remedy under this Indenture, unless such holder previously shall have
given to the Trustee written notice of default and of the continuance thereof,
as provided in Section 4.01, and unless also (i) the holders of not less than
25% in aggregate principal amount of the Securities of that series then
Outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Indenture and
shall have offered to the Trustee such reasonable indemnity as the Trustee may
require against the costs, expenses and liabilities to be incurred in compliance
with such request, (ii) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and (iii) 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, and
being expressly covenanted by each Person who acquires and holds a Security or
related coupon with every other such Person, that no one or more holders of
Securities shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other holder of such Securities or coupons, or to obtain or seek
to obtain priority over or preference to any other such holder, or to enforce
any right under this Indenture, except in the manner provided in this Section
4.04 and for the equal, ratable and common benefit of all holders of Securities
and coupons.
Notwithstanding any other provision of this Indenture, however, the
right of any holder of any Security to receive payment of the principal of and
any premium and interest on such Security on or after the respective Stated
Maturities, or to institute suit for the enforcement of any such payment on or
after such respective dates against the Company, shall not be impaired or
affected without the consent of such holder.
SECTION 4.05. Proceedings by Trustee. In case of an Event of
----------------------
Default under this Indenture, the Trustee in its discretion may proceed to
protect and enforce its rights and the rights of the Securityholders by such
appropriate
38
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judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 4.06. Remedies Cumulative and Continuing; Delay or Omission
-----------------------------------------------------
Not Waiver. All rights, powers and remedies conferred upon or reserved to the
- ----------
Trustee or to the Securityholders, to the extent permitted by law, shall be
deemed cumulative and not exclusive of any thereof or of any other rights,
powers and remedies available to the Trustee or the holders of the Securities
and related coupons, now or hereafter existing, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture; and no delay or omission of the Trustee
or of any holder of any of the Securities or related coupons to exercise any
such right, power or remedy shall impair any such right, power or remedy, or
shall be construed to be a waiver of any default or an acquiescence in such
default; and, subject to the provisions of Section 4.04, every power and remedy
conferred upon or reserved to the Trustee or to the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders. The assertion of any right, power or remedy
shall not prevent the concurrent assertion of any other right, power or remedy.
SECTION 4.07. Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Securityholders. (a) The holders of a majority in aggregate
- ---------------------------
principal amount of the Securities of all series affected (voting as one class)
at the time Outstanding determined in accordance with Section 6.04 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; provided, however, that (i) such direction may not be in
conflict with law or this Indenture or expose the Trustee to personal liability
or be unduly prejudicial to the holders of the Securities and related coupons
not joining in the direction, and (ii) the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with this Indenture and
such direction.
(b) Prior to any declaration that the principal of the Outstanding
Securities of any series is due and payable, the holders of a majority in
aggregate principal
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amount of the Securities of that series at the time Outstanding on behalf of the
holders of all of the Securities of that series may waive any past default or
Event of Default under this Indenture and its consequences except a default
under a covenant in this Indenture that, pursuant to Section 8.02, cannot be
modified without the consent of each holder of a Security of the series affected
thereby. Upon any such waiver, the Company, the Trustee and the holders of the
Securities of that series and the related coupons shall be restored to their
former positions and rights under this Indenture, respectively; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon. Whenever any default or Event of Default
under this Indenture shall have been waived as permitted by this Section 4.07,
such default or Event of Default, for all purposes of the Securities, the
related coupons and this Indenture, shall be deemed to have been cured and to be
not continuing.
SECTION 4.08. Notice of Defaults. The Trustee, within 90 days
------------------
after the occurrence of a default with respect to Securities of any series,
shall mail to all Securityholders of that series, at their addresses shown on
the Security Register, notice of all such defaults known to the Trustee, unless
such defaults shall have been cured or waived before the giving of such notice
(the term "default" for the purpose of this Section 4.08 being hereby defined to
mean any event which constitutes or after notice or lapse of time or both would
constitute an Event of Default); and provided that, except in the case of
default in the payment of the principal of or any premium or interest on any of
the Securities of that series or in the making of any sinking fund payment or
analogous obligation with respect to Securities of that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Securityholders of that
series.
SECTION 4.09. Undertaking to Pay Costs. All parties to this
------------------------
Indenture agree, and each holder of any Security or coupon by his acceptance
thereof shall be deemed to have agreed, that any court in its discretion may
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 in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against any party
40
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litigant; provided, however, that the provisions of this Section 4.09 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Outstanding Securities of that series, or to any
suit instituted by any Securityholder for the enforcement of the payment of the
principal of or any premium or interest on any Security on or after the
respective Stated Maturities (or, in the case of redemption or repayment, on or
after the redemption date or repayment date).
ARTICLE FIVE
CONCERNING THE TRUSTEE
SECTION 5.01. Duties and Responsibilities of Trustee. In case an
--------------------------------------
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, its own willful misconduct or any action or failure to act taken or
omitted by it in bad faith, except that:
(a) except during the continuance of an Event of Default:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee,
the Trustee conclusively may rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but, in the case of any such
certificates or opinions that by any provisions of this Indenture
specifically are required to be
41
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furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the holders of not less than a majority in principal amount of the
Securities of any series at the time Outstanding (determined as provided in
Section 6.04) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not 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
5.01.
The provisions of this Section 5.01 are in furtherance of and subject
to Sections 315 and 316 of the Trust Indenture Act.
SECTION 5.02. Reliance on Documents, Opinions, etc. Subject to the
-------------------------------------
applicable provisions of the Trust Indenture Act and in furtherance thereof and
subject to the provisions of Section 5.01:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
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(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or omitted by it under this Indenture in good faith and in
accordance with such Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, coupon or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books and records of the Company to the extent reasonably necessary to
verify such facts or matters; and
(g) the Trustee may execute any of the trusts or powers under this
Indenture or perform any duties under this Indenture either directly or by
or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it with due care under this Indenture.
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SECTION 5.03. No Responsibility for Recitals, etc. The recitals
------------------------------------
contained in this Indenture and in the Securities (except in the Trustee's
certificate of authentication) and in any coupons shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities or the coupons.
The Trustee shall not be accountable for the use or application by the Company
of any Securities or the proceeds of any Securities authenticated and delivered
by the Trustee.
SECTION 5.04. Trustee, Paying Agents or Registrar May Own Securities.
-------------------------------------------------------
Subject to the applicable provisions of the Trust Indenture Act, the Trustee or
any Paying Agent or Security registrar, in its individual or any other capacity,
may become the owner or pledgee of Securities with the same rights it would have
if it were not Trustee, Paying Agent or Security registrar.
SECTION 5.05. Money to Be Held in Trust. Subject to the provisions
-------------------------
of Section 13.03 and Section 13.04, all money received by the Trustee, until
used or applied as herein provided, shall be held in trust for the purposes for
which it was received. Money held by the Trustee need not be segregated from
other funds except as provided by law. The Trustee shall be under no liability
for interest on any money received by it under this Indenture, except as the
Company and the Trustee otherwise may agree.
SECTION 5.06. Compensation and Expenses of Trustee. The Company will
------------------------------------
pay to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation for all services rendered by it under this Indenture
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the reasonable expenses and disbursements of its counsel and of all persons
not regularly in its employ) except any such expense, disbursement or advance as
may be attributable to its negligence, bad faith or willful misconduct. The
Company also covenants to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence, bad faith
or willful misconduct on the part of the Trustee and arising out of or in
connection with the acceptance or administration of this trust, including the
reasonable costs and expenses of defending itself against any claim of liability
in connection with the
44
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exercise or performance of any of its powers under this Indenture. The
obligations of the Company under this Section 5.06 shall constitute additional
indebtedness under this Indenture.
SECTION 5.07. Officers' Certificate as Evidence. Subject to the
---------------------------------
provisions of Section 5.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action under this
Indenture, such matter (unless other evidence in respect thereof be herein
specifically prescribed), in the absence of negligence, bad faith or willful
misconduct on the part of the Trustee, may be deemed to be conclusively proved
and established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence, bad faith or willful
misconduct on the part of the Trustee, shall be full warrant to the Trustee for
any action taken or omitted by it under the provisions of this Indenture upon
the faith of such Officers' Certificate.
SECTION 5.08. Eligibility of Trustee. The Trustee under this
----------------------
Indenture shall at all times be a corporation organized and doing business under
the laws of the United States or any State thereof or of the District of
Columbia (or a corporation or other person permitted to act as Trustee by the
Commission) authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal, State or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 5.08 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 5.08, the Trustee shall resign immediately in the
manner and with the effect specified in Section 5.09. Neither the Company nor
any person directly or indirectly controlling, controlled by, or under common
control with the Company shall serve as Trustee under this Indenture.
SECTION 5.09. Resignation or Removal of Trustee. (a) The Trustee
---------------------------------
may resign at any time by giving written notice of such resignation to the
Company, by mailing notice of such resignation to the holders of Registered
Securities at their addresses as they shall appear on the Security Register and,
if any Bearer Securities are Outstanding, by
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publishing notice of such resignation in a newspaper of general circulation, in
each place of payment for such Bearer Securities, customarily published at least
once a day for at least five days in each calendar week.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act after written request therefor by
the Company or by any Securityholder who has been a bona fide holder of a
Security or Securities for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 5.08 and shall fail to resign after written
request therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or a public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee by written
instrument, executed by Company Order authorized by the Board of Directors, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee (with written notice of such removal mailed to the
holders of Registered Securities at their address as they shall appear on the
Security Register, and, if any Bearer Securities are Outstanding, by publishing
notice of such resignation in a newspaper of general circulation, in each place
of payment for such Bearer Securities, customarily published at least once a day
for at least five days in each calendar week), or, subject to the provisions of
Section 4.09, any Securityholder who has been a bona fide holder of a Security
or Securities for at least six months, on behalf of himself and all others
similarly situated, may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(c) 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, the
Company promptly shall appoint a successor Trustee by a Company Order authorized
by the Board of Directors, one copy of which instrument shall be delivered to
the retiring Trustee and
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one copy to the successor Trustee. If, within one year after such resignation,
removal or incapability or the occurrence of such vacancy, a successor Trustee
shall be appointed by the holders of a majority in principal amount of the
Securities (voting as a single class) at the time Outstanding by instrument or
instruments delivered to the Company and the retiring Trustee, the successor
Trustee so appointed, forthwith upon its acceptance of such appointment, shall
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the Company
or the Securityholders and accepted appointment in the manner provided in
Section 5.10 within 60 days after notice of the resignation or removal of the
Trustee is mailed to the Securityholders, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee, or
any Securityholder who has been a bona fide holder of a Security or Securities
for at least six months, subject to the provisions of Section 4.09, on behalf of
himself and all others similarly situated, may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(d) The holders of a majority in aggregate principal amount of the
Securities (voting as a single class) at the time Outstanding at any time, upon
notice to the Trustee, may remove the Trustee.
(e) Any removal of the Trustee and appointment of a successor Trustee
pursuant to any of the provisions of this Section 5.09 shall become effective
upon acceptance of appointment by the successor Trustee as provided in Section
5.10. Any resignation of the Trustee shall become effective only upon the
appointment of a successor Trustee and upon the acceptance of appointment by the
successor Trustee as provided in Section 5.10.
SECTION 5.10. Acceptance by Successor Trustee. Any successor Trustee
-------------------------------
appointed as provided in Section 5.09 shall execute, acknowledge and deliver to
the Company and to its predecessor Trustee an instrument accepting such
appointment under this Indenture, and thereupon the resignation or removal of
the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations of its predecessor under this Indenture,
with like effect as if originally named as Trustee in this Indenture; but,
nevertheless, on the written request of the Company or of the successor Trustee,
the Trustee ceasing to act, upon payment of any amounts then due it pursuant to
the provisions of Section 5.06, shall execute and deliver an
47
<PAGE>
instrument transferring to such successor Trustee all the rights and powers of
the Trustee so ceasing to act and shall transfer, assign and deliver to such
successor all property and money held by such predecessor Trustee under this
Indenture. Upon request of any such successor Trustee, the Company shall execute
any and all instruments in writing for more fully and certainly vesting in and
confirming to such successor Trustee all such rights and powers. Any Trustee
ceasing to act, nevertheless shall retain a lien upon all property or funds held
or collected by such Trustee to secure any amounts then due it pursuant to the
provisions of Section 5.06.
No successor Trustee shall accept appointment as provided in this
Section 5.10 unless at the time of such acceptance such successor Trustee shall
be qualified under the provisions of Section 310(b) of the Trust Indenture Act
and eligible under the provisions of Section 5.08.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 5.10, the Company shall mail notice of the succession of such
Trustee under this Indenture to the holders of Registered Securities at their
addresses as they shall appear on the Security Register, and, if any Bearer
Securities are Outstanding, by publishing notice of such resignation in a
newspaper of general circulation, in each place of payment for such Bearer
Securities, customarily published at least once a day for at least five days in
each calendar week. If the Company fails to mail such notice within ten days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed and, if necessary, published at the expense
of the Company.
SECTION 5.11. Succession by Merger, etc. Any corporation into which
--------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee (including the
trust created by this Indenture), shall be the successor Trustee under this
Indenture without the execution or filing of any paper or any further act on the
part of any of the parties to this Indenture provided such corporation shall be
qualified under the provisions of Section 310(b) of the Trust Indenture Act and
eligible under the provisions of Section 5.08.
In case at the time such successor Trustee shall succeed to the trusts
created by this Indenture any of the Securities shall have been authenticated
but not delivered, any such successor Trustee may adopt the certificate of
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authentication of any predecessor Trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor Trustee may authenticate such Securities
either in the name of any predecessor Trustee under this Indenture or in the
name of the successor Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS
SECTION 6.01. Action by Securityholders. Whenever in this Indenture
-------------------------
it is provided that the holders of a specified percentage in aggregate principal
amount of the Securities of any or all series may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action), the fact that at the time of taking any such
action the holders of such specified percentage have joined in such action may
be evidenced (i) by any instrument or any number of instruments of similar tenor
executed by Securityholders in person or by agent or proxy appointed in writing,
(ii) by the record of the holders of Securities voting in favor of such action
at any meeting of Securityholders duly called and held in accordance with the
provisions of this Article Six or (iii) by a combination of such instrument or
instruments and any such record of such a meeting of Securityholders. The
Company may set a record date for purposes of determining the identity of
holders entitled to vote or consent to any action by vote or consent authorized
or permitted under this Indenture, which record date shall be the later of ten
days prior to the first solicitation of such consent or the date of the most
recent list of holders furnished to the Trustee pursuant to the provisions of
Section 312(a) of the Trust Indenture Act prior to such solicitation. If a
record date is fixed, those persons who were holders of Securities at such
record date (or their duly designated proxies), and only those persons, shall be
entitled to take such action by vote or consents or to revoke any vote or
consent previously given, whether or not such persons continue to be holders
after such record date. No such vote or consent shall be valid or effective if
such
49
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vote occurs or such consent is obtained more than 120 days after such record
date.
SECTION 6.02. Proof of Execution by Securityholders. (a) Subject to
-------------------------------------
the provisions of Sections 5.01, 5.02 and 7.05, proof of the execution of any
instrument by a Securityholder or his agent or proxy shall be sufficient if made
in accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee.
(b) The ownership of Registered Securities of any series shall be
proved by the Security Register or by a certificate of the Security registrar of
such series.
(c) The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may be proved by the production
of such Bearer Securities or by a certificate executed, as depositary, by any
trust company, bank, banker or other depositary, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that at
the date therein mentioned such Person had on deposit with such depositary, or
exhibited to it, the Bearer Securities in the amount and with the serial numbers
therein described; or such facts may be proved by the certificate or affidavit
of the Person holding such Bearer Securities, if such certificate or affidavit
is deemed by the Trustee to be satisfactory. The Trustee and the Company may
assume that such ownership of any Bearer Security continues until (i) another
certificate or affidavit bearing a later date issued in respect of the same
Bearer Security is produced, (ii) such Bearer Security is produced to the
Trustee by some other Person, (iii) such Bearer Security is surrendered in
exchange for a Registered Security or (iv) such Bearer Security is no longer
Outstanding. The fact and date of execution of any such instrument or writing,
the authority of the Person executing the same and the principal amount and
serial numbers of Bearer Securities held by the Person so executing such
instrument or writing and the date of holding the same may also be proved in any
other manner which the Trustee deems sufficient; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section 6.02(c).
(d) The record of any Securityholders' meeting shall be proved in the
manner provided in Section 7.07.
SECTION 6.03. Who Are Deemed Absolute Owners. Prior to due
------------------------------
presentation of a Registered Security for registration of transfer, the Company,
the Trustee, any Paying Agent and any Security registrar may treat the Person
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in whose name such Registered Security is registered as owner of such Registered
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 2.09) interest on such Registered Security and for all
other purposes whatsoever, whether or not such Registered Security is overdue
and notwithstanding any notation of ownership or other writing on such
Registered Security made by anyone other than the Company or any Security
registrar, and neither the Company, the Trustee, any Paying Agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any such holder as shown in the Security Register, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for money payable upon any such
Registered Security.
The Company, the Trustee, any Paying Agent and any Security registrar
may treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Bearer Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Bearer Security or coupon is overdue, and neither the
Company, the Trustee, any Paying Agent nor any Security registrar shall be
affected by any notice to the contrary. All such payments so made to any such
bearer shall be valid and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for money payable upon any such Bearer
Security.
None of the Company, the Trustee, any Paying Agent or the Security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 6.04. Company-Owned Securities Disregarded. In determining
------------------------------------
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any direction, consent, waiver or other action under this
Indenture, Securities that are owned by the Company or any other obligor on the
Securities or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Securities shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination; provided, however, that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, consent, waiver or other
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action, only Securities that the Trustee knows are so owned shall be so
disregarded.
SECTION 6.05. Revocation of Consents; Future Holders Bound. At any
--------------------------------------------
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 6.01, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Securities of any or all series specified in
this Indenture in connection with such action, any holder of a Security the
serial number of which is shown by the evidence to be included in the Securities
the holders of which have consented to such action, by filing written notice
with the Trustee at the principal office of the Trustee and upon proof of
holding as provided in Section 6.02, may revoke such action so far as concerns
such Security. Except as provided in this Section 6.05, any such action taken
by the holder of any Security shall be conclusive and binding upon such holder
and upon all future holders and owners of such Security, irrespective of whether
or not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution for such Security.
ARTICLE SEVEN
SECURITYHOLDERS' MEETINGS
SECTION 7.01. Purposes of Meetings. A meeting of Securityholders of
--------------------
any or all series may be called at any time and from time to time pursuant to
the provisions of this Article Seven for any of the following purposes:
(1) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
default under this Indenture and its consequences, or to take any other
action authorized to be taken by Securityholders pursuant to any of the
provisions of Article Four;
(2) to remove the Trustee and nominate a successor Trustee
pursuant to the provisions of Article Five;
(3) to consent to the execution of an indenture or indentures
supplemental to this Indenture pursuant to the provisions of Section 8.02;
or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Securities
52
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under any other provision of this Indenture or under applicable law.
SECTION 7.02. Call of Meetings by Trustee. The Trustee at any time
---------------------------
may call a meeting of Securityholders of any or all series to take any action
specified in Section 7.01, to be held at such time and at such place in The City
of New York for Registered Securities and the City of London, England for Bearer
Securities, as the Trustee shall determine. Notice of every meeting of the
Securityholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
to holders, if any, of Registered Securities of each series affected at their
addresses as they shall appear on the Security Register, and shall be provided
to holders, if any, of Bearer Securities of each series affected by publication
thereof in a newspaper of general circulation, in each Place of Payment for each
such series, customarily published at least once a day for at least five days in
each calendar week. Such notice to holders of Registered Securities shall be
mailed not fewer than 20 nor more than 90 days prior to the date fixed for the
meeting. Such notice to holders of Bearer Securities shall be made by the
required publication on at least two dates, the first such publication to be not
more than 90 days and the second such publication to be not fewer than 20 days
prior to the date fixed for the meeting.
Any meeting of Securityholders shall be valid without notice if the
holders of all Securities then Outstanding of each series affected are present
in person or by proxy or if notice is waived before or after the meeting by the
holders of all Outstanding Securities of each series affected, and if the
Company and the Trustee are either present by duly authorized representatives
or, before or after the meeting, have waived notice.
SECTION 7.03. Call of Meetings by Company or Securityholders. In
----------------------------------------------
case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least 10% in aggregate principal amount of the
Securities then Outstanding of any or all series, as the case may be, that may
be affected by the action proposed to be taken, shall have requested the Trustee
to call a meeting of Securityholders of any or all series, as the case may be,
that may be so affected, by written request setting forth in reasonable detail
the action proposed to be taken at the meeting, and the Trustee shall not have
mailed or published (as appropriate under Section 7.02) the notice of such
meeting within 20 days after receipt of such request, then the Company or such
Securityholders may determine the time and the place in the city designated in
Section 7.02, as the
53
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case may be, for such meeting and may call such meeting to take any action
authorized in Section 7.01, by mailing or publishing notice of such meeting as
provided in Section 7.02.
SECTION 7.04. Qualifications for Voting. To be entitled to vote at
-------------------------
any meeting of Securityholders of any series a person shall (i) be a holder of
one or more Securities of such series as set forth in the Security Register for
such series or (ii) be a person appointed by an instrument in writing as proxy
by a holder of one or more Securities of such series, subject to the provisions
of Section 6.02. The only persons who shall be entitled to be present or to
speak at any meeting of Securityholders shall be the persons entitled to vote at
such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 7.05. Regulations. (a) Notwithstanding any other provisions
-----------
of this Indenture, the Trustee may make such reasonable regulations as it may
deem advisable for any meeting of Securityholders, in regard to proof of the
holding of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
(b) The Trustee, by an instrument in writing, shall appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 7.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, in like
manner shall appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the holders of a majority
in principal amount of the Securities represented at the meeting and entitled to
vote.
(c) Subject to the provisions of Section 6.04, at any meeting each
Securityholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Securities.
(d) No vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of
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Securityholders duly called pursuant to the provisions of Section 7.02 or
Section 7.03 may be adjourned from time to time by a majority of those present
and the meeting may be held as so adjourned without further notice.
SECTION 7.06. Quorum. The Persons entitled to vote a majority in
------
principal amount of the Outstanding Securities affected by the action proposed
to be taken shall constitute a quorum for a meeting of such Securityholders. In
the absence of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting, if convened at the request of holders of Securities, shall
be dissolved. In the absence of a quorum in any other case the meeting may be
adjourned for a period of not fewer than ten days as determined by the chairman
of the meeting prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may be further
adjourned for a period of not fewer than ten days as determined by the chairman
of the meeting prior to the adjournment of such adjourned meeting. Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
7.02, except that such notice need be given only once not fewer than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities affected
by the action proposed to be taken which shall constitute a quorum.
SECTION 7.07. Voting. The vote upon any resolution submitted to any
------
meeting of Securityholders shall be by written ballots on which shall be
subscribed the signatures of the holders of Securities or of their
representatives by proxy and the principal amount of the Securities held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record in duplicate of the proceedings of each meeting of Securityholders shall
be prepared by the secretary of the meeting and there shall be attached to such
record the original reports of the inspectors of votes on any vote by ballot
taken at such meeting and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
such notice was mailed or published as provided in Section 7.02 or Section 7.03.
The record shall show the principal amount of the Securities voting in favor of
or against any resolution. The record shall be signed and verified by the
affidavits of
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the permanent chairman and secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be preserved
by the Trustee.
Any record so signed and verified shall be conclusive evidence of the
matters stated in such record.
SECTION 7.08. No Delay of Rights by Meeting. Nothing in this
-----------------------------
Article Seven shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Securityholders or any rights expressly or impliedly
conferred under this Article Seven to make such call, any hindrance or delay in
the exercise of any right or rights conferred upon or reserved to the Trustee or
to the Securityholders under any of the provisions of this Indenture or of the
Securities.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.01. Supplemental Indentures Without Consent of
------------------------------------------
Securityholders. The Company, when authorized by the resolutions of the Board
- ---------------
of Directors, and the Trustee from time to time and at any time may enter into
an indenture or indentures supplemental to this Indenture for one or more of the
following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumptions by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Nine;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of any series
of the Securities or coupons as the Board of Directors and the Trustee
shall consider to be for the protection of the holders of such Securities
or coupons, and to make the occurrence, or the occurrence and continuance,
of a default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any of
the several remedies set forth in this Indenture; provided, however, that
in respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for notice or a particular period of
grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such
56
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default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any provision
contained in this Indenture or in any supplemental indenture that may be
defective or inconsistent with any other provision contained in this
Indenture or in any supplemental indenture, or to make such other
provisions in regard to matters or questions arising under this Indenture
that shall not adversely affect the interests of the holders of Outstanding
Securities of any series or any related coupons;
(d) to establish the form or terms of Securities of any series as
permitted by Section 2.01;
(e) to add to, change or eliminate any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal or any premium on Registered Securities or of principal or any
premium or interest on Bearer Securities, to permit Bearer Securities to be
issued in exchange for Registered Securities or to permit or facilitate the
issuance of Securities in uncertificated form, provided any such action
shall not adversely affect the interests of the holders of Outstanding
Securities of any series or any related coupons;
(f) 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; provided, however, that such action shall not adversely affect
the interests of the holders of Outstanding Securities of any series;
(g) to provide for the documentation necessary for the issuance of
Securities outside the United States of America;
(h) to provide for the documentation necessary for the issuance of
Securities at an issue price lower than the principal amount thereof,
including to provide that upon the redemption or acceleration of the
Maturity thereof an amount less than the principal amount thereof shall
become due and payable and that such amount shall be used to determine the
relative voting rights of the holders thereof; or
(i) to conform the Indenture to the provisions of the Trust Indenture
Act as then in effect.
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The Trustee hereby is authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations that may be contained in such supplemental indenture
and to accept the conveyance, transfer and assignment of any property under such
supplemental indenture, but the Trustee shall not be obligated to, but in its
discretion may, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 8.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time Outstanding, notwithstanding
any provisions of Section 8.02.
SECTION 8.02. Supplemental Indentures with Consent of Securityholders
-------------------------------------------------------
of a Series. With the consent (evidenced as provided in Section 6.01) of the
- -----------
holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding of each series affected by such supplemental
indenture or indentures, the Company, when authorized by the resolutions of the
Board of Directors, and the Trustee from time to time and at any time may enter
into an indenture or indentures supplemental to this Indenture 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 the Securities of each such series; provided, however, that without
the consent of the holder of each Outstanding Security affected thereby no such
supplemental indenture shall: (a) change the Stated Maturity of the principal
of or any premium or any installment of interest on, any Security, or reduce the
principal amount of any Security or any premium or interest on any Security, or
reduce the amount of principal payable upon acceleration of the Maturity of any
Original Issue Discount Security, or change any Place of Payment where, or the
coin or currency in which, any Security or any premium or interest on any
Security is payable, or impair the right to institute suit for the enforcement
of any such payment on or after its Stated Maturity; (b) reduce the percentage
in principal amount of 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 under this Indenture and their consequences provided for in
this Indenture; or (c) modify the provisions of Section 4.01 providing for the
rescinding and annulment of a declaration accelerating the Maturity of the
Securities of any series, or any of the provisions of
58
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this Section 8.02 or Section 4.07(b), except to increase any such percentage or
to provide that certain other provisions of this Indenture cannot be modified or
waived.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Securityholders of
such series as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee in its discretion may, but shall not be
obliged to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 8.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 8.03. Compliance with Trust Indenture Act; Effect of
----------------------------------------------
Supplemental Indentures. Any supplemental indenture executed pursuant to the
- -----------------------
provisions of this Article Eight shall comply with the Trust Indenture Act as
then in effect. Upon the execution of any supplemental indenture pursuant to
the provisions of this Article Eight, this Indenture shall be and be deemed to
be modified and amended in accordance with such supplemental indenture and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of the series
of Securities affected thereafter shall be determined, exercised and enforced
under this Indenture subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
SECTION 8.04. Notation on Securities. Securities authenticated and
----------------------
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eight may bear a notation in form acceptable to the
Trustee as to any matter provided for in such supplemental indenture. If the
Company so shall determine, new Securities of any series and any related coupons
so modified as to conform, in the opinion of the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee and
delivered in
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exchange, as provided in Section 2.06, for the Outstanding Securities of such
series and any related coupons, upon surrender of such Outstanding Securities of
such series and any related coupons.
SECTION 8.05. Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Section 5.01 and
- -----------------
Section 5.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article Eight complies with the requirements of this Article Eight.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 9.01. Company May Consolidate, etc., on Certain Terms. The
-----------------------------------------------
Company shall not consolidate with or merge into another corporation or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless:
(1) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer or which leases the properties and assets of the Company
substantially as an entirety shall be a corporation organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and expressly shall assume, by a supplemental
indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, the due and punctual payment of the principal of and any premium
and interest on the Securities, according to their terms, and the
performance of every covenant of this Indenture and in such series 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 which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and supplemental
indenture comply with this Article Nine and that all
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conditions precedent provided for in this Indenture relating to such
transaction have been complied with.
SECTION 9.02. Successor Corporation Substituted. Upon any
---------------------------------
consolidation by the Company with or merger by the Company into any other
corporation or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety in accordance with Section 9.01, 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 corporation had
been named as the Company in this Indenture, and thereafter, except in the case
of a lease, the predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Securities of each series and any related
coupons.
Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Company prior to such succession,
any of or all the Securities of each series issuable under this Indenture which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of upon the
Company Order, and subject to all the terms, conditions and limitations in this
Indenture, the Trustee shall authenticate and shall deliver any Securities that
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee on
its behalf for that purpose. All the Securities so issued shall have in all
respects 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 such Securities had been issued at the date of the execution of
this Indenture.
ARTICLE TEN
REDEMPTION OF SECURITIES
SECTION 10.01. Applicability of Article. Securities of any series
------------------------
that are redeemable before their Stated Maturity shall be redeemable only in
accordance with their terms and (except as otherwise specified as contemplated
by Section 2.01 for Securities of any series) in accordance with this Article
Ten.
61
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SECTION 10.02. Election to Redeem; Notice to Trustee. The election
-------------------------------------
of the Company to redeem any Securities shall be evidenced by a Company Order.
In case of any redemption at the election of the Company of less than all the
Securities of any series, the Company, at least 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), shall notify the Trustee of such Redemption Date, of the tenor and
terms of the Securities of such series to be redeemed and of the principal
amount of such Securities 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 or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
SECTION 10.03. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities of any series of like tenor and terms specified
by the Company are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities of such series and of such tenor and
terms not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denominations for such Securities
or any integral multiple thereof) of the principal amount of such Registered
Securities or such Bearer Securities or a denomination larger than the minimum
authorized denomination for such Registered Securities or such Bearer
Securities.
The Trustee promptly shall notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, 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 Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 10.04. Notice of Redemption. Notice of redemption shall be
--------------------
given in the manner provided in Section 7.02 not fewer than 30 or more than 60
days prior to the Redemption Date. All notices of redemption shall state:
(1) the Redemption Date;
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(2) the Redemption Price;
(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed;
(4) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after such
date;
(5) the Place or Places of Payment where such Securities,
together in the case of Bearer Securities with all coupons, if any,
appertaining thereto maturing after the Redemption Date, are to be
surrendered for payment of the Redemption Price;
(6) that Bearer Securities may be surrendered for payment only
at such place or places that are outside the United States, except as
provided in Section 3.02; and
(7) that the redemption is for a sinking fund, if such is the
case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 10.05. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 3.04(b)) an amount of money sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall be the same
date as the Stated Maturity of an installment of interest thereon) accrued
interest on, all the Securities that are to be redeemed on that date; provided,
however, that deposits with respect to Bearer Securities shall be made with a
Paying Agent or Paying Agents located outside the United States except as
otherwise provided in Section 3.02, unless otherwise specified as contemplated
by Section 2.01.
SECTION 10.06. Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall become due and payable, on the Redemption Date, at the Redemption Price
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<PAGE>
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be redeemed, except to the extent
provided below, shall be void. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that: (i) installments of interest on
Bearer Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable only upon presentation and surrender of coupons for such
interest (at an office or agency located outside the United States except as
otherwise provided in Section 3.02); and (ii) installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant record date for the payment of
such interest according to the terms of such Securities.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Bearer Security may be paid after deducting from the Redemption Price an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
is furnished to them such security or indemnity as they may require to hold each
of them and any Paying Agent harmless. If thereafter the holder of such Bearer
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such holder shall be entitled to receive the amount so deducted on
account of such coupon without interest thereon; provided, however, that
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside of the United
States except as otherwise provided in Section 3.02.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium, until paid,
shall bear interest from the Redemption Date at the rate prescribed therefor in
the Security or related coupon.
SECTION 10.07. Registered Securities Redeemed in Part. Any
--------------------------------------
Registered Security that is to be redeemed only in part shall be surrendered at
a Place of Payment therefor (with, if the Company or the Trustee so requires,
due
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endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the holder of such Security without service
charge, a new Registered Security or new Registered Securities of the same
series and of like tenor and terms, of any authorized denomination as requested
by such holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE ELEVEN
SINKING FUNDS
SECTION 11.01. Applicability of Article. The provisions of this
------------------------
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 2.01 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 11.02. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of the
Securities of such series.
SECTION 11.02. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company
(1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and
(2) may apply as a credit Securities of a series that have been
repurchased at the option of a holder or redeemed either at the election of
the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the
terms of such Securities,
in each case in satisfaction of all or any part of any sinking fund payment with
respect to the Securities of such
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series required to be made pursuant to the terms of such Securities as provided
for by the terms of such series, provided that such Securities have not been
previously so credited. Such Securities shall be received and credited for such
purpose by the Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund, and the amount of such sinking
fund payment shall be reduced accordingly.
SECTION 11.03. Redemption of Securities for Sinking Fund. Not fewer
-----------------------------------------
than 60 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 of that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 11.02 and also will deliver to the Trustee any Securities to be so
delivered. Not fewer than 30 days before each such sinking fund payment date the
Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 10.03 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 10.04. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Section 10.06 and Section 10.07.
ARTICLE TWELVE
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 12.01. Terms Set Forth in the Securities. Securities of
---------------------------------
any series which in accordance with their terms are repayable at the option of
the holders thereof before their Stated Maturity shall be repaid in accordance
with the terms set forth in such Securities.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture. When (a) the Company shall
----------------------
deliver to the Trustee for cancellation all Securities of any series and any
related coupons theretofore authenticated (other than any Securities of such
series and any related coupons that shall have been mutilated, destroyed, lost
or stolen and in lieu of or in
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substitution for which other Securities or coupons shall have been authenticated
and delivered) and not theretofore canceled, or (b) all the Securities of any
series and any related coupons not theretofore canceled or delivered to the
Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay upon Stated Maturity, redemption or
repayment at the option of a holder all the Securities of such series and
related coupons (other than any Securities of such series and related coupons
that shall have been mutilated, destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.06) not theretofore canceled or
delivered to the Trustee for cancellation, including principal and any premium
and interest due or to become due prior to such Stated Maturity, Redemption Date
or date of repayment, as the case may be, but excluding, however, the amount of
any money for the payment of principal of or any premium or interest on the
Securities
(1) theretofore deposited with the Trustee and repaid by the
Trustee to the Company in accordance with the provisions of Section 13.04,
or
(2) paid to any State or the District of Columbia pursuant to
its unclaimed property or similar laws, and if in either case the Company
also shall pay or cause to be paid all other sums payable under this
Indenture by the Company
then this Indenture shall cease to be of further effect with respect to
Securities of such series and any related coupons, and the Trustee, on demand of
the Company accompanied by an Officers' Certificate and an Opinion of Counsel as
required by Section 15.05 and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture with respect to Securities of such series and any related coupons.
The obligations of the Company to the Trustee under Section 5.06 shall survive
the termination of this Indenture.
The Trustee shall notify the Securityholders of such series, at the
expense of the Company, of the immediate availability of the amount referred to
in clause (b) of this Section 13.01 by mailing a notice, first class postage
prepaid, to the holders of Registered Securities of such series at their
addresses as they shall appear on the Security Register, and, if any Bearer
Securities are
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Outstanding, by publishing notice of such resignation in a newspaper of general
circulation, in each place of payment for such Bearer Securities, customarily
published at least once a day for at least five days in each calendar week.
SECTION 13.02. Deposited Money to Be Held in Trust by Trustee.
----------------------------------------------
Subject to Section 13.04, all money deposited with the Trustee pursuant to
Section 13.01 shall be held in trust and applied by it to the payment, either
directly or through any Paying Agent (including the Company if acting as its own
Paying Agent, other than as to Bearer Securities, except as provided in Section
3.02), to the holders of the particular Securities and related coupons for the
payment of which such money has been deposited with the Trustee, of all sums due
and to become due thereon for principal and any premium and interest.
SECTION 13.03. Paying Agent to Repay Money Held. Upon the
--------------------------------
satisfaction and discharge of this Indenture all money then held by any Paying
Agent of the Securities (other than the Trustee), upon demand of the Company,
shall be repaid to it or paid to the Trustee, and thereupon such Paying Agent
shall be released from all further liability with respect to such money.
SECTION 13.04. Return of Unclaimed Money. Any money deposited with
-------------------------
or paid to the Trustee or any Paying Agent for payment of the principal of or
any premium or interest on Securities of any series, or then held by the Company
in trust for the payment of the principal of or any premium or interest on
Securities of any series, and not applied but remaining unclaimed by the holders
of Securities of that series for two years after the date upon which the
principal or any premium or interest on such Securities, as the case may be,
shall have become due and payable, shall be repaid to the Company by the Trustee
on demand or, if then held by the Company, shall be discharged from such trust,
and all liability of the Trustee thereupon shall cease; and the holder of any of
such Securities thereafter, as an unsecured general creditor, shall look only to
the Company for payment of such Securities, 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, thereupon shall cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
at the expense of the Company, in the case of Registered Securities or Bearer
Securities, may cause to be published once, in a newspaper of general
circulation in each Place of Payment for such series customarily published on
each Business Day (whether or not published on Saturdays, Sundays or holidays)
or, in the case of Registered Securities, to be mailed to each such holder, or
in the case
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of Registered Securities to be mailed and published, notice that such money
remains unclaimed and that, after a date specified in such notice, which shall
not be fewer than 30 days from the date of such publication or mailing, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 13.05. Discharge of Indenture as to Certain Series of
----------------------------------------------
Securities. (a) If this Section 13.05 is specified in the manner contemplated
- ----------
by Section 2.01 to be applicable to the Securities of any series, the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
Securities of any such series at the time Outstanding and, upon Company Order,
the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction, discharge and defeasance of such indebtedness, when:
(1) either:
(A) with respect to all Securities of such series at the
time Outstanding, the Company shall have deposited or caused to be
deposited irrevocably with the Trustee for such series as trust funds
in trust, U.S. dollars, U.S. Government Obligations or a combination
thereof, in an amount that through the payment of interest and
principal and premium in respect thereof in accordance with their
terms will provide (without any reinvestment of such interest or
principal), not later than one Business Day before the due date of any
payment in respect of the Securities for such series, money in an
amount sufficient (in the case of a deposit including any U.S.
Government Obligations, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof delivered to the Trustee at or prior to the time of such
deposit) to pay and discharge each installment of principal of
(including any mandatory sinking fund payments), and any premium and
interest on, the Outstanding Securities of such series on the dates
such installments of principal and any premium and interest are due or
upon the Stated Maturity, Redemption Date or repayment at the option
of a holder of such series, as applicable; or
(B) the Company properly has fulfilled such other means of
satisfaction and discharge as is specified, in the manner contemplated
by
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<PAGE>
Section 2.01, to be applicable to the Securities of such series;
(2) no Event of Default or event (including such deposit) which,
with notice or lapse of time, or both, would become an Event of Default
with respect to the Securities of such series shall have occurred and be
continuing on the date of such deposit as evidenced to the Trustee in an
Officers' Certificate delivered concurrently with such deposit to the
Trustee;
(3) the Company shall have paid or caused to be paid all other
sums payable with respect to the Securities of such series at the time
Outstanding;
(4) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound, or the
Company has obtained a waiver of any such breach, violation or default;
(5) unless otherwise specified in the manner contemplated by
Section 2.01, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that holders of the Securities of such series will
not recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this Section 13.05 and
will be subject to Federal income tax on the same amount and in the manner
and at the same times as would have been the case if such option had not
been exercised and, in the case of the Securities of such series being
discharged, accompanied by a ruling to that effect received from or
published by the Internal Revenue Service; and
(6) the Company shall have 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, discharge and
defeasance of the entire indebtedness on all Securities of any such series
at the time Outstanding have been complied with.
(b) "U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
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credit obligation by the United States of America which in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
(c) Upon the satisfaction of the conditions set forth in this Section
13.05 with respect to all the Securities of any series at the time Outstanding,
the terms and conditions of such series, including the terms and conditions with
respect thereto set forth in this Indenture, shall no longer be binding upon, or
applicable to, the Company (except as to any surviving rights of conversion or
registration of transfer or exchange and rights relating to mutilated,
destroyed, lost and stolen Securities pursuant to Section 2.07 of Securities of
such series expressly provided for herein or in the form of Security of such
series); provided, however, that the Company shall not be discharged from any
payment obligations in respect of Securities of such series which are deemed not
to be Outstanding under clause (c) of the definition thereof if such obligations
continue to be valid obligations of the Company under applicable law.
SECTION 13.06. Repayment to Company of Deposits Made Pursuant to
-------------------------------------------------
Section 13.05. After the payment in full of the entire indebtedness of a
- -------------
series of Securities with respect to which a deposit has been made with the
Trustee pursuant to Section 13.05, the Trustee and any Paying Agent for such
series upon Company Order promptly shall return to the Company any money or U.S.
Government Obligations held by them that are not required for the payment of the
principal of and any premium and interest on the Securities of such series.
SECTION 13.07. Deposits Irrevocable. Any deposit referred to in
--------------------
Section 13.01 and Section 13.05(a)(1)(A) shall be irrevocable. If any
Securities of a series with respect to which a deposit has been made pursuant to
Section 13.01 and Section 13.05(a)(1)(A) at the time Outstanding are to be
redeemed prior to their Stated Maturity, whether pursuant to any optional
redemption provisions or in accordance with any mandatory sinking fund
requirement, the Company shall make such arrangements as are satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
SECTION 13.08. Reinstatement. If the Trustee is unable to apply
-------------
any money or U.S. Government Obligations in accordance with Section 13.01 or
Section 13.05 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the
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<PAGE>
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 13.01 or
Section 13.05 until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 13.01 or Section
13.05.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 14.01. Indenture and Securities Solely Corporate Obligations.
-----------------------------------------------------
No recourse for the payment of the principal of or any premium or interest on
any Security, or for any claim based on any Security or coupon or otherwise in
respect of any Security or coupon, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any Security, or
because of the creation of any indebtedness represented by any Security or
coupon, shall be had against any incorporator, stockholder, officer or director,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities and coupons.
ARTICLE FIFTEEN
MISCELLANEOUS PROVISIONS
SECTION 15.01. Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements contained in this Indenture by
the Company shall bind its successors and assigns whether so expressed or not.
SECTION 15.02. Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provisions of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
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SECTION 15.03. Addresses for Notices, etc. Any notice or demand
---------------------------
that by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Securities on the Company may be
given or served by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company with the Trustee) to Southern National Corporation, Attention:
Treasurer, 200 West Second Street, Winston-Salem, North Carolina 27101. Any
notice, direction, request or demand by any Securityholder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the principal office of the Trustee,
Attention: Corporate Trust Administration. Any notice, direction, request or
demand by any Securityholder to or upon BB&T-NC shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
office of BB&T-NC, Attention: Corporate Trust Department, 223 West Nash Street,
Wilson, North Carolina 27893.
SECTION 15.04. Governing Law. THIS INDENTURE AND EACH SECURITY
-------------
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK,
AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
SECTION 15.05. Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Upon any application or request by the Company to the Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (other than certificates provided pursuant to
Section 4.04, which certificates shall comply with the requirements of Section
4.04) shall include: (i) a statement that the person making such certificate or
opinion has read such covenant or condition; (ii) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinion contained in such certificate or opinion are based; (iii) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (iv) a
statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
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The provisions of this Section 15.05 are in furtherance of and subject
to Sections 314(c)(1), 314(c)(2) and 314(e) of the Trust Indenture Act.
SECTION 15.06. Legal Holidays. Unless otherwise specified in the
--------------
manner contemplated by Section 2.01, in any case where the Stated Maturity of
principal of or any premium or interest on the Securities will not be a Business
Day, payment of such principal, premium or interest need not be made on such
date but may be made on the next following Business Day with the same force and
effect as if made on the Stated Maturity and, if such principal, premium or
interest is duly paid on such next following Business Day, no interest shall
accrue for the period from and after such Stated Maturity to such next following
Business Day.
SECTION 15.07. Trust Indenture Act to Control. If and to the that
------------------------------
extent that any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required to be included in this Indenture by
any provision of the Trust Indenture Act, such required provision shall control.
SECTION 15.08. No Security Interest Created. Nothing in this
----------------------------
Indenture or in the Securities or coupons, expressed or implied, shall be
construed to constitute a security interest under the Uniform Commercial Code or
similar legislation, as now or hereafter enacted and in effect, in any
jurisdiction where property of the Company or its Subsidiaries is located.
SECTION 15.09. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Securities or coupons, express or implied, shall give to any Person,
other than the parties to this Indenture, any Paying Agent, any Security
registrar and their successors under this Indenture and the holders of
Securities or coupons any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 15.10. Payments to Be Made in U.S. Dollars. Notwithstanding
-----------------------------------
anything in this Indenture to the contrary, any payments on or relating to any
Security or related coupon shall be made only in U.S. dollars.
SECTION 15.11. Table of Contents, Headings, etc. The table of
---------------------------------
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions of this Indenture.
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SECTION 15.12. Execution in Counterparts. This Indenture may be
-------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
_________________________________________________
State Street Bank and Trust Company hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions set forth above
in this Indenture.
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IN WITNESS WHEREOF, SOUTHERN NATIONAL CORPORATION has caused this
Indenture to be signed and acknowledged by its [Vice] President, and its
corporate seal to be affixed hereunto, and the same to be attested by its
Secretary, and STATE STREET BANK AND TRUST COMPANY has caused this Indenture
to be signed and acknowledged by the person whose name is set forth below, and
has caused its corporate seal to be affixed hereunto and the same to be attested
by the person whose name is set forth below, as of the day and year first
written above.
SOUTHERN NATIONAL CORPORATION
By: /s/ Scott E. Reed
---------------------------------
Scott E. Reed
Senior Executive Vice President
and Chief Financial Officer
[SEAL]
Attest:
/s/ Jerone C. Herring
- ----------------------------------
Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth A. Smith
---------------------------------
Ruth A. Smith
Vice President
[SEAL]
Attest:
/s/ Traci Hopkins
- ----------------------------------
Assistant Secretary
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STATE OF NORTH CAROLINA )
) ss.:
COUNTY OF FORSYTH )
On the 22nd day of May, 1996, before me personally came
Scott E. Reed, to me known, who, being by me duly sworn did depose and say
that he resides at Forsyth County, North Carolina; that he is the Senior
Executive Vice President and Chief Financial Officer of SOUTHERN NATIONAL
CORPORATION, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by the
authority of the Board of Directors of said corporation; and that he signed his
name thereto by like authority.
/s/ Dawn L. Carter
-------------------------------------
Notary Public
[NOTARIAL SEAL]
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On the 23rd day of May, 1996, before me personally came
Ruth Smith, to me known, who, being by me duly sworn did depose and say
that he resides at _____________________________________________; that he is a
Vice President of State Street Bank and Trust Company, one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by the authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Laura L. Morse
----------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
EXHIBIT 4.2
SOUTHERN NATIONAL CORPORATION
TO
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
INDENTURE
REGARDING SUBORDINATED SECURITIES
DATED AS OF MAY 24, 1996
<PAGE>
Reconciliation and Tie Sheet*
between
Provisions of the Trust Indenture Act of 1939
and
Indenture, dated as of May 24, 1996
between
SOUTHERN NATIONAL CORPORATION
to
STATE STREET BANK AND TRUST COMPANY, Trustee
Section of Act Section of Indenture
- -------------- --------------------
310(a)(1), (2).......................... 6.08
310(a)(3), (4).......................... Not applicable
310(a)(5)............................... 6.08
310(b).................................. **
310(c).................................. Not applicable
311(c).................................. Not appliable
312..................................... **
313(a).................................. **
313(b)(1)............................... Not applicable
313(b)(2)............................... **
313(c), (d)............................. **
314(a).................................. **
314(b).................................. Not applicable
314(c)(1) and (2)....................... 16.05
314(c)(3)............................... Not applicable
314(d).................................. Not applicable
314(e).................................. 16.05
314(f).................................. Not applicable
315(a)(c) and (d)....................... 6.01
315(b).................................. 5.08
315(e).................................. 5.09
316(a)(1)............................... 5.01 and 5.07
316(a)(2)............................... Omitted
316(a) last sentence.................... 7.04
316(b).................................. 5.04
316(c).................................. 7.05
317(a).................................. 5.02
317(b).................................. 4.04(a)
318(a).................................. 16.07
_________________
* This Reconciliation and Tie Sheet is not a part of the Indenture.
** Included pursuant to Section 318(c) of the Trust Indenture Act of 1939.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties .......................................................... 1
Recitals .......................................................... 1
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions........................................ 1
<CAPTION>
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
<S> <C> <C>
SECTION 2.01. Amount Unlimited; Issuable in Series............... 8
SECTION 2.02. Form of Securities and of Trustee's Certificate
of Authentication.................................. 11
SECTION 2.03. Securities in Global Form.......................... 12
SECTION 2.04. Denomination, Authentication and Dating of
Securities......................................... 13
SECTION 2.05. Execution of Securities............................ 16
SECTION 2.06. Exchange and Registration of Transfer of
Securities......................................... 17
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities.... 21
SECTION 2.08. Temporary Securities............................... 23
SECTION 2.09. Payment of Interest; Interest Rights............... 24
SECTION 2.10. Cancellation of Securities Paid, etc............... 26
<CAPTION>
ARTICLE THREE
SUBORDINATION OF SECURITIES
<S> <C> <C>
SECTION 3.01. Agreement of Securityholders That Securities
Subordinated to Extent Provided.................... 26
SECTION 3.02. Company Not to Make Payments with Respect to
Securities in Certain Circumstances................ 27
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.03. Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or
Reorganization of Company.......................... 28
SECTION 3.04. Securityholders to Be Subrogated to Rights of
Holders of Senior Indebtedness..................... 30
SECTION 3.05. Obligation of the Company Unconditional, etc....... 30
SECTION 3.06. Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice............................... 31
SECTION 3.07. Application by Trustee of Money Deposited with It.. 31
SECTION 3.08. Article Applicable to Paying Agents................ 32
SECTION 3.09. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior
Indebtedness....................................... 32
SECTION 3.10. Securityholders Authorize Trustee to Effectuate
Subordination of Securities........................ 32
SECTION 3.11. Right of Trustee to Holder Senior Indebtedness..... 32
SECTION 3.12. Article Three Not to Prevent Events of Default..... 33
SECTION 3.13. Trustee Not Fiduciary for Holders of Senior
Indebtedness....................................... 33
<CAPTION>
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
<S> <C> <C>
SECTION 4.01. Payment of Principal and Interest.................. 33
SECTION 4.02. Offices for Notices and Payments, etc.............. 33
SECTION 4.03. Provisions as to Paying Agent...................... 35
SECTION 4.04. Statement as to Compliance......................... 36
SECTION 4.05. Notice of Defaults................................. 36
SECTION 4.06. Limitation on Certain Dispositions and on Merger
and Sale of Assets................................. 37
SECTION 4.07. Limitation on Creation of Liens.................... 38
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.08. Corporate Existence................................ 38
<CAPTION>
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON
EVENT OF DEFAULT OR ACCELERATION EVENT
<S> <C> <C>
SECTION 5.01. Events of Default.................................. 38
SECTION 5.02. Payment of Securities on Default; Suit Therefor.... 41
SECTION 5.03. Application of Money Collected by Trustee.......... 43
SECTION 5.04. Proceedings by Securityholders..................... 44
SECTION 5.05. Proceedings by Trustee............................. 45
SECTION 5.06. Remedies Cumulative and Continuing; Delay or
Omission Not Waiver................................ 45
SECTION 5.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders............ 46
SECTION 5.08. Notices of Defaults.................................47
SECTION 5.09. Undertaking to Pay Costs............................47
<CAPTION>
ARTICLE SIX
CONCERNING THE TRUSTEE
<S> <C> <C>
SECTION 6.01. Duties and Responsibilities of Trustee............. 48
SECTION 6.02. Reliance on Documents, Opinions, etc............... 49
SECTION 6.03. No Responsibility for Recitals, etc................ 50
SECTION 6.04. Trustee, Paying Agents or Registrar May Own
Securities......................................... 50
SECTION 6.05. Money to Be Held in Trust.......................... 51
SECTION 6.06. Compensation and Expenses of Trustee............... 51
SECTION 6.07. Officers' Certificate as Evidence.................. 51
SECTION 6.08. Eligibility of Trustee............................. 52
SECTION 6.09. Resignation or Removal of Trustee.................. 52
SECTION 6.10. Acceptance by Successor Trustee.................... 54
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6.11. Succession by Merger............................... 55
<CAPTION>
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
<S> <C> <C>
SECTION 7.01. Action by Securityholders.......................... 55
SECTION 7.02. Proof of Execution by Securityholders.............. 56
SECTION 7.03. Who Are Deemed Absolute Owners..................... 57
SECTION 7.04. Company-Owned Securities Disregarded............... 58
SECTION 7.05. Revocation of Consents; Future Holders Bound....... 58
<CAPTION>
ARTICLE EIGHT
SECURITYHOLDERS' MEETINGS
<S> <C> <C>
SECTION 8.01. Purposes of Meetings............................... 58
SECTION 8.02. Call of Meetings by Trustee........................ 59
SECTION 8.03. Call of Meetings by Company or Securityholders..... 60
SECTION 8.04. Qualifications for Voting.......................... 60
SECTION 8.05. Regulations........................................ 60
SECTION 8.06. Quorum............................................. 61
SECTION 8.07. Voting............................................. 61
SECTION 8.08. No Delay of Rights by Meeting...................... 62
<CAPTION>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
<S> <C> <C>
SECTION 9.01. Supplemental Indentures Without Consent of
Securityholders.................................... 62
SECTION 9.02. Supplemental Indentures of Securityholders of a
Series............................................. 64
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures............................ 65
SECTION 9.04. Notation on Securities............................. 66
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.05. Evidence of Compliance of Supplemental Indenture
to Be Furnished Trustee............................ 66
<CAPTION>
ARTICLE TEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
<S> <C> <C>
SECTION 10.01. Company May Consolidate, etc., on Certain Terms.... 66
SECTION 10.02. Successor Corporation Substituted.................. 67
<CAPTION>
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
<S> <C> <C>
SECTION 11.01. Applicability of Article........................... 68
SECTION 11.02. Election to Redeem; Notice to Trustee.............. 68
SECTION 11.03. Selection by Trustee of Securities to Be
Redeemed........................................... 68
SECTION 11.04. Notice of Redemption............................... 69
SECTION 11.05. Deposit of Redemption Price........................ 69
SECTION 11.06. Securities Payable on Redemption Date.............. 70
SECTION 11.07. Registered Securities Redeemed in Part............. 71
<CAPTION>
ARTICLE TWELVE
SINKING FUNDS
<S> <C> <C>
SECTION 12.01. Applicability of Article........................... 71
SECTION 12.02. Satisfaction of Sinking Fund Payments with
Securities......................................... 71
SECTION 12.03. Redemption of Securities for Sinking Fund.......... 72
<CAPTION>
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
<S> <C> <C>
SECTION 13.01. Terms Set Forth in the Securities.................. 72
<CAPTION>
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
</TABLE>
v
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 14.01. Discharge of Indenture............................. 73
SECTION 14.02. Deposited Money to Be Held in Trust by Trustee..... 74
SECTION 14.03. Paying Agent to Repay Money Held................... 74
SECTION 14.04. Return of Unclaimed Money.......................... 74
SECTION 14.05. Deposits Irrevocable............................... 75
SECTION 14.06. Reinstatement...................................... 75
<CAPTION>
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
<S> <C> <C>
SECTION 15.01. Indenture and Securities Solely Corporate
Obligations........................................ 75
<CAPTION>
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 16.01. Provisions Binding on Company's Successors......... 76
SECTION 16.02. Official Acts by Successor Corporation............. 76
SECTION 16.03. Addresses for Notices, etc......................... 76
SECTION 16.04. Governing Law...................................... 76
SECTION 16.05. Evidence of Compliance with Conditions Precedent... 76
SECTION 16.06. Legal Holidays..................................... 77
SECTION 16.07. Trust Indenture Act to Control..................... 77
SECTION 16.08. No Security Interest Created....................... 77
SECTION 16.09. Benefits of Indenture.............................. 78
SECTION 16.10. Payments to Be Made in U.S. Dollars................ 78
SECTION 16.11. Table of Contents, Headings, etc................... 78
SECTION 16.12. Execution in Counterparts.......................... 78
</TABLE>
vi
<PAGE>
THIS INDENTURE, dated as of May 24, 1996, is executed and delivered
from SOUTHERN NATIONAL CORPORATION, a North Carolina corporation (such
corporation or, subject to Article Ten, its successors and assigns, the
"Company"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company (such corporation or, subject to Article Six, its successors and assigns
as Trustee under this Indenture, the "Trustee").
RECITAL 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
subordinated debentures, notes or other evidences of indebtedness or warrants
therefor to be issued in one or more series (the "Securities"), as provided
herein.
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, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01
-----------
(except to the extent the application of such definitions is expressly limited
to certain instances, and except as otherwise expressly provided in this
Indenture or unless the context otherwise requires) for all purposes of this
Indenture will have the respective meanings specified in this Section 1.01.
Except as otherwise expressly provided in this Indenture or unless the context
otherwise requires, all other terms used in this Indenture that are defined in
the Trust Indenture Act or that the Trust Indenture Act defines by reference to
the Securities Act of 1933 or by Commission rule under the Trust Indenture Act
will have the meanings assigned to such terms in the Trust Indenture Act, in
such rule thereunder or in such Securities Act as in force at the date of the
execution of this Indenture.
"Acceleration Event", with respect to Securities of any series, means
the occurrence with respect to the Company of any of the events described in
Section 5.01(g) or (h) (other than the appointment of a conservator with respect
to any Constituent Bank insured by the Federal Deposit Insurance Corporation or
any successor agency), continued for the period of time, if any,
<PAGE>
and after the giving of notice, if any, designated in Section 5.01(g) or (h), or
shall have the meaning otherwise specified in the Securities of such series.
"Bank" means (i) any institution organized under the laws of the
United States, any State, the District of Columbia, Puerto Rico or any territory
of the United States that (a) accepts deposits that the depositor has a legal
right to withdraw on demand and (b) engages in the business of making commercial
loans and (ii) any trust company organized under any of the foregoing laws.
Unless otherwise provided, for purposes of this Indenture a Bank also will be
considered a "corporation".
"BB&T-NC" shall mean Branch Banking and Trust Company, a North
Carolina corporation, and any successor or successors thereto.
"Bearer Security" means any Security established pursuant to Section
2.02 that is payable to bearer.
"Bearer Security Tax Certificate" or "Certificate of non-U.S.
Ownership", when used with respect to a Bearer Security, means a certificate
satisfying the requirements of Treasury Regulation (S) 1.163-5(c)(2)(i)(D)(3),
as that provision may be amended or redesignated from time to time, which
certificate shall be in a form approved by the Company.
"Board of Directors" means the Board of Directors of the Company or,
with respect to any matter, any committee of the Board of Directors duly
authorized to act for the Board of Directors with respect to such matter.
"Business Day", with respect to each series of Securities, means any
day other than a Saturday or Sunday that is neither a legal holiday nor a day on
which banking institutions are authorized or obligated by law or regulation to
close in either The City of New York or, with respect to Registered Notes that
will bear interest based on a specified percentage of London interbank offered
quotations ("LIBOR"), in London, England, or, in the case of Bearer Securities,
in any Place of Payment.
"CEDEL, S.A." means Centrale de Livraison de Valeurs Mobilieres S.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 Indenture the Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
2
<PAGE>
"Company" means the corporation identified as the Company in the first
paragraph of this Indenture until a successor corporation shall succeed to and
be substituted for the Company pursuant to the provisions of Article Ten, and
thereafter shall mean such successor corporation.
"Company Order" means a written request or order signed in the name of
the Company by its Chairman of the Board, any Vice Chairman, its Chief Executive
Officer, its President, any Executive Vice President or any Senior Vice
President and its Treasurer, any Assistant Treasurer, its Secretary or any
Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Banking Assets" means all net assets owned directly
or indirectly by each Subsidiary that is a Bank as such net assets would be
reflected on a consolidated balance sheet of the Company prepared in accordance
with generally accepted accounting principles at the time.
"Constituent Bank" means any Subsidiary that is a Bank.
"Controlled Subsidiary" means any Subsidiary of which more than 80% of
the aggregate voting power of the outstanding shares of the Voting Stock at the
time is owned directly or indirectly by the Company or by one or more Controlled
Subsidiaries or by the Company and one or more Controlled Subsidiaries, after
giving effect to the issuance to any Person other than the Company or any
Controlled Subsidiary of Voting Stock of the Subsidiary issuable on exercise of
options, warrants or rights to subscribe for such Voting Stock or on conversion
of securities convertible into such Voting Stock.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Defaulted Interest" has the meaning specified in Section 2.09.
"Depositary", with respect to the Securities of any series issuable or
issued in the form of one or more Global Securities, means The Depository Trust
Company, New York, New York, or such other Person designated as Depositary by
the Company in the manner provided in Section 2.01, until a successor Depositary
shall have been appointed pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" means or includes each Person who is then
a Depositary hereunder, and if at any time there is more than one such Person,
"Depositary" as used with respect to the
3
<PAGE>
Global Securities of any such series means the Depositary with respect to the
Securities of that series.
"Euro-clear" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euro-clear System.
"Event of Default" means any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, designated in Section 5.01.
"Global Security" means a Security issued to evidence all or part of a
series of Securities in accordance with Section 2.03.
"Indenture" means this instrument as originally executed or, if
amended or supplemented as provided in this Indenture, as so amended or
supplemented.
"interest", when used with respect to an Original Issue Discount
Security that by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by the declaration of
acceleration, call for redemption, repayment at the option of the holder or
otherwise.
"Officers' Certificate", when used with respect to the Company, means
a certificate signed by the Chairman of the Board, any Vice Chairman, the Chief
Executive Officer, the President, any Executive Vice President or any Senior
Vice President and by the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company. Except as otherwise provided in this
Indenture, each such certificate shall include the statements provided for in
Section 16.05.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and who shall be
acceptable to the Trustee. Except as otherwise provided in this Indenture, each
such opinion shall include the statements provided for in Section 16.05.
4
<PAGE>
"Original Issue Discount Security" means any Security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 5.01.
The term "principal amount" or "aggregate principal amount", when used with
respect to Original Issue Discount Securities, has the meaning (or meanings)
specified in the manner contemplated by Section 2.01 for purposes of:
determining the amount due and payable in the event of an acceleration of
Maturity as provided in Section 5.01; the redemption provisions in Article
Eleven; determining whether the holders of the requisite principal amount of
Outstanding Securities of any series have given any request, demand,
authorization, direction, notice, consent or waiver under this Indenture; and
determining whether a quorum is present at a meeting of Securityholders.
"Outstanding", when used with reference to Securities of any series or
the related coupons, subject to the provisions of Section 7.04, means, as of any
particular time, all Securities of such series or any related coupons
authenticated and delivered by the Trustee pursuant to this Indenture, except:
(a) such Securities and coupons theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation;
(b) such Securities and coupons, or portions thereof, for the payment
or redemption of which money in the necessary amount shall have been
deposited in trust with the Trustee or with any Paying Agent (other than
the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent), provided that
if such Securities are to be redeemed prior to the Maturity thereof, notice
of such redemption shall have been provided as specified in Article Eleven,
or provision satisfactory to the Trustee shall have been made for mailing
such notice; and
(c) such Securities or coupons in lieu of or in substitution for
which other Securities or coupons shall have been authenticated and
delivered pursuant to the terms of Section 2.07, except to the extent that
a bona fide holder in due course of any such Securities shall have
presented proof satisfactory to the Trustee that such holder is a bona fide
holder in due course of any such Securities or coupons.
"Paying Agent", when used with respect to Securities of any series,
means any Person authorized by the Company to
5
<PAGE>
pay the principal of and any premium or interest on any Securities of that
series on behalf of the Company.
"Person" means a corporation, an association, a partnership, an
organization, a trust, an individual, a government or a political subdivision
thereof or a governmental agency.
"Place of Payment" has the meaning stated in Section 2.01(5).
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt that was evidenced by such
particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 2.07 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.
"Principal Constituent Bank" means BB&T-NC and, at any time, any other
Constituent Bank the total assets of which (as set forth in the most recent
statement of condition of such Constituent Bank) equal more than 30% of the
total assets of all Constituent Banks as determined from the most recent
statements of condition of the Constituent Banks.
"principal office of the Trustee" or any other similar term means the
principal office of the Trustee at which at any particular time its corporate
trust business shall be administered, which office, at the date of this
Indenture, is located at Two International Place, 4th Floor, Boston,
Massachusetts 02110.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" means any Security in the form of registered
securities established pursuant to Section 2.02, that is registered in the
Security Register.
"Regular Record Date", with respect to the interest payable on any
Interest Payment Date on the Securities of any series, means the date specified
for that purpose as contemplated by Section 2.01.
"Responsible Officer", when used with respect to the Trustee, means
any officer of the principal office of the Trustee, the Chairman or Vice
Chairman of its board of
6
<PAGE>
directors, the Chairman or Vice Chairman of the executive committee of the board
of directors, or any other officer of the Trustee to whom any corporate trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Security" or "Securities" has the meaning stated in the recitals of
this Indenture and means any Security or Securities, as the case may be,
authenticated and delivered pursuant to this Indenture. Whenever this Indenture
refers to any interest on or with respect to any Security that is represented by
a coupon, such reference to the Security also shall include reference to a
coupon.
"Security Register", when used with respect to a Registered Security,
has the meaning specified in Section 2.06(b).
"Securityholder", "holder of Securities", "holder" or other similar
term, when used with respect to a Registered Security, means any Person in whose
name at the time a particular Registered Security is registered on the Security
Register and, when used with respect to a Bearer Security or coupon, the bearer
thereof.
"Senior Indebtedness" means: (a) the principal of, 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 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; (c) indebtedness and
obligations of others of the kind described in clauses (a) and (b) for the
payment of which the Company is responsible or liable as guarantor or otherwise;
and (d) any deferral, renewal or extension of any Senior Indebtedness; provided,
however, that, in the case of both clauses (a) and (b), 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 shall not be Senior
Indebtedness for purposes of this Indenture.
7
<PAGE>
"Special Record Date" has the meaning specified in Section 2.09.
"Stated Maturity", when used with respect to any Security or any
payment of premium or any installment of interest thereon, means the date
specified in such Security or a coupon representing such installment of interest
as the fixed date on which the principal of such Security or such payment of
premium or such installment of interest is due and payable.
"Subsidiary" means any corporation of which a majority of the
aggregate voting power of the outstanding Voting Stock at the time shall be
owned by the Company or by the Company and one or more Subsidiaries or by one or
more Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as it was
in force at the date of execution of this Indenture, except as provided in
Section 9.03.
"Trustee" means the Person identified as the Trustee in the first
paragraph of this Indenture until a successor shall succeed to the trusts
created by this Indenture pursuant to the provisions of Article Six, and
thereafter shall mean such successor.
"United States" means the United States of America (including the
District of Columbia) and its possessions.
"Vice President", when used with respect to the Company or the
Trustee, means any such officer whether or not designated by a number or a word
or words added before or after such title.
"Voting Stock" of a corporation or other entity means stock of the
class or classes having general voting power in an election of the board of
directors, managers or trustees of such corporation or other entity
(irrespective of whether, at the time, stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
ARTICLE TWO
THE SECURITIES AND SECURITY FORMS
SECTION 2.01. Amount Unlimited; Issuable in Series. The aggregate
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principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited. Securities may be issued in one or more series.
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The terms and conditions listed below, as applicable, of any series of
Securities shall be established either in an indenture supplemental hereto or in
or pursuant to a resolution of the Board of Directors:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of all other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, other Securities of the
series pursuant to Section 2.05, 2.06, 2.07, 9.04 or 11.07);
(3) the date or dates on which the principal of the Securities of the
series is payable;
(4) the rate or rates (which may be fixed or variable) at which the
Securities of the series shall bear interest, if any, or the formula by
which interest shall be calculated by the Company or an agent designated
for such purpose, the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest shall be payable and the
Regular Record Date for the interest payable on any Registered Security on
any Interest Payment Date;
(5) the place or places, if any, in addition to those specified
herein, where the principal of and any premium or interest on Securities of
the series shall be payable (the "Place of Payment"), any Registered
Securities of the series may be surrendered for registration of transfer,
Securities of the series may be surrendered for exchange and notices and
demands to or upon the Company in respect of the Securities of the series
and this Indenture may be served and where notices to holders pursuant to
this Indenture will be published;
(6) the price or prices at which, the period or periods within which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof and the price or prices at
which, the period or periods within which and the
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other terms and conditions upon which Securities of the series shall be
redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation, which in the case of Securities of any series that are
repayable at the option of a holder thereof shall be set forth in the form
of such Security;
(8) whether Securities of the series are to be issuable as Registered
Securities, Bearer Securities or both, whether Securities of the series are
to be issuable with or without coupons or both and, in the case of Bearer
Securities, the date as of which such Bearer Securities shall be dated if
other than the date of original issuance of the first Security of such
series of like tenor and term to be issued;
(9) whether the Securities of the series shall be issued in whole or
in part in the form of a Global Security or Securities and, in such case,
the Depositary (if other than The Depository Trust Company) for such Global
Security or Securities and whether such global form shall be permanent or
temporary;
(10) if Securities of the series are to be issuable initially in the
form of one or more temporary Global Securities, the circumstances under
and the manner in which such temporary Global Securities can be exchanged
for definitive Securities of the series and whether such definitive
Securities will be Registered Securities, Bearer Securities or both and
will be in global form;
(11) the denominations in which Registered Securities of the series
shall be issuable, if other than denominations of $1,000 and any integral
multiple thereof, and the denominations in which Bearer Securities of such
series, if any, shall be issuable if other than the denomination of $5,000;
(12) any Event of Default or Acceleration Event with respect to the
Securities of such series, if not set forth herein or if different from
those set forth herein;
(13) the form of Securities of such series;
(14) the Person or Persons who shall be Security registrar for the
Securities of such series if other than as provided for in this Indenture,
and the place or places where the Security Register for such series shall
be maintained and the Person or Persons who will be the initial Paying
Agent or Agents, if other than as provided for in this Indenture;
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(15) if warrants for Securities of any series are to be issued, the
form in which the warrants shall be issued, the circumstances under and the
manner in which the warrants may be exercised, any obligation of the
Company concerning any Securities underlying the warrants and any other
terms or conditions regarding the warrants and any Securities underlying
the warrants; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any series and the coupons appertaining to Bearer
Securities of such series, if any, issued under this Indenture in all respects
shall be equally and ratably entitled to the benefits hereof with respect to
such series without preference, priority or distinction on account of actual
time or times of authentication and delivery or Maturity of the Securities of
such series. All Securities of the same series and the coupons appertaining to
Bearer Securities of such series, if any, shall be substantially identical
except as to denomination and except as may otherwise be provided either in an
indenture supplemental hereto or a resolution of the Board of Directors.
SECTION 2.02. Form of Securities and of Trustee's Certificate of
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Authentication. The Registered Securities, if any, and the Bearer Securities
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and related coupons, if any, of each series and the certificates of
authentication on the Securities shall be in substantially the form as shall be
established as provided in Section 2.01 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 any law or with any rules made pursuant thereto or with
any rules of any securities exchange or as may be determined consistently
herewith by the officers executing such Securities or coupons, as evidenced by
their execution of the Securities or coupons. If the form of Securities of any
series or coupons (including any Global Security) is established by action taken
pursuant to a resolution of the Board of Directors, a copy of an appropriate
record of such action shall be certified by the Secretary or any Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect as of the date of such certificate, and shall be
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 2.04(b) or the authentication and delivery of such
Securities.
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The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange, all as determined by the officers executing
such Securities or coupons, as evidenced by their execution of such Securities
or coupons.
The form of Trustee's certificate of authentication for all Securities
shall be as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities issued under the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By __________________________________
Authorized Signatory
SECTION 2.03. Securities in Global Form. (a) If Securities of a
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series are issuable in whole or in part in global form, as specified in the
manner contemplated by Section 2.01, then, notwithstanding the provisions of
clause (11) of Section 2.01 or Section 2.04, such Global Security shall
represent such of the Outstanding Securities of such series as shall be
specified therein and may provide that it shall represent the aggregate amount
of Outstanding Securities from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities represented thereby from time to time
may be reduced to reflect exchanges. Any endorsement of a Global Security to
reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby, shall be made in such manner and upon
instructions given by such Person or Persons as shall be specified in such
Global Security or in the Company Order to be delivered to the Trustee pursuant
to Section 2.04(b).
(b) The provisions of the last sentence of Section 2.05(b) shall
apply to any Securities represented by a Global Security if such Securities were
never issued and sold by the Company (whether because of failure of settlement
or otherwise) and the Company delivers to the Trustee the Global Security
together with written instructions with regard to the reduction in the principal
amount of Securities represented thereby, together with the written statement
contemplated by the last sentence of Section 2.05(b), notwithstanding the
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absence of delivery of such Securities as contemplated thereby.
(c) Global Securities may be issued in either registered or bearer
form and in either temporary or permanent form.
SECTION 2.04. Denomination, Authentication and Dating of Securities.
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(a) Securities of each series shall be issuable in such form and denominations
as shall be specified in the form of Security for such series approved or
established pursuant to Section 2.02. In the absence of any specification, as
provided in Section 2.01, with respect to the Securities of any series, the
Registered Securities of such series, if any, shall be issuable in denominations
of $1,000 and any integral multiple thereof and the Bearer Securities of such
series, if any, shall be issuable in the denomination of $5,000. Each
Registered Security shall be dated as of the date of its authentication. Each
Bearer Security shall be dated as of the date specified in the manner
contemplated by Section 2.01.
(b) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication. Except as otherwise
provided in this Article Two, the Trustee thereupon shall authenticate and
deliver such Securities in accordance with a Company Order; provided, however,
that in connection with its original issuance a Bearer Security may be delivered
only outside the United States and, except in the case of a temporary Global
Security, only if the Company or its agent shall have received from the Person
entitled to receive the Bearer Security a Bearer Security Tax Certificate and
only if the Company and the Trustee have no reason to know that such certificate
is false.
(c) To the extent authorized in or pursuant to a resolution of the
Board of Directors or established in an indenture supplemental hereto, such
Company Order may be electronically transmitted and may provide instructions as
to registration of holders, principal amounts, rates of interest, Stated
Maturities and other matters contemplated by such resolution of the Board of
Directors or supplemental indenture to be so instructed in respect thereof.
(d) In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and, subject to Section 6.01, shall be
fully protected in relying upon:
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(i) a copy of the resolution or resolutions of the Board of
Directors in or pursuant to which the terms and form of the Securities were
established, certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in
full force and effect as of the date of such certificate;
(ii) an executed supplemental indenture, if any;
(iii) an Officers' Certificate delivered in accordance with
Section 16.05; and
(iv) an Opinion of Counsel which shall state:
(A) that the form of such Securities and coupons, if any,
has been established by a supplemental indenture or by or pursuant to
a resolution of the Board of Directors in accordance with Sections
2.01 and 2.02 and in conformity with the provisions of this Indenture;
(B) that the terms of such Securities and coupons, if any,
have been established in accordance with Section 2.01 and in
conformity with the other provisions of this Indenture;
(C) that such Securities, when authenticated and delivered
by the Trustee and issued (with coupons attached, if applicable) by
the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization and moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(D) that all conditions precedent, if any, provided for in
this Indenture have been complied with; and
(E) that the execution and delivery by the Company of such
Securities and coupons, if any, do not conflict with any law,
administrative regulation or court decree known by legal counsel
furnishing the Opinion of Counsel to be applicable to the Company.
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(e) If the Company shall establish pursuant to Section 2.01 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Global Securities, then the Company shall execute and the Trustee, in
accordance with this Section 2.04 and the Company Order with respect to such
series, shall authenticate and deliver one or more Global Securities in
permanent or temporary form that (i) shall represent and shall be denominated in
an aggregate amount equal to the aggregate principal amount of the Outstanding
Securities of such series to be represented by one or more Global Securities,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary and (iii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instruction.
(f) The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section 2.04 if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith by its board of directors or trustees, executive committee or a
trust committee of directors or trustees or vice presidents shall determine that
such action would expose the Trustee to personal liability to existing holders.
(g) Notwithstanding any contrary provision herein, if all Securities
of a series are not to be originally issued at one time, it shall not be
necessary for the Company to deliver to the Trustee a Company Order, Officers'
Certificate, resolution of the Board of Directors, supplemental indenture or
Opinion of Counsel otherwise required pursuant to Section 2.04(b) or Section
2.04(d) at or prior to the time of authentication of each Security of such
series if such documents are delivered to the Trustee or its agent at or prior
to the authentication upon original issuance of the first Security of such
series to be issued. In such event, any subsequent request by the Company to
the Trustee to authenticate Securities of such series upon original issuance
shall constitute a representation and warranty by the Company that, as of the
date of such request, the statements made in the Officers' Certificate or other
certificates delivered pursuant to Section 2.04(d) shall be true and correct as
if made on such date. A Company Order, Officers' Certificate, resolution of the
Board of Directors or supplemental indenture delivered by the Company to the
Trustee in the circumstances set forth in this Section 2.04(g) may provide that
Securities that are the subject thereof will be authenticated and delivered by
the Trustee or its agent on original issue from time to time in the aggregate
principal amount established for such series pursuant to such procedures
acceptable to the Trustee as may be specified from time to time by Company Order
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upon the telephonic, electronic or written order of persons designated in such
Company Order, supplemental indenture or resolution of the Board of Directors
(any such telephonic or electronic instructions to be promptly confirmed in
writing by such persons) and that such persons are authorized to determine,
consistent with such Company Order, supplemental indenture or resolution of the
Board of Directors, such terms and conditions of said Securities as are
specified in such Company Order, supplemental indenture or resolution of the
Board of Directors.
(h) Each Depositary designated pursuant to clause (9) of Section 2.01
for a Global Security in registered form, at the time of its designation and at
all times while it serves as Depositary, shall be a clearing agency registered
under the Securities Exchange Act of 1934 and any other applicable statute or
regulation.
SECTION 2.05. Execution of Securities. (a) The Securities and the
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related coupons shall be signed in the name and on behalf of the Company by the
manual or facsimile signature of its Chairman of the Board, its Chief Executive
Officer or its President or, in lieu thereof, of any Senior Vice President or
its Treasurer and attested by its Secretary, under its corporate seal (which may
be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). For the purpose of any such signature or attestation, the Company
may adopt and use the facsimile signature of any person who has been or is or
shall be such officer.
(b) No Security or appurtenant coupon shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose unless such
security bears thereon a certificate of authentication substantially in the form
set forth in Section 2.02, manually executed by an authorized signatory of the
Trustee. Such certificate by the Trustee upon any Security executed by the
Company shall be conclusive evidence that the Security so authenticated has been
duly authenticated and delivered under this Indenture. Except as permitted by
Section 2.07, the Trustee shall not authenticate and deliver any Bearer Security
unless all appurtenant coupons for interest then matured have been detached and
cancelled. Notwithstanding the foregoing, if any Security or portions thereof
shall have been duly authenticated and delivered hereunder but never issued and
sold by the Company (whether because of failure of settlement or otherwise), and
the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 2.10 together with a written statement stating that such
Security or portion thereof has never been issued and sold by the Company, for
all purposes of this Indenture such Security shall be deemed never
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to have been authenticated and delivered hereunder and shall not be entitled to
the benefits of this Indenture.
(c) In case any officer of the Company whose manual or facsimile
signature appears on any of the Securities or coupons shall cease to be such
officer before the Securities or coupons so signed shall have been authenticated
and delivered by the Trustee, or disposed of by the Company, such Securities or
coupons nevertheless may be authenticated and delivered or disposed of as though
the person whose manual or facsimile signature appears on such Securities or
coupons had not ceased to be such officer of the Company; and any Security or
coupon may bear the manual or facsimile signature on behalf of the Company by
such persons as, at the actual date of the execution of such Security or coupon,
shall be the proper officers of the Company, although at the date of the
execution of this Indenture any such person was not such an officer.
SECTION 2.06. Exchange and Registration of Transfer of Securities.
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(a) Registered Securities of any series may be exchanged for a like aggregate
principal amount of Registered Securities of other authorized denominations and
of like tenor and terms of the same series. Registered Securities to be
exchanged shall be surrendered at the office or agency to be maintained by the
Company pursuant to Section 4.02 in each Place of Payment for such series of
Registered Securities, and the Company shall execute and cause to be registered,
and the Trustee shall authenticate and deliver in exchange therefor, the
Registered Security or Securities which the Securityholder making the exchange
shall be entitled to receive.
(b) For each series of Registered Securities, the Company shall cause
to be kept in at least one such office or agency a Security register (the
"Security Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for registration of Registered Securities
and registration of transfer of Registered Securities as provided in this
Article Two. Each such Security Register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time. At all reasonable times such Security Registers shall be open for
inspection by the Trustee. Upon due presentment for registration of transfer of
any Registered Security of any series at any such office or agency, the Company
shall execute and register and the Trustee shall authenticate and deliver in the
name of the transferee or transferees a new Registered Security or Securities of
the same series and of like tenor and terms for an equal aggregate principal
amount. Unless otherwise provided (pursuant to Section 2.01 or otherwise), the
Company initially appoints BB&T-NC, at the office of BB&T-NC, 223 West Nash
Street, Wilson, North Carolina,
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as a Security registrar for each series of Registered Securities.
(c) All Registered Securities presented for registration of transfer
or for exchange or payment, if so required by the Company or the Trustee, shall
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the holder or his attorney duly authorized in writing.
(d) To the extent specified in the manner provided by Section 2.01,
Registered Securities or Bearer Securities of any series may be issued in
exchange for Bearer Securities (except as otherwise specified in the manner
contemplated by Section 2.01 with respect to a Bearer Security in global form)
of the same series, of any authorized denomination and of like tenor and terms
and aggregate principal amount, upon surrender of the Bearer Securities to be
exchanged at any office or agency specified in the manner provided by Section
2.01, with all unmatured coupons and all unpaid matured coupons thereto
appertaining. If the holder of a Bearer Security is unable to produce any such
unmatured coupon or coupons or unpaid matured coupon or coupons, such exchange
may be effected if the Bearer Securities are accompanied by payment in funds
acceptable to the Company and the Trustee in an amount equal to the amount
represented by such missing coupon or coupons, or the surrender of such missing
coupon or coupons may be waived by the Company and the Trustee if there is
furnished to them such security or indemnity as they may require to hold
harmless each of them and any Paying Agent. If thereafter the holder of such
Security shall surrender to any Paying Agent any such missing coupon in respect
of which such payment shall have been made, such holder shall be entitled to
receive the amount of such payment; provided, however, that, except as otherwise
provided in Section 4.02, interest represented by coupons shall be payable only
upon presentation and surrender of those coupons at an office or agency located
outside the United States. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the holder making the exchange is entitled to
receive.
(e) If at any time the Depositary for the Global Securities of a
series notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Securities of such series or if at any time the
Depositary for the Registered Securities of such series shall no longer be
eligible under Section 2.03 because it no longer is a clearing agency registered
under the Securities Exchange Act of 1934 and any other applicable statute or
regulation, the Company shall appoint a successor Depositary with respect to the
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Global Securities of such series. If a successor Depositary for the Global
Securities of such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such ineligibility, the
Company's election pursuant to Section 2.01(9) shall no longer be effective with
respect to the Securities of such series and the Company will execute, and the
Trustee, upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver Securities
of such series in definitive form in an aggregate principal amount equal to the
principal amount of the Global Security or Securities representing such series
in exchange for such Global Security or Securities.
(f) The Company at any time and in its sole discretion may determine
that the Securities of any series issued in the form of one or more Global
Securities shall no longer be represented by such Global Security or Securities.
In such event the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver, Securities of such series in
definitive form and in an aggregate principal amount equal to the principal
amount of the Global Security or Securities representing such series in exchange
for such Global Security or Securities.
(g) If specified by the Company pursuant to Section 2.01 with respect
to a series of Securities, the Depositary for such series of Securities may
surrender a Global Security for such series of Securities in exchange in whole
or in part for Securities of such series of like tenor and terms and in
definitive form on such terms as are acceptable to the Company and such
Depositary. Thereupon the Company shall execute, and the Trustee shall
authenticate and deliver:
(i) to each Person specified by such Depositary a new Security
or new Securities of the same series, of like tenor and terms and of any
authorized denomination as requested by such Person in aggregate principal
amount equal to and in exchange for such Person's beneficial interest in
the Global Security; and
(ii) to such Depositary a new Global Security of like tenor and
terms and in a denomination equal to the difference, if any, between the
principal amount of the surrendered Global Security and the aggregate
principal amount of Securities delivered to holders thereof.
(h) In any exchange provided for in Section 2.06(e), Section 2.06(f)
or Section 2.06(g), the
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Company will execute and the Trustee will authenticate and deliver Securities
(i) in definitive registered form in authorized denominations, if the Securities
of such series are issuable as Registered Securities, (ii) in definitive bearer
form in authorized denominations, with unmatured coupons attached, if the
Securities of such series are issuable as Bearer Securities or (iii) as either
Registered or Bearer Securities, if the Securities of such series are issuable
in either form; provided, however, that (A) no definitive Bearer Security shall
be delivered in exchange for a temporary Global Security unless the Company or
its agent shall have received from the person entitled to receive the definitive
Bearer Security a Bearer Security Tax Certificate, (B) delivery of a Bearer
Security shall occur only outside the United States and (C) no definitive Bearer
Security will be issued if the Company or the Trustee has reason to know that
such certificate is false.
(i) Upon the exchange of all of a Global Security for Securities in
certificated form, such Global Security shall be cancelled by the Trustee. The
exchange of any portion of a Global Security for Securities in certificated form
shall be subject to Section 2.03(a). Registered Securities issued in exchange
for all or part of a Global Security shall be registered in such names and in
such authorized denominations as the Depositary for such Global Security,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Registered
Securities to the persons in whose names such Securities are so registered. The
Trustee shall deliver Bearer Securities issued in exchange for all or part of a
Global Security to the persons, and in such authorized denominations, as the
Depositary for such Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee; provided,
however, that (A) no definitive Bearer Security shall be delivered in exchange
for all or part of a temporary Global Security unless the Company or its agent
shall have received from the person entitled to receive the definitive Bearer
Security a Bearer Security Tax Certificate, (B) delivery of a Bearer Security
shall occur only outside the United States and (C) no definitive Bearer Security
will be issued if the Company or the Trustee has reason to know that any such
certificate is false.
(j) No service charge shall be made to a holder for any exchange or
registration of transfer 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 such exchange or registration of transfer.
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(k) The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any particular series during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Securities of such series selected for redemption under
Section 11.03 and ending at the close of business on the day of such mailing,
(ii) to register the transfer of or exchange any Registered Security so selected
for redemption in whole or in part, except the unredeemed portion of any
Registered Security being redeemed in part or (iii) to exchange any Bearer
Security so selected for redemption except that such a Bearer Security may be
exchanged for a Registered Security of that series, provided that such
Registered Security shall be surrendered immediately for redemption with written
instruction for payment consistent with the provisions of this Indenture.
(l) Notwithstanding anything herein to the contrary: the exchange of
Bearer Securities for Registered Securities shall be subject to applicable laws
and regulations in effect at the time of exchange; and neither the Company nor
the Trustee or any Security registrar shall exchange any Bearer Securities into
Registered Securities if it has received an Opinion of Counsel that as a result
of such exchanges the Company could suffer adverse consequences under the United
States Federal income tax laws and regulations then in effect and the Company
has delivered to the Trustee a Company Order directing the Trustee not to make
such exchanges thereafter unless and until the Trustee receives a subsequent
Company Order to the contrary. The Company shall deliver copies of such Company
Order to the Security registrar.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities. (a)
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In case any temporary or definitive Security of any series or any related coupon
shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request and in the absence of notice to the
Company and the Trustee that such Security or coupon has been acquired by a bona
fide purchaser, the Trustee shall authenticate and deliver a new Security of the
same series or related coupon, of equal aggregate principal amount and of like
tenor and terms bearing a number not contemporaneously outstanding, in exchange
and substitution for the mutilated Security or coupon, or in lieu of and in
substitution for the Security or coupon so destroyed, lost or stolen. In every
case the applicant for a substituted Security or coupon shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to hold each of them harmless, and, in every case of destruction, loss or theft,
the applicant also shall furnish to the Company and to the Trustee evidence to
their satisfaction of the destruction,
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loss or theft of such security or coupon and of the ownership of such Security
or coupon.
(b) The Trustee may authenticate any such substitute Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substitute Security or coupon, 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
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Security or coupon which has matured or is about to
mature shall become mutilated or be destroyed, lost or stolen, the Company,
instead of issuing a substitute Security or coupon, may pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Security or coupon) if the applicant for such payment shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to hold each of them harmless and, in the case of destruction, loss or theft,
evidence satisfactory to the Company and the Trustee of the destruction, loss or
theft of such Security or coupon and of the ownership of such Security or
coupon.
(c) Every substitute Security or coupon issued pursuant to the
provisions of this Section 2.07 by virtue of the fact that any Security or
coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
or coupon shall be found at any time, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
or coupons of the relevant series duly issued under this Indenture. All
Securities or coupons shall be held and owned by the holders upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities without
their surrender.
(d) Notwithstanding the foregoing, the payment of principal of and
any premium and interest on Bearer Securities, except as otherwise provided in
Section 4.02, shall be payable only at an office or an agency located outside of
the United States, and, with respect to any coupons, interest represented
thereby shall be payable only upon presentation and surrender of such coupons.
22
<PAGE>
SECTION 2.08. Temporary Securities. (a) Pending the preparation
--------------------
of definitive Securities of any series, the Company may execute and the Trustee
shall authenticate and deliver temporary Securities (printed or lithographed).
Temporary Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Securities of such series (and of
like tenor and terms) in lieu of which they are issued in registered form or, if
authorized, in bearer form with one or more coupons or without coupons, but with
such omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Company. In the case of Securities
of any series issuable as Bearer Securities, such temporary Securities may be in
global form, representing all or any part of the Outstanding Securities of such
series.
(b) Unless otherwise provided pursuant to Section 2.01:
(i) Except in the case of temporary Securities in global form,
every such temporary Security shall be authenticated by the Trustee in
substantially the same manner, and with the same effect, as the definitive
Securities. Without unreasonable delay the Company will execute and
deliver to the Trustee definitive Securities of such series and thereupon
any or all temporary Securities of such series (accompanied, if applicable,
by all unmatured coupons and all unpaid matured coupons appertaining
thereto) may be surrendered in exchange therefor at the principal office of
the Trustee, and the Trustee shall authenticate and deliver in exchange for
such temporary Securities an equal aggregate principal amount of definitive
Securities of such series of authorized denominations. Such exchange shall
be made at the Company's expense and without any charge to the holder.
Until so exchanged, the temporary Securities of any series in all respects
shall be entitled to the same benefits under this Indenture as definitive
Securities of such series authenticated and delivered under this Indenture.
Notwithstanding the foregoing, no Bearer Security shall be delivered in
exchange for a Registered Security, and a Bearer Security shall be
delivered in exchange for a Bearer Security only in compliance with the
conditions set forth in Section 2.06.
(ii) If Securities of any series are issued in temporary global
form, any such temporary Global Security, unless otherwise provided
pursuant to Section 2.01, shall be delivered to the Depositary for the
benefit of Euro-clear and CEDEL S.A. for credit to
23
<PAGE>
the respective accounts of the beneficial owners of such Securities or to
such other accounts as they may direct.
(iii) Any such temporary Global Security shall be exchangeable, on
the terms and in the manner set forth therein, in whole or in part, for an
equal aggregate principal amount of definitive Securities of the same
series of authorized denominations and of like tenor and terms as the
portions of such temporary Global Security to be exchanged. Any definitive
Bearer Security shall be delivered in exchange for a portion of a temporary
Global Security only upon receipt by the Trustee from the Person entitled
to receive such definitive Bearer Security of a Bearer Security Tax
Certificate.
(iv) Until exchanged in full as hereinabove provided, the
temporary Securities of any series shall be entitled in all respects to the
same benefits under this Indenture as definitive Securities of the same
series and of like tenor and terms authenticated and delivered hereunder,
except that any interest payable with respect to a temporary Global
Security will be paid as specified therein.
SECTION 2.09. Payment of Interest; Interest Rights. Interest on any
------------------------------------
Registered Security which 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
Registered Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest. In case a Bearer
Security of any series is surrendered in exchange for a Registered Security of
such series after the close of business (at an office or agency in a Place of
Payment for such series) on any Regular Record Date and before the opening of
business (at such office or agency) on the next succeeding Interest Payment
Date, such Bearer Security shall be surrendered without the coupon relating to
such Interest Payment Date and interest will not be payable on such Interest
Payment Date in respect of the Registered Security issued in exchange for such
Bearer Security, but will be payable only to the holder of such coupon when due
in accordance with the provisions of this Indenture. Payment of interest on any
Registered Security may be made as provided in Section 3.02. Except as otherwise
provided in the terms of any particular series pursuant to Section 2.01.
interest will be calculated on the basis of a year consisting of twelve 30-day
months.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date ("Defaulted Interest")
forthwith shall cease to be payable to the holder on the relevant Regular Record
Date
24
<PAGE>
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 (i) or (ii)
below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
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 provided in this clause (i). Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 nor fewer than ten days prior to the date of the
proposed payment and not fewer than ten days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee promptly shall
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 at his address as it appears in the
Security Register, not fewer than ten days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been given as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to the following clause
(ii).
(ii) The Company may make payment of any Defaulted Interest on
any such Security in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of that
series may be listed, and upon such notice as may be required by any such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause (ii), such manner of payment shall
be deemed practicable by the Trustee.
25
<PAGE>
Subject to the foregoing provisions of this Section 2.09, each
Security of any series delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security of such series
shall carry the rights to interest accrued and unpaid, and to accrue, that were
carried by such other Security.
Subject to the limitations set forth in Section 4.02, the holder of
any coupon appertaining to a Bearer Security shall be entitled to receive the
interest payable on such coupon upon presentation and surrender of such coupon
on or after the Interest Payment Date of such coupon at an office or agency
maintained for such purpose pursuant to Section 4.02.
SECTION 2.10. Cancellation of Securities Paid, etc. All Securities
------------------------------------
and coupons surrendered for the purpose of payment, exchange or registration of
transfer, if surrendered to the Company or any Paying Agent or any Security
registrar, shall be delivered to the Trustee and promptly cancelled by the
Trustee, or, if surrendered to the Trustee, promptly shall be cancelled by it;
and no Securities or coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Trustee may destroy
cancelled Securities or coupons and will deliver a certificate of such
destruction to the Company.
ARTICLE THREE
SUBORDINATION OF SECURITIES
SECTION 3.01. Agreement of Securityholders That Securities
--------------------------------------------
Subordinated to Extent Provided. The Company, for itself and its successors
- -------------------------------
and assigns, covenants and agrees and each holder of Securities and any related
coupons by such holders acceptance of a Security or coupon likewise covenants
and agrees that, subject to the provisions of Article Fourteen, the payment of
the principal of and any premium and interest on any and all Securities and
coupons is expressly subordinated hereby, to the extent and in the manner set
forth in this Article Three, to the prior payment in full of all Senior
Indebtedness. The provisions of this Article Three shall constitute a
continuing offer to all persons who, in reliance upon such provisions, become
holders of, or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness, and such holders are
hereby made obligees under this Article Three as if their names were written in
this Article Three as such, and they and each of them may proceed to enforce the
provisions of this Article Three.
26
<PAGE>
SECTION 3.02. Company Not to Make Payments with Respect to Securities
-------------------------------------------------------
in Certain Circumstances. (a) If payment of the Securities is accelerated
- ------------------------
because of an Acceleration Event, the Company promptly shall notify holders of
Senior Indebtedness of the acceleration.
(b) The Company may not pay principal of or any premium or interest
on the Securities and may not acquire any Securities for cash or property other
than capital stock of the Company if:
(1) a default on Senior Indebtedness occurs and is continuing
that permits holders of such Senior Indebtedness to accelerate its
maturity; and
(2) such default is the subject of judicial proceedings or the
Company receives written notice of such default from a representative of
the holders of such Senior Indebtedness. If the Company receives any such
notice, a similar notice received within 360 days thereafter relating to
the same default on the same issue of Senior Indebtedness shall not be
effective for purposes of this Section 3.02(b).
The Company may resume payments on the Securities and may acquire them
when:
(i) such default is cured or waived or shall have ceased to
exist or the Senior Indebtedness to which such default relates shall have
been paid in full in cash or cash equivalent; or
(ii) if such default is not the subject of judicial proceedings,
120 days pass after such written notice is received by the Company, but
only if this Article Three does not otherwise prohibit such payment or
acquisition at that time.
(c) In the event that notwithstanding the provisions of this Section
3.02 the Company shall make any payment to the Trustee on account of the
principal of or any premium or interest on the Securities prohibited by Section
3.02(b), then, unless and until such payment is thereafter permitted under
Section 3.02(b), such payment shall be held by the Trustee in trust for the
benefit of, and shall be paid forthwith over and delivered to, the holders of
Senior Indebtedness (pro rata as to each of such holders on the basis of the
respective amounts of Senior Indebtedness held by them) or their representative
or the trustee under the indenture or other agreement (if any) pursuant to which
any instruments evidencing any Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the
27
<PAGE>
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with the terms of such Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness.
(d) The provisions of this Section 3.02 shall not apply to any
payment with respect to which Section 3.03 shall apply.
SECTION 3.03. Securities Subordinated to Prior Payment of All Senior
------------------------------------------------------
Indebtedness on Dissolution, Liquidation or Reorganization of Company. Upon
- ---------------------------------------------------------------------
any distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy, insolvency
or receivership proceedings or upon an assignment for the benefit of creditors
or otherwise):
(a) The holders of all Senior Indebtedness first shall be entitled to
receive payment in full of the principal of and any premium and interest
due on Senior Indebtedness before the holders of the Securities are
entitled to receive any payment on account of the principal of or any
premium or interest on the Securities (other than payment in shares of
stock of the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of reorganization
or readjustment, which stock and securities are subordinated to the payment
of all Senior Indebtedness and securities received in lieu thereof that at
the time may be outstanding, except to the extent that such stock and
securities received in lieu of Senior Indebtedness by their terms are
expressly not superior in right of payment to the Securities).
(b) Any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than shares of
stock of the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of reorganization
or readjustment, which stock and securities are subordinated to the payment
of all Senior Indebtedness and securities received in lieu thereof which
may at the time be outstanding except to the extent that such stock and
securities received in lieu of Senior Indebtedness by their terms are
expressly not superior in right of payment to the Securities), to which the
holders of the Securities and any related coupons would be entitled except
for the provisions of this Section 3.03, shall be paid by the liquidating
28
<PAGE>
trustee or agent or other person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or other
trustee or agent, directly to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, to the extent necessary to make payment
in full of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution or provision for such Senior
Indebtedness to the holders of such Senior Indebtedness.
(c) In the event that notwithstanding the foregoing provisions of
this Section 3.03, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
shares of stock of the Company as reorganized or readjusted, or securities
of the Company or any other corporation provided for by a plan of
reorganization or readjustment, which stock and securities are subordinated
to the payment of all Senior Indebtedness and securities received in lieu
thereof that at the time may be outstanding, except to the extent that such
stock and securities received in lieu of Senior Indebtedness by their terms
are expressly not superior in right of payment of the Securities), shall be
received by the Trustee or the holders of the Securities on account of
principal or any premium or interest on the Securities before all Senior
Indebtedness is paid in full, or effective provision made for its payment,
such payment or distribution (subject to the provisions of Section 3.06 and
Section 3.07) shall be received and held in trust for and shall be paid
over to the holders of the Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, for
application to the payment of such Senior Indebtedness until all such
Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution or provision for such Senior
Indebtedness to the holders of such Senior Indebtedness.
(d) The consolidation of the Company with, or the merger of the
Company into, another Person or the dissolution, winding up, liquidation or
reorganization of the Company following the conveyance, transfer or lease
of its properties and assets substantially as an entirety to another Person
upon the terms and conditions set forth in Article Ten shall not be deemed
a dissolution, winding up, liquidation or reorganization of the Company for
the purposes of this Section 3.03 if the Person formed by
29
<PAGE>
such consolidation or into which the Company is merged or the Person that
acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, as a part of such
consolidation, merger, conveyance, transfer or lease, shall comply with the
conditions set forth in Article Ten.
SECTION 3.04. Securityholders to Be Subrogated to Rights of Holders
-----------------------------------------------------
of Senior Indebtedness. Subject to the payment in full of all Senior
- ----------------------
Indebtedness, the holders of the Securities and any related coupons shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness until all amounts owing on the Securities shall be paid in full.
For the purpose of such subrogation, no payments or distributions to the holders
of the Senior Indebtedness (whether by or on behalf of the Company or by or on
behalf of the holders of the Securities or any related coupons) by virtue of
this Article Three that otherwise would have been made to the holders of the
Securities or coupons shall be deemed, as between the Company and the holders of
the Securities and coupons, to be payment by the Company to or on account of the
Senior Indebtedness.
SECTION 3.05. Obligation of the Company Unconditional, etc. The
--------------------------------------------
provisions of this Article Three are and are intended solely for the purpose of
defining the relative rights of the holders of the Securities and any related
coupons on the one hand and the holders of the Senior Indebtedness on the other
hand. Nothing contained in this Article Three or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company and the
holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Securities the principal of and any
premium and interest on the Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Securities or the coupons and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything in this Article Three or elsewhere in this Indenture prevent the
Trustee or the holder of any Security or coupon from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article Three of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy. Nothing contained in this Article Three
is intended to alter the rights between the holders of the Securities and any
related coupons and the Company's creditors other than the holders of the
Securities or coupons and the holders of Senior Indebtedness. Upon any payment
or distribution of assets of
30
<PAGE>
the Company referred to in this Article Three, the Trustee, subject to the
provisions of Section 6.01, and the holders of the Securities and any related
coupons shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the holders of the Securities and coupons, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of, the
amounts of, the amounts payable on, the amount or amounts paid or distributed on
and all other facts pertinent to the Senior Indebtedness and other indebtedness
of the Company and all other facts pertinent to this Article Three.
SECTION 3.06. Trustee Entitled to Assume Payments Not Prohibited in
-----------------------------------------------------
Absence of Notice. The Company shall give prompt written notice to a
- -----------------
Responsible Officer of the Trustee located at its principal office of any fact
known to the Company that would prohibit, pursuant to this Article Three, the
making of any payment to or by the Trustee with respect to the Securities or any
related coupons. Notwithstanding the provisions of Section 3.01 or Section 3.02
or any other provision of this Indenture, the Trustee shall not at any time be
charged with knowledge of the existence of any fact that would prohibit the
making of any payment of money to or by the Trustee, unless and until the
Trustee shall have received at the principal office of the Trustee written
notice of such facts from the Company or from one or more holders of Senior
Indebtedness or from any trustee for such holders; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section 6.01,
shall be entitled to assume that no such facts exist.
SECTION 3.07. Application by Trustee of Money Deposited with It.
-------------------------------------------------
Anything in this Indenture to the contrary notwithstanding, any deposit of money
by the Company with the Trustee (whether or not in trust) for the payment of the
principal of or any premium or interest on any Securities or coupons shall be
subject to the provisions of Sections 3.01, 3.02, 3.03 and 3.04 except that, if
not fewer than three Business Days prior to the date on which by the terms of
this Indenture any such money may become payable for any purpose (including
without limitation the payment of principal of or any premium or interest on any
Security and any amounts immediately due and payable upon the execution of any
instrument acknowledging satisfaction and discharge of this Indenture as
provided in Article Fourteen) the Trustee shall not have received with respect
to such money the notice provided for in Section 3.06, then, anything contained
in this Article Three to the contrary notwithstanding, the Trustee
31
<PAGE>
shall have full power and authority to receive such money and to apply the same
to the purpose for which it was received, and shall not be affected by any
notice to the contrary that may be received by it during such three Business Day
period.
SECTION 3.08. 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 under this Indenture, the term "Trustee" as used in
this Article Three shall be construed (unless the context otherwise requires) 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 Three in
addition to or in place of the Trustee.
SECTION 3.09. Subordination Rights Not Impaired by Acts or Omissions
------------------------------------------------------
of Company or Holders of Senior Indebtedness. No right of any present or
- --------------------------------------------
future holder of any Senior Indebtedness to enforce subordination as provided in
this Article Three shall be prejudiced or impaired at any time in any way 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 of such act, failure to act or noncompliance which any such holder may
have or otherwise be charged with.
SECTION 3.10. Securityholders Authorize Trustee to Effectuate
-----------------------------------------------
Subordination of Securities. Each holder of the Securities by his acceptance of
- ---------------------------
a Security authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article Three and appoints the Trustee his attorney-in-fact for
such purpose, including in the event of any dissolution, winding up, liquidation
or reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise), action tending towards liquidation of the business and assets of the
Company, the immediate filing of a claim for the unpaid balance of its or his
Securities in the form required in such proceedings and action causing such
claim to be approved. If the Trustee does not file a proper claim or proof of
debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then the holder or holders
of Senior Indebtedness hereby are authorized to and have the right to file an
appropriate claim for and on behalf of the holders of such Securities.
SECTION 3.11. Right of Trustee to Hold Senior Indebtedness. The
--------------------------------------------
Trustee shall be entitled to all the rights set forth in this Article Three in
respect of any Senior
32
<PAGE>
Indebtedness at any time held by it to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall be construed to deprive
the Trustee of any of its rights as such holder.
SECTION 3.12. Article Three Not to Prevent Events of Default. The
----------------------------------------------
failure to make a payment on account of principal or any premium or interest by
reason of any provision in this Article Three shall not be construed as
preventing the occurrence of an Event of Default under Section 5.01.
SECTION 3.13. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- ------------
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
Three or otherwise.
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Principal and Interest. The Company duly
---------------------------------
and punctually will pay or cause to be paid the principal of and any premium and
interest on the Securities of each series at the places, at the respective times
and in the manner provided in this Indenture and in the Securities. Any
interest due on Bearer Securities on or before Maturity shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 4.02. Offices for Notices and Payments, etc. So long as any
-------------------------------------
Securities of a series remain Outstanding, the Company will maintain in each
Place of Payment for such series of Securities an office or agency where the
Securities of that series (but, except as otherwise provided below, unless such
Place of Payment is located outside the United States, not Bearer Securities)
may be presented for payment, for registration of transfer and for exchange as
provided in this Indenture and where notices and demands to or upon the Company
in respect of the Securities or of this Indenture may be served. If Securities
of a series are issuable as Bearer Securities, the Company will maintain,
subject to any laws or regulations applicable thereto, an office or agency in a
Place of Payment for such series that is located outside the United States where
Securities of such
33
<PAGE>
series and the related coupons may be presented for payment. The Company will
give to the Trustee prompt written notice of the location of each such office or
agency and of any change of location thereof. In case the Company shall fail to
maintain any such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the principal office of the Trustee, and
the Company hereby initially appoints the Trustee its agent to receive all such
presentations and demands, except that Bearer Securities of that series and the
related coupons may be presented for payment at the place specified for that
purpose pursuant to Section 2.01(5). Unless otherwise provided pursuant to
Section 2.01, the Company hereby initially designates as the Place of Payment
for each series of Securities (other than Bearer Securities of that series and
the related coupons) Wilson, North Carolina and appoints BB&T-NC, at the office
of BB&T-NC, 223 West Nash Street, Wilson, North Carolina, as Paying Agent in
such city. Notwithstanding any other provisions to the contrary, the Company at
its option may make payment of principal and any premium and interest with
respect to any Registered Security by check mailed to the Person entitled
thereto, as such address appears on the Security Register, except that a holder
of $10,000,000 or more in aggregate principal amount of Securities of such
series and of like tenor and terms will be entitled to receive payments by wire
transfer of immediately available funds if appropriate wire transfer
instructions shall have been received in writing by the Trustee not later than
ten Business Days prior to the applicable payment date.
No payment of principal of or any premium or interest on Bearer
Securities shall be made at any office or agency of the Company in the United
States or by check mailed to any address in the United States or by transfer to
an account maintained with a bank located in the United States; provided,
however, that payment of principal of and any premium and interest on any Bearer
Security may be made at an office or agency of, and designated by, the Company
located in the United States if (but only if) payment of the full amount of such
principal, premium or interest at all offices outside the United States
maintained for the purpose by the Company in accordance with this Indenture is
illegal or effectively precluded by exchange controls or other similar
restrictions and the Trustee receives an Opinion of Counsel that such payment
within the United States is legal. Unless otherwise provided as contemplated by
Section 2.01 with respect to any series of Securities, at the option of the
holder of any Bearer Security or related coupon payment may be made by mailing a
check to an address outside the United States or by transfer to an account
maintained by the payee with a bank located outside the United States.
34
<PAGE>
The Company also from time to time may designate one more offices or
agencies (in or outside of such Place of Payment) where the Securities of one or
more series and any appurtenant coupons (subject to the preceding paragraph) may
be presented or surrendered for any and all such purposes, and from time to time
may rescind such designations. 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 4.03. Provisions as to Paying Agent. (a) The Company, with
-----------------------------
respect to the Securities of each series, prior to each due date of principal of
or any premium or interest on such Securities, will deposit with the Paying
Agent for such Securities a sum sufficient to pay the principal, premium or
interest so becoming due, such sum to be held in trust for the benefit of the
persons entitled to such principal, premium or interest. If the Company shall
appoint a Paying Agent other than the Trustee with respect to the Securities of
any series, the Company will notify the Trustee of its making, or failure to
make, any such payment; and the Company also shall cause any such Paying Agent
to execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 4.03, as
follows:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of or any premium or interest on such Securities
(whether such sums have been paid to it by the Company or by any other
obligor on such Securities) in trust for the benefit of the Persons
entitled thereto;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on such Securities) to make any payment of
the principal of or any premium or interest on such Securities when the
same shall be due and payable; and
(3) that it forthwith will pay to the Trustee, at any time
during the continuance of an Event of Default, upon the written request of
the Trustee, all sums so held by it as such agent.
(b) If the Company shall act as its own Paying Agent with respect to
the Securities of any series, on or before each due date of the principal of or
any premium or interest on the Securities of such series, it will set aside,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay such principal, premium or interest so becoming due and
will notify the Trustee of any failure to take such action and of any failure
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by the Company (or by any other obligor under such Securities) to make any
payment of the principal of or any premium or interest on such Securities when
the same shall become due and payable.
(c) Notwithstanding anything in this Section 4.03 to the contrary,
the Company, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture or for any other reason, may pay or by Company Order
direct any Paying Agent to pay to the Trustee all sums held in trust by the
Company or any Paying Agent under this Indenture, such sums to be held by the
Trustee upon the trusts contained in this Indenture.
(d) Notwithstanding anything in this Section 4.03 to the contrary,
the agreement to hold sums in trust as provided in this Section 4.03 is subject
to Section 14.03 and Section 14.04.
SECTION 4.04. Statement as to Compliance. The Company will deliver
--------------------------
to the Trustee, within 120 days after the end of each calendar year commencing
with the first calendar year following the issuance of Securities of any series
under this Indenture, a written certificate of the principal executive officer,
the principal financial officer or the principal accounting officer of the
Company, covering the period from the date of issuance of such Securities to the
end of the calendar year in which such Securities were issued, in the case of
the first such certificate, and covering the preceding calendar year, in the
case of each subsequent certificate, stating, as to each signer of such
certificate, that:
(1) a review of the activities of the Company during the year
and of performance under this Indenture has been made under his
supervision;
(2) to the best of his knowledge, based on such review, the
Company has fulfilled all its conditions and covenants under this Indenture
throughout such year, or, if there has been a default in the fulfillment of
any such condition or covenant, specifying each such default known to him
and the nature and status of such default; and
(3) such certificate sets forth as of the end of such year a
list of all Principal Constituent Banks.
SECTION 4.05. Notice of Defaults. The Company will deliver to the
------------------
Trustee within five days after the occurrence thereof written notice of any
event which with the giving of
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notice or the lapse of time or both would be an Event of Default under Section
5.01.
SECTION 4.06. Limitation on Certain Dispositions and on Merger and
----------------------------------------------------
Sale of Assets. Except as otherwise provided in Article Ten, the Company will
- --------------
not:
(a) sell, assign, transfer or otherwise dispose of any shares of, or
securities convertible into or options, warrants or rights to subscribe for
or purchase shares of, Voting Stock of a Principal Constituent Bank, and
will not permit a Principal Constituent Bank to issue any shares of, or
securities convertible into or options, warrants or rights to subscribe for
or purchase shares of, such Voting Stock if, in each case, after giving
effect to any such transaction, the Principal Constituent Bank would cease
to be a Controlled Subsidiary; or
(b) permit a Principal Constituent Bank to:
(i) merge or consolidate with any other corporation, unless
the surviving corporation is, or upon consummation of the merger or
consolidation will become, the Company or a Controlled Subsidiary; or
(ii) lease, sell or transfer all or substantially all its
properties and assets to any corporation or other Person, except to
the Company or a Controlled Subsidiary or a Person that, upon such
lease, sale or transfer, will become the Company or a Controlled
Subsidiary.
Notwithstanding the foregoing, any such sale, assignment, transfer or
other disposition of securities, any such merger or consolidation or any such
lease, sale or transfer of properties and assets shall not be prohibited if
required (i) by any law or any rule, regulation or order of any governmental
agency or authority or (ii) as a condition imposed by any law or any rule,
regulation or order of any governmental agency or authority with respect to the
acquisition by the Company or any Controlled Subsidiary, directly or indirectly,
through purchase of securities or assets, or a merger, consolidation or
otherwise, of any Person, provided that after giving effect to such acquisition
(A) such Person will be a Controlled Subsidiary, (B) the Consolidated Net
Banking Assets of the Company will be at least equal to the Consolidated Net
Banking Assets of the Company prior thereto and (C) BB&T-NC will be a Controlled
Subsidiary.
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SECTION 4.07. Limitation on Creation of Liens. So long as any of
-------------------------------
the Securities shall be outstanding, the Company will not create, assume, incur
or suffer to be created, assumed or incurred or to exist any pledge, encumbrance
or lien, as security for indebtedness for borrowed money, upon any shares of, or
securities convertible into or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of a Principal Constituent Bank now or
hereafter owned by the Company, directly or indirectly, if, treating such
pledge, encumbrance or lien as a transfer of the shares of, or securities
convertible into or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock subject thereto to the secured party, the Principal
Constituent Bank would not be a Controlled Subsidiary.
SECTION 4.08. Corporate Existence. Except as otherwise provided in
-------------------
Article Ten, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Securityholders.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT OR ACCELERATION EVENT
SECTION 5.01. Events of Default. "Event of Default", when used
-----------------
with respect to Securities of any series, means each of the following events
unless it is either inapplicable to a particular series or is specifically
deleted or modified in the supplemental indenture or resolution of the Board of
Directors under which such series of Securities is issued or in the form of
Security for such series:
(a) default in the payment of any installment of interest upon any of
the Securities of that series as and when the same shall become due and
payable, and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of or any premium on any
of the Securities of that series as and when the same shall become due and
payable at their Stated Maturity, upon redemption, by declaration or
otherwise;
38
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(c) default in the payment of any sinking fund installment or
analogous obligation as and when the same shall become due and payable by
the terms of the Securities of that series;
(d) a default or event of default as defined or designated in any
mortgage, indenture, loan agreement or instrument under which there may be
issued or borrowed, or by which there is secured or evidenced, any
indebtedness of the Company (other than Securities of such series or
indebtedness owed by the Company to any Subsidiary) or any Subsidiary
(other than indebtedness of any Subsidiary owing to the Company or to
another Subsidiary), whether such indebtedness now exists or shall be
created hereafter, shall happen and (i) not less than $1,000,000 of such
indebtedness shall be past due under such mortgage, indenture, loan
agreement or instrument or such default or event of default shall result in
not less than $1,000,000 of such indebtedness becoming or being declared
due and payable and (ii) such indebtedness or such declaration, as the case
may be, shall not have been discharged or rescinded or annulled within 15
days after the date on which written notice thereof is given to the Company
by the Trustee or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the Securities of that series then
Outstanding;
(e) a final judgment or judgments or order or orders for the payment
of money in excess of $1,000,000 shall be entered against the Company or
one or more Principal Constituent Banks and within 90 days after entry
thereof such judgment or judgments or order or orders shall not have been
discharged or the execution thereof stayed pending appeal or within 90 days
after the expiration of any such stay such judgment or judgments or order
or orders shall not have been discharged;
(f) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Securities of such series or in this Indenture (other than a covenant or
agreement a default in the performance of which or the breach of which
specifically is provided for elsewhere in this Section 5.01 or which
expressly has been included in this Indenture solely for the benefit of one
or more series of Securities other than such series), and continuance of
such failure for a period of 90 days after the date on which written notice
of such failure, requiring the Company to remedy the same, shall have been
given to the Company by the Trustee, or to the Company and the Trustee by
the holders of at least 25% in
39
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aggregate principal amount of the Securities of such series at the time
Outstanding;
(g) a court or governmental authority having jurisdiction in the
premises shall enter a decree or order for relief in respect of the Company
or a Principal Constituent Bank in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or a Principal
Constituent Bank or for any substantial part of its property, or ordering
the winding up or liquidation of its affairs and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(h) the Company or a Principal Constituent Bank shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of the
Company or a Principal Constituent Bank or for substantially all of its
property (other than the appointment of a conservator with repect to any
Constituent Bank insured by the Federal Deposit Insurance Corporation or
any successor agency), or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due
or shall take any corporate action in furtherance of any of the foregoing.
If an Acceleration Event with respect to the Securities of any series
at the time Outstanding occurs and is continuing, then and in each such case,
unless the principal of all the Securities of such series already shall have
become due and payable, either the Trustee or the holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding,
by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the principal amount of all the Securities of that
series to be due and payable immediately, and upon any such declaration the same
shall become and shall be immediately due and payable. This provision, however,
is subject to the condition that, at any time after such a declaration of
acceleration, and before any judgment or decree for the payment of the money due
shall have been obtained or entered as hereinafter provided, the holders of a
majority in aggregate principal amount of the Securities of such series
40
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then Outstanding, by written notice to the Company and to the Trustee, may waive
all defaults and rescind and annul such declaration and its consequences, if:
(1) the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay:
(A) all matured installments of interest on all the
Securities of that series and the principal of and any premium on any
and all Securities of that series that shall have become due otherwise
than by acceleration (with interest on overdue installments of
interest (to the extent that payment of such interest is enforceable
under applicable law) and on such principal and premium at the rate
borne by the Securities of that series, to the date of such payment or
deposit); and
(B) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(2) any and all defaults with respect to Securities of that
series under this Indenture, other than the nonpayment of principal of and
any premium and accrued interest on Securities that shall have become due
by acceleration, shall have been cured or waived as provided in Section
5.07.
No such waiver or rescission and annulment shall extend or shall
affect any subsequent default or shall impair any right consequent thereon.
In case the Trustee or any Securityholder shall have proceeded to
enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee or any
Securityholder, then and in every such case the Company, the Trustee and such
Securityholders, subject to any determination in such proceeding, shall be
restored respectively to their several positions and rights under this
Indenture, and all rights, remedies and powers of the Company, the Trustee and
such Securityholders shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit Therefor. (a)
-----------------------------------------------
Subject to the provisions of Article Three, in case default shall be made in the
payment of (i) any installment of interest upon any of the Securities as and
when the same shall become due and payable, and such default shall
41
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have continued for a period of 30 days, or (ii) the principal of or any premium
on any of the Securities as and when the same shall have become due and payable
whether at Maturity of the Securities, by declaration or otherwise, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Securities, the whole amount that then shall have become due
and payable on all such Securities for principal, premium or interest, or any
combination thereof, as the case may be, with interest upon the overdue
principal and premium and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of interest, at
the rate borne by the Securities; and, in addition, such further amount as shall
be sufficient to cover the costs and expenses of collection, including
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents, attorneys and counsel.
(b) In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor on the
Securities and coupons and collect in the manner provided by law out of the
property of the Company or any other obligor on the Securities and coupons,
wherever situated, the money adjudged or decreed to be payable.
(c) In case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Securities and
coupons under Title 11 of the United States Code or any other applicable law, or
in case a receiver or trustee shall have been appointed for the property of the
Company or such other obligor, or in the case of any other similar judicial
proceedings relative to the Company or other obligor on the Securities and
coupons, or to the creditors or property of the Company or such other obligor,
the Trustee, irrespective of whether the principal of the Securities shall then
be due and payable as expressed in the Securities or by declaration or otherwise
and irrespective of whether the Trustee shall have made any demand pursuant to
the provisions of this Section 5.02, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal and any premium and interest owing and
unpaid in respect of the Securities, and, in case of any judicial proceedings,
(i) to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the
42
<PAGE>
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Securities and
coupons, its or their creditors, or its or their property, and (ii) to collect
and receive any money or other property payable or deliverable on any such
claims, and to distribute the same after the deduction of its charges and
expenses; and any receiver, assignee or trustee in bankruptcy or reorganization
is hereby authorized by each of the Securityholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee any amount due
it for reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel and any other amounts due the Trustee under
Section 6.06. To the extent that such payment of reasonable compensation,
expenses and counsel fees out of the trust estate in any such proceedings shall
be denied for any reason, payment of the same shall be secured by a lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other property which the holders of the Securities and coupons may be
entitled to receive in such proceedings, whether in liquidation or under any
plan of reorganization or arrangement or otherwise.
(d) Nothing contained in this Section 5.02 shall be deemed to
authorize the Trustee to authorize or consent to or adopt on behalf of any
Securityholder any plan of reorganization or arrangement affecting the
Securities or related coupons or the rights of any Securityholder, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
(e) All rights of action and of asserting claims under this
Indenture, or under any of the Securities or related coupons, may be enforced by
the Trustee without the possession of any of the Securities or coupons, or the
production thereof in any trial or other proceeding relative thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, shall be for
the ratable benefit of the holders of the Securities and related coupons.
SECTION 5.03. Application of Money Collected by Trustee. Any money
-----------------------------------------
collected by the Trustee with respect to any series of Securities or related
coupons pursuant to Section 5.02 shall be applied, subject to the provisions of
Article Three, in the order following, at the date or dates
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fixed by the Trustee for the distribution of such money, upon presentation of
the several Securities of such series or coupons, or both, as the case may be,
and stamping thereon the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts then due the Trustee under
Section 6.06;
SECOND: In case the principal of the Outstanding Securities of that
series shall not have become due and be unpaid, to the payment of interest
on the Securities of that series in the order of the Maturity of the
installments of such interest, with interest (to the extent enforceable
under applicable law) upon the overdue installments of interest at the rate
borne by the Securities of that series, such payments to be made ratably to
the persons entitled thereto; and
THIRD: In case the principal of the Outstanding Securities of that
series shall have become due, by declaration or otherwise, to the payment
of the whole amount then owing and unpaid upon the Securities of that
series for principal and any premium and interest, with interest on the
overdue principal and any premium and (to the extent enforceable under
applicable law) upon overdue installments of interest at the rate borne by
the Securities of that series; and in case such money shall be insufficient
to pay in full the whole amounts so due and unpaid upon the Securities of
that series, then to the payment of such principal and any premium and
interest without preference or priority of principal over interest, or of
interest over principal or of any premium over principal or interest, or of
principal or interest over any premium or of any installment of interest
over any other installment of interest, or of any Security of that series
over any other Security of that series, or of any coupon related to a
Security of a series over any other coupon related to a Security of the
same series, ratably to the aggregate of such principal and any premium and
accrued and unpaid interest.
SECTION 5.04. Proceedings by Securityholders. No holder of any
------------------------------
Security of any series or any related coupon shall have any right to institute
any suit, action or proceeding in equity or at law upon or under or with respect
to this Indenture or for the appointment of a receiver or trustee, or for any
other remedy under this Indenture, unless such holder previously shall have
given to the Trustee written notice of default and of the continuance thereof,
as provided in Section 5.01, and unless also (i) the holders of not less than
25% in aggregate principal amount of the Securities of
44
<PAGE>
that series then Outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee under this
Indenture and shall have offered to the Trustee such reasonable indemnity as the
Trustee may require against the costs, expenses and liabilities to be incurred
in compliance with such request, (ii) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or refused
to institute any such action, suit or proceeding and (iii) 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, and
being expressly covenanted by each Person who acquires and holds a Security or
related coupon with every other such Person, that no one or more holders of
Securities shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other holder of such Securities or coupons, or to obtain or seek
to obtain priority over or preference to any other such holder, or to enforce
any right under this Indenture, except in the manner provided in this Section
5.04 and for the equal, ratable and common benefit of all holders of Securities
and coupons.
Notwithstanding any other provision of this Indenture, however, the
right of any holder of any Security to receive payment of the principal of and
any premium and interest on such Security on or after the respective Stated
Maturities, or to institute suit for the enforcement of any such payment on or
after such respective dates against the Company, shall not be impaired or
affected without the consent of such holder.
SECTION 5.05. Proceedings by Trustee. In case of an Event of
----------------------
Default under this Indenture, the Trustee in its discretion may proceed to
protect and enforce its rights and the rights of the Securityholders by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, either by suit in equity or by action at
law or by proceeding in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
proper remedy or legal or equitable right vested in the Trustee by this
Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing; Delay or Omission
-----------------------------------------------------
Not Waiver. All rights, powers and remedies conferred upon or reserved to the
- ----------
Trustee or to the Securityholders, to the extent permitted by law, shall be
deemed cumulative and not exclusive of any thereof or of any
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<PAGE>
other rights, powers and remedies available to the Trustee or the holders of the
Securities and related coupons, now or hereafter existing, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture; and no delay or omission
of the Trustee or of any holder of any of the Securities or related coupons to
exercise any such right, power or remedy shall impair any such right, power or
remedy, or shall be construed to be a waiver of any default or an acquiescence
in such default; and, subject to the provisions of Section 5.04, every power and
remedy conferred upon or reserved to the Trustee or to the Securityholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Securityholders. The assertion of any right, power or
remedy shall not prevent the concurrent assertion of any other right, power or
remedy.
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Securityholders. (a) The holders of a majority in aggregate
- ---------------------------
principal amount of the Securities of all series affected (voting as one class)
at the time Outstanding determined in accordance with Section 7.04 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; provided, however, that (i) such direction may not be in
conflict with law or this Indenture or expose the Trustee to personal liability
or be unduly prejudicial to the holders of the Securities and related coupons
not joining in the direction, and (ii) the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with this Indenture and
such direction.
(b) Prior to any declaration that the principal of the Outstanding
Securities of any series is due and payable, the holders of a majority in
aggregate principal amount of the Securities of that series at the time
Outstanding on behalf of the holders of all of the Securities of that series may
waive any past default or Event of Default or Acceleration Event under this
Indenture and its consequences except a default under a covenant in this
Indenture that, pursuant to Section 9.02, cannot be modified without the consent
of each holder of a Security of the series affected thereby. Upon any such
waiver, the Company, the Trustee and the holders of the Securities of that
series and the related coupons shall be restored to their former positions and
rights under this Indenture, respectively; but no such waiver shall extend to
any subsequent or other default or Event of Default or Acceleration Event or
impair any right consequent thereon. Whenever any default or Event of Default or
Acceleration Event under this Indenture shall have been waived as permitted by
this Section 5.07, such default or Event of Default or
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Acceleration Event, for all purposes of the Securities, the related coupons and
this Indenture, shall be deemed to have been cured and to be not continuing.
SECTION 5.08. Notices of Defaults. The Trustee, within 90 days
-------------------
after the occurrence of a default with respect to Securities of any series,
shall mail to all Securityholders of that series, at their addresses shown on
the Security Register, notice of all such defaults known to the Trustee, unless
such defaults shall have been cured or waived before the giving of such notice
(the term "default" for the purpose of this Section 5.08 being hereby defined to
mean any event which constitutes or after notice or lapse of time or both would
constitute an Event of Default); and provided that, except in the case of
default in the payment of the principal of or any premium or interest on any of
the Securities of that series or in the making of any sinking fund payment or
analogous obligation with respect to Securities of that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Securityholders of that
series.
SECTION 5.09. Undertaking to Pay Costs. All parties to this
------------------------
Indenture agree, and each holder of any Security or coupon by his acceptance
thereof shall be deemed to have agreed, that any court in its discretion may
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 in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant; provided, however, that the provisions of this Section 5.09 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Outstanding Securities of that series, or to any
suit instituted by any Securityholder for the enforcement of the payment of the
principal of or any premium or interest on any Security on or after the
respective Stated Maturities (or, in the case of redemption or repayment, on or
after the redemption date or repayment date).
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ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee. In case an
--------------------------------------
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, its own willful misconduct or any action or failure to act taken or
omitted by it in bad faith, except that:
(a) except during the continuance of an Event of Default:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee, the
Trustee conclusively may rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but, in the case of any such
certificates or opinions that by any provisions of this Indenture
specifically are required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the holders of
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not less than a majority in principal amount of the Securities of any
series at the time Outstanding (determined as provided in Section 7.04)
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Whether or not expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.01.
The provisions of this Section 6.01 are in furtherance of and subject
to Sections 315 and 316 of the Trust Indenture Act.
SECTION 6.02. Reliance on Documents, Opinions, etc. Subject to the
------------------------------------
applicable provisions of the Trust Indenture Act and in furtherance thereof and
subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or omitted by it under this Indenture in good faith and in
accordance with such Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, coupon or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books and records of the Company to the extent reasonably necessary to
verify such facts or matters; and
(g) the Trustee may execute any of the trusts or powers under this
Indenture or perform any duties under this Indenture either directly or by
or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it with due care under this Indenture.
SECTION 6.03. No Responsibility for Recitals, etc. The recitals
-----------------------------------
contained in this Indenture and in the Securities (except in the Trustee's
certificate of authentication) and in any coupons shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities or the coupons.
The Trustee shall not be accountable for the use or application by the Company
of any Securities or the proceeds of any Securities authenticated and delivered
by the Trustee.
SECTION 6.04. Trustee, Paying Agents or Registrar May Own Securities.
------------------------------------------------------
Subject to the applicable provisions of the Trust Indenture Act, the Trustee or
any Paying Agent or Security registrar, in its individual or any other capacity,
may become the owner or pledgee of Securities with the same
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rights it would have if it were not Trustee, Paying Agent or Security registrar.
SECTION 6.05. Money to Be Held in Trust. Subject to the provisions
-------------------------
of Section 14.03 and Section 14.04, all money received by the Trustee, until
used or applied as herein provided, shall be held in trust for the purposes for
which it was received. Money held by the Trustee need not be segregated from
other funds except as provided by law. The Trustee shall be under no liability
for interest on any money received by it under this Indenture, except as the
Company and the Trustee otherwise may agree.
SECTION 6.06. Compensation and Expenses of Trustee. The Company
------------------------------------
will pay to the Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation for all services rendered by it under this Indenture
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the reasonable expenses and disbursements of its counsel and of all persons
not regularly in its employ) except any such expense, disbursement or advance as
may be attributable to its negligence, bad faith or willful misconduct. The
Company also covenants to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence, bad faith
or willful misconduct on the part of the Trustee and arising out of or in
connection with the acceptance or administration of this trust, including the
reasonable costs and expenses of defending itself against any claim of liability
in connection with the exercise or performance of any of its powers under this
Indenture. The obligations of the Company under this Section 6.06 shall
constitute additional indebtedness under this Indenture.
SECTION 6.07. Officers' Certificate as Evidence. Subject to the
---------------------------------
provisions of Section 6.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action under this
Indenture, such matter (unless other evidence in respect thereof be herein
specifically prescribed), in the absence of negligence, bad faith or willful
misconduct on the part of the Trustee, may be deemed to be conclusively proved
and established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence, bad faith or willful
misconduct on the part of the Trustee, shall be full warrant to the Trustee for
any action
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taken or omitted by it under the provisions of this Indenture upon the faith of
such Officers' Certificate.
SECTION 6.08. Eligibility of Trustee. The Trustee under this
----------------------
Indenture shall at all times be a corporation organized and doing business under
the laws of the United States or any State thereof or of the District of
Columbia (or a corporation or other person permitted to act as Trustee by the
Commission) authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal, State or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.08, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.08, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.09. Neither the Company nor
any person directly or indirectly controlling, controlled by, or under common
control with the Company shall serve as Trustee under this Indenture.
SECTION 6.09. Resignation or Removal of Trustee. (a) The Trustee
---------------------------------
may resign at any time by giving written notice of such resignation to the
Company, by mailing notice of such resignation to the holders of Registered
Securities at their addresses as they shall appear on the Security Register,
and, if any Bearer Securities are Outstanding, by publishing notice of such
resignation in a newspaper of general circulation, in each place of payment for
such Bearer Securities, customarily published at least once a day for at least
five days in each calendar week.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act after written request therefor by
the Company or by any Securityholder who has been a bona fide holder of a
Security or Securities for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.08 and shall fail to resign after written
request therefor by the Company or by any such Securityholder, or
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(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or a public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee by written
instrument, executed by Company Order authorized by the Board of Directors, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee (with written notice of such removal mailed to the
holders of Registered Securities at their address as they shall appear on the
Security Register, and, if any Bearer Securities are Outstanding, by publishing
notice of such resignation in a newspaper of general circulation, in each place
of payment for such Bearer Securities, customarily published at least once a day
for at least five days in each calendar week), or, subject to the provisions of
Section 5.09, any Securityholder who has been a bona fide holder of a Security
or Securities for at least six months, on behalf of himself and all others
similarly situated, may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(c) 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, the
Company promptly shall appoint a successor Trustee by a Company Order authorized
by the Board of Directors, one copy of which instrument shall be delivered to
the retiring Trustee and one copy to the successor Trustee. If, within one year
after such resignation, removal or incapability or the occurrence of such
vacancy, a successor Trustee shall be appointed by the holders of a majority in
principal amount of the Securities (voting as a single class) at the time
Outstanding by instrument or instruments delivered to the Company and the
retiring Trustee, the successor Trustee so appointed, forthwith upon its
acceptance of such appointment, shall become the successor Trustee and supersede
the successor Trustee appointed by the Company. If no successor Trustee shall
have been so appointed by the Company or the Securityholders and accepted
appointment in the manner provided in Section 6.10 within 60 days after notice
of the resignation or removal of the Trustee is mailed to the Securityholders,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee, or any Securityholder who has been a bona
fide holder of a Security or Securities for at least six months, subject to the
provisions of Section 5.09, on behalf of himself and all others similarly
situated, may petition any
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court of competent jurisdiction for the appointment of a successor Trustee.
(d) The holders of a majority in aggregate principal amount of the
Securities (voting as a single class) at the time Outstanding at any time, upon
notice to the Trustee, may remove the Trustee.
(e) Any removal of the Trustee and appointment of a successor Trustee
pursuant to any of the provisions of this Section 6.09 shall become effective
upon acceptance of appointment by the successor Trustee as provided in Section
6.10. Any resignation of the Trustee shall become effective only upon the
appointment of a successor Trustee and upon the acceptance of appointment by the
successor Trustee as provided in Section 6.10.
SECTION 6.10. Acceptance by Successor Trustee. Any successor
-------------------------------
Trustee appointed as provided in Section 6.09 shall execute, acknowledge and
deliver to the Company and to its predecessor Trustee an instrument accepting
such appointment under this Indenture, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations of its predecessor under this Indenture,
with like effect as if originally named as Trustee in this Indenture; but,
nevertheless, on the written request of the Company or of the successor Trustee,
the Trustee ceasing to act, upon payment of any amounts then due it pursuant to
the provisions of Section 6.06, shall execute and deliver an instrument
transferring to such successor Trustee all the rights and powers of the Trustee
so ceasing to act and shall transfer, assign and deliver to such successor all
property and money held by such predecessor Trustee under this Indenture. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor Trustee all such rights and powers. Any Trustee ceasing to act
nevertheless shall retain a lien upon all property or funds held or collected by
such Trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.
No successor Trustee shall accept appointment as provided in this
Section 6.10 unless at the time of such acceptance such successor Trustee shall
be qualified under the provisions of Section 310(b) of the Trust Indenture Act
and eligible under the provisions of Section 6.08.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall
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mail notice of the succession of such Trustee under this Indenture to the
holders of Registered Securities at their addresses as they shall appear on the
Security Register, and, if any Bearer Securities are Outstanding, by publishing
notice of such resignation in a newspaper of general circulation, in each place
of payment for such Bearer Securities, customarily published at least once a day
for at least five days in each calendar week. If the Company fails to mail such
notice within ten days after acceptance of appointment by the successor Trustee,
the successor Trustee shall cause such notice to be mailed and, if necessary,
published at the expense of the Company.
SECTION 6.11. Succession by Merger, etc. Any corporation into which
-------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee (including the
trust created by this Indenture), shall be the successor Trustee under this
Indenture without the execution or filing of any paper or any further act on the
part of any of the parties to this Indenture provided such corporation shall be
qualified under the provisions of Section 310(b) of the Trust Indenture Act and
eligible under the provisions of Section 6.08.
In case at the time such successor Trustee shall succeed to the trusts
created by this Indenture any of the Securities shall have been authenticated
but not delivered, any such successor Trustee may adopt the certificate of
authentication of any predecessor Trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor Trustee may authenticate such Securities
either in the name of any predecessor Trustee under this Indenture or in the
name of the successor Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders. Whenever in this Indenture
-------------------------
it is provided that the holders of a specified percentage in aggregate principal
amount of the Securities of any or all series may take any action (including
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the making of any demand or request, the giving of any notice, consent or waiver
or the taking of any such other action), the fact that at the time of taking any
such action the holders of such specified percentage have joined in such action
may be evidenced (i) by any instrument or any number of instruments of similar
tenor executed by Securityholders in person or by agent or proxy appointed in
writing, (ii) by the record of the holders of Securities voting in favor of such
action at any meeting of Securityholders duly called and held in accordance with
the provisions of this Article Seven or (iii) by a combination of such
instrument or instruments and any such record of such a meeting of
Securityholders. The Company may set a record date for purposes of determining
the identity of holders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture, which record date shall be
the later of ten days prior to the first solicitation of such consent or the
date of the most recent list of holders furnished to the Trustee pursuant to the
provisions of Section 312(a) of the Trust Indenture Act prior to such
solicitation. If a record date is fixed, those persons who were holders of
Securities at such record date (or their duly designated proxies), and only
those persons, shall be entitled to take such action by vote or consents or to
revoke any vote or consent previously given, whether or not such persons
continue to be holders after such record date. No such vote or consent shall be
valid or effective if such vote occurs or such consent is obtained more than 120
days after such record date.
SECTION 7.02. Proof of Execution by Securityholders. (a) Subject
-------------------------------------
to the provisions of Sections 6.01, 6.02 and 8.05, proof of the execution of any
instrument by a Securityholder or his agent or proxy shall be sufficient if made
in accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee.
(b) The ownership of Registered Securities of any series shall be
proved by the Security Register or by a certificate of the Security registrar of
such series.
(c) The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may be proved by the production
of such Bearer Securities or by a certificate executed, as depositary, by any
trust company, bank, banker or other depositary, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that at
the date therein mentioned such Person had on deposit with such depositary, or
exhibited to it, the Bearer Securities in the amount and with the serial numbers
therein described; or such facts may be proved by the certificate or affidavit
of the Person holding such Bearer
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Securities, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership of any
Bearer Security continues until (i) another certificate or affidavit bearing a
later date issued in respect of the same Bearer Security is produced, (ii) such
Bearer Security is produced to the Trustee by some other Person, (iii) such
Bearer Security is surrendered in exchange for a Registered Security or (iv)
such Bearer Security is no longer Outstanding. The fact and date of execution of
any such instrument or writing, the authority of the Person executing the same
and the principal amount and serial numbers of Bearer Securities held by the
Person so executing such instrument or writing and the date of holding the same
may also be proved in any other manner which the Trustee deems sufficient; and
the Trustee may in any instance require further proof with respect to any of the
matters referred to in this Section 7.02(c).
(d) The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.07.
SECTION 7.03. Who Are Deemed Absolute Owners. Prior to due
------------------------------
presentation of a Registered Security for registration of transfer, the Company,
the Trustee, any Paying Agent and any Security registrar may treat the Person in
whose name such Registered Security is registered as owner of such Registered
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 2.09) interest on such Registered Security and for all
other purposes whatsoever, whether or not such Registered Security is overdue
and notwithstanding any notation of ownership or other writing on such
Registered Security made by anyone other than the Company or any Security
registrar, and neither the Company, the Trustee, any Paying Agent nor any
Security registrar shall be affected by any notice to the contrary. All such
payments so made to any such holder as shown in the Security Register, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for money payable upon any such
Registered Security.
The Company, the Trustee, any Paying Agent and any Security registrar
may treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Bearer Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Bearer Security or coupon is overdue, and neither the
Company, the Trustee, any Paying Agent nor any Security registrar shall be
affected by any notice to the contrary. All such payments so made to any such
bearer shall be valid and, to the extent of the sum or sums so
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paid, effectual to satisfy and discharge the liability for money payable upon
any such Bearer Security.
None of the Company, the Trustee, any Paying Agent or the Security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 7.04. Company-Owned Securities Disregarded. In determining
------------------------------------
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any direction, consent, waiver or other action under this
Indenture, Securities that are owned by the Company or any other obligor on the
Securities or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Securities shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination; provided, however, that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, consent, waiver or other action, only Securities that the Trustee
knows are so owned shall be so disregarded.
SECTION 7.05. Revocation of Consents; Future Holders Bound. At any
--------------------------------------------
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 7.01, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Securities of any or all series specified in
this Indenture in connection with such action, any holder of a Security the
serial number of which is shown by the evidence to be included in the Securities
the holders of which have consented to such action, by filing written notice
with the Trustee at the principal office of the Trustee and upon proof of
holding as provided in Section 7.02, may revoke such action so far as concerns
such Security. Except as provided in this Section 7.05, any such action taken
by the holder of any Security shall be conclusive and binding upon such holder
and upon all future holders and owners of such Security, irrespective of whether
or not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution for such Security.
ARTICLE EIGHT
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings. A meeting of Securityholders
--------------------
of any or all series may be called at any time and from time to time pursuant to
the provisions of this Article Eight for any of the following purposes:
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(1) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
default under this Indenture and its consequences, or to take any other
action authorized to be taken by Securityholders pursuant to any of the
provisions of Article Five;
(2) to remove the Trustee and nominate a successor Trustee
pursuant to the provisions of Article Six;
(3) to consent to the execution of an indenture or indentures
supplemental to this Indenture pursuant to the provisions of Section 9.02;
or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture or under applicable
law.
SECTION 8.02. Call of Meetings by Trustee. The Trustee at any time
---------------------------
may call a meeting of Securityholders of any or all series to take any action
specified in Section 8.01, to be held at such time and at such place in The City
of New York for Registered Securities and the City of London, England for Bearer
Securities, as the Trustee shall determine. Notice of every meeting of the
Securityholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
to holders, if any, of Registered Securities of each series affected at their
addresses as they shall appear on the Security Register, and shall be provided
to holders, if any, of Bearer Securities of each series affected by publication
thereof in a newspaper of general circulation, in each Place of Payment for each
such series, customarily published at least once a day for at least five days in
each calendar week. Such notice to holders of Registered Securities shall be
mailed not fewer than 20 nor more than 90 days prior to the date fixed for the
meeting. Such notice to holders of Bearer Securities shall be made by the
required publication on at least two dates, the first such publication to be not
more than 90 days and the second such publication to be not fewer 20 days prior
to the date fixed for the meeting.
Any meeting of Securityholders shall be valid without notice if the
holders of all Securities then Outstanding of each series affected are present
in person or by proxy or if notice is waived before or after the meeting by the
holders of all Outstanding Securities of each series affected, and if the
Company and the Trustee are either
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present by duly authorized representatives or, before or after the meeting, have
waived notice.
SECTION 8.03. Call of Meetings by Company or Securityholders. In
----------------------------------------------
case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least 10% in aggregate principal amount of the
Securities then Outstanding of any or all series, as the case may be, that may
be affected by the action proposed to be taken, shall have requested the Trustee
to call a meeting of Securityholders of any or all series, as the case may be,
that may be so affected, by written request setting forth in reasonable detail
the action proposed to be taken at the meeting, and the Trustee shall not have
mailed or published (as appropriate under Section 8.02) the notice of such
meeting within 20 days after receipt of such request, then the Company or such
Securityholders may determine the time and the place in the city designated in
Section 8.02, as the case may be, for such meeting and may call such meeting to
take any action authorized in Section 8.02, by mailing or publishing notice of
such meeting as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting. To be entitled to vote at
-------------------------
any meeting of Securityholders of any series a person shall (i) be a holder of
one or more Securities of such series as set forth in the Security Register for
such series or (ii) be a person appointed by an instrument in writing as proxy
by a holder of one or more Securities of such series, subject to the provisions
of Section 7.02. The only persons who shall be entitled to be present or to
speak at any meeting of Securityholders shall be the persons entitled to vote at
such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 8.05. Regulations. (a) Notwithstanding any other
-----------
provisions of this Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Securityholders, in regard to proof
of the holding of Securities and of the appointment of proxies, and in regard to
the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall think
fit.
(b) The Trustee, by an instrument in writing, shall appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, in like
manner shall appoint a temporary chairman. A permanent chairman and a permanent
secretary of
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the meeting shall be elected by vote of the holders of a majority in principal
amount of the Securities represented at the meeting and entitled to vote.
(c) Subject to the provisions of Section 7.04, at any meeting each
Securityholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Securities.
(d) No vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing duly
designating him as the person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or Section 8.03 may be adjourned from time to time by a majority of those
present and the meeting may be held as so adjourned without further notice.
SECTION 8.06. Quorum. The Persons entitled to vote a majority in
------
principal amount of the Outstanding Securities affected by the action proposed
to be taken shall constitute a quorum for a meeting of such Securityholders. In
the absence of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting, if convened at the request of holders of Securities, shall
be dissolved. In the absence of a quorum in any other case the meeting may be
adjourned for a period of not fewer than ten days as determined by the chairman
of the meeting prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may be further
adjourned for a period of not fewer than ten days as determined by the chairman
of the meeting prior to the adjournment of such adjourned meeting. Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
8.02, except that such notice need be given only once not fewer than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities affected
by the action proposed to be taken which shall constitute a quorum.
SECTION 8.07. Voting. The vote upon any resolution submitted to any
------
meeting of Securityholders shall be by written ballots on which shall be
subscribed the signatures of the holders of Securities or of their
representatives by proxy and the principal amount of the Securities held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and
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file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the original
reports of the inspectors of votes on any vote by ballot taken at such meeting
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that such notice was
mailed or published as provided in Section 8.02 or Section 8.03. The record
shall show the principal amount of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee.
Any record so signed and verified shall be conclusive evidence of the
matters stated in such record.
SECTION 8.08. No Delay of Rights by Meeting. Nothing in this Article
-----------------------------
Eight shall be deemed or construed to authorize or permit, by reason of any call
of a meeting of Securityholders or any rights expressly or impliedly conferred
under this Article Eight to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Securityholders under any of the provisions of this Indenture or of the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of
------------------------------------------
Securityholders. The Company, when authorized by the resolutions of the Board
- ---------------
of Directors, and the Trustee from time to time and at any time may enter into
an indenture or indentures supplemental to this Indenture for one or more of the
following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumptions by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Ten;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of any series
of the Securities or coupons as the Board of Directors and the Trustee
shall consider to be for the protection of the holders of such Securities
or coupons, and to make the occurrence,
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or the occurrence and continuance, of a default in any such additional
covenants, restrictions or conditions a default or an Event of Default
permitting, subject to Article Three, the enforcement of all or any of the
several remedies set forth in this Indenture; provided, however, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for notice or a particular period of
grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or, subject to Article Three, may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;
(c) to cure any ambiguity or to correct or supplement any provision
contained in this Indenture or in any supplemental indenture that may be
defective or inconsistent with any other provision contained in this
Indenture or in any supplemental indenture, or to make such other
provisions in regard to matters or questions arising under this Indenture
that shall not adversely affect the interests of the holders of Outstanding
Securities of any series or any related coupons;
(d) to establish the form or terms of Securities of any series as
permitted by Section 2.01;
(e) to add to, change or eliminate any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal or any premium on Registered Securities or of principal or any
premium or interest on Bearer Securities, to permit Bearer Securities to be
issued in exchange for Registered Securities or to permit or facilitate the
issuance of Securities in uncertificated form, provided any such action
shall not adversely affect the interests of the holders of Outstanding
Securities of any series or any related coupons;
(f) 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; provided, however, that such action shall not adversely affect
the interests of the holders of Outstanding Securities of any series;
(g) to provide for the documentation necessary for the issuance of
Securities outside the United States of America;
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(h) to provide for the documentation necessary for the issuance of
Securities at an issue price lower than the principal amount thereof,
including to provide that upon the redemption or acceleration of the
Maturity thereof an amount less than the principal amount thereof shall
become due and payable and that such amount shall be used to determine the
relative voting rights of the holders thereof; or
(i) to conform the Indenture to the provisions of the Trust Indenture
Act as then in effect.
The Trustee hereby is authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations that may be contained in such supplemental indenture
and to accept the conveyance, transfer and assignment of any property under such
supplemental indenture, but the Trustee shall not be obligated to, but in its
discretion may, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time Outstanding, notwithstanding
the provisions of Section 9.02.
SECTION 9.02. Supplemental Indentures with Consent of Securityholders
-------------------------------------------------------
of a Series. With the consent (evidenced as provided in Section 7.01) of the
- -----------
holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding of each series affected by such supplemental
indenture or indentures, the Company, when authorized by the resolutions of the
Board of Directors, and the Trustee from time to time and at any time may enter
into an indenture or indentures supplemental to this Indenture 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 the Securities of each such series; provided, however, that without
the consent of the holder of each Outstanding Security affected thereby no such
supplemental indenture shall: (a) change the Stated Maturity of the principal
of or any premium or any installment of interest on, any Security, or reduce the
principal amount of any Security or any premium or interest on any Security, or
reduce the amount of principal payable upon acceleration of the Maturity of any
Original Issue Discount Security, or change any Place of Payment where, or the
coin or currency in which, any Security or any premium or interest on any
Security is payable, or impair the right to
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institute suit for the enforcement of any such payment on or after its Stated
Maturity, or make any change in Article Three that adversely affects the rights
of any Securityholder; (b) reduce the percentage in principal amount of
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 under this Indenture and their consequences provided for in this
Indenture; or (c) modify the provisions of Section 5.01 providing for the
rescinding and annulment of a declaration accelerating the Maturity of the
Securities of any series, or any of the provisions of this Section 9.02 or
Section 5.07(b), except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived.
Upon request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders of such
series as aforesaid, the Trustee shall join with the Company in the execution of
such supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee in its discretion may, but shall not be obliged to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
-----------------------------------------------
Supplemental Indentures. Any supplemental indenture executed pursuant to the
- -----------------------
provisions of this Article Nine shall comply with the Trust Indenture Act as
then in effect. Upon the execution of any supplemental indenture pursuant to
the provisions of this Article Nine, this Indenture shall be and be deemed to be
modified and amended in accordance with such supplemental indenture and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of the series
of Securities affected thereafter shall be determined, exercised and enforced
under this Indenture subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
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SECTION 9.04. Notation on Securities. Securities authenticated and
----------------------
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Nine may bear a notation in form acceptable to the
Trustee as to any matter provided for in such supplemental indenture. If the
Company so shall determine, new Securities of any series and any related coupons
so modified as to conform, in the opinion of the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee and
delivered in exchange, as provided in Section 2.06, for the Outstanding
Securities of such series and any related coupons, upon surrender of such
Outstanding Securities of such series and any related coupons.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Section 6.01 and
- -----------------
Section 6.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article Nine complies with the requirements of this Article Nine.
ARTICLE TEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain Terms.
-----------------------------------------------
The Company shall not consolidate with or merge into another corporation or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, unless:
(1) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer or which leases the properties and assets of the Company
substantially as an entirety shall be a corporation organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and expressly shall assume, by a supplemental
indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, the due and punctual payment of the principal of and any premium
and interest on the Securities, according to their terms, and the
performance of every covenant of this Indenture and in such series 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 which, after notice or lapse of time or
both, would become an
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Event of Default, shall have happened and be continuing; and
(3) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and supplemental
indenture comply with this Article Ten and that all conditions precedent
provided for in this Indenture relating to such transaction have been
complied with.
SECTION 10.02. Successor Corporation Substituted. Upon any
---------------------------------
consolidation by the Company with or merger by the Company into any other
corporation or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety in accordance with Section 10.01, 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 corporation had
been named as the Company in this Indenture, and thereafter, except in the case
of a lease, the predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Securities of each series and any related
coupons.
Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Company prior to such succession,
any of or all the Securities of each series issuable under this Indenture which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of upon the
Company Order, and subject to all the terms, conditions and limitations in this
Indenture, the Trustee shall authenticate and shall deliver any Securities that
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee on
its behalf for that purpose. All the Securities so issued shall have in all
respects 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 such Securities had been issued at the date of the execution of
this Indenture.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.01. Applicability of Article. Securities of any series
------------------------
that are redeemable before their Stated Maturity shall be redeemable only in
accordance with their terms and (except as otherwise specified as contemplated
by Section 2.01 for Securities of any series) in accordance with this Article
Eleven, to the extent Article Three does not prohibit such a redemption.
SECTION 11.02. Election to Redeem; Notice to Trustee. The election
-------------------------------------
of the Company to redeem any Securities shall be evidenced by a Company Order.
In case of any redemption at the election of the Company of less than all the
Securities of any series, the Company, at least 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), shall notify the Trustee of such Redemption Date, of the tenor and
terms of the Securities of such series to be redeemed and of the principal
amount of such Securities 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 or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
SECTION 11.03. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities of any series of like tenor and terms specified
by the Company are to be redeemed, the particular Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities of such series and of such tenor and
terms not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denominations for such Securities
or any integral multiple thereof) of the principal amount of such Registered
Securities or such Bearer Securities or a denomination larger than the minimum
authorized denomination for such Registered Securities or such Bearer
Securities.
The Trustee promptly shall notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, 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
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Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.
SECTION 11.04. Notice of Redemption. Notice of redemption shall be
--------------------
given in the manner provided in Section 8.02 not fewer than 30 or more than 60
days prior to the Redemption Date. All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed;
(4) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after such
date;
(5) the Place or Places of Payment where such Securities,
together in the case of Bearer Securities with all coupons, if any,
appertaining thereto maturing after the Redemption Date, are to be
surrendered for payment of the Redemption Price;
(6) that Bearer Securities may be surrendered for payment only
at such place or places that are outside the United States, except as
provided in Section 4.02; and
(7) that the redemption is for a sinking fund, if such is the
case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.05. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 4.04(b)) an amount of money sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall be the same
date as the Stated Maturity of an installment of interest thereon) accrued
interest on, all the
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Securities that are to be redeemed on that date; provided, however, that
deposits with respect to Bearer Securities shall be made with a Paying Agent or
Paying Agents located outside the United States except as otherwise provided in
Section 4.02, unless otherwise specified as contemplated by Section 2.01.
SECTION 11.06. Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall become due and payable, on the Redemption Date, at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be redeemed, except to the extent
provided below, shall be void. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that: (i) installments of interest on
Bearer Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable only upon presentation and surrender of coupons for such
interest (at an office or agency located outside the United States except as
otherwise provided in Section 4.02); and (ii) installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant record date for the payment of
such interest according to the terms of such Securities.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Bearer Security may be paid after deducting from the Redemption Price an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
is furnished to them such security or indemnity as they may require to hold each
of them and any Paying Agent harmless. If thereafter the holder of such Bearer
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such holder shall be entitled to receive the amount so deducted on
account of such coupon without interest thereon; provided, however, that
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside of the United
States except as otherwise provided in Section 4.02.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium, until paid,
shall bear interest from the Redemption Date at the rate prescribed therefor in
the Security or related coupon.
SECTION 11.07. Registered Securities Redeemed in Part. Any
--------------------------------------
Registered Security that is to be redeemed only in part shall be surrendered at
a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the holder of such Security without service
charge, a new Registered Security or new Registered Securities of the same
series and of like tenor and terms, of any authorized denomination as requested
by such holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 12.01. Applicability of Article. Subject to Section 3.02(b),
------------------------
the provisions of this Article Twelve shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 2.01 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 12.02. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of the
Securities of such series.
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company
(1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and
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(2) may apply as a credit Securities of a series that have been
repurchased at the option of a holder or redeemed either at the election of
the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the
terms of such Securities,
in each case in satisfaction of all or any part of any sinking fund payment with
respect to the Securities of such series required to be made pursuant to the
terms of such Securities as provided for by the terms of such series, provided
that such Securities have not been previously so credited. Such Securities
shall be received and credited for such purpose by the Trustee at the Redemption
Price specified in such Securities 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 for Sinking Fund. Not fewer
-----------------------------------------
than 60 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 of that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 12.02 and also will deliver to the Trustee any Securities to be so
delivered. Not fewer than 30 days before each such sinking fund payment date 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 and Section 11.07.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 13.01. Terms Set Forth in the Securities. Securities of any
---------------------------------
series which in accordance with their terms are repayable at the option of the
holders thereof before their Stated Maturity shall be repaid in accordance with
the terms set forth in such Securities, to the extent Article Three does not
prohibit such a repayment.
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ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 14.01. Discharge of Indenture. When (a) the Company shall
----------------------
deliver to the Trustee for cancellation all Securities of any series and any
related coupons theretofore authenticated (other than any Securities of such
series and any related coupons that shall have been mutilated, destroyed, lost
or stolen and in lieu of or in substitution for which other Securities or
coupons shall have been authenticated and delivered) and not theretofore
cancelled, or (b) all the Securities of any series and any related coupons not
theretofore cancelled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit (to the extent Article Three does not prohibit such a
deposit) with the Trustee, in trust, funds sufficient to pay upon Stated
Maturity, redemption or repayment at the option of a holder all the Securities
of such series and related coupons (other than any Securities of such series and
related coupons that shall have been mutilated, destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.07) not theretofore
cancelled or delivered to the Trustee for cancellation, including principal and
any premium and interest due or to become due prior to such Stated Maturity,
Redemption Date or date of repayment, as the case may be, but excluding,
however, the amount of any money for the payment of principal of or any premium
or interest on the Securities
(1) theretofore deposited with the Trustee and repaid by the Trustee
to the Company in accordance with the provisions of Section 14.04 or
(2) paid to any State or the District of Columbia pursuant to its
unclaimed property or similar laws, and if in either case the Company also
shall pay or cause to be paid all other sums payable under this Indenture
by the Company,
then this Indenture shall cease to be of further effect with respect to
Securities of such series and any related coupons, and the Trustee, on demand of
the Company accompanied by an Officers' Certificate and an Opinion of Counsel as
required by Section 16.05 and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture with respect to Securities of such series and any related coupons.
The obligations of the
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Company to the Trustee under Section 6.06 shall survive the termination of this
Indenture.
The Trustee shall notify the Securityholders of such series, at the
expense of the Company, of the immediate availability of the amount referred to
in clause (b) of this Section 14.01 by mailing a notice, first class postage
prepaid, to the holders of Registered Securities of such series at their
addresses as they shall appear on the Security Register, and, if any Bearer
Securities are Outstanding, by publishing notice of such resignation in a
newspaper of general circulation, in each place of payment for such Bearer
Securities, customarily published at least once a day for at least five days in
each calendar week.
SECTION 14.02. Deposited Money to Be Held in Trust by Trustee.
----------------------------------------------
Subject to Article Three and to Section 14.04, all money deposited with the
Trustee pursuant to Section 14.01 shall be held in trust and applied by it to
the payment, either directly or through any Paying Agent (including the Company
if acting as its own Paying Agent, other than as to Bearer Securities, except as
provided in Section 4.02), to the holders of the particular Securities and
related coupons for the payment of which such money has been deposited with the
Trustee, of all sums due and to become due thereon for principal and any premium
and interest.
SECTION 14.03. Paying Agent to Repay Money Held. Upon the
--------------------------------
satisfaction and discharge of this Indenture all money then held by any Paying
Agent of the Securities (other than the Trustee), upon demand of the Company,
shall be repaid to it or paid to the Trustee, and thereupon such Paying Agent
shall be released from all further liability with respect to such money.
SECTION 14.04. Return of Unclaimed Money. Any money deposited with
-------------------------
or paid to the Trustee or any Paying Agent for payment of the principal of or
any premium or interest on Securities of any series, or then held by the Company
in trust for the payment of the principal of or any premium or interest on
Securities of any series, and not applied but remaining unclaimed by the holders
of Securities of that series for two years after the date upon which the
principal or any premium or interest on such Securities, as the case may be,
shall have become due and payable, shall be repaid to the Company by the Trustee
on demand or, if then held by the Company, shall be discharged from such trust,
and all liability of the Trustee thereupon shall cease; and the holder of any of
such Securities thereafter, as an unsecured general creditor, shall look only to
the Company for payment of such Securities, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all
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liability of the Company as trustee thereof, thereupon shall cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, at the expense of the Company, in the case of Registered
Securities or Bearer Securities, may cause to be published once, in a newspaper
of general circulation in each Place of Payment for such series customarily
published on each Business Day (whether or not published on Saturdays, Sundays
or holidays) or, in the case of Registered Securities, to be mailed to each such
holder, or in the case of Registered Securities to be mailed and published,
notice that such money remains unclaimed and that, after a date specified in
such notice, which shall not be fewer than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company.
SECTION 14.05. Deposits Irrevocable. Any deposit referred to in
--------------------
Section 14.01 shall be irrevocable. If any Securities of a series with respect
to which a deposit has been made pursuant to Section 14.01 and at the time
Outstanding are to be redeemed prior to their Stated Maturity, whether pursuant
to any optional redemption provisions or in accordance with any mandatory
sinking fund requirement, the Company shall make such arrangements as are
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
SECTION 14.06. Reinstatement. If the Trustee is unable to apply
-------------
any money or U.S. Government Obligations in accordance with Section 14.01 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 14.01 until such time as the Trustee is permitted to apply
all such money or U.S. Government Obligations in accordance with Section 14.01.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 15.01. Indenture and Securities Solely Corporate Obligations.
-----------------------------------------------------
No recourse for the payment of the principal of or any premium or interest on
any Security, or for any claim based on any Security or coupon or otherwise in
respect of any Security or coupon, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any Security, or
because of the creation of any indebtedness represented by any Security or
coupon,
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shall be had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities and coupons.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements contained in this Indenture by
the Company shall bind its successors and assigns whether so expressed or not.
SECTION 16.02. Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provisions of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 16.03. Addresses for Notices, etc. Any notice or demand that
--------------------------
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Securities on the Company may be
given or served by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company with the Trustee) to Southern National Corporation, Attention:
Treasurer, 200 West Second Street, Winston-Salem, North Carolina 27101. Any
notice, direction, request or demand by any Securityholder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the principal office of the Trustee,
Attention: Corporate Trust Administration. Any notice, direction, request or
demand by any securityholder to or upon BB&T-NC shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
office of BB&T-NC, Attention: Corporate Trust Department, 223 West Nash Street,
Wilson, North Carolina 27893.
SECTION 16.04. GOVERNING LAW. THIS INDENTURE AND EACH SECURITY
-------------
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK,
AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
SECTION 16.05. Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Upon any application or request by the Company to the Trustee to take any action
under any of the
76
<PAGE>
provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (other than certificates provided pursuant to
Section 4.04, which certificates shall comply with the requirements of Section
4.04) shall include: (i) a statement that the person making such certificate or
opinion has read such covenant or condition; (ii) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinion contained in such certificate or opinion are based; (iii) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (iv) a
statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
The provisions of this Section 16.05 are in furtherance of and subject
to Sections 314(c)(1), 314(c)(2) and 314(e) of the Trust Indenture Act.
SECTION 16.06. Legal Holidays. Unless otherwise specified in the
--------------
manner contemplated by Section 2.01, in any case where the Stated Maturity of
principal of or any premium or interest on the Securities will not be a Business
Day, payment of such principal, premium or interest need not be made on such
date but may be made on the next following Business Day with the same force and
effect as if made on the Stated Maturity and, if such principal, premium or
interest is duly paid on such next following Business Day, no interest shall
accrue for the period from and after such Stated Maturity to such next following
Business Day.
SECTION 16.07. Trust Indenture Act to Control. If and to the extent
------------------------------
that any provision of this Indenture limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any
provision of the Trust Indenture Act, such required provision shall control.
SECTION 16.08. No Security Interest Created. Nothing in this
----------------------------
Indenture or in the Securities or coupons, expressed or implied, shall be
construed to constitute a security interest under the Uniform Commercial Code or
similar
77
<PAGE>
legislation, as now or hereafter enacted and in effect, in any
jurisdiction where property of the Company or its Subsidiaries is located.
SECTION 16.09. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Securities or coupons, express or implied, shall give to any Person,
other than the parties to this Indenture, any Paying Agent, any Security
registrar and their successors under this Indenture, the holders of Securities
or coupons and, to the extent provided in this Indenture, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 16.10. Payments to Be Made in U.S. Dollars. Notwithstanding
-----------------------------------
anything in this Indenture to the contrary, any payments on or relating to any
Security or related coupon shall be made only in U.S. dollars.
SECTION 16.11. Table of Contents, Headings, etc. The table of
--------------------------------
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions of this Indenture.
SECTION 16.12. Execution in Counterparts. This Indenture may be
-------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
______________
<PAGE>
STATE STREET BANK AND TRUST COMPANY hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions set forth above
in this Indenture.
IN WITNESS WHEREOF, SOUTHERN NATIONAL CORPORATION has caused this
Indenture to be signed and acknowledged by its [Vice] President, and its
corporate seal to be affixed hereunto, and the same to be attested by its
Secretary, and STATE STREET BANK AND TRUST COMPANY has caused this Indenture to
be signed and acknowledged by the person whose name is set forth below, and has
caused its corporate seal to be affixed hereunto and the same to be attested by
the person whose name is set forth below, as of the day and year first written
above.
SOUTHERN NATIONAL CORPORATION
By /s/ Scott E. Reed
--------------------------
Scott E. Reed
Senior Executive Vice President
and Chief Financial Officer
[SEAL]
Attest:
/s/ Jerone C. Herring
- -------------------------
Secretary
STATE STREET BANK AND TRUST COMPANY
By /s/ Ruth A. Smith
--------------------------
Ruth A. Smith
Vice President
[SEAL]
Attest:
/s/ Traci Hopkins
- -------------------------
Assistant Secretary
79
<PAGE>
STATE OF NORTH CAROLINA )
)ss.:
COUNTY OF FORSYTH )
On the 22nd day of May, 1996, before me personally came Scott E. Reed,
to me known, who, being by me duly sworn did depose and say that he resides at
Forsyth County, North Carolina; that he is the Senior Executive Vice President
and Chief Financial Officer of Southern National Corporation, one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by the authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Dawn L. Carter
-------------------------------
Notary Public
[NOTARIAL SEAL]
COMMONWEALTH OF MASSACHUSETTS )
)ss.:
COUNTY OF SUFFOLK )
On the 23rd day of May, 1996, before me personally came Ruth Smith, to
me known, who, being by me duly sworn did depose and say that he resides at
______________________________; that he is a Vice President of State Street Bank
and Trust Company, one of the corporations described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by the authority of the Board of Directors of said corporation, and that
he signed his name thereto by like authority.
/s/ Laura L. Morse
-------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 11
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
For the Periods as Indicated
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------------- ------------------------------------
1996 1995 1996 1995
---------------- ---------------- --------------- --------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Weighted average number of common shares
outstanding during the period 103,472,102 102,498,387 102,188,289 102,350,232
Add-
Dilutive effect of outstanding options
(as determined by application of treasury
stock method) 1,521,628 1,025,414 1,510,049 992,186
Issuance of additional shares under share
repurchase agreement, contingent upon
market price 156,320 -- 142,578 --
---------------- ---------------- --------------- --------------
Weighted average number of common shares,
as adjusted 105,150,050 103,523,801 103,840,916 103,342,418
================ ================ =============== ==============
Net income $ 73,917 $ 57,908 $ 143,527 $ 45,563
Less - Preferred dividend requirement -- 1,289 610 2,588
---------------- ---------------- --------------- --------------
Income available for common shares $ 73,917 $ 56,619 $ 142,917 $ 42,975
================ ================ =============== ==============
Primary earnings per share $ .70 $ .55 $ 1.38 $ .42
================ ================ =============== ==============
Fully Diluted Earnings Per Share:
Weighted average number of common shares
outstanding during the period 103,472,102 102,498,387 102,188,289 102,350,232
Add-
Shares issuable assuming conversion of
convertible preferred stock -- 4,525,723 1,887,620 4,536,917
Dilutive effect of outstanding options
(as determined by application of
treasury stock method) 1,807,865 1,261,944 1,819,658 1,286,528
Issuance of additional shares under
share repurchase agreement, contingent
upon market price 156,320 -- 142,578 --
Shares issuable assuming conversion of
convertible debentures -- 488,852 -- 492,252
---------------- ---------------- --------------- --------------
Weighted average number of common shares,
as adjusted 105,436,287 108,774,906 106,038,145 108,665,929
================ ================ =============== ==============
Net income $ 73,917 $ 57,908 $ 143,527 $ 45,563
Add - After tax interest expense and
amortization of issue costs applicable -- 81 -- 162
to convertible debentures --------------- ---------------- --------------- --------------
Net income, as adjusted $ 73,197 $ 57,989 $ 143,527 $ 45,725
=============== ================ =============== ==============
Fully diluted earnings per share $ .70 $ .53 $ 1.35 $ .42
=============== ================ =============== ==============
- -------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 571,872
<INT-BEARING-DEPOSITS> 599
<FED-FUNDS-SOLD> 21,610
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,127,899
<INVESTMENTS-CARRYING> 133,953
<INVESTMENTS-MARKET> 137,087
<LOANS> 13,687,664
<ALLOWANCE> 177,195
<TOTAL-ASSETS> 20,556,137
<DEPOSITS> 14,990,684
<SHORT-TERM> 1,785,553
<LIABILITIES-OTHER> 247,090
<LONG-TERM> 1,955,559
0
0
<COMMON> 517,151
<OTHER-SE> 1,060,100
<TOTAL-LIABILITIES-AND-EQUITY> 20,556,137
<INTEREST-LOAN> 620,964
<INTEREST-INVEST> 151,321
<INTEREST-OTHER> 376
<INTEREST-TOTAL> 772,661
<INTEREST-DEPOSIT> 277,358
<INTEREST-EXPENSE> 378,180
<INTEREST-INCOME-NET> 394,481
<LOAN-LOSSES> 22,500
<SECURITIES-GAINS> (162)
<EXPENSE-OTHER> 297,410
<INCOME-PRETAX> 214,041
<INCOME-PRE-EXTRAORDINARY> 214,041
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,527
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.35
<YIELD-ACTUAL> 4.34
<LOANS-NON> 62,670
<LOANS-PAST> 18,025
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 172,158
<CHARGE-OFFS> 23,728
<RECOVERIES> 6,265
<ALLOWANCE-CLOSE> 177,195
<ALLOWANCE-DOMESTIC> 177,195
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 28,351
</TABLE>
