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AMENDED AND RESTATED DECLARATION
OF TRUST
SOVEREIGN CAPITAL TRUST IV
Dated as of February 26, 2004
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Table of Contents
Page No.
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ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.01. Definitions.............................................................................. 2
ARTICLE II
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application......................................................... 9
Section 2.02. Lists of Holders of Securities........................................................... 10
Section 2.03. Reports by the Property Trustee.......................................................... 10
Section 2.04. Periodic Reports to Property Trustee..................................................... 10
Section 2.05. Evidence of Compliance with Conditions Precedent......................................... 11
Section 2.06. Events of Default; Waiver................................................................ 11
Section 2.07. Event of Default; Notice................................................................. 12
ARTICLE III
ORGANIZATION
Section 3.01. Name..................................................................................... 13
Section 3.02. Office................................................................................... 13
Section 3.03. Purpose.................................................................................. 13
Section 3.04. Authority................................................................................ 14
Section 3.05. Title to Property of the Trust........................................................... 14
Section 3.06. Powers and Duties of the Administrative Trustees......................................... 14
Section 3.07. Prohibition of Actions by the Trust and the Trustees..................................... 17
Section 3.08. Powers and Duties of the Property Trustee................................................ 18
Section 3.09. Certain Duties and Responsibilities of the Property Trustee.............................. 20
Section 3.10. Certain Rights of Property Trustee....................................................... 22
Section 3.11. Delaware Trustee......................................................................... 24
Section 3.12. Execution of Documents................................................................... 24
Section 3.13. Not Responsible for Recitals or Issuance of Securities................................... 24
Section 3.14. Duration of Trust........................................................................ 24
Section 3.15. Mergers.................................................................................. 25
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ARTICLE IV
SPONSOR
Section 4.01. Sponsor's Purchase of Common Securities.................................................. 26
Section 4.02. Responsibilities of the Sponsor.......................................................... 26
Section 4.03. Right to Proceed......................................................................... 27
ARTICLE V
TRUSTEES
Section 5.01. Number of Trustees: Appointment of Co-Trustee............................................ 27
Section 5.02. Delaware Trustee......................................................................... 28
Section 5.03. Property Trustee; Eligibility............................................................ 28
Section 5.04. Certain Qualifications of Administrative Trustees and Delaware Trustee Generally......... 29
Section 5.05. Administrative Trustees.................................................................. 29
Section 5.06. Delaware Trustee......................................................................... 30
Section 5.07. Appointment, Removal and Resignation of Trustees......................................... 30
Section 5.08. Vacancies among Trustees................................................................. 32
Section 5.09. Effect of Vacancies...................................................................... 32
Section 5.10. Meetings................................................................................. 32
Section 5.11. Delegation of Power...................................................................... 33
Section 5.12. Merger, Conversion, Consolidation or Succession to Business.............................. 33
ARTICLE VI
DISTRIBUTIONS AND CONVERSION
Section 6.01. Distributions............................................................................ 33
Section 6.02. Distribution of Debentures and Warrants in Exchange for Securities....................... 34
Section 6.03. Conversion............................................................................... 35
ARTICLE VII
ISSUANCE OF SECURITIES
Section 7.01. General Provisions Regarding Securities.................................................. 39
Section 7.02. Execution and Authentication............................................................. 39
Section 7.03. Form and Dating.......................................................................... 40
Section 7.04. Registrar, Paying Agent and Exchange Agent............................................... 41
Section 7.05. Paying Agent to Hold Money in Trust...................................................... 42
Section 7.06. Replacement Securities................................................................... 42
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Section 7.07. Outstanding Trust PIERS.................................................................. 43
Section 7.08. Trust PIERS in Treasury.................................................................. 43
Section 7.09. Temporary Securities..................................................................... 43
Section 7.10. Cancellation............................................................................. 44
Section 7.11. CUSIP Numbers............................................................................ 44
Section 7.12. Tax Treatment of Debentures and Warrants................................................. 44
ARTICLE VIII
TERMINATION OF TRUST
Section 8.01. Termination of Trust..................................................................... 45
Section 8.02. Liquidation Distribution Upon Dissolution or Termination of the Trust.................... 46
ARTICLE IX
TRANSFER OF INTERESTS
Section 9.01. Transfer of Securities................................................................... 47
Section 9.02. Transfer Procedures and Restrictions..................................................... 49
Section 9.03. Deemed Security Holders.................................................................. 52
Section 9.04. Book Entry Interests..................................................................... 52
Section 9.05. Notices to Clearing Agency............................................................... 53
Section 9.06. Appointment of Successor Clearing Agency................................................. 53
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
Section 10.01. Liability................................................................................ 53
Section 10.02. Exculpation.............................................................................. 54
Section 10.03. Fiduciary Duty........................................................................... 54
Section 10.04. Indemnification.......................................................................... 55
Section 10.05. Outside Businesses....................................................................... 58
ARTICLE XI
ACCOUNTING
Section 11.01. Fiscal Year.............................................................................. 58
Section 11.02. Certain Accounting Matters............................................................... 58
Section 11.03. Banking.................................................................................. 59
Section 11.04. Withholding.............................................................................. 59
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ARTICLE XII
AMENDMENTS AND MEETINGS
Section 12.01. Amendments............................................................................... 60
Section 12.02. Meetings of the Holders; Action by Written Consent....................................... 63
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
Section 13.01. Representations and Warranties of Property Trustee....................................... 64
Section 13.02. Representations and Warranties of Delaware Trustee....................................... 64
ARTICLE XIV
[INTENTIONALLY OMITTED]
ARTICLE XV
MISCELLANEOUS
Section 15.01. Notices.................................................................................. 65
Section 15.02. Governing Law............................................................................ 66
Section 15.03. Intention of the Parties................................................................. 67
Section 15.04. Headings................................................................................. 67
Section 15.05. Successors and Assigns................................................................... 67
Section 15.06. Partial Enforceability................................................................... 67
Section 15.07. Counterparts............................................................................. 67
ANNEX I TERMS OF SECURITIES...................................................................... A-1
EXHIBIT A-1 FORM OF TRUST PIERS CERTIFICATE.......................................................... A-1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE...................................................... A-2-1
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CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Trust Agreement
- ------------------- ---------------
310(a)......................................... 5.3
310(b)......................................... 5.3(c); 5.3(d)
311(a)......................................... 2.2(b)
311(b)......................................... 2.2(b)
312(a)......................................... 2.2(a)
312(b)......................................... 2.2(b)
313............................................ 2.3
314(a)......................................... 2.4; 3.6(j)
314(c)......................................... 2.5
315(a)......................................... 3.9
315(b)......................................... 2.7(a)
315(c)......................................... 3.9(a)
315(d)......................................... 3.9(b)
316(a)......................................... 2.6
316(c)......................................... 3.6(e)
317(a)......................................... 3.8(e); 3.8(h)
317(b)......................................... 3.8(i); 7.5
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* This Cross-Reference Table does not constitute part of the Trust
Agreement and shall not affect the interpretation of any of its terms
or provisions.
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SOVEREIGN CAPITAL TRUST IV
February 26, 2004
AMENDED AND RESTATED DECLARATION OF TRUST ("Trust Agreement")
dated and effective as of February 26, 2004 by the Trustees (as defined herein),
the Sponsor (as defined herein) and by the holders, from time to time, of
undivided beneficial interests in the Trust to be issued pursuant to this Trust
Agreement;
WHEREAS, the Trustees and the Sponsor established Sovereign
Capital Trust IV (the "Trust"), a trust formed under the Delaware Statutory
Trust Act pursuant to a Declaration of Trust dated as of September 8, 1999 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on September 10, 1999, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer (each as hereinafter defined), and
engaging in only those other activities necessary, advisable or incidental
thereto;
WHEREAS, as of the date hereof, no interests in the Trust have
been issued;
WHEREAS, the Sponsor proposes to issue warrants (the
"Warrants") pursuant to the agreement dated as of February 26, 2004 (the
"Warrant Agreement"), between the Sponsor and The Bank of New York, as warrant
agent (in such capacity, the "Warrant Agent") representing the right to
purchase, under certain circumstances described herein, Common Stock (as defined
herein);
WHEREAS, the Sponsor is simultaneously entering into a Third
Supplemental Indenture, dated as of February 26, 2004 (the "Third Supplemental
Indenture"), to the Junior Subordinated Indenture dated as of September 1, 1999,
among the Debenture Issuer (as defined herein) and the Debenture Trustee (as
defined herein), between the Sponsor and BNY Midwest Trust Company, as indenture
trustee (together with the Third Supplemental Indenture, the "Indenture"),
whereby the 4.375% Junior Subordinated Deferrable Interest Debentures Due March
1, 2034 (the "Debentures") will be issued;
WHEREAS, the Trust intends to invest the proceeds of the sale
of the Trust Securities in the purchase of the Debentures and the Warrants;
WHEREAS, all of the Trustees and the Sponsor, by this Trust
Agreement, amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a statutory trust under the Statutory Trust Act and
that this Trust Agreement constitute the governing instrument of such statutory
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Trust Agreement.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.01. Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Trust Agreement but
not defined in the preamble above have the respective meanings assigned
to them in this Section 1.01;
(b) a term defined anywhere in this Trust Agreement has
the same meaning throughout;
(c) all references to "the Trust Agreement" or "this
Trust Agreement" are to this Trust Agreement as modified, supplemented
or amended from time to time;
(d) all references in this Trust Agreement to Articles
and Sections and Annexes and Exhibits are to Articles and Sections of
and Annexes and Exhibits to this Trust Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the
same meaning when used in this Trust Agreement unless otherwise defined
in this Trust Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and
vice versa.
"Administrative Trustee" has the meaning set forth in Section 5.01.
"Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that is
authorized to legally bind such former Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday or a Sunday or a day
on which banking institutions in the City of New York are authorized or required
by law or executive order to close.
2
"Cash Exercise" has the meaning set forth in Annex I.
"Change of Control" has the meaning specified in the Indenture.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Trust PIERS and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Trust PIERS.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Time" means the time of any Delivery Date under the
Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the United States Securities and Exchange Commission
as from time to time constituted, or if at any time after the execution of this
Trust Agreement such Commission is not existing and performing the duties now
assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.01(a).
"Company Indemnified Person" means (a) any Administrative Trustee; (b)
any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.
"Contingent Debt Regulations" has the meaning specified in Section
7.12.
"Contingent Distribution" has the meaning set forth in Annex I.
"Contingent Distribution Period" has the meaning set forth in Annex I.
"Conversion Date" has the meaning specified in Section 6.03(l).
"Conversion Price" means, as of any date of determination, $50 divided
by the applicable Conversion Ratio in effect on such date.
"Conversion Ratio" has the meaning set forth in Section 6.03(a). Any
adjustment made from time to time to the Exercise Amount, as such term is
defined in the Warrant Agreement, pursuant to Article IV of the Warrant
Agreement shall result automatically in a corresponding adjustment to the
Conversion Ratio, and thereafter "Conversion Ratio" shall refer to such adjusted
amount.
"Conversion Value" has the meaning set forth in Annex I.
3
"Corporate Trust Office" means the office of the Property Trustee at
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at 101 Barclay Street, 8 West, New York,
New York 10286, Attn: Corporate Trust Administration.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Sovereign Bancorp, Inc., a Pennsylvania
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Trustee" means BNY Midwest Trust Company (successor to
Harris Trust and Savings Bank), an Illinois trust company, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"Debentures" has the meaning set forth in the Recitals.
"Default" means an event, act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.
"Definitive Trust PIERS" shall have the meaning set forth in Section
7.03(c).
"Delaware Trustee" has the meaning set forth in Section 5.02.
"Direct Action" shall have the meaning set forth in Section 3.08(e).
"Distribution" means a distribution payable to Holders in accordance
with Section 6.01.
"Distribution Notice" has the meaning set forth in Section 6.02(c).
"Distribution Rate" has the meaning set forth in Annex I hereto.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.04.
"Extension Period" has the meaning set forth in Annex I hereto.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).
4
"Fiscal Year" has the meaning set forth in Section 11.01.
"Global Trust PIERS" has the meaning set forth in Section 7.03(a).
"Holder" means a Person in whose name a Security is registered, such
Person being a beneficial owner within the meaning of the Statutory Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" has the meaning set forth in the Recitals.
"Indenture Event of Default" means an Event of Default (as such term is
defined in the Indenture) under the Indenture.
"Interest Payment Date" has the meaning set forth in the Third
Supplemental Indenture.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company" Act means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.06(g).
"Like Amount" has the meaning set forth in Annex I hereto.
"Liquidation Distribution" has the meaning set forth in Annex I hereto.
"List of Holders" has the meaning set forth in Section 2.02(a).
"Majority in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Trust PIERS or by the Trust
Indenture Act, Holder(s) of outstanding Trust Securities voting together as a
single class or, as the context may require, Holders of outstanding Trust PIERS
or Holders of outstanding Common Securities voting separately as a class, who
are the record owners of more than 50% of the aggregate liquidation amount at
maturity (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions, including
Contingent Distributions if any, to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Market Price" has the meaning specified in the Warrant Agreement.
"93 Day Period" has the meaning set forth Annex I hereto.
"Nominal Accreted Value" has the meaning specified in the Indenture.
5
"No Recognition Opinion" has the meaning set forth in Section 6.02.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by any two of the Chairman, a Vice Chairman, the Chief
Executive Officer, the President, a Vice President, the Chief Financial Officer,
the Treasurer, the Comptroller, the Secretary, or an Assistant Secretary of such
Person. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(i) a statement that each officer signing the Certificate
has read the covenant or condition and the definitions relating
thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(iii) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of the Sponsor.
"Paying Agent" has the meaning set forth in Section 7.04.
"Payment Amount" has the meaning set forth in Section 6.01.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PORTAL" has the meaning set forth in Section 4.02(d).
"Pro Rata" has the meaning set forth in Annex I.
"Property Trustee" has the meaning set forth in Section 5.03(a).
"Property Trustee Account" has the meaning set forth in Section
3.08(c).
"Prospectus" has the meaning set forth in Section 3.06(b).
"QIBs" shall mean qualified institutional buyers as defined in Rule
144A.
"Quorum" means a majority of the Administrative Trustees or, if there
are only two Administrative Trustees, both of them.
6
"Redemption Date" means any date fixed for redemption of the Trust
PIERS pursuant to a Redemption/Distribution Notice.
"Redemption/Distribution Notice" has the meaning set forth in Annex I
hereto.
"Redemption Price" has the meaning set forth in Annex I hereto.
"Registrar" has the meaning set forth in Section 7.04.
"Registration Statement" means the Registration Statement on Form S-3
(333-71568) filed with the Commission.
"Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means any officer within the Corporate Trust
Office of the Property Trustee, including any vice-president, any assistant
vice-president, the treasurer, any assistant treasurer or other officer of the
Corporate Trust Office of the Property Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Trust Agreement.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities" or "Trust Securities" means the Common Securities and the
outstanding Trust PIERS.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"Short-Term Debentures" has the meaning set forth in the Third
Supplemental Debenture.
"Special Event" has the meaning set forth in Annex I hereto.
"Sponsor" means Sovereign Bancorp, Inc., a Pennsylvania corporation, or
any successor entity resulting from any merger, consolidation, amalgamation or
other business combination, in its capacity as sponsor of the Trust.
7
"Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Successor Entity" has the meaning set forth in Section 3.15(b)(i).
"Super Majority" has the meaning set forth in Section 2.06(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Trust PIERS or by the Trust
Indenture Act, Holder(s) of outstanding Trust Securities voting together as a
single class or, as the context may require, Holders of outstanding Trust PIERS
or Holders of outstanding Common Securities voting separately as a class, who
are the record owners of 10% or more of the aggregate liquidation amount at
maturity (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions, including
Contingent Distributions if any, to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Third Supplemental Indenture" has the meaning set forth in the
Recitals.
"Trading Day" has the meaning set forth in the Third Supplemental
Indenture.
"Trading Price" means, as of any date with respect to a given security,
the closing sale price for such security (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either
case, the average of the average bid and the average ask prices) on that date as
reported in composite transactions by the principal U.S. securities exchange on
which the applicable security is traded or, if the applicable security is not
listed on a U.S. national or regional securities exchange, as reported by the
Nasdaq National Market, provided that:
(v) if the applicable security is not listed for trading on a
U.S. national or regional securities exchange and not reported
by the Nasdaq National Market on the relevant date, the
Trading Price will be the last quoted bid price for such
security in the over-the-counter market on the relevant date
as reported by the National Quotation Bureau or similar
organization;
(w) if the applicable security is not so quoted, the Trading
Price will be the average of the mid-points of the last bid
and ask prices of such security on the relevant date from each
of three nationally recognized independent investment banking
firms selected by the Sponsor for this purpose;
(x) if such bid and ask prices cannot reasonably be obtained
from at least three nationally recognized independent
investment banking firms, but such bid and ask prices are
obtained from two nationally recognized independent investment
banking firms, then the Trading Price will be the average of
the mid-points of such bid and ask prices from the two
nationally recognized independent investment banking firms;
and
8
(y) if such bid and ask prices can reasonably be obtained from
only one nationally recognized independent investment banking
firm, then the Trading Price will be the mid-point of such bid
and ask prices from this one nationally recognized independent
investment banking firm.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury Department, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this Trust
Agreement as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Trust PIERS" has the meaning specified in Section 7.01(a).
"Trust PIERS Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Trust PIERS Guarantee" means the guarantee agreement dated as of
February 26, 2004, by the Sponsor in respect of the Trust PIERS.
"Underwriting Agreement" means any underwriting or placement agreement
for the initial offering and sale of Trust PIERS.
"Warrant" has the meaning set forth in the Recitals.
"Warrant Agent" has the meaning set forth in the Recitals.
"Warrant Agreement" has the meaning set forth in the Recitals.
9
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Trust Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Trust
Agreement in order for this Trust Agreement to be qualified under the
Trust Indenture Act and shall, to the extent applicable, be governed by
such provisions.
(b) The Property Trustee shall be the only Trustee which
is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Trust
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
(d) The application of the Trust Indenture Act to this
Trust Agreement shall not affect the Trust's classification as a
grantor trust for United States federal income tax purposes and shall
not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees
on behalf of the Trust shall provide the Property Trustee, unless the
Property Trustee is Registrar for the Securities, (i) within 14 days
after each record date for payment of Distributions, a list, in such
form as the Property Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such record date,
provided that neither the Sponsor nor the Administrative Trustees on
behalf of the Trust shall be obligated to provide such List of Holders
at any time the List of Holders does not differ from the most recent
List of Holders given to the Property Trustee by the Sponsor and the
Administrative Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request for a
List of Holders as of a date no more than 14 days before such List of
Holders is given to the Property Trustee. The Property Trustee shall
preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it
receives in the capacity as Paying Agent (if acting in such capacity),
provided that the Property Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust
Indenture Act.
SECTION 2.03. Reports by the Property Trustee.
Within 60 days after May 15 of each year, commencing May 15, 2004, the
Property Trustee shall provide to the Holders of the Trust PIERS such reports as
are required by
10
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
Delivery of such reports, information and documents to the Property Trustee is
for informational purposes only and the Property Trustee's receipt of such shall
not constitute constructive notice of any information contained therein or
determinable from the information contained therein.
SECTION 2.04. Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by Section 314 of the Trust Indenture Act (if any)
and the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions
Precedent.
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Trust Agreement that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Trust PIERS may, by vote or written consent, on behalf of the Holders
of all of the Trust PIERS, waive any past Event of Default in respect
of the Trust PIERS and its consequences, provided that, if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of
Default under this Trust Agreement shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in aggregate principal amount of the holders of the Debentures
(a "Super Majority") to be waived under the Indenture, the Event of
Default under the Trust Agreement may only be waived by the vote of the
Holders of at least the proportion in aggregate liquidation amount of
the Trust PIERS that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.06 shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded
from this Trust Agreement and the Securities, as permitted by the Trust
Indenture Act. Upon such waiver, any such Event of Default shall cease
to exist, and any Event of Default with respect to the Trust PIERS
arising therefrom shall be deemed to have been cured, for every purpose
of this Trust Agreement, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to
11
the Trust PIERS or impair any right consequent thereon. Any waiver by
the Holders of the Trust PIERS of an Event of Default with respect to
the Trust PIERS shall also be deemed to constitute a waiver by the
Holders of the Common Securities of any such Event of Default with
respect to the Common Securities for all purposes of this Trust
Agreement without any further act, vote, or consent of the Holders of
the Common Securities.
(b) The Holders of a Majority in liquidation amount of
the Common Securities may, by vote, on behalf of the Holders of all of
the Common Securities, waive any past Event of Default with respect to
the Common Securities and its consequences, provided that, if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under this Trust Agreement as provided below in this Section
2.06(b), the Event of Default under this Trust Agreement shall also not
be waivable; or
(ii) requires the consent or vote of a Super Majority to
be waived, except where the Holders of the Common Securities are deemed
to have waived such Event of Default under this Trust Agreement as
provided below in this Section 2.06(b), the Event of Default under this
Trust Agreement may only be waived by the vote of the Holders of at
least the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding;
provided further, the Holders of Common Securities will be deemed to
have waived any such Event of Default and all Events of Default with
respect to the Common Securities and its consequences until all Events
of Default with respect to the Trust PIERS have been cured, waived or
otherwise eliminated, and until such Events of Default have been so
cured, waived or otherwise eliminated, the Property Trustee will be
deemed to be acting solely on behalf of the Holders of the Trust PIERS
and only the Holders of the Trust PIERS will have the right to direct
the Property Trustee in accordance with the terms of the Securities.
The foregoing provisions of this Section 2.06(b) shall be in lieu of
Section 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and
such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
are hereby expressly excluded from this Trust Agreement and the
Securities, as permitted by the Trust Indenture Act. Subject to the
foregoing provisions of this Section 2.06(b), upon such waiver, any
such default shall cease to exist and any Event of Default with respect
to the Common Securities arising therefrom shall be deemed to have been
cured for every purpose of this Trust Agreement, but no such waiver
shall extend to any subsequent or other default or Event of Default
with respect to the Common Securities or impair any right consequent
thereon.
(c) A waiver of an Event of Default under the Indenture
by the Property Trustee, at the direction of the Holders of the Trust
PIERS, constitutes a waiver of the corresponding Event of Default under
this Trust Agreement. The foregoing provisions of this Section 2.06(c)
shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and
12
such Section 316(a)(1)(B) of the Trust Indenture Act is hereby
expressly excluded from this Trust Agreement and the Securities, as
permitted by the Trust Indenture Act.
SECTION 2.07. Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default actually known to a Responsible
Officer, transmit by mail, first class postage prepaid, to the Holders,
notices of all defaults with respect to the Securities actually known
to a Responsible Officer, unless such defaults have been cured before
the giving of such notice (the term "defaults" for the purposes of this
Section 2.07(a) being hereby defined to be an Event of Default as
defined in the Indenture, not including any periods of grace provided
for therein and irrespective of the giving of any notice provided
therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures,
the Property Trustee shall be protected in withholding such notice if
and so long as a Responsible Officer in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Property Trustee shall not be deemed to have
knowledge of any default except:
(i) a default under Sections 2.10(a) and 2.10(b) of the
Third Supplemental Indenture; or
(ii) any default as to which the Property Trustee shall
have received written notice or of which a Responsible Officer charged
with the administration of the Trust Agreement shall have actual
knowledge as evidenced in writing.
(c) Within ten Business Days after the occurrence of any
Event of Default under Sections 2.10(a) and 2.10(b) of the Indenture,
the Property Trustee shall transmit notice of such Event of Default to
the Holders of the Trust PIERS, the Administrative Trustees and the
Sponsor, unless such Event of Default shall have been cured or waived.
The Sponsor and the Administrative Trustees shall file annually with
the Property Trustee a certification as to whether or not they are in
compliance with all the conditions and covenants applicable to them
under this Trust Agreement. The Sponsor or Administrative Trustees
shall deliver to the Property Trustee as soon as possible and in any
event within five days after the Sponsor or the Administrative Trustees
become aware of the occurrence of any Event of Default or an event
that, with notice or the lapse of time or both, would constitute an
Event of Default, an Officer's Certificate setting forth the details of
such Event of Default or default and the action that the Sponsor or
Administrative Trustees propose to take with respect thereto.
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ARTICLE III
ORGANIZATION
SECTION 3.01. Name.
The Trust is named "Sovereign Capital Trust IV" as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Holders. The Trust's activities may be conducted under the name of
the Trust or any other name deemed advisable by the Administrative Trustees.
SECTION 3.02. Office.
The address of the principal office of the Trust is 101 Barclay Street,
8 West, New York, New York 10283. On ten Business Days written notice to the
Holders of Securities, the Administrative Trustees may designate another
principal office.
SECTION 3.03. Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities, (b) use the proceeds from the sale of the Securities to acquire
the Debentures and the Warrants, and (c) except as otherwise limited herein, to
engage in only those other activities necessary, advisable or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, mortgage or pledge any of its assets, or otherwise
undertake (or permit to be undertaken) any activity that would cause the Trust
not to be classified for United States federal income tax purposes as a grantor
trust.
SECTION 3.04. Authority.
Subject to the limitations provided in this Trust Agreement and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Trust Agreement.
SECTION 3.05. Title to Property of the Trust.
Except as provided in SECTION 3.08 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Trust Agreement,
legal title to all assets of the Trust shall be vested in the Trust. The Holders
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
14
SECTION 3.06. Powers and Duties of the Administrative
Trustees.
The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Securities in accordance with
this Trust Agreement; provided, however, that (i) the Trust may issue
no more than one series of Trust PIERS and no more than one series of
Common Securities, (ii) there shall be no interests in the Trust other
than the Securities, and (iii) the issuance of Securities shall be
limited to a simultaneous issuance of both the Trust PIERS and Common
Securities at a Closing Time, provided that the Underwriters may
exercise their option to purchase additional Trust PIERS at the times
and under the conditions specified in the Underwriting Agreement;
(b) in connection with the issue and sale of the Trust
PIERS, at the direction of the Sponsor, to:
(i) prepare and execute, if necessary, a prospectus and
prospectus supplement (the "Prospectus") in preliminary and final form
prepared by the Sponsor, in relation to the offering and sale of Trust
PIERS, and to execute and file with the Commission, at such time as
determined by the Sponsor, any registration statement, including any
amendments thereto;
(ii) to execute and file with the Commission, at such time
as determined by the Sponsor, any registration statement, including any
amendments thereto, in relation to the securities to be issued upon any
Cash Exercise;
(iii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be necessary
in order to qualify or register all or part of the Trust PIERS in any
State in which the Sponsor has determined to qualify or register such
Trust PIERS for sale;
(iv) execute and file an application, prepared by the
Sponsor, to permit the Trust PIERS to trade or be quoted or listed in
or on the New York Stock Exchange or any other securities exchange,
quotation system or the Nasdaq Stock Market's National Market;
(v) execute and deliver letters, documents, or
instruments with DTC and other Clearing Agencies relating to the Trust
PIERS;
(vi) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Trust
PIERS under Section 12 of the Exchange Act; and
(vii) execute and enter into the Underwriting Agreement
providing for, among other things, the sale and registration of the
Trust PIERS;
15
(c) to acquire the Debentures and the Warrants with the
proceeds of the sale of the Trust PIERS and the Common Securities;
provided, however, that the Administrative Trustees shall cause legal
title to the Debentures and the Warrants to be held of record in the
name of the Property Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including and with respect to, for the purposes of Section
316(c) of the Trust Indenture Act, Distributions, voting rights,
redemptions and exchanges, and to issue relevant notices to the Holders
of Trust PIERS and Holders of Common Securities as to such actions and
applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of the
Securities;
(g) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or
demands of or against the Trust ("Legal Action"), unless pursuant to
Section 3.08(e) the Property Trustee has the exclusive power to bring
such Legal Action;
(h) to employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers,
contractors, advisors, and consultants and pay reasonable compensation
for such services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4)
of the Trust Indenture Act to the Property Trustee, which certificate
may be executed by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as,
Registrar and Exchange Agent for the Securities or to appoint a Paying
Agent for the Securities as provided in Section 7.04 except for such
time as such power to appoint a Paying Agent is vested in the Property
Trustee;
(m) to give prompt written notice to the Property Trustee
and to Holders of any notice received from the Debenture Issuer of its
election to defer payments of interest on the Debentures by extending
the interest payment period under the Indenture;
(n) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's
valid existence, rights, franchises and privileges as a statutory trust
under the laws of the State of Delaware and of each other jurisdiction
in
16
which such existence is necessary to protect the limited liability of
the Holders or to enable the Trust to effect the purposes for which the
Trust was created;
(o) to take any action, not inconsistent with this Trust
Agreement or with applicable law, that the Administrative Trustees
determine in their discretion to be necessary or desirable in carrying
out the activities of the Trust as set out in this Section 3.06,
including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified for United States
federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that
the Debentures and Warrants will be treated as a unitary financial
instrument that is indebtedness of the Debenture Issuer subject to the
Contingent Debt Regulations for United States federal income tax
purposes;
(p) to take all action necessary to cause the offer and
sale of the Trust PIERS to be registered pursuant to an effective
registration statement under the Securities Act;
(q) to take all action necessary to cause the issuance of
the securities issuable upon any Cash Exercise to be registered
pursuant to an effective registration statement under the Securities
Act;
(r) to take all action necessary to cause all applicable
tax returns and tax information reports that are required to be filed
with respect to the Trust to be duly prepared and filed by the
Administrative Trustees, on behalf of the Trust; and
(s) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in
all matters necessary or incidental to the foregoing.
The Administrative Trustees must exercise the powers set forth in this
Section 3.06 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.08.
Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.06 shall be reimbursed by the Debenture Issuer.
SECTION 3.07. Prohibition of Actions by the Trust and the
Trustees.
17
(a) The Trust shall not, and the Trustees (including the
Property Trustee and the Delaware Trustee) shall cause the Trust not
to, engage in any activity other than as required or authorized by this
Trust Agreement. In particular, the Trust shall not:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders pursuant to the terms of this Trust Agreement and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as
to vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) other than as provided in this Trust Agreement or
Annex I, (A) direct the time, method and place of conducting any
proceeding with respect to any remedy available to the Debenture
Trustee, or exercising any trust or power conferred upon the Debenture
Trustee with respect to the Debentures, (B) waive any past default that
is waivable under the Indenture, or (C) exercise any right to rescind
or annul any declaration that the principal of all the Debentures shall
be due and payable; or
(viii) consent to any amendment, modification or termination
of the Indenture, the Debentures, the Warrant Agreement or the Warrants
where such consent shall be required unless the Trust shall have
received an opinion of a nationally recognized independent tax counsel
experienced in such matters to the effect that such amendment,
modification or termination will not cause more than an insubstantial
risk that for United States federal income tax purposes the Trust will
not be classified as a grantor trust.
SECTION 3.08. Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures and the Warrants
shall be owned by and held of record in the name of the Property
Trustee in trust for the benefit of the Holders. The right, title and
interest of the Property Trustee to the Debentures and the Warrants
shall vest automatically in each Person who may hereafter be appointed
as Property Trustee in accordance with SECTION 5.07. Such vesting and
cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures and Warrants have been executed
and delivered.
(b) The Property Trustee shall not transfer its right,
title and interest in the Debentures and Warrants to the Administrative
Trustees or to the Delaware Trustee (if the Property Trustee does not
also act as Delaware Trustee).
18
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of
and under the exclusive control of the Property Trustee on behalf of
the Holders and, upon the receipt of payments of funds made in respect
of the Debentures held by the Property Trustee, deposit such funds into
the Property Trustee Account and make payments or cause the Paying
Agent to make payments to the Holders from the Property Trustee Account
in accordance with Section 6.01. Funds in the Property Trustee Account
shall be held uninvested until disbursed in accordance with this Trust
Agreement. The Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose long-term
unsecured indebtedness by a "nationally recognized statistical rating
organization," as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act, is at least investment grade;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Trust
Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders
upon the occurrence of certain events.
(d) The Property Trustee shall take all actions and
perform such duties as may be specifically required of the Property
Trustee pursuant to the terms of this Trust Agreement.
(e) Subject to Section 3.09(a), the Property Trustee
shall take any Legal Action which arises out of or in connection with
an Event of Default of which a Responsible Officer has actual knowledge
or the Property Trustee's duties and obligations under this Trust
Agreement or the Trust Indenture Act and if such Property Trustee shall
have failed to take such Legal Action, the Holders of the Trust PIERS
may take such Legal Action, to the same extent as if such Holders of
Trust PIERS held an aggregate principal amount of Debentures equal to
the aggregate liquidation amount of such Trust PIERS, without first
proceeding against the Property Trustee or the Trust; provided however,
that if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to pay the
principal of or premium, if any, or interest on the Debentures on the
date such principal, premium, if any, or interest is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder
of Trust PIERS may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or premium, if any, or
interest on the Debentures having a principal amount equal to the
aggregate liquidation amount of the Trust PIERS of such Holder (a
"Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the
Holders of the Common Securities will be subrogated to the rights of
such Holder of Trust PIERS to the extent of any payment made by the
Debenture Issuer to such Holder of Trust PIERS in such Direct
19
Action. Except as provided in the preceding sentences, the Holders of
Trust PIERS will not be able to exercise directly any other remedy
available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a Trustee
unless either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders pursuant to the
terms of the Securities; or
(ii) a successor Property Trustee has been appointed and
has accepted that appointment in accordance with Section 5.07 (a
"Successor Property Trustee").
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of
Debentures under the Indenture and of a holder of Warrants under the
Warrant Agreement and, if an Event of Default actually known to a
Responsible Officer occurs and is continuing, the Property Trustee
shall, for the benefit of Holders, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms
of such Securities.
(h) The Property Trustee shall be authorized to undertake
any actions set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying
Agent, the Property Trustee may authorize one or more Persons to act as
additional Paying Agents and to pay Distributions, redemption payments
or liquidation payments on behalf of the Trust with respect to all
Securities and any such Paying Agent shall comply with Section 317(b)
of the Trust Indenture Act. Any such additional Paying Agent may be
removed by the Property Trustee at any time the Property Trustee
remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time
by the Property Trustee while the Property Trustee is so acting as
Paying Agent.
(j) Subject to this Section 3.08, the Property Trustee
shall have none of the duties, liabilities, powers or the authority of
the Administrative Trustees set forth in Section 3.06.
Notwithstanding anything expressed or implied to the contrary in this
Trust Agreement or any Annex or Exhibit hereto, (i) the Property Trustee shall
exercise the powers set forth in this Section 3.08 in a manner that is
consistent with the purposes and functions of the Trust set out in Section 3.03,
and (ii) the Property Trustee shall not take any action that is inconsistent
with the purposes and functions of the Trust set out in Section 3.03.
SECTION 3.09. Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any
Event of Default and after the curing or waiver of all Events of
Default that may have occurred, shall undertake to perform only such
duties as are specifically set forth in this Trust Agreement and in the
Securities and no implied covenants shall be read into this Trust
Agreement against the
20
Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06) of which a
Responsible Officer has actual knowledge, the Property Trustee shall
exercise such of the rights and powers vested in it by this Trust
Agreement, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Trust Agreement shall be
construed to relieve the Property Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the express
provisions of this Trust Agreement and in the Securities and
the Property Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Trust Agreement and in the Securities, and
no implied covenants or obligations shall be read into this
Trust Agreement against the Property Trustee;
(B) in the absence of bad faith on the part
of the Property Trustee, the Property Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Property Trustee and conforming to
the requirements of this Trust Agreement; provided, however,
that in the case of any such certificates or opinions that by
any provision hereof are specifically required to be furnished
to the Property Trustee, the Property Trustee shall be under a
duty to examine the same to determine whether or not they
substantially conform to the requirements of this Trust
Agreement (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein);
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Trust Agreement;
(iv) no provision of this Trust Agreement shall require
the Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or
liability is not
21
reasonably assured to it under the terms of this Trust Agreement or
indemnity reasonably satisfactory to the Property Trustee against such
risk or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures, the
Warrants and the Property Trustee Account shall be to deal with such
property in a similar manner as the Property Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Trust Agreement and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency
of the Debentures, the Warrants or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Property Trustee need
not be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 3.08(c)(i) and except to the extent otherwise required by law;
and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Sponsor
with their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for any default or misconduct of the
Administrative Trustees or the Sponsor.
SECTION 3.10. Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.09:
(i) the Property Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document (whether in
its original or facsimile form) believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the
Administrative Trustees contemplated by this Trust Agreement may be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Trust
Agreement, the Property Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which, upon
receipt of such request, shall be promptly delivered by the Sponsor or
the Administrative Trustees;
22
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or reregistration
thereof;
(v) the Property Trustee may consult with counsel or
other experts of its selection and the advice or opinion of such
counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Trust Agreement from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any Holder, unless such Holder
shall have provided to the Property Trustee security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including reasonable attorneys' fees and expenses and the
expenses of the Property Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be requested by
the Property Trustee provided, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Trust Agreement;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation, at the
expense of the Debenture Issuer, into such facts or matters as it may
see fit and shall incur no liability of any kind by reason of such
inquiry or investigation;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the Property
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders, and the
signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Trust Agreement, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
23
(x) whenever in the administration of this Trust
Agreement the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Property Trustee (i) may request
instructions from the Holders which instructions may only be given by
the Holders of the same proportion in liquidation amount of the
Securities as would be entitled to direct the Property Trustee under
the terms of the Securities in respect of such remedy, right or action,
(ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in or accordance with
such instructions;
(xi) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Trust Agreement;
(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Trust Agreement;
(xiii) in no event shall the Property Trustee be responsible
or liable for special, indirect, or consequential loss or damage of any
kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Property Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action;
(xiv) the Property Trustee shall not be deemed to have
notice of any Default or Event of Default unless a Responsible Officer
of the Property Trustee has actual knowledge thereof or unless written
notice of any event which is in fact such a Default is received by the
Property Trustee at the Corporate Trust Office of the Property Trustee,
and such notice references the Securities and the Indenture; and
(xv) the rights, privileges, protections, immunities and
benefits given to the Property Trustee, including, without limitation,
its right to be indemnified, are extended to, and shall be enforceable
by, the Property Trustee in each of its capacities hereunder, and each
agent, custodian and other Person employed to act hereunder.
(b) No provision of this Trust Agreement shall be deemed
to impose any duty or obligation on the Property Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred
or imposed on it, in any jurisdiction in which it shall be illegal, or
in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to
exercise any such right, power, duty or obligation. No permissive power
or authority available to the Property Trustee shall be construed to be
a duty.
SECTION 3.11. Delaware Trustee.
Notwithstanding any other provision of this Trust Agreement
other than Section 5.02, the Delaware Trustee shall not be entitled to exercise
any powers, nor shall the
24
Delaware Trustee have any of the duties and responsibilities of the
Administrative Trustees or the Property Trustee described in this Trust
Agreement. Except as set forth in Section 5.02, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Statutory Trust Act.
SECTION 3.12. Execution of Documents.
Unless otherwise determined by the Administrative Trustees, and except
as otherwise required by the Statutory Trust Act, a majority of the
Administrative Trustees or, if there are only two, any Administrative Trustee
or, if there is only one, such Administrative Trustee is authorized to execute
on behalf of the Trust any documents that the Administrative Trustees have the
power and authority to execute pursuant to Section 3.06.
SECTION 3.13. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Trust Agreement and the Securities shall
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this Trust
Agreement, the Securities, the Debentures or the Indenture.
SECTION 3.14. Duration of Trust.
The Trust, unless terminated pursuant to the provisions of ARTICLE VIII
hereof, shall have existence up to March 1, 2043.
SECTION 3.15. Mergers.
(a) The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or sell, assign, convey, transfer or
lease its properties and assets substantially as an entirety to any
Person, except as described in Section 3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor, with
the consent of the Administrative Trustees or, if there are more than
two, a majority of the Administrative Trustees and without the consent
of the Holders, the Delaware Trustee or the Property Trustee, merge
with or into, consolidate, amalgamate, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or
substantially as an entirety to, a trust organized as such under the
laws of any State; provided that:
(i) if the Trust is not the successor entity, such
successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations
of the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the
Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the
Securities rank
25
with respect to Distributions, including Contingent
Distributions, and payments upon liquidation,
redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Property Trustee, as the holder of the Debentures and the Warrants;
(iii) the Trust PIERS or the Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange, automated quotation
system, or with another organization on which the Trust PIERS are then
listed or quoted;
(iv) if the Trust PIERS (including any Successor
Securities) are rated by any nationally recognized statistical rating
organization prior to such transaction, such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause
the Trust PIERS (including any Successor Securities), or if the
Debentures are so rated, the Debentures, to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the Holders (including the
holders of any Successor Securities) in any material respect (other
than with respect to any dilution of such Holders' interests in the new
entity);
(vi) such Successor Entity has a purpose identical to that
of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an
opinion of an independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights,
preferences and privileges of the Holders (including
the holders of any Successor Securities) in any
material respect (other than with respect to any
dilution of the Holders' interest in the new entity);
(B) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor the Successor Entity
will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer, or
lease, the Trust (or the Successor Entity) will be
classified as a grantor trust for United States
federal income tax purposes; and
(viii) the Sponsor or any permitted successor or assignee
owns all of the common securities of such Successor Entity and
guarantees the obligations of such
26
Successor Entity under the Successor Securities at least to the extent
provided by the Trust PIERS Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount at
maturity of the Securities, consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to, any other
Person or permit any other Person to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease would cause the
Trust or the Successor Entity not to be classified as a grantor trust
for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.01. Sponsor's Purchase of Common Securities.
At the Closing Time, the Sponsor will purchase all of the Common
Securities then issued by the Trust, in an amount at least equal to
approximately, but not less than, 3% of the capital of the Trust, at the same
time as the Trust PIERS are issued and sold.
SECTION 4.02. Responsibilities of the Sponsor.
In connection with the issue and sale of the Trust PIERS, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Prospectus and to prepare for filing
by the Trust with the Commission any Registration Statement, including
any amendments thereto;
(b) to prepare for filing by the Trust with the
Commission any registration statement, including any amendments
thereto, relating to the issuance of securities issuable upon Cash
Exercise;
(c) to determine the States in which to take appropriate
action to qualify or register for sale all or part of the Trust PIERS
and to do any and all such acts, other than actions which must be taken
by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such States;
(d) if deemed necessary or advisable by the Sponsor, to
prepare for filing by the Trust an application to permit the Trust
PIERS to trade or be quoted or listed in or on the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market, the
New York Stock Exchange, or any other securities exchange, quotation
system or the Nasdaq Stock Market's National Market for listing or
quotation of the Trust PIERS;
27
(e) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A, including any
amendments thereto, relating to the registration of the Trust PIERS
under Section 12 of the Exchange Act; and
(f) to negotiate the terms of the Underwriting Agreement
providing for the sale of the Trust PIERS.
SECTION 4.03. Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Trust PIERS, in
the event that a failure of the Trust to pay Distributions on the Trust PIERS is
attributable to the failure of the Sponsor to pay interest or principal on the
Debentures, to institute a proceeding directly against the Debenture Issuer for
enforcement of its payment obligations on the Debentures.
ARTICLE V
TRUSTEES
SECTION 5.01. Number of Trustees: Appointment of Co-Trustee.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities,
the Sponsor may, by written instrument, increase or decrease the number
of Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a
class at a meeting of the Holders of the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further that (1) if required by the Statutory Trust Act, one
Trustee, in the case of a natural person, shall be a person who is a resident of
the State of Delaware or that, if not a natural person, is an entity which has
its principal place of business in the State of Delaware (the "Delaware
Trustee"); (2) there shall be at least one Trustee who is an employee or officer
of, or is affiliated with the Sponsor (an "Administrative Trustee"); (3) one
Trustee shall be the Property Trustee for so long as this Trust Agreement is
required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements; and (4) all Trustees are United States persons, as defined by
Section 7701(a)(30) of the Code, and at least one of the Trustees is a bank, as
defined in Section 501 of the Code, or a United States government-owned agency
or United States government-sponsored enterprise. Notwithstanding the above,
unless an Event of Default shall have occurred and be continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust's property may at the
time be located, the Holders of a Majority in liquidation amount of the Common
Securities acting as a class at a meeting of the Holders of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more Persons either to act as a co-trustee, jointly with the Property
28
Trustee, of all or any part of the Trust's property, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of this Trust Agreement. In case an Event of Default
has occurred and is continuing, the Property Trustee alone shall have power to
make any such appointment of a co-trustee.
SECTION 5.02. Delaware Trustee.
If required by the Statutory Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise
meets the requirements of applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.03. Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the
"Property Trustee") which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to supervision
or examination by federal, state, territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then for the purposes of this
Section 5.03(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.03(a), the Property Trustee shall
immediately resign in the manner and with the effect set forth in
Section 5.07(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Property Trustee and the Holder of the Common
Securities (as if it were the obligor referred to in Section 310(b) of
the Trust Indenture Act) shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
29
(d) The Trust PIERS Guarantee shall be deemed to be
specifically described in this Trust Agreement for purposes of clause
(i) of the first provision contained in Section 310(b) of the Trust
Indenture Act.
(e) The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street, Fl. 8W
New York, New York 10286
Attention: Corporate Trust Administration
SECTION 5.04. Certain Qualifications of Administrative
Trustees and Delaware Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers. Each Administrative Trustee shall be a U.S. person for
purposes of Section 7701(a)(30) of the Code.
SECTION 5.05. Administrative Trustees.
The initial Administrative Trustees shall be:
Mark R. McCollom
James D. Hogan
Thomas Brugger
(a) Except as expressly set forth in this Trust Agreement
and except if a meeting of the Administrative Trustees is called with
respect to any matter over which the Administrative Trustees have power
to act, any power of the Administrative Trustees may be exercised by,
or with the consent of, any one such Administrative Trustee.
(b) Unless otherwise determined by the Administrative
Trustees, and except as otherwise required by the Statutory Trust Act
or applicable law, any Administrative Trustee is authorized to execute
on behalf of the Trust any documents which the Administrative Trustees
have the power and authority to cause the Trust to execute pursuant to
Section 3.06, provided, that, the registration statement referred to in
Section 3.06, including any amendments thereto, shall be signed by all
of the Administrative Trustees; and
(c) An Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purposes of signing any
documents which the Administrative Trustees have power and authority to
cause the Trust to execute pursuant to Section 3.06.
SECTION 5.06. Delaware Trustee.
The initial Delaware Trustee shall be:
30
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
SECTION 5.07. Appointment, Removal and Resignation of
Trustees.
(a) Subject to Section 5.07(b) and to Section 6(b) of
Annex I hereto, Trustees may be appointed or removed without cause at
any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the Holders
of a Majority in liquidation amount at maturity of the Common
Securities voting as a class at a meeting of the Holders of the Common
Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the
Property Trustee or the Delaware Trustee, by vote of Holders of a
Majority in liquidation amount at maturity of the Trust PIERS voting as
a class at a meeting of Holders of the Trust PIERS.
(b)
(i) The Trustee that acts as Property Trustee shall not
be removed in accordance with Section 5.07(a) until a Successor
Property Trustee ("Successor Property Trustee") has been appointed and
has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Administrative Trustees
and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not
be removed in accordance with this Section 5.07(a) until a successor
Trustee possessing the qualifications to act as Delaware Trustee under
Sections 5.02 and 5.04 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Administrative Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until
his successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior
or subsequent accounting) by an instrument in writing signed by the
Trustee and delivered to the Sponsor and the Trust, which resignation
shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
31
(A) until a Successor Property Trustee has
been appointed and has accepted such appointment by
instrument executed by such Successor Property
Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof
distributed to the Holders; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event
of Default shall have occurred and be continuing after the issuance of
the Securities, the Holders of the Trust PIERS, shall use their best
efforts to promptly appoint a Successor Delaware Trustee or Successor
Property Trustee, as the case may be, if the Property Trustee or the
Delaware Trustee delivers an instrument of resignation in accordance
with this Section 5.07.
(e) If no Successor Property Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as
provided in this Section 5.07 within 30 days after delivery of an
instrument of resignation or removal, the Property Trustee or Delaware
Trustee resigning or being removed, as applicable, may petition, at the
expense of the Debenture Issuer, any court of competent jurisdiction
for appointment of a Successor Property Trustee or Successor Delaware
Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property
Trustee or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Property
Trustee or Successor Delaware Trustee, as the case may be.
SECTION 5.08. Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.01, or if the number of Trustees
is increased pursuant to Section 5.01, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.07.
SECTION 5.09. Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the
number of Administrative Trustees
32
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 5.07, the Administrative
Trustees in office, regardless of their number, shall have all the powers
granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 5.10. Meetings.
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Trust Agreement, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees. In the event
there is only one Administrative Trustee, any and all action of such
Administrative Trustee shall be evidenced by a written consent of such
Administrative Trustee.
SECTION 5.11. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 3.06, including any registration
statement or amendment thereto filed with the Commission, or making any
other governmental filing; and
(b) the Administrative Trustees shall have power to
delegate from time to time to such of their number or to officers of
the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the
Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth
herein.
SECTION 5.12. Merger, Conversion, Consolidation or Succession
to Business.
33
Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee, as the case may be, shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
the Property Trustee or the Delaware Trustee, as the case may be, shall be the
successor of the Property Trustee or the Delaware Trustee, as the case may be,
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS AND CONVERSION
SECTION 6.01. Distributions.
(a) Holders shall receive Distributions, including Contingent
Distributions, in accordance with the applicable terms of the relevant Holder's
Securities. If and to the extent that the Debenture Issuer makes a payment of
interest (including Compounded Interest (as defined in the Indenture),
Additional Sums (as defined in the Indenture) and Contingent Interest (as
defined in the Indenture)), premium and/or principal on the Debentures held by
the Property Trustee or any other payments with respect to the Debentures held
by the Property Trustee (the amount of any such payment being a "Payment
Amount"), the Property Trustee shall and is directed, to the extent funds are
available for that purpose, to make a distribution (a "Distribution") of the
Payment Amount to Holders.
(b) Payment of Distributions, including Contingent Distributions,
on, and any payment of the Redemption Price upon a redemption of, the Securities
shall be made on a Pro Rata basis based on the liquidation amount at maturity of
such Securities; provided that if, on any date on which payment of a
Distribution or the Redemption Price is to be made, an Indenture Event of
Default has occurred and is continuing, then such payment shall not be made on
any of the Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities shall be made, until
all accumulated and unpaid Distributions, including Contingent Distributions, or
payments of the Redemption Price, as the case may be, on all of the outstanding
Trust PIERS for which Distributions, including Contingent Distributions, are to
be paid or that have been called for redemption, as the case may be, are fully
paid. All funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions, including Contingent
Distributions, on, or the Redemption Price of, the Trust PIERS then due and
payable.
SECTION 6.02. Distribution of Debentures and Warrants in
Exchange for Securities.
(a) Provided that the conditions set forth in Section
6.02(b) are satisfied, at any time, the Administrative Trustees may
dissolve the Trust and, after satisfaction of liabilities to creditors
of the Trust as provided by applicable law, cause the Debentures and
the Warrants held by the Property Trustee to be distributed to the
Holders in
34
liquidation of such Holders' interests in the Trust on a Pro Rata
basis, upon not less than 30 nor more than 60 days notice, and,
simultaneous with such distribution, to cause a Like Amount of the
Securities to be exchanged by the Trust on a Pro Rata basis.
(b) The dissolution of the Trust and distribution of the
Debentures and the Warrants pursuant to Section 6.02(a) shall be
permitted only upon satisfaction of the following conditions:
(i) A Special Event shall have occurred;
(ii) the receipt by the Administrative Trustees of an
Opinion of Counsel, rendered by an independent law firm having a
recognized national tax practice, to the effect that the Holder shall
not recognize any gain or loss for United States federal income tax
purposes as a result of the dissolution of the Trust and the
distribution of the Debentures and the Warrants (a "No Recognition
Opinion"); and
(iii) the receipt by the Administrative Trustees of the
prior written consent of the Debenture Issuer.
(c) Notice of any distribution of Debentures and Warrants
in exchange for the Securities (a "Distribution Notice"), which notice
shall be irrevocable, shall be given by the Trust by mail to each
Holder of Securities not fewer than 30 nor more than 60 days before the
date of distribution of the Debentures and the Warrants. A Distribution
Notice shall be deemed to be given on the day such notice is first
mailed by first-class mail, postage prepaid, to Holders. No defect in
the Distribution Notice or in the mailing of the Distribution Notice
with respect to any Holder shall affect the validity of the exchange
proceedings with respect to any other Holder.
Each Distribution Notice shall be sent by the
Property Trustee on behalf of the Trust to:
(i) in respect of the Trust PIERS, the Clearing Agency or
its nominee (or any successor Clearing Agency or its nominee) if the
Global Trust PIERS have been issued or the Holders thereof if
Definitive Trust PIERS have been issued, and
(ii) in respect of the Common Securities, the Holder (or
Holders) thereof.
(d) On and from the date fixed by the Property Trustee
for any distribution of Debentures and Warrants and liquidation of the
Trust:
(i) the Securities no longer shall be deemed to be
outstanding;
(ii) the Clearing Agency or its nominee (or any successor
Clearing Agency or its nominee), as the Holder of the Trust PIERS, will
receive a registered global certificate or certificates representing
the Debentures and, unless the Warrants shall have expired, a
registered global certificate or certificates representing the Warrants
to be delivered upon such distribution; and
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(iii) any certificates representing Securities not held by
the Clearing Agency or its nominee (or any successor Clearing Agency or
its nominee) shall be deemed to represent Debentures having an
aggregate principal amount equal to the aggregate liquidation amount of
such Securities and bearing accrued and unpaid interest in an amount
equal to the accumulated and unpaid Distributions on such Securities,
together with, unless the Warrants shall have expired, one Warrant per
$50 principal amount at maturity of Debentures, until such certificates
are presented for cancellation, at which time the Debenture Issuer
shall issue, and the Debenture Trustee shall authenticate, a
certificate representing such Debentures and, unless the Warrants shall
have expired, the Sponsor shall issue, and the Warrant Agent shall
authenticate, a certificate representing such Warrants.
SECTION 6.03. Conversion. The Holders shall have the right at
any time upon the occurrence of one or more of the events set forth in the Trust
PIERS Certificate and on the dates specified therein, whether at maturity or
upon redemption (whether at the option of the Sponsor, pursuant to a Special
Event or in connection with a Change of Control), at their option, to cause the
Conversion Agent to convert Trust Securities, on behalf of the converting
Holders, into shares of common stock, no par value, of the Sponsor (the "Common
Stock") in the manner described herein on and subject to the following terms and
conditions
(a) The Trust Securities shall be convertible at the
office of the Conversion Agent into fully paid and nonassessable shares
of Common Stock pursuant to the Holder's written direction to the
Conversion Agent to exchange such Trust Securities for a portion of the
Debentures and Warrants theretofore held by the Trust on the basis of
one Debenture with a $50 principal amount at maturity and one Warrant
per Trust Security, and immediately exercise such Warrant for fully
paid and nonassessable shares of Common Stock of the Sponsor at an
initial conversion ratio of 1.6301 shares of Common Stock for each
Warrant, subject to certain adjustments set forth in ARTICLE IV of the
Warrant Agreement (as so adjusted from time to time, the "Conversion
Ratio").
(b) In order to exchange Trust Securities for Debentures
and Warrants and to exercise such Warrants for Common Stock, the Holder
must submit to the Conversion Agent an irrevocable written notice of
conversion in the form provided on the Trust PIERS Certificate (or such
other notice which is acceptable to the Sponsor) (the "Conversion
Request"), together, if the Trust Securities are in certificated form,
with such Trust Security Certificates, duly endorsed or assigned to the
Sponsor or in blank and, if such conversion right is being exercised
prior to March 5, 2007 pursuant to the Cash Exercise Right, cash in the
amount of the Nominal Accreted Value of the Debentures on the
Conversion Date (as defined below). The Conversion Request shall (i)
set forth the Liquidation Amount of Trust Securities to be converted
and the name or names, if other than the Holder, in which the shares of
Common Stock should be issued, and (ii) direct the Conversion Agent (A)
to exchange such Trust Securities for a Like Amount of the Debentures
and Warrants held by the Trust, and (B) to immediately exercise such
Warrants on behalf of such Holder into Common Stock (at the Conversion
Ratio specified in the preceding paragraph) by delivering to the
Sponsor the corresponding Debentures and, if such conversion right is
being exercised prior to March 5, 2007 pursuant to the Cash Exercise
Right, cash in the amount of the Nominal Accreted
36
Value of the Debentures on the Conversion Date. The Conversion Agent
shall notify the Trust of the Holder's election to exchange Trust
Securities for a portion of the Debentures and Warrants held by the
Trust and the Property Trustee, on behalf of the Trust, shall, upon
receipt of such notice, deliver to the Conversion Agent the appropriate
principal amount of Debentures and Warrants for exchange in accordance
with this Section 6.03. The Conversion Agent shall thereupon notify the
Sponsor of the Holder's election to exercise such Warrants for shares
of Common Stock.
(c) A Holder's ability to Cash Exercise its Trust PIERS
at any time prior to March 5, 2007 is subject to the following
conditions:
(i) a registration statement shall be in effect
under the Securities Act covering the issuance and sale of the
Common Stock and, to the extent required by applicable law,
the Short-Term Debentures upon Cash Exercise;
(ii) the Common Stock shall have been registered,
qualified or deemed to be exempt under applicable state
securities laws; and
(iii) to the extent required by applicable law, a
then-current prospectus is delivered to the Holder exercising
its right to Cash Exercise.
(d) The Sponsor agrees to use its reasonable best efforts
to file as soon as practicable and in any event no later than five
Business Days after the first Trading Day when the Market Price of the
Common Stock shall be equal to or greater than the Conversion Price as
of such date and as adjusted pursuant to Article IV of the Warrant
Agreement, to have declared effective and to thereafter maintain the
effectiveness, until the earlier of (i) March 5, 2007 or (ii) such time
as no Trust PIERS or Warrants remain outstanding, of a shelf
registration statement covering the issuance and sale of the Common
Stock and, to the extent required by applicable law, the Short-Term
Debentures upon Cash Exercise. The Sponsor further agrees to use the
cash proceeds of any Cash Exercise for "current transactions" within
the meaning of Section 3(a)(3) under the Securities Act.
(e) Any Trust PIERS or portion thereof surrendered for
conversion during the period from the close of business on the record
date for any Distribution Date to the close of business on the Business
Day next preceding the following Distribution Date shall (unless such
Trust PIERS or portion thereof being converted shall have been called
for redemption on a Redemption Date which occurs during the period from
the close of business on such record date to the close of business on
the Business Day next preceding the following Distribution Date) be
accompanied by payment, in New York Clearing House funds or other funds
acceptable to the Sponsor, of an amount equal to the Distributions
(including Contingent Distributions, if any) otherwise payable on such
Distribution Date on the Liquidation Amount being converted; provided,
however, that if notice of redemption of Trust PIERS is mailed or
otherwise given to Holders, then, if any Holder converts any Trust
PIERS into Common Stock on any date on or after the date on which such
notice of redemption is mailed or otherwise given, and if such date of
conversion falls on any day from and including the first day of an
Extension Period and
37
on or prior to the Distribution Date upon which such Extension Period
ends, such converting Holder shall be entitled to receive either (i) if
the date of such conversion falls after a Regular Record Date and on or
prior to the next succeeding Distribution Date, all accrued and unpaid
Distributions on such Trust PIERS (including Distributions thereon, if
any, to the extent permitted by applicable law) to such Distribution
Date, or (ii) if the date of such conversion does not fall on a date
described in clause (i) above, all accrued and unpaid Distributions
(including Contingent Distributions, if any) on such Trust PIERS
(including Distributions (including Contingent Distributions, if any)
thereon, if any, to the extent permitted by applicable law) to the most
recent Distribution Date prior to the date of such conversion, which
Distributions (including Contingent Distributions, if any) shall, in
either such case, be paid to such converting Trust PIERS unless the
date of conversion of such Trust PIERS is on or prior to the
Distribution Date upon which such Extension Period ends and after the
Regular Record Date for such Distribution Date, in which case
Distributions (including Contingent Distributions, if any) shall be
paid to the person who was the Holder at the close of business on such
regular record date. Except as otherwise set forth above in this
paragraph, in the case of any Trust PIERS which is converted,
Distributions (including Contingent Distributions, if any) which are
payable after the date of conversion of such Trust PIERS shall not be
payable, and the Sponsor shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but
unpaid Distributions (including Contingent Distributions, if any) on
the Trust PIERS being converted, which shall be deemed to be paid in
full. Except as provided herein, no payment or other adjustment shall
be made for Distributions (including Contingent Distributions, if any)
accrued on any Trust PIERS converted or for dividends on any shares
issued upon the conversion of such Trust PIERS.
(f) Each Holder of a Trust Security by his acceptance
thereof appoints The Bank of New York (in such capacity the "Conversion
Agent") for the purpose of effecting the conversion of Trust Securities
in accordance with this Section 6.03. In effecting the conversion and
transactions described in this Section 6.03, the Conversion Agent shall
be acting as agent of the Holders directing it to effect such
conversion transactions. The Conversion Agent is hereby authorized (i)
to exchange Trust Securities from time to time for Debentures and
Warrants held by the Trust in connection with the conversion of such
Trust Securities with this Section 6.03, and (ii) to exercise all or a
portion of the Warrants for Common Stock and thereupon to deliver such
shares of Common Stock in accordance with the provisions of this
Section 6.03 and to deliver to the Trust a new Debenture and Warrants
or Debentures and Warrants for any resulting unconverted principal
amount.
(g) No fractional shares of Common Stock shall be issued
as a result of conversion, but in lieu thereof, such fractional
interest shall be paid in cash (based on the Trading Price of the
Common Stock on the third Trading Day prior to the Conversion Date) by
the Sponsor to the Trust, which in turn shall make such payment to the
Holder or Holders of Trust Securities so converted.
(h) The Sponsor shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for
issuance upon the exercise of the
38
Warrants, free from any preemptive or other similar rights, such number
of shares of Common Stock as shall from time to time be issuable upon
the exercise of all of the Warrants then outstanding. Notwithstanding
the foregoing, the Sponsor shall be entitled to deliver, upon exercise
of Warrants, shares of Common Stock reacquired and held in the treasury
of the Sponsor (in lieu of the issuance of authorized and unissued
shares of Common Stock), so long as any such treasury shares are free
and clear of all liens, charges, security interests or encumbrances.
Any shares of Common Stock issued upon exercise of the Warrants shall
be duly authorized, validly issued, fully paid and nonassessable. The
Trust shall deliver the shares of Common Stock of the Sponsor received
upon exercise of the Warrants to the converting Holder free and clear
of all liens, charges, security interests and encumbrances, except for
United States withholding taxes.
(i) The Sponsor shall pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common Stock
on exercise of Warrants and the delivery of the shares of Common Stock
by the Trust upon conversion of the Trust Securities. The Sponsor shall
not, however, be required to pay any tax that may be payable in respect
of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the Trust Securities so
converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Trust
the amount of any such tax or has established to the satisfaction of
the Trust that has been paid.
(j) Nothing in the preceding Section 6.03 shall limit the
requirements of the Trust to withhold taxes pursuant to the terms of
the Trust Securities or as set forth in this Trust Agreement or
otherwise require the Property Trustee or the Trust to pay any amount
on account of such withholdings.
(k) The Property Trustee has no duty to determine when an
adjustment under this ARTICLE VI should be made, how it should be made
or what it should be. The Property Trustee has no duty to determine
whether a supplemental indenture under this Section 6.03 need be
entered into or whether any provisions of any supplemental indenture
are correct. The Property Trustee shall not be accountable for and
makes no representation as to the validity or value of any securities
or assets issued upon conversion of Securities. The Property Trustee
shall not be responsible for the Sponsor's failure to comply with this
Article VI. Each Conversion Agent (other than the Sponsor or an
Affiliate of the Sponsor) shall have the same protection under this
Section 6.03 as the Property Trustee.
(l) The "Conversion Date" with respect to a Holder
seeking conversion of Trust Securities shall be the date on which such
Holder complies with all of the requirements set forth in this Section
6.03 for conversion of such Trust Securities.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.01. General Provisions Regarding Securities.
(a) The Administrative Trustees shall on behalf of the
Trust issue one class of capital securities representing undivided
beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I (the "Trust PIERS") and one class of common
securities representing undivided beneficial interests in the assets of
the Trust having such terms as are set forth in Annex I (the "Common
Securities").
(b) The consideration received by the Trust for the
issuance of the Securities shall constitute a contribution to the
capital of the Trust and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Trust Agreement, the Securities so issued shall be deemed to be validly
issued, fully paid and non-assessable.
(d) Every Person, by virtue of having become a Holder or
a Trust PIERS Beneficial Owner in accordance with the terms of this
Trust Agreement, shall be deemed to have expressly assented and agreed
to the terms of, and shall be bound by, this Trust Agreement.
SECTION 7.02. Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust
by an Administrative Trustee by manual or facsimile signature. In case
any Administrative Trustee of the Trust who shall have signed any of
the Securities shall cease to be such Administrative Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such
Securities had not ceased to be such Administrative Trustee; and any
Securities may be signed on behalf of the Trust by such persons who, at
the actual date of execution of such Security, shall be the
Administrative Trustees of the Trust, although at the date of the
execution and delivery of the Trust Agreement any such person was not
such a Administrative Trustee.
(b) One Administrative Trustee shall sign the Securities
for the Trust by manual or facsimile signature.
A Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee.
The signature shall be conclusive evidence that the Security has been
authenticated under this Trust Agreement.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Securities for
original issue. The aggregate number of Trust PIERS outstanding at any
time shall not exceed the number set forth in the Terms in Annex I
hereto except as provided in Section 7.06.
40
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Securities. An authenticating
agent may authenticate Securities whenever the Property Trustee may do
so. Each reference in this Trust Agreement to authentication by the
Property Trustee includes authentication by such agent. An
authenticating agent has the same rights as the Property Trustee to
deal with the Sponsor or an Affiliate.
SECTION 7.03. Form and Dating.
The Trust PIERS shall be substantially in the form of Exhibit
A-1 and the Common Securities shall be substantially in the form of
Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Trust Agreement. The Property Trustee's certificate of
authentication shall be substantially in the form set forth in Exhibits
A-1 and A-2. Certificates representing the Securities may be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by
their execution thereof. The Securities may have letters, CUSIP or
other numbers, notations or other marks of identification or
designation and such legends or endorsements required by law, stock
exchange rule, agreements to which the Trust is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Trust). The Trust at the direction of the
Sponsor shall furnish any such legend not contained in Exhibit A-1 to
the Property Trustee in writing. Each Trust PIERS shall be dated the
date of its authentication. The terms and provisions of the Securities
set forth in Annex I and the forms of Securities set forth in Exhibits
A-1 and A-2 are part of the terms of this Trust Agreement and to the
extent applicable, the Property Trustee and the Sponsor, by their
execution and delivery of this Trust Agreement, expressly agree to such
terms and provisions and to be bound thereby.
(a) Global Securities. Securities may be issued in the
form of one or more, permanent global Securities in definitive, fully
registered form without distribution coupons with the appropriate
global legends (a "Global Trust PIERS"), which shall be deposited on
behalf of the purchasers of the Trust PIERS represented thereby with
the Property Trustee, at its New York office, as custodian for the
Clearing Agency, and registered in the name of the Clearing Agency or a
nominee of the Clearing Agency, duly executed by the Trust and
authenticated by the Property Trustee as hereinafter provided. The
number of Trust PIERS represented by a Global Trust PIERS may from time
to time be increased or decreased by adjustments made on the records of
the Property Trustee and the Clearing Agency or its nominee as
hereinafter provided.
(b) Book-Entry Provisions. This Section 7.03(b) shall
apply only to the Global Trust PIERS and such other Trust PIERS in
global form as may be authorized by the Trust to be deposited with or
on behalf of the Clearing Agency.
The Trust shall execute and the Property Trustee shall, in
accordance with this Section 7.03, authenticate and make available for
delivery initially one or more Global Trust PIERS that (i) shall be
registered in the name of Cede & Co. or other nominee of such Clearing
Agency and (ii) shall be delivered by the Trustee to such Clearing
Agency
41
or pursuant to such Clearing Agency's written instructions or held by
the Property Trustee as custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Trust Agreement with
respect to any Global Trust PIERS held on their behalf by the Clearing
Agency or by the Property Trustee as the custodian of the Clearing
Agency or under such Global Trust PIERS, and the Clearing Agency may be
treated by the Trust, the Property Trustee and any agent of the Trust
or the Property Trustee as the absolute owner of such Global Trust
PIERS for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Trust, the Property Trustee or any
agent of the Trust or the Property Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Clearing Agency or impair, as between the Clearing Agency and its
Participants, the operation of customary practices of such Clearing
Agency governing the exercise of the rights of a holder of a beneficial
interest in any Global Trust PIERS.
(c) Definitive Trust PIERS. Except as provided in Section
7.09 or 9.02(e)(i), owners of beneficial interests in a Global Trust
PIERS will not be entitled to receive physical delivery of certificated
Trust PIERS ("Definitive Trust PIERS").
(d) Authorized Denominations. The Trust PIERS are
issuable only in denominations of $50.00 and any integral multiple
thereof.
SECTION 7.04. Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in the Borough of Manhattan, The City
of New York, (i) an office or agency where Trust PIERS may be presented
for registration of transfer ("Registrar"), (ii) an office or agency
where Trust PIERS may be presented for payment ("Paying Agent") and
(iii) an office or agency where Securities may be presented for
exchange ("Exchange Agent"). The Registrar shall keep a register of the
Trust PIERS and of their transfer. The Trust may appoint the Registrar,
the Paying Agent and the Exchange Agent and may appoint one or more
co-registrars, one or more additional paying agents and one or more
additional exchange agents in such other locations as it shall
determine. The term "Registrar" includes any additional registrar,
"Paying Agent" includes any additional paying agent and the term
"Exchange Agent" includes any additional exchange agent. The Trust may
change any Paying Agent, Registrar, co-registrar or Exchange Agent
without prior notice to any Holder. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees. The Trust shall notify the Property Trustee of
the name and address of any Agent not a party to this Trust Agreement.
If the Trust fails to appoint or maintain another entity as Registrar,
Paying Agent or Exchange Agent, the Property Trustee shall act as such.
The Trust or any of its Affiliates may act as Paying Agent, Registrar,
or Exchange Agent. The Trust shall act as Paying Agent, Registrar,
co-registrar, and Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as
Registrar, Paying Agent, and Exchange Agent for the Trust PIERS.
42
SECTION 7.05. Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.06. Replacement Securities.
If a Holder claims that a Security owned by it has been lost, destroyed
or wrongfully taken or if such Security is mutilated and is surrendered to the
Trust or in the case of the Trust PIERS to the Property Trustee, the Trust shall
issue and the Property Trustee shall, upon written order of the Trust,
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. An indemnity bond must be provided by
the Holder which, in the judgment of the Property Trustee, is sufficient to
protect the Trustees, the Sponsor, the Trust or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Trust may
charge such Holder for its expenses in replacing a Security.
Every replacement Security is an additional beneficial interest in the
Trust.
SECTION 7.07. Outstanding Trust PIERS.
The Trust PIERS outstanding at any time are all the Trust
PIERS authenticated by the Property Trustee except for those cancelled
by it, those delivered to it for cancellation, and those described in
this SECTION as not outstanding.
If a Trust PIERS is replaced, paid or purchased pursuant to
SECTION 7.06 hereof, it ceases to be outstanding unless the Property
Trustee receives proof satisfactory to it that the replaced, paid or
purchased Trust PIERS is held by a bona fide purchaser.
If Trust PIERS are considered paid in accordance with the
terms of this Trust Agreement, they cease to be outstanding and
Distributions, including Contingent Distributions, on them shall cease
to accumulate.
A Trust PIERS does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the
Security.
SECTION 7.08. Trust PIERS in Treasury.
In determining whether the Holders of the required amount of Securities
have concurred in any direction, waiver or consent, Trust PIERS owned by the
Trust, the Sponsor or an Affiliate
43
of the Sponsor, as the case may be, shall be disregarded and deemed not to be
outstanding, except that for the purposes of determining whether the Property
Trustee shall be fully protected in relying on any such direction, waiver or
consent, only Securities which a Responsible Officer of the Property Trustee
actually knows are so owned shall be so disregarded.
SECTION 7.09. Temporary Securities.
(a) Until Definitive Securities are ready for delivery,
the Trust may prepare and, in the case of the Trust PIERS, the Property
Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of Definitive Securities but may
have variations that the Trust considers appropriate for temporary
Securities. Without unreasonable delay, the Trust shall prepare and, in
the case of the Trust PIERS, the Property Trustee shall authenticate
Definitive Securities in exchange for temporary Securities.
(b) A Global Trust PIERS deposited with the Clearing
Agency or with the Property Trustee as custodian for the Clearing
Agency pursuant to Section 7.03 shall be transferred to the beneficial
owners thereof in the form of certificated Trust PIERS only if such
transfer complies with Section 9.02 and (i) the Clearing Agency
notifies the Sponsor that it is unwilling or unable to continue as
Clearing Agency for such Global Trust PIERS or if at any time such
Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act and a clearing agency is not appointed by the Sponsor
within 90 days of such notice, (ii) a Default or an Event of Default
has occurred and is continuing or (iii) the Trust at its sole
discretion elects to cause the issuance of certificated Trust PIERS.
(c) Any Global Trust PIERS that is transferable to the
beneficial owners thereof in the form of certificated Trust PIERS
pursuant to this Section 7.09 shall be surrendered by the Clearing
Agency to the Property Trustee located in the Borough of Manhattan, The
City of New York, to be so transferred, in whole or from time to time
in part, without charge, and the Property Trustee shall authenticate
and make available for delivery, upon such transfer of each portion of
such Global Trust PIERS, an equal aggregate liquidation amount of
Securities of authorized denominations in the form of certificated
Trust PIERS. Any portion of a Global Trust PIERS transferred pursuant
to this Section shall be registered in such names as the Clearing
Agency shall direct.
(d) Subject to the provisions of Section 7.09(c), the
Holder of a Global Trust PIERS may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which such Holder is
entitled to take under this Trust Agreement or the Securities.
(e) In the event of the occurrence of any of the events
specified in Section 7.09(b), the Trust will promptly make available to
the Property Trustee a reasonable supply of certificated Trust PIERS in
fully registered form without distribution coupons.
SECTION 7.10. Cancellation.
44
The Trust at any time may deliver Trust PIERS to the Property Trustee
for cancellation. The Registrar, Paying Agent and Exchange Agent shall forward
to the Property Trustee any Trust PIERS surrendered to them for registration of
transfer, redemption, exchange or payment. The Property Trustee shall promptly
cancel all Trust PIERS, surrendered for registration of transfer, redemption,
exchange, payment, replacement or cancellation and shall dispose of cancelled
Trust PIERS as the Trust directs, provided that the Property Trustee shall not
be obligated to destroy Trust PIERS. The Trust may not issue new Trust PIERS to
replace Trust PIERS that it has paid or that have been delivered to the Property
Trustee for cancellation or that any Holder has exchanged.
SECTION 7.11. CUSIP Numbers.
The Trust in issuing the Trust PIERS may use "CUSIP" numbers (if then
generally in use), and, if so, the Property Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders of Trust PIERS; provided that
any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Trust PIERS or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Trust PIERS, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Sponsor will
promptly notify the Property Trustee of any change in the CUSIP numbers.
SECTION 7.12. Tax Treatment of Debentures and Warrants.
The Sponsor and the Trust agree, and by acceptance of a beneficial
ownership interest in the Trust Securities each beneficial holder of Trust
Securities agrees, for United States federal income tax purposes, (i) to treat
each Debenture and the corresponding Warrant in which such holder has a
beneficial interest as a single unitary instrument, (ii) to treat such unitary
instrument as indebtedness of the Sponsor, (iii) to treat such indebtedness as
subject to Section 1.1275-4(b) of the Treasury Regulations (the "Contingent Debt
Regulations"), (iv) to be bound by the Sponsor's determination of the
"comparable yield" and "projected payment schedule," within the meaning of the
Contingent Debt Regulations, with respect to such holder's Trust Securities, and
(v) to use such "comparable yield" and "projected payment schedule" in
determining its interest accruals with respect to such holder's Trust Securities
and in determining adjustments thereto. For purposes of the foregoing, the
Sponsor's determination of the "comparable yield" is 7.410% per annum,
compounded quarterly. The projected payment schedule, determined by the Sponsor,
is attached to the Third Supplemental Indenture as Exhibit B. A Holder of Trust
Securities may obtain the Issue Date, yield to maturity, comparable yield and a
copy of the projected payment schedule for the Debentures and corresponding
Warrants by telephoning the Sponsor's Investor Relations Department at (610)
320-8400 or submitting a written request for such information to Investor
Relations Department, Sovereign Bank, Mail Code 11-900-IR5, P.O. Box 12646,
Reading, PA 19612, Attn: Mark R. McCollom.
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ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.01. Termination of Trust.
(a) The Trust shall automatically terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the
revocation of the Sponsor's charter and the expiration of 90 days after
the date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount (as
defined in Annex I hereto) of the Debentures and Warrants to the
Holders, provided that, the Property Trustee has received written
notice from the Sponsor directing the Property Trustee to terminate the
Trust (which direction is optional, and except as otherwise expressly
provided below, within the discretion of the Sponsor) and provided,
further, that such direction and such distribution is conditioned on
(i) the receipt by the Sponsor of any required regulatory approval and
(ii) the Administrative Trustees' receipt of a No Recognition Opinion;
(iv) upon the entry of a decree of judicial dissolution of
the Sponsor or the Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(vi) upon the repayment of the Debentures and expiration
of the Warrants or at such time as no Debentures or Warrants are
outstanding; or
(vii) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable after the occurrence of an
event referred to in Section 8.01(a), the Administrative Trustees shall
file a certificate of cancellation with the Secretary of State of the
State of Delaware.
(c) The provisions of Section 3.09 and ARTICLE X shall
survive the termination of the Trust.
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SECTION 8.02. Liquidation Distribution Upon Dissolution or
Termination of the Trust.
(a) In the event of any voluntary or involuntary
dissolution or termination of the Trust pursuant to Section 8.01(a)(i),
8.01(a)(ii), 8.01(a)(iii) or 8.01(a)(iv) (each a "Liquidation"), the
Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible
by distributing to the Holders, after satisfaction of liabilities to
creditors of the Trust, if any, as provided by applicable law,
Debentures in an aggregate principal amount at maturity equal to the
aggregate stated liquidation amount of, with an interest rate identical
to the Distribution rate of, and accrued and unpaid interest equal to
accumulated and unpaid Distributions, including Contingent
Distributions, on, such Securities in exchange for such Securities, and
Warrants equal in number to the number of such Debentures.
(b) If, notwithstanding the other provisions of this
Section 8.02, distribution of the Debentures and Warrants in the manner
set forth in Section 8.02(a)(i) is determined by the Property Trustee
not to be practical, the assets of the Trust shall be liquidated, and
the Trust shall be wound-up by the Property Trustee in such manner as
the Property Trustee determines. In such event, the Holders shall be
entitled to receive out of the assets of the Trust available for
distribution to the Holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal
to the liquidation amount at maturity of the Securities plus
accumulated and unpaid Distributions, including Contingent
Distributions, thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such Liquidation, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay the aggregate Liquidation
Distribution in full, then the amounts payable directly by the Trust on
the Securities shall be paid on a Pro Rata basis, provided that if an
Indenture Event of Default has occurred and is continuing, then the
Trust PIERS shall have a preference over the Common Securities with
regard to the Liquidation Distribution.
(c) Notice of any distribution of Debentures and Warrants
in exchange for the Securities (an "Exchange Notice"), which notice
shall be irrevocable, shall be given by the Administrative Trustees on
behalf of the Trust by mail to each Holder at least 30 but no more than
60 days before the date fixed for such distribution. For purposes of
the calculation of the date of distribution and the dates on which
notices are given pursuant to this Section 8.02(c), an Exchange Notice
shall be deemed to be given on the day such notice is first mailed by
first-class mail, postage prepaid, to the Holders. Each Exchange Notice
shall be addressed to the Holders at the address of each such Holder
appearing on the books and records of the Trust. No defect in the
Exchange Notice or in the mailing thereof with respect to any Holder
shall affect the validity of the distribution proceedings with respect
to any other Holder.
(d) On and from the date fixed for any distribution of
Debentures and Warrants upon dissolution of the Trust:
(i) the Securities no longer shall be deemed to be
outstanding;
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(ii) the Clearing Agency or its nominee (or any successor
Clearing Agency or its nominee), as the Holder of the Trust PIERS, will
receive a registered global certificate or certificates representing
the Debentures and, if the Warrants shall not have expired, a
registered global certificate or certificates representing the Warrants
to be delivered upon such distribution; and
(iii) any certificates representing Securities not held by
the Clearing Agency or its nominee (or any successor Clearing Agency or
its nominee) shall be deemed to represent Debentures having an
aggregate principal amount at maturity equal to the aggregate
liquidation amount at maturity of such Securities and bearing accrued
and unpaid interest in an amount equal to the accumulated and unpaid
Distributions, including Contingent Distributions, on such Securities,
together with Warrants, if the Warrants shall not have expired, in the
ratio of one Warrant per $50 principal amount at maturity of
Debentures, until such certificates are presented for cancellation, at
which time the Debenture Issuer shall issue, and the Debenture Trustee
shall authenticate, a certificate representing such Debentures, and
unless the Warrants shall have expired, the Sponsor shall issue, and
the Warrant Agent shall authenticate, a certificate representing such
Debentures.
(e) Each Holder of Trust Securities shall be deemed to
agree, by its acceptance of any Trust Security, not to assert upon the
occurrence of any of the events indicated in clauses (i), (ii) or (iv)
of Section 8.01(a), or any similar event, any claim before any court
having jurisdiction in the premises under the Federal bankruptcy laws,
as now or hereafter constituted, or any other applicable Federal or
state bankruptcy, insolvency or other similar law, in excess of the
Nominal Accreted Value of a Like Amount of Debentures on the date of
commencement of any such proceedings before such court.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.01. Transfer of Securities.
(a) Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this
Trust Agreement and in the terms of the Securities. Any transfer or
purported transfer of any Security not made in accordance with this
Trust Agreement shall be null and void.
(b) Subject to this Article IX, Trust PIERS may only be
transferred, in whole or in part, in accordance with the terms and
conditions set forth in this Trust Agreement. Any transfer or purported
transfer of any Security not made in accordance with this Trust
Agreement shall be null and void.
(c) For so long as the Trust Securities remain
outstanding, the Sponsor covenants (i) to maintain, directly or
indirectly, ownership of 100% of the Common Securities of the Trust;
provided, however, that any permitted successor of the Sponsor
48
under the Indenture may succeed to the Sponsor's ownership of such
Common Securities, (ii) not to cause, as sponsor of the Trust, or to
permit, as Holder of the Common Securities, the dissolution, winding-up
or termination of the Trust, except in connection with a distribution
of the Debentures and the Warrants as provided in this Trust Agreement
and in connection with certain mergers, consolidations or amalgamations
permitted by this Trust Agreement, (iii) to cause the Trust (a) to
remain a statutory trust, except in connection with the distribution of
Debentures and the Warrants to the Holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust
Securities, or certain mergers, consolidations or amalgamations, each
as permitted by this Trust Agreement, and (b) to otherwise continue to
be classified as a grantor trust for United States federal income tax
purposes, (iv) to use its commercially reasonable efforts to ensure
that the Trust will not be an Investment Company required to be
registered under the Investment Company Act, and (v) not to take any
action that would be reasonably likely to cause the Trust to be
classified as an association or a publicly traded partnership taxable
as a corporation for United States federal income tax purposes.
(d) For so long as the Trust Securities remain
outstanding, the Sponsor covenants not to cause, as sponsor of the
Trust, or to permit, as Holder of the Common Securities the Debentures
and the Warrants held by the Property Trustee to be transferred
separately. Any transfer of a Debenture without a corresponding Warrant
shall be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be a Holder of such Debentures or
Warrants for any purpose, and such transferee shall be deemed to have
no interest whatsoever in such Debentures or Warrants.
(e) The Administrative Trustees shall provide for the
registration of Securities and of the transfer of Securities, which
will be effected without charge but only upon payment (with such
indemnity as the Administrative Trustees may require) in respect of any
tax or other governmental charges that may be imposed in relation to
it. Upon surrender for registration of transfer of any Securities, the
Administrative Trustees shall cause one or more new Securities to be
issued in the name of the designated transferee or transferees. Every
Security surrendered for registration of transfer shall be accompanied
by a written instrument of transfer in form satisfactory to the
Administrative Trustees duly executed by the Holder or such Holder's
attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Property Trustee (in
the case of Trust PIERS) or the Trust (in the case of Common
Securities). A transferee of a Security shall be entitled to the rights
and subject to the obligations of a Holder hereunder upon the receipt
by such transferee of a Security. By acceptance of a Security, each
transferee shall be deemed to have agreed to be bound by this Trust
Agreement.
SECTION 9.02. Transfer Procedures and Restrictions.
(a) General. No transfer or exchange of a Definitive
Trust PIERS or of an interest in the Global Trust PIERS shall be
effective unless the transferor delivers to the Trust a certificate in
a form substantially similar to that attached hereto as the form of
"Assignment" in Exhibit A-1.
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(b) Transfer and Exchange of Definitive Trust PIERS. When
Definitive Trust PIERS are presented to the Registrar or co-Registrar
(i) to register the transfer of such Definitive Trust
PIERS; or
(ii) to exchange such Definitive Trust PIERS which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of
Definitive Trust PIERS,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Trust PIERS surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Trust and the Registrar or
co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
(c) Restrictions on Transfer of a Definitive Trust PIERS
for a Beneficial Interest in a Global Trust PIERS. A Definitive Trust
PIERS may not be exchanged for a beneficial interest in a Global Trust
PIERS except upon satisfaction of the requirements set forth below.
Upon receipt by the Property Trustee of a Definitive Trust PIERS, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with written
instructions directing the Property Trustee to make, or to direct the
Clearing Agency to make, an adjustment on its books and records with
respect to the appropriate Global Trust PIERS to reflect an increase in
the number of the Trust PIERS represented by such Global Trust PIERS,
then the Property Trustee shall cancel such Definitive Trust PIERS and
cause, or direct the Clearing Agency to cause, the aggregate number of
Trust PIERS represented by the appropriate Global Trust PIERS to be
increased accordingly. If no Global Trust PIERS are then outstanding,
the Trust shall issue and the Property Trustee shall authenticate, upon
written order of any Administrative Trustee, an appropriate number of
Trust PIERS in global form.
(d) Transfer and Exchange of Global Trust PIERS. Subject
to Section 9.02(e), the transfer and exchange of Global Trust PIERS or
beneficial interests therein shall be effected through the Clearing
Agency, in accordance with this Trust Agreement (including applicable
restrictions on transfer set forth herein, if any) and the procedures
of the Clearing Agency therefor.
(e) Transfer of a Beneficial Interest in a Global Trust
PIERS for a Definitive Trust PIERS.
(i) Any Person having a beneficial interest in a Global
Trust PIERS may upon request, but only upon 20 days prior notice to the
Property Trustee, and if accompanied by the information specified
below, exchange such beneficial interest for a Definitive Trust PIERS
representing the same number of Trust PIERS. Upon receipt by the
Property Trustee from the Clearing Agency or its nominee on behalf of
any Person having a beneficial interest in a Global Trust PIERS of
written instructions or such other form of instructions as is customary
for the Clearing Agency or the Person designated by the Clearing Agency
as having such a beneficial interest in a Trust PIERS and a
certification from the transferor (in a form substantially similar to
that attached hereto as
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the form of "Assignment" in Exhibit A-1), which may be submitted by
facsimile, then the Property Trustee will cause the aggregate number of
Trust PIERS represented by Global Trust PIERS to be reduced on its
books and records and, following such reduction, the Trust will execute
and the Property Trustee will authenticate and make available for
delivery to the transferee a Definitive Trust PIERS.
(ii) Definitive Trust PIERS issued in exchange for a
beneficial interest in a Global Trust PIERS pursuant to this Section
9.02(e) shall be registered in such names and in such authorized
denominations as the Clearing Agency, pursuant to instructions from its
Clearing Agency Participants or otherwise, shall instruct the Property
Trustee in writing. The Property Trustee shall deliver such Trust PIERS
to the Persons in whose names such Trust PIERS are so registered in
accordance with such instructions of the Clearing Agency.
(f) Restrictions on Transfer and Exchange of Global Trust
PIERS. Notwithstanding any other provisions of this Trust Agreement
(other than the provisions set forth in subsection (g) of this Section
9.02), a Global Trust PIERS may not be transferred as a whole except by
the Clearing Agency to a nominee of the Clearing Agency or another
nominee of the Clearing Agency or by the Clearing Agency or any such
nominee to a successor Clearing Agency or a nominee of such successor
Clearing Agency.
(g) Authentication of Definitive Trust PIERS. If at any
time:
(i) the Clearing Agency notifies the Company that it is
unwilling or unable to continue as depositary therefor or if at any
time the Clearing Agency shall no longer be eligible to serve as
depositary and a successor depositary for the Trust Securities is not
appointed by the Company within 60 days after the Company receives such
notice or becomes aware of such ineligibility;
(ii) the Trust, in its discretion, notifies the Property
Trustee in writing that it is electing to cause the issuance of
certificated Securities; or
(iii) if there shall have occurred and be continuing a
default by the Company or the Trust in respect of its obligations under
this Agreement
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Administrative Trustee requesting the
authentication and delivery of Definitive Trust PIERS to the Persons designated
by the Trust, will authenticate and make available for delivery Definitive Trust
PIERS, equal in number to the number of Trust PIERS represented by the Global
Trust PIERS, in exchange for such Global Trust PIERS.
(h) Cancellation or Adjustment of Global Trust PIERS. At
such time as all beneficial interests in a Global Trust PIERS have
either been exchanged for Definitive Trust PIERS to the extent
permitted by this Trust Agreement or redeemed, repurchased or canceled
in accordance with the terms of this Trust Agreement, such Global Trust
PIERS shall be returned to the Clearing Agency for cancellation or
retained and canceled by the
51
Property Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Trust PIERS is exchanged for Definitive
Trust PIERS, Trust PIERS represented by such Global Trust PIERS shall
be reduced and an adjustment shall be made on the books and records of
the Clearing Agency and the Registrar, to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges
of Trust PIERS.
(i) To permit registrations of transfers and exchanges,
the Trust shall execute and the Property Trustee shall authenticate
Definitive Trust PIERS and Global Trust PIERS at the Registrar's or
co-registrar's request in accordance with the terms of this Trust
Agreement.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such indemnity as
the Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of (a) Trust PIERS during a
period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Trust
PIERS for redemption and ending at the close of business on the day of
such mailing; or (b) any Trust PIERS so selected for redemption in
whole or in part, except the unredeemed portion of any Trust PIERS
being redeemed in part.
(iv) Prior to the due presentation for registration of
transfer of any Trust PIERS, the Trust, the Property Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and treat the
Person in whose name a Trust PIERS is registered as the absolute owner
of such Trust PIERS for the purpose of receiving Distributions on such
Trust PIERS and for all other purposes whatsoever, and none of the
Trust, the Property Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Trust PIERS issued upon any transfer or exchange
pursuant to the terms of this Trust Agreement shall evidence the same
security and shall be entitled to the same benefits under this Trust
Agreement as the Trust PIERS surrendered upon such transfer or
exchange.
(j) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Trust PIERS, a Clearing
Agency Participant in the Clearing Agency or other Person with respect
to the accuracy of the records of the Clearing Agency or its nominee or
of any Clearing Agency Participant thereof, with respect to any
ownership interest in the Trust PIERS or with respect to the delivery
to any Clearing Agency Participant, beneficial owner or other Person
(other than the Clearing Agency) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Trust PIERS. All notices and communications to be given to the Holders
and all payments to be made to Holders under the Trust PIERS shall be
given or
52
made only to or upon the order of the registered Holders (which shall
be the Clearing Agency or its nominee in the case of a Global Trust
PIERS). The rights of beneficial owners in any Global Trust PIERS shall
be exercised only through the Clearing Agency subject to the applicable
rules and procedures of the Clearing Agency. The Property Trustee may
conclusively rely and shall be fully protected in relying upon
information furnished by the Clearing Agency or any agent thereof with
respect to its Clearing Agency Participants and any beneficial owners.
(ii) The Property Trustee and the Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Trust Agreement or
under applicable law with respect to any transfer of any interest in
any Trust PIERS (including any transfers between or among Clearing
Agency Participants or beneficial owners in any Global Trust PIERS)
other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Trust Agreement, and
to examine the same to determine substantial compliance as to form with
the express requirements hereof.
(k) Minimum Transfers. Trust PIERS may only be
transferred in minimum blocks of $50 aggregate liquidation amount at
maturity. Any transfer of Trust PIERS in a block having an aggregate
liquidation amount of less than $50 shall be deemed to be void and of
no legal effect whatsoever. Any such transferee shall be deemed not to
be a Holder of such Trust PIERS for any purpose, including, but not
limited to, the receipt of Distributions, including Contingent
Distributions, on such Trust PIERS, and such transferee shall be deemed
to have no interest whatsoever in such Trust PIERS.
SECTION 9.03. Deemed Security Holders.
The Trustees may treat the Person in whose name any Security shall be
registered on the books and records of the Trust as the sole owner of such
Security for purposes of receiving Distributions, including Contingent
Distributions, and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Security on the part of any Person, whether or not the Trust shall have actual
or other notice thereof.
SECTION 9.04. Book Entry Interests.
Global Trust PIERS shall initially be registered on the books and
records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no Trust PIERS Beneficial Owner will receive a definitive Trust
PIERS Certificate representing such Trust PIERS Beneficial Owner's interests in
such Global Trust PIERS, except as provided in Section 9.02 and Section 7.09.
Unless and until definitive, fully registered Trust PIERS certificates have been
issued to the Trust PIERS Beneficial Owners pursuant to Section 9.02 and Section
7.09:
(a) the provisions of this Section 9.04 shall be in full
force and effect;
53
(b) the Trust and the Trustees shall be entitled to deal
with the Clearing Agency for all purposes of this Trust Agreement
(including the payment of Distributions on the Global Trust PIERS and
receiving approvals, votes or consents hereunder) as the Holder of the
Trust PIERS and the sole holder of the Global Certificates and shall
have no obligation to the Trust PIERS Beneficial Owners;
(c) to the extent that the provisions of this Section
9.04 conflict with any other provisions of this Trust Agreement, the
provisions of this Section 9.04 shall control; and
(d) the rights of the Trust PIERS Beneficial Owners shall
be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Trust PIERS
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants and receive and transmit payments of Distributions on the
Global Certificates to such Clearing Agency Participants. DTC will make
book entry transfers among the Clearing Agency Participants.
SECTION 9.05. Notices to Clearing Agency.
Unless and until Definitive Trust PIERS have been issued, whenever a
notice or other communication to the Trust PIERS Holders is required under this
Trust Agreement, the Trustees shall give all such notices and communications
specified herein to be given to the Holders of Global Trust PIERS to the
Clearing Agency, and shall have no notice obligations to the Trust PIERS
Beneficial Owners.
SECTION 9.06. Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Trust PIERS, the Administrative Trustees may, in
their sole discretion, appoint a successor Clearing Agency with respect to such
Trust PIERS.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.01. Liability.
(a) Except as expressly set forth in this Trust
Agreement, the Securities Guarantees and the terms of the Securities,
the Sponsor shall not be:
(i) personally liable for the return of any portion of
the capital contributions (or any return thereon) of the Holders which
shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any
deficit upon dissolution of the Trust or otherwise.
54
(b) The Debenture Issuer shall be liable for all of the
debts and obligations of the Trust (other than in respect of the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Statutory Trust
Act, the Holders shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such
Indemnified Person by this Trust Agreement or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such
information, opinions, reports or statements presented to the Trust by
any Person as to matters the Indemnified Person reasonably believes are
within such other Person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the Trust,
including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other
facts pertinent to the existence and amount of assets from which
Distributions to Holders might properly be paid.
SECTION 10.03. Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered
Person, an Indemnified Person acting under this Trust Agreement shall
not be liable to the Trust or to any other Covered Person for its good
faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict
the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Property
Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified
Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Persons; or
55
(ii) whenever this Trust Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Trust Agreement or any other
agreement contemplated herein or of any duty or obligation of the Indemnified
Person at law or in equity or otherwise.
(c) Whenever in this Trust Agreement an Indemnified
Person is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard
and shall not be subject to any other or different standard imposed by
this Trust Agreement.
SECTION 10.04. Indemnification.
(a)
(i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
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(ii) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees and
expenses) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Trust and except that no such indemnification
shall be made in respect of any claim, issue or matter as to which such
Company Indemnified Person shall have been adjudged to be liable to the
Trust unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such Person is fairly
and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall
be successful on the merits or otherwise (including dismissal of an
action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in
defense of any claim, issue or matter therein, he shall be indemnified,
to the full extent permitted by law, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person is
proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (i) and (ii). Such determination
shall be made (1) by the Administrative Trustees by a majority vote of
a Quorum consisting of such Administrative Trustees who were not
parties to such action, suit or proceeding, (2) if such a Quorum is not
obtainable, or, even if obtainable, if a Quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses)
incurred by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be
paid by the Debenture Issuer in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section
10.4(a). Notwithstanding the foregoing, no advance shall be made by the
Debenture Issuer if a determination is reasonably and promptly made (i)
by the Administrative Trustees by a majority vote of a quorum of
disinterested Administrative Trustees, (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion or (iii) the Common
57
Security Holder of the Trust, that, based upon the facts known to the
Administrative Trustees, counsel or the Common Security Holder at the
time such determination is made, such Company Indemnified Person acted
in bad faith or in a manner that such person did not believe to be in
or not opposed to the best interests of the Trust, or, with respect to
any criminal proceeding, that such Company Indemnified Person believed
or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Administrative
Trustees, independent legal counsel or Common Security Holder
reasonably determine that such person deliberately breached his duty to
the Trust or its Common or Trust PIERS Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 10.4(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Trust PIERS Holders of the Trust
or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. All rights to
indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while this
Section 10.4(a) is in effect. Any repeal or modification of this
Section 10.4(a) shall not affect any rights or obligations then
existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a Company Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(b) The Debenture Issuer agrees to indemnify the (i)
Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Property Trustee and the Delaware Trustee, and (iv) any officers,
directors, shareholders, members, partners, employees, representatives,
custodians, nominees or agents of the Property Trustee and the Delaware
Trustee (each of the Persons in (i) through (iv) being referred to as a
"Fiduciary
58
Indemnified Person") for, and to hold each Fiduciary Indemnified Person
harmless against, any and all loss, liability, damage, claim or expense
including taxes (other than taxes based on the income of such Fiduciary
Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses (including reasonable legal fees and expenses) of
defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder. The obligation to indemnify as set forth in this
Section 10.4(b) shall survive the satisfaction and discharge of this
Trust Agreement and the resignation or removal of any Fiduciary
Indemnified Person.
SECTION 10.05. Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders shall have no rights by
virtue of this Trust Agreement in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property
Trustee shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.01. Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code or the Treasury Regulations.
SECTION 11.02. Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of
account, records and supporting documents, which shall reflect in
reasonable detail, each transaction of the Trust. The books of account
shall be maintained on the accrual method of accounting, in accordance
with generally accepted accounting principles, consistently applied.
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(b) The Administrative Trustees shall cause to be duly
prepared and delivered to each of the Holders, any annual United States
federal income tax information statement, required by the Code,
containing such information with regard to the Securities held by each
Holder as is required by the Code and the Treasury Regulations.
Notwithstanding any right under the Code to deliver any such statement
at a later date, the Administrative Trustees shall endeavor to deliver
all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual
United States federal income tax return, on a Form 1041 or such other
form required by United States federal income tax law, and any other
annual income or franchise tax returns required to be filed by the
Administrative Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 11.03. Banking.
The Trust may maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such accounts shall be
designated by the Administrative Trustees; provided, however, that the Property
Trustee shall designate the signatories for the Property Trustee Account.
SECTION 11.04. Withholding.
(a) The Trust and the Administrative Trustees shall
comply with all withholding requirements under United States federal,
state and local law. The Trust shall request, and the Holders shall
provide to the Trust, such forms or certificates as are necessary to
establish an exemption from withholding with respect to each Holder,
and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling,
its withholding obligations. The Administrative Trustees shall file
required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit
amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Trust is required to withhold and
pay over any amounts to any authority with respect to Distributions or
allocations to any Holder due to withholding requirements under United
States federal, state and local law, the amount withheld shall be
deemed to be a Distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be
limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions
made, the Trust may reduce subsequent Distributions by the amount of
such withholding.
(b) All payments of Distributions or Redemption Prices
under the Trust Agreement and by the Guarantor under the Guarantee
shall be made without withholding or deduction for, or on account of,
any present or future taxes, duties, assessments or governmental
charges of whatever nature (but, except as provided in this Trust
Agreement, other than any estate, inheritance, gift, sales, transfer or
personal property
60
taxes imposed with respect to the Trust PIERS or the Guarantee) imposed
or levied by or on behalf of any jurisdiction outside the United States
or any political sub-division thereof or by any authority therein
having power to tax unless such withholding or deduction is required by
law. In that event, the Issuer or the Guarantor, as applicable, will
pay such additional amounts as may be necessary in order that the net
amounts received by a Holder after such withholding or deduction shall
equal the amount of interest and principal which would have been
receivable in respect of the Debentures in the absence of such
withholding or deduction ("Additional Tax Amounts"), except that no
such Additional Tax Amounts shall be payable:
(i) to or on behalf of a Holder that is:
a. able to avoid such withholding or
deduction by making a declaration
of non-residence or other claim for
exemption to the relevant tax
authority or
b. is liable for such taxes, duties,
assessments or governmental charges
in respect of the Debentures by
reason of its having some
connection with the taxing
jurisdiction other than merely by
the holding of the Trust PIERS; or
(ii) with respect to any such taxes, duties, assessments
or governmental charges that would not have been imposed but for the
presentation of such Trust PIERS or Guarantee, where presentation is
required, for payment on a date more than 30 days after the date on
which such payment became due and payable or the date on which payment
thereof is duly provided for, whichever is later, except to the extent
that the Holder thereof would have been entitled to Additional Tax
Amounts had the Debentures or Guarantee been presented for payment on
any date during such 30-day period.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.01. Amendments.
(a) Except as otherwise provided in this Trust Agreement
or by any applicable terms of the Securities, this Trust Agreement may
only be amended by a written instrument approved and executed by:
(i) the Sponsor;
(ii) the Administrative Trustees (or if there are more
than two Administrative Trustees a majority of the Administrative
Trustees);
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
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(iv) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate
from each of the Trust and the Sponsor that such amendment is permitted
by, and conforms to, the terms of this Trust Agreement (including the
terms of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from the
Sponsor that such amendment is permitted by, and
conforms to, the terms of this Trust Agreement
(including the terms of the Securities); and
(B) an Opinion of Counsel (who may be
counsel to the Sponsor or the Trust) that such
amendment is permitted by, and conforms to, the terms
of this Trust Agreement (including the terms of the
Securities) and that all conditions precedent, if
any, in this Trust Agreement to the execution and
delivery of such amendment have been satisfied,
provided, however, that the Property Trustee shall not be required to sign any
such amendment; and
(iii) to the extent the result of such amendment would be
to:
(A) cause the Trust to fail to continue
to be classified for purposes of United States
federal income taxation as a grantor trust;
(B) reduce or otherwise adversely
affect the powers of the Property Trustee in
contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be
an Investment Company required to be registered under
the Investment Company Act;
(c) At such time after the Trust has issued any
Securities that remain outstanding, any amendment that would adversely
affect the rights, privileges or preferences of any Holder may be
effected only with such additional requirements as may be set forth in
the terms of such Securities;
(d) Section 9.01(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders;
62
(e) Article IV shall not be amended without the consent
of the Holders of a Majority in liquidation amount of the Common
Securities;
(f) The rights of the holders of the Common Securities
under Article V to increase or decrease the number of, and appoint and
remove Trustees shall not be amended without the consent of the Holders
of a Majority in liquidation amount at maturity of the Common
Securities; and
(g) Notwithstanding Section 12.1(c), this Trust Agreement
may be amended without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any
provision in this Trust Agreement that may be inconsistent with any
other provision of this Trust Agreement or to make any other provisions
with respect to matters or questions arising under this Trust Agreement
which shall not be inconsistent with the other provisions of the Trust
Agreement; and
(ii) to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as shall be necessary to ensure that the
Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Securities are outstanding or
to ensure that the Trust will not be required to register as an
Investment Company under the Investment Company Act.
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the Holders, and any
amendments of this Trust Agreement shall become effective when notice thereof is
given to the Holders.
(h) Notwithstanding the foregoing, the Trust Agreement
may not be amended, without the consent of each Holder of Trust PIERS
and Common Securities affected by such amendment, to:
(i) change the amount or timing of any Distribution on
Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities on
a specified date;
(ii) reduce the liquidation amount or the Distribution
Rate or change the payment date or maturity of the Trust PIERS;
(iii) change the rights of a Holder of the Trust PIERS upon
a Change of Control;
(iv) restrict the rights of a Holder of Trust PIERS to
institute suit for the enforcement of payment of a Distribution on or
after the specified date;
(v) allow the Trust to transfer Debentures and Warrants
held by it separately;
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(vi) change the rights of any Holder of Trust PIERS to
convert its Trust PIERS upon the satisfaction of the conditions
required for such conversion and at the Conversion Ratio, as adjusted;
or
(vii) reduce the above-stated percentage of liquidation
amount of Trust PIERS, the Holders of which are required to modify or
amend the Trust Agreement or to consent to any waiver thereunder.
SECTION 12.02. Meetings of the Holders; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities
may be called at any time by the Administrative Trustees (or as
provided in the terms of the Securities) to consider and act on any
matter on which Holders of such class of Securities are entitled to act
under the terms of this Trust Agreement, the terms of the Securities or
the rules of any stock exchange on which the Trust PIERS are listed or
admitted for trading. The Administrative Trustees shall call a meeting
of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount at maturity of such class of
Securities. Such direction shall be given by delivering to the
Administrative Trustees one or more notices in writing stating that the
signing Holders wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders
calling a meeting shall specify in writing the Security Certificates
held by the Holders exercising the right to call a meeting and only
those Securities specified shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms
of the Securities, the following provisions shall apply to meetings of
Holders:
(i) notice of any such meeting shall be given to all the
Holders having a right to vote thereat at least seven days and not more
than 60 days before the date of such meeting. Whenever a vote, consent
or approval of the Holders is permitted or required under this Trust
Agreement or the rules of any stock exchange on which the Trust PIERS
are listed or admitted for trading, such vote, consent or approval may
be given at a meeting of the Holders. Any action that may be taken at a
meeting of the Holders may be taken without a meeting if a consent in
writing setting forth the action so taken is signed by the Holders
owning not less than the minimum amount of Securities in liquidation
amount that would be necessary to authorize or take such action at a
meeting at which all Holders having a right to vote thereon were
present and voting. Prompt notice of the taking of action without a
meeting shall be given to the Holders entitled to vote who have not
consented in writing. The Administrative Trustees may specify that any
written ballot submitted to the Security Holder for the purpose of
taking any action without a meeting shall be returned to the Trust
within the time specified by the Administrative Trustees;
(ii) each Holder may authorize any Person to act for it by
proxy on all matters in which a Holder is entitled to participate,
including waiving notice of any meeting, or voting or participating at
a meeting. No proxy shall be valid after the expiration of 11
64
months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder executing
it. Except as otherwise provided herein, all matters relating to the
giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the Administrative
Trustees may designate; and
(iv) unless the Statutory Trust Act, this Trust Agreement,
the terms of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Trust PIERS are then listed or
trading, otherwise provides, the Administrative Trustees, in their sole
discretion, shall establish all other provisions relating to meetings
of Holders, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Holders, waiver of
any such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy or
any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.01. Representations and Warranties of Property
Trustee.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Trust Agreement,
and each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a New York banking
corporation with trust powers and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Trust
Agreement;
(b) The execution, delivery and performance by the
Property Trustee of this Trust Agreement has been duly authorized by
all necessary corporate action on the part of the Property Trustee.
This Trust Agreement has been duly executed and delivered by the
Property Trustee and constitutes a legal, valid and binding obligation
of the Property Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law);
65
(c) The execution, delivery and performance of this Trust
Agreement by the Property Trustee does not conflict with or constitute
a breach of the charter or by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or
registration with or notice to, any New York State or federal banking
authority is required for the execution, delivery or performance by the
Property Trustee of this Trust Agreement.
SECTION 13.02. Representations and Warranties of Delaware
Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Trust
Agreement, and each Successor Delaware Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Delaware
Trustee's acceptance of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly
existing and in good standing under the laws of the State of Delaware,
with trust power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Trust Agreement;
(b) The execution, delivery and performance by the
Delaware Trustee of this Trust Agreement has been duly authorized by
all necessary corporate action on the part of the Delaware Trustee.
This Trust Agreement has been duly executed and delivered by the
Delaware Trustee and constitutes a legal, valid and binding obligation
of the Delaware Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law);
(c) No consent, approval or authorization of, or
registration with or notice to, any federal banking authority is
required for the execution, delivery or performance by the Delaware
Trustee of this Trust Agreement; and
(d) The Delaware Trustee is a natural person who is a
resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of
Delaware.
ARTICLE XIV
[Intentionally Omitted]
ARTICLE XV
MISCELLANEOUS
66
SECTION 15.01. Notices.
All notices provided for in this Trust Agreement shall be in
writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrative
Trustees at the Trust's mailing address set forth below (or such other
address as the Trust may give notice of to the Holders):
Sovereign Capital Trust IV
c/o The Bank of New York
101 Barclay Street
8 West
New York, New York 10283
Attention: Administrative Trustee
(b) if given to the Delaware Trustee, at the mailing
address set forth below (or such other address as Delaware Trustee may
give notice of to the Holders):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Property Trustee, at the Property
Trustee's mailing address set forth below (or such other address as the
Property Trustee may give notice of to the Holders):
The Bank of New York
101 Barclay Street, 8 West
New York, New York 10283
Attention: Corporate Trust Administration
(d) if given to the Holder of the Common Securities, at
the mailing address of the Sponsor set forth below (or such other
address as the Holder of the Common Securities may give notice to the
Trust):
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, PA 19610
Attention: Chief Financial Officer
67
(e) if given to any other Holder, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 15.02. Governing Law.
This Trust Agreement and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 15.03. Intention of the Parties.
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The provisions
of this Trust Agreement shall be interpreted to further this intention of the
parties.
SECTION 15.04. Headings.
Headings contained in this Trust Agreement are inserted for convenience
of reference only and do not affect the interpretation of this Trust Agreement
or any provision hereof.
SECTION 15.05. Successors and Assigns.
Whenever in this Trust Agreement any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Trust Agreement by the
Sponsor and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 15.06. Partial Enforceability.
If any provision of this Trust Agreement, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Trust Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.07. Counterparts.
This Trust Agreement may contain more than one counterpart of the
signature page and this Trust Agreement may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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[SIGNATURES ON FOLLOWING PAGE]
69
[SIGNATURES FROM PRECEDING PAGE]
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
_________________________________________________
Mark R. McCollom, as Administrative Trustee
_________________________________________________
James D. Hogan, as Administrative Trustee
_________________________________________________
Thomas Brugger, as Administrative Trustee
THE BANK OF NEW YORK (Delaware) as
Delaware Trustee
By:______________________________________________
Name:
Title:
THE BANK OF NEW YORK as Property Trustee
By:______________________________________________
Name:
Title:
SOVEREIGN BANCORP, INC., as Sponsor
By:______________________________________________
Mark R. McCollom
Senior Vice President
ANNEX I
TERMS OF
4.375% CONTINGENT CONVERTIBLE TRUST PREFERRED INCOME EQUITY
REDEEMABLE SECURITIES
4.375% COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of
Trust, dated as of February 26, 2004 (as amended from time to time, the "Trust
Agreement"), the designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Securities are set out below (each capitalized
term used but not defined herein has the meaning set forth in the Trust
Agreement or, if not defined in such Trust Agreement, as defined in the
Prospectus referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
(a) Trust PIERS. 14,000,000 Trust PIERS, or up to 16,000,000 Trust
PIERS if the Underwriters exercise in full their option under the Underwriting
Agreement to purchase additional Trust PIERS, of the Trust with an aggregate
liquidation amount with respect to the assets of the Trust of Seven Hundred
Million Dollars ($700,000,000), or up to Eight Hundred Million Dollars
($800,000,000) if the Underwriters exercise in full their option under the
Underwriting Agreement to purchase additional Trust PIERS, and each with a
liquidation amount with respect to the assets of the Trust of $50.00 per
Security, are hereby designated for the purposes of identification only as the
"4.375% Contingent Convertible Trust Preferred Income Equity Redeemable
Securities" (collectively, the "Trust PIERS"). The certificates evidencing the
Trust PIERS shall be substantially in the form of Exhibit A-1 to the Trust
Agreement, with such changes and additions thereto or deletions therefrom as may
be required by ordinary usage, custom or practice or to conform to the rules of
any exchange or quotation system on or in which the Trust PIERS are listed,
traded or quoted.
(b) Common Securities. 432,990 Common Securities of the Trust with
an aggregate liquidation amount with respect to the assets of the Trust of
twenty-five million, six hundred forty-nine thousand, five hundred Dollars
($21,649,500) or up to 494,846 Common Securities of the Trust with an aggregate
liquidation amount with respect to the assets of the Trust of twenty-four
million, seven hundred forty-two thousand, three hundred Dollars ($24,742,300)
if the Underwriters exercise in full their option under the Underwriting
Agreement to purchase additional Trust PIERS and a liquidation amount with
respect to the assets of the Trust of $50.00 per Security, are hereby designated
for the purposes of identification only as "4.375% Common Securities"
(collectively, the "Common Securities"). The certificates evidencing the Common
Securities shall be substantially in the form of Exhibit A-2 to the Trust
Agreement, with such changes and additions thereto or deletions therefrom as may
be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate
per annum of 4.375% (the "Distribution Rate") of the liquidation amount of
$50.00 per Security (the
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"Liquidation Amount"), such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarterly period will bear additional distributions thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions", as used herein, includes distributions of any such
interest. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Property Trustee and to the extent the
Property Trustee has funds on hand legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from February 26, 2004, and will be payable
quarterly in arrears on March 1, June 1, September 1 and December 1 of each
year, commencing on June 1, 2004 (each, a "Distribution Date"), except as
otherwise described below. Distributions will be computed on the basis of a
360-day year consisting of twelve 30-day months and for any period less than a
full calendar month on the basis of the actual number of days elapsed in such
month.
(c) Subject to the accrual and record date provisions specified
herein and in the Trust Agreement, the Trust shall pay contingent distributions
("Contingent Distributions") to the Holders during any quarterly period (each, a
"Contingent Distribution Period") from March 1 to May 31, June 1 to August 31,
September 1 to November 31 or December 1 to February 28 (or February 29 in a
leap year), other than the Contingent Distribution Period beginning on December
1, 2033, commencing with the Contingent Distribution Period beginning March 1,
2007, if the average of the Trading Prices of the Trust PIERS for the five
consecutive Trading Days immediately preceding the first Trading Day of such
Contingent Interest Period equals $65.00 or more.
The amount of Contingent Distribution payable in respect of any
Contingent Distribution Period will equal $0.08 per $50 liquidation amount at
maturity of Trust PIERS, and such Contingent Distribution will accrue and be
payable to Holders in the same manner as regular Distributions. Regular
Distributions will continue to accrue at the rate of 4.375% per year on the
liquidation amount of the Trust PIERS whether or not Contingent Distributions
are paid.
(d) As long as no Event of Default has occurred and is continuing
under the Indenture, the Debenture Issuer has the right under the Indenture to
defer payments of interest (other than Contingent Interest) by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 20 consecutive quarters, including the first such quarter
during such period (each an "Extension Period"), during which Extension Period
no interest (other than Contingent Interest) shall be due and payable on the
Debentures, provided that no Extension Period shall end on a date other than an
Interest Payment Date for the Debentures or extend beyond the Maturity Date of
the Debentures. As a consequence of such deferral, Distributions (other than
Contingent Distributions) will also be deferred. Despite such deferral,
Distributions (other than Contingent Distributions) will continue to accumulate
with additional Distributions thereon (to the extent permitted by applicable law
but not at a rate greater than the rate at which interest is then accruing on
the Debentures) at the Distribution Rate compounded quarterly during any such
Extension Period. Prior to the termination of any such Extension Period, the
Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided that such Extension Period, together with all
such
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previous and further extensions within such Extension Period, may not exceed 20
consecutive quarters, including the first quarter during such Extension Period,
or extend beyond the Maturity Date of the Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.
(e) Distributions, including Contingent Distributions, if any, on
the Securities will be payable to the Holders thereof as they appear on the
books and records of the Trust on the fifteenth (15th) day of the month prior to
the month in which the relevant Distribution Date occurs, which Distribution
Dates correspond to the interest payment dates on the Debentures; provided,
however, that in the event that the only Holder is DTC or any successor Clearing
Agency, Distributions, including Contingent Distributions, if any, on the
Securities will be payable to the Holder thereof as they appear on the records
of the Trust on the Business Day immediately preceding the relevant Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
Trust Agreement, each such payment in respect of the Trust PIERS will be made as
described under the heading "Description of the Trust PIERS" in the Prospectus
Supplement dated February 19, 2004, of the Debenture Issuer and the Trust
relating to the Securities, the Debentures and the Warrants. The relevant record
dates for the Common Securities shall be the same as the record dates for the
Trust PIERS. Distributions, including Contingent Distributions, if any, payable
on any Securities that are not punctually paid on any Distribution Date, as a
result of the Debenture Issuer having failed to make a payment under the
Debentures, will cease to be payable to the Holder on the relevant record date,
and such defaulted Distribution will instead be payable to the Person in whose
name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day, then payment
of the Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that if such next succeeding Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day with the same force and effect as if made on such date.
(f) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders.
(g) In the event of a Change of Control, the Distribution Rate
will be reset (as reset, the "Reset Distribution Rate") to be equal to the
greater of (i) 7.410% per annum and (ii) the rate determined by a reference
agent selected by Sovereign Bancorp, Inc. (the "Sponsor") as the market yield at
that time for a non-convertible trust preferred security representing
subordinated debt of the surviving entity with substantially the same terms and
conditions as the Trust PIERS will have after the Change of Control, other than
(x) the terms and conditions set out below under Section 4(e)(i)(A) and Section
4(e)(ii) of these terms allowing for redemption following a Change of Control
and (y) the terms and conditions set out above under Section 2(c) with respect
to the payment of Contingent Distributions.
3. Liquidation Distribution Upon Dissolution.
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In the event of any termination of the Trust or the Sponsor otherwise
gives notice of its election to liquidate the Trust pursuant to Section
8.01(a)(iii) of the Trust Agreement, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders a Like
Amount (as defined below) of the Debentures, together with one Warrant per $50
principal amount at maturity of Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
Holders will be entitled to receive Pro Rata out of the assets of the Trust
legally available for distribution to Holders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the liquidation amount of $50.00 per Security plus accumulated and
unpaid Distributions, including Contingent Distributions, thereon to the date of
payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the Securities,
Securities having a Liquidation Amount equal to the principal amount at maturity
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures and Warrants upon the liquidation of the Trust,
Debentures having a principal amount at maturity equal to the Liquidation Amount
of the Securities of the Holder to whom such Debentures are distributed,
together with one Warrant per $50 principal amount at maturity of Debentures.
If, upon any such liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets on hand legally available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
Each Holder of Trust Securities shall be deemed to agree, by its
acceptance of any Trust Security, not to assert upon the occurrence of any of
the events indicated in clauses (i), (ii) or (iv) of Section 8.01(a) of the
Trust Agreement, or any similar event, any claim before any court having
jurisdiction in the premises under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, in excess of the Nominal Accreted Value of a
Like Amount of Debentures on the date of commencement of any such proceedings
before such court.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, at
maturity or upon early redemption (either at the option of the Debenture Issuer,
upon a Change of Control or pursuant to a Special Event, as described below),
the proceeds from such repayment shall be simultaneously applied by the Property
Trustee (subject to the Property Trustee having received notice no later than 45
days prior to such repayment) to redeem a Like Amount of the Securities at a
redemption price equal to (i) in the case of the repayment of the Debentures at
maturity, the Maturity Redemption Price (as defined below), (ii) in the case of
the optional redemption of the Debentures upon the occurrence and continuation
of a Special Event, the Special Event Redemption Price (as defined below) and
(iii) in the case of the optional redemption of the Debentures on or after March
5, 2007, the Optional Redemption Price (as defined below). The Maturity
Redemption Price, the Special Event Redemption Price and the Optional Redemption
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Price are referred to collectively as the "Redemption Price". Holders will be
given not less than 30 nor more than 60 days notice of such redemption.
(b) The "Maturity Redemption Price", with respect to a redemption
of Securities, shall mean an amount equal to the principal amount at maturity of
and accrued and unpaid interest, including Contingent Interest, on the
Debentures as of the maturity date thereof.
(c) The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to redeem the Debentures in whole or in
part at any time on or after March 5, 2007, upon not less than 30 days and not
more than 60 days notice, at the Optional Redemption Price and, simultaneous
with such redemption, to cause a Like Amount of the Securities to be redeemed by
the Trust at the Optional Redemption Price on a Pro Rata basis. "Optional
Redemption Price" shall mean a price equal to the liquidation amount at maturity
of Securities to be redeemed plus accumulated and unpaid Distributions,
including Contingent Distributions, thereon, if any, to the date of such
redemption.
(d) If at any time a Tax Event or an Investment Company Event
(each as defined below, and each a "Special Event") occurs, the Debenture Issuer
shall have the right (subject to the conditions set forth in the Indenture) at
any time, upon not less than 30 nor more than 60 days notice, to redeem the
Debentures in whole, but not in part, within the 93 days following the
occurrence of such Special Event (the "93 Day Period"), and, simultaneous with
such redemption, to cause a Like Amount of the Securities to be redeemed by the
Trust at the Special Event Redemption Price on a Pro Rata basis.
"Tax Event" shall occur upon receipt by the Debenture Issuer and the
Trust of an opinion of counsel rendered by an independent law firm experienced
in such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is announced
on or after February 26, 2004, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Debentures or (ii) the Trust is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" shall mean that in the written opinion of an
independent law firm having a recognized national securities practice, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, which change becomes effective on or after the date on which the Trust
PIERS were initially issued.
"Special Event Redemption Price" shall mean, with respect to a
redemption of Securities, a price equal to 100% of the principal of a Like
Amount of Debentures to be redeemed plus
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accumulated but unpaid Distributions, including Contingent Distributions,
thereon, if any, to the date of such redemption.
(e) (i) Upon the occurrence of a Change of Control, the
Sponsor may cause the redemption of the Trust PIERS, in whole, but not
in part, (A) at any time during the thirty days beginning on the
ninetieth day after the occurrence of such Change of Control, and (B)
at any time during the period beginning on the fifth anniversary of the
occurrence of such Change of Control and ending on the Stated Maturity
of the Debentures.
(ii) Upon the occurrence of a Third-Party Change of
Control, the Sponsor will have the right to immediately cause the
redemption of the Trust PIERS, in whole or in part, by delivering, at
its option, a combination of cash and common stock of the Sponsor that,
in the case of partial redemption, together with the Trust PIERS that
remain outstanding following such redemption, has a Market Value (as
defined in the Third Supplemental Indenture) equal to the Market Value
at that time of a non-convertible trust preferred security representing
subordinated debt of the surviving entity with the same terms and
conditions as the Trust PIERS will have after the Change of Control,
provided, however, that in no event shall such Market Value be less
than $50 per Trust PIERS.
(f) On and from the date fixed by the Administrative Trustees for
any distribution of Debentures and liquidation of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of the
Trust PIERS, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and any
certificates representing Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(g) The Trust may not redeem fewer than all the outstanding
Securities unless all accumulated and unpaid Distributions have been paid on all
Securities for all quarterly Distribution periods terminating on or before the
date of redemption.
(h) The procedure with respect to redemptions or distributions of
Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder to be
redeemed or exchanged not fewer than 6 nor more than 20 days before the
date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for redemption of the Debentures.
For purposes of the calculation of the date of redemption or exchange
and the dates on which notices are given pursuant to this Section
4(f)(i), a Redemption/Distribution Notice shall be deemed to be given
on the day such notice is first mailed by first-class mail, postage
prepaid, to Holders. Each Redemption/Distribution Notice shall be
addressed to the Holders at the address of each such Holder appearing
in the books and records of the Trust. Each Redemption/Distribution
Notice shall contain the following information:
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(A) the intended Redemption Date;
(B) the Conversion Ratio as the date of the
Notice;
(C) that following redemption the Trust PIERS
will no longer be deemed to be outstanding for any purposes,
including payment of Distributions, including Contingent
Distributions, or conversion;
(D) upon a Change of Control, including a
Third-Party Change of Control, information sufficient to
describe briefly the transaction that constituted the Change
of Control or Third-Party Change of Control;
(E) in the case of a redemption upon a Third
Party Change of Control, whether the redemption price will be
paid in cash, Common Stock or a combination thereof, and, if
any shares of Common Stock are to be used to pay such amount,
the number of such shares (which shall not in any event exceed
the number of Trust Securities being redeemed multiplied by
the Conversion Ratio then in effect) and the method of
calculating the number of such shares that represent the
applicable portion of the redemption price to be paid in such
shares;
(F) the place or places where Trust PIERS are to
be surrendered for payment of the redemption price; and
(G) the CUSIP number of the Trust PIERS.
No defect in the Redemption/Distribution Notice or in the mailing of
either thereof with respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect to any other
Holder.
(ii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, (which notice will be irrevocable),
then (A) with respect to Trust PIERS issued in book-entry form, by
12:00 noon, New York City time, on the redemption date, provided that
the Debenture Issuer has paid the Property Trustee a sufficient amount
of cash in connection with the related redemption or maturity of the
Debentures by 10:00 a.m., New York City time, on the maturity date or
the date of redemption, as the case requires, the Property Trustee will
deposit irrevocably with the Clearing Agency or its nominee (or
successor Clearing Agency or its nominee) funds sufficient to pay the
applicable Redemption Price with respect to such Trust PIERS and will
give the Clearing Agency irrevocable instructions and authority to pay
the Redemption Price to the relevant Clearing Agency Participants, and
(B) with respect to Trust PIERS issued in certificated form and Common
Securities, provided that the Debenture Issuer has paid the Property
Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will pay
the relevant Redemption Price to the Holders by check mailed to the
address of the relevant Holder appearing on the books and records of
the Trust on the redemption date. If a Redemption/Distribution Notice
shall have been given and funds deposited as required, if applicable,
then immediately prior to the close of business on the date of such
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deposit, or on the redemption date, as applicable, Distributions will
cease to accumulate on the Securities so called for redemption and all
rights of Holders so called for redemption will cease, except the right
of the Holders of such Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Securities shall
cease to be outstanding.
(iii) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of
Holders on the close of business on a regular record date in respect of
a Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of (i) any
Securities beginning on the opening of business 15 days before the day
of mailing of a notice of redemption or any notice of selection of
Securities for redemption and ending at the close of Business on the
day of mailing of such notice of redemption or selection or (ii) any
Securities selected for redemption except the unredeemed portion of any
Security being redeemed. If any date fixed for redemption of Securities
is not a Business Day, then payment of the Redemption Price payable on
such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) except that, if such next succeeding Business Day falls in the
next calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as
if made on such date fixed for redemption. If payment of the Redemption
Price in respect of any Securities is improperly withheld or refused
and not paid either by the Property Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions
on such Securities will continue to accumulate from the original
redemption date to the actual date of payment, in which case the actual
payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to (A) in respect of the Trust
PIERS, the Clearing Agency or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or,
if Definitive Trust PIERS Certificates have been issued, to the Holder
thereof, and (B) in respect of the Common Securities to the Holder
thereof.
(v) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws and banking
laws), provided the acquiror is not the Holder of the Common Securities
or the obligor under the Indenture, the Sponsor or any of its
subsidiaries may at any time and from time to time purchase outstanding
Trust PIERS by tender, in the open market or by private agreement.
5. Conversion.
(a) Subject to and upon compliance with the provisions of the
Trust Agreement, the Trust PIERS are convertible, at the option of the Holder,
at any time on and after the occurrence of any of the events described below,
and before 5:00 pm, New York, New York time, on the
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Business Day immediately preceding the date of repayment of such Trust PIERS,
whether at stated maturity or upon redemption, into fully paid and nonassessable
shares of Common Stock at an initial Conversion Ratio of 1.6301 shares of Common
Stock for each $50 in aggregate liquidation amount of Trust PIERS, subject to
adjustment. A Holder may convert any portion of the liquidation amount of the
Trust PIERS into that number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share)
obtained by multiplying (x) the quotient obtained by dividing the liquidation
amount of the Trust PIERS to be converted by $50 by (y) the Conversion Ratio.
Upon any exercise of such conversion right, the Conversion Agent shall exchange
the Trust PIERS to be converted into Debentures and Warrants on the basis of $50
principal amount at maturity of Debentures and one Warrant per Trust PIERS, and
immediately exercise such Warrants for shares of Common Stock in an amount
determined as described in this paragraph by delivering to the Sponsor in
satisfaction of the Warrant exercise price the Debentures and, if such
conversion right is being exercised prior to March 5, 2007 pursuant to the Cash
Exercise Right, cash in the amount of the Nominal Accreted Value of the
Debentures on the Conversion Date.
(b) A Holder's right to convert its Trust PIERS will arise only
upon the occurrence of any of the following:
(i) Conversion Rights Based on Common Stock Price. If, as
of the last day of any calendar quarter, the Trading Price of the
Common Stock on each of at least 20 Trading Days in a period of 30
consecutive Trading Days ending on the last Trading Day of such quarter
is more than 130% of the Conversion Price in effect on the last Trading
Day of such calendar quarter, then on and after the first day of the
following calendar quarter (and only during such following calendar
quarter), Holders may surrender their Trust PIERS for conversion into
shares of Common Stock at any time at their option until 5:00 p.m., New
York, New York time, on the last day of such calendar quarter or
earlier Redemption Date.
(ii) Conversion Rights Based on Trust PIERS Trading Price.
At any time prior to March 1, 2029, Holders may also surrender a Trust
PIERS for conversion during the five-Business-Day period following any
10-consecutive-Trading-Day period in which the average of the Trading
Prices for the Trust PIERS for such 10-Trading-Day period is less than
105% of the average of the Conversion Values for the Trust PIERS for
each day during such period and the Conversion Value for each day of
that period was less than $49.00 (98% of the issue price of the Trust
PIERS). As used herein, "Conversion Value" as of any date means, per
$50 liquidation amount at maturity of Trust PIERS, the product of the
Trading Price of the Common Stock on such date multiplied by the
Conversion Ratio then in effect.
(iii) Conversion Based on Credit Ratings. A Holder may
surrender for conversion a Trust PIERS during any period in which (A)
the rating assigned to the Trust PIERS by Moody's Investor Services
("Moody's") is below B1, (B) the rating assigned to the Trust PIERS by
Standard & Poor's Rating Group ("S&P") is below B-, or (C) the rating
assigned to the Trust PIERS by either Moody's or S&P is suspended or
withdrawn.
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(iv) Conversion Rights Based on Notice of Redemption. A
Holder may surrender for conversion a Trust PIERS that has been called
for redemption at any time prior to 5:00 p.m., New York, New York time,
on the Business Day immediately preceding the date of redemption, even
if such Trust PIERS is not otherwise convertible at that time.
(v) Conversion Rights Based on Occurrence of Certain
Corporate Transactions.
If:
(A) the Sponsor shall distribute to all holders of its
Common Stock rights or warrants entitling such holders to
subscribe for or purchase, for a period expiring within 60
days of the date of any such distribution, Common Stock at a
price per share less than the Trading Price of the Common
Stock on the Trading Day immediately preceding the date of the
announcement of such distribution;
(B) the Sponsor elects to distribute to all holders of
its Common Stock cash or other assets, debt securities or
rights or warrants to purchase its securities, which
distribution has a per share value (as determined by the
Sponsor's Board of Directors) exceeding 5% of the Trading
Price of Common Stock on the Business Day preceding the
declaration date for the distribution; or
(C) a Change of Control (other than a Change of Control
that occurs due to a consolidation, merger or binding share
exchange described in the succeeding paragraph) would have
occurred but holders of Trust PIERS do not have the right to
require the Sponsor to repurchase their Trust PIERS as a
result of the event otherwise constituting a Change of Control
because either (1) the trading price of Common Stock during
the period described in clause (x) of the definition of
"Change of Control" set forth in the Third Supplemental
Indenture equals or exceeds the level specified in such
definition or (2) the consideration received in such Change of
Control consists of common stock that is freely tradable and
the Trust PIERS become convertible into such common stock (as
described in clause (y) of the definition of "Change of
Control" set forth in the Third Supplemental Indenture),
then the Sponsor shall be required to notify the Holders of the Trust
PIERS at least 20 days prior to the ex-dividend date for the
distribution or within 20 days of the occurrence of an event described
under (c) above, as the case may be. Once the Sponsor has given such
notice, Holders may surrender their Trust PIERS for conversion at any
time until either (a) the earlier of the close of business on the
Business Day immediately prior to the ex-dividend date and the date on
which the Sponsor announces that the distribution will not take place,
in the case of a distribution or (b) 20 days after the date of the
Change of Control notice, in the case of an event described under (c)
above. A Holder will not have the right to convert Trust PIERS as a
result of a distribution if the Holder has rights to participate, or
will have such rights, in the distribution without conversion.
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(D) In addition, if the Sponsor is party to a consolidation,
merger or binding share exchange pursuant to which Common Stock will be
converted into cash, securities or other property, (each of which is
referred to herein as a "Business Consolidation Transaction"), a Holder
may convert Trust PIERS at any time from and after the date which is 15
days prior to the anticipated effective date of such Business
Consolidation Transaction until 15 days after the effective date of
such Business Consolidation Transaction, provided, however, that if
such transaction also constitutes a Change of Control, then the right
to convert Trust PIERS will automatically terminate upon the effective
date of the Change of Control. At and after the effective time of a
Business Consolidation Transaction, the right to convert a Trust PIERS
into Common Stock will be changed into a right to convert the Trust
PIERS into the kind and amount of cash, securities or other property
which the Holder would have received if the Holder had converted such
Trust PIERS into Common Stock immediately prior to the Business
Consolidation Transaction. Such adjustment would be made assuming the
Holders did not exercise any rights of election as to the kind or
amount of consideration receivable. If the Sponsor engages in any such
transaction described in the next preceding sentence, the Conversion
Rate shall not be otherwise adjusted. The Sponsor shall not become a
party to any such transaction unless its terms are consistent with the
conversion rights described in this paragraph.
(c) At any time prior to March 5, 2007 a Holder at its option may
exercise its conversion right arising out the Common Stock price condition
described in 5(b)(i) above either by delivery of Debentures in satisfaction of
the Warrant exercise price or by delivery of such Debentures together with cash
in an amount equal to the aggregate Nominal Accreted Value on the Conversion
Date of such Debentures ("Cash Exercise"), provided, however, that no Holder may
Cash Exercise unless the conditions set forth in Section 6.03(c) of the Trust
Agreement have been satisfied. A Holder may not Cash Exercise if the conversion
right arises solely out of any other event than the Common Stock price condition
described in 5(b)(i) above.
(d) The Trust PIERS shall be subject to the further provisions
relating to conversion set forth in the Trust Agreement and the Warrant
Agreement.
6. Voting Rights - Trust PIERS.
(a) Except as provided under Sections 6(b) and 8 and as otherwise
required by law and the Trust Agreement, the Holders of the Trust PIERS will
have no voting rights.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in liquidation amount
of all outstanding Trust PIERS; provided, however, that where a consent under
the Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given
A-11
by the Property Trustee without the prior approval of each Holder of the Trust
PIERS; provided, further, that if an Event of Default (as defined in the
Indenture) under the Indenture shall have occurred and is continuing, then
Holders of at least 25% of the aggregate liquidation amount of the Trust PIERS
may direct the Property Trustee to declare the principal and interest, including
any contingent interest, on the Debentures due and payable. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Trust PIERS except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Trust PIERS of any notice of default with
respect to the Debentures.
If an Event of Default under the Trust Agreement has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Trust PIERS may directly institute a proceeding against the Debenture Issuer for
enforcement of payment to such Holder of the principal of or premium, if any, or
interest on a Like Amount of Debentures (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such Direct
Action, the rights of the Common Securities Holder will be subordinated to the
rights of such Holder of Trust PIERS to the extent of any payment made by the
Debenture Issuer to such Holder of Trust PIERS in such Direct Action. Except as
provided in the second preceding sentence, the Holders of Trust PIERS will not
be able to exercise directly any other remedy available to the holders of the
Debentures.
Any approval or direction of Holders of Trust PIERS may be given at a
separate meeting of Holders of Trust PIERS convened for such purpose, at a
meeting of all of the Holders of Securities in the Trust or pursuant to written
consent. The Property Trustees will cause a notice of any meeting at which
Holders of Trust PIERS are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of Trust PIERS. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such action is to be
taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Trust PIERS will be required
for the Trust to redeem and cancel Trust PIERS or to distribute the Debentures
in accordance with the Trust Agreement and the terms of the Securities.
Notwithstanding that Holders of Trust PIERS are entitled to vote or
consent under any of the circumstances described above, any of the Trust PIERS
that are owned by the Sponsor or any Affiliate of the Sponsor shall not be
entitled to vote or consent and shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under Sections 7(b), 7(c), and 8 and as
otherwise required by law and the Trust Agreement, the Holders of the Common
Securities will have no voting rights.
A-12
(b) Unless an Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the holder of the Common
Securities. In no event will the holders of the Trust PIERS have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in the Sponsor as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
(c) If an Event of Default under the Trust Agreement has occurred
and is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (or in the case of redemption, on the redemption date), then a
Holder of Common Securities may institute a Direct Action for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on a
Like Amount of Debentures on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the Common
Securities Holder will be subordinated to the rights of such Holder of Trust
PIERS to the extent of any payment made by the Debenture Issuer to such Holder
of Common Securities in such Direct Action. Except as provided in the second
preceding sentence, the Holders of Common Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
at which Holders of Common Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Trust Agreement and the terms of the
Securities.
8. Amendments to Trust Agreement and Indenture.
In addition to the requirements set out in Section 12.1 of the Trust
Agreement, the Trust Agreement may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees, without the consent of the
Holders (i) to cure any ambiguity, correct or supplement any provisions in the
Trust Agreement that may be inconsistent with any other provisions, or to make
any other provisions with respect to matters or questions arising under the
Trust Agreement which shall not be inconsistent with the other provisions of the
Trust Agreement, or (ii) to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a grantor
trust at all times that any Securities are outstanding or to ensure that the
Trust will not be required to register as an "Investment Company" under the
Investment
A-13
Company Act; provided, however, that in the case of clause (i), such action
shall not adversely affect in any material respect the interests of any Holder,
any amendments of the Trust Agreement shall become effective when notice thereof
is given to the Holders. The Trust Agreement may also be amended by the Trustees
and the Sponsor with (i) the consent of Holders representing a Majority in
liquidation amount of all outstanding Securities, and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an Investment
Company under the Investment Company Act, provided that, without the consent of
each Holder of Trust Securities, the Trust Agreement may not be amended to:
(i) change the amount or timing of any Distribution on
Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities on
a specified date;
(ii) reduce the liquidation amount or the Distribution
Rate or change the payment date or maturity of the Trust PIERS;
(iii) change the rights of a Holder of the Trust PIERS upon
a Change of Control (as defined in the Third Supplemental Indenture);
(iv) restrict the rights of a Holder of Trust PIERS to
institute suit for the enforcement of payment of a Distribution on or
after the specified date;
(v) allow the Trust to transfer Debentures and Warrants
separately;
(vi) change the rights of any Holder of Trust PIERS to
convert its Trust PIERS upon the satisfaction of the conditions
required for such conversion and at the Conversion Ratio, as adjusted;
or
(vii) reduce the percentage of liquidation amount of Trust
PIERS, the Holders of which are required to modify or amend the Trust
Agreement or to consent to any waiver thereunder..
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Trust Agreement has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Trust PIERS pro rata according to the aggregate liquidation amount of Trust
PIERS held by the relevant Holder relative to the aggregate liquidation amount
of all Trust PIERS outstanding, and only after satisfaction of all amounts owed
to the Holders of the Trust PIERS, to each Holder of Common Securities pro rata
A-14
according to the aggregate liquidation amount of Common Securities held by the
relevant Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.
10. Ranking.
The Trust PIERS rank pari passu with the Common Securities and payment
thereon shall be made Pro Rata with the Common Securities, except that, if an
Event of Default under the Trust Agreement occurs and is continuing, no payments
in respect of Distributions on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Securities shall be made until the Holders
of the Trust PIERS shall be paid in full the Distributions, Redemption Price,
Liquidation Distribution and other payments to which they are entitled at such
time.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Trust PIERS and Common Securities, by the acceptance
thereof, agrees to the provisions of the Trust PIERS Guarantee, including the
subordination provisions therein, and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders shall have no preemptive rights to subscribe for any
additional securities.
13. Miscellaneous.
These terms constitute a part of the Trust Agreement.
The Sponsor will provide a copy of the Trust Agreement, the Trust PIERS
Guarantee, or the Indenture (including any supplemental indenture) to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
A-15
EXHIBIT A-1
FORM OF TRUST PIERS CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL TRUST PIERS, INSERT: THIS TRUST
PIERS IS A GLOBAL TRUST PIERS WITHIN THE MEANING OF THE TRUST AGREEMENT
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS TRUST
PIERS IS EXCHANGEABLE FOR TRUST PIERS REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE TRUST AGREEMENT AND NO TRANSFER OF THIS TRUST PIERS (OTHER THAN
A TRANSFER OF THIS TRUST PIERS AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF
THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING
AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN
LIMITED CIRCUMSTANCES.]
THE TRUST PIERS WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $50.
THE HOLDER OF THIS TRUST PIERS BY ITS PURCHASE AND HOLDING HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT (A) THE PURCHASE, HOLDING AND DISPOSITION
OF THE TRUST PIERS (INCLUDING RELATED TRANSACTIONS IN THE COMMON STOCK, WARRANTS
OR DEBENTURES OF THE COMPANY) (1) DOES OR WILL SATISFY THE REQUIREMENTS OF, AND
IS OR WILL BE ENTITLED TO FULL EXEMPTIVE RELIEF UNDER A PROHIBITED TRANSACTION
CLASS EXEMPTION OR AN APPLICABLE EXEMPTION FROM SIMILAR LAWS OR (2) WILL NOT
CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION UNDER ERISA, THE INTERNAL
REVENUE CODE OR APPLICABLE SIMILAR LAWS, (B) THE COMPANY AND THE TRUSTEES ARE
NOT "FIDUCIARIES" WITHIN THE MEANING OF SECTION 3(21) OF ERISA AND THE
REGULATIONS THEREUNDER WITH RESPECT TO THE HOLDER'S INTEREST IN THE TRUST PIERS
(OR THE UNDERLYING WARRANTS AND DEBENTURES) AND (C) IN PURCHASING THE TRUST
PIERS, THE HOLDER APPROVES THE PURCHASE OF THE WARRANTS AND DEBENTURES AND THE
APPOINTMENT OF THE TRUSTEES.
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS
SECURITY REPRESENTS AN UNDIVIDED BENEFICIAL INTEREST IN A CONTINGENT PAYMENT
DEBT INSTRUMENT AND HOLDERS WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S
"COMPARABLE YIELD" FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO
SECTION 7.12 OF THE TRUST AGREEMENT, THE COMPANY AGREES, AND BY ACCEPTANCE OF A
BENEFICIAL OWNERSHIP INTEREST IN THE TRUST PIERS EACH BENEFICIAL HOLDER OF TRUST
PIERS AGREES, FOR UNITED STATES FEDERAL INCOME TAX
A-1-1
PURPOSES, (I) TO TREAT EACH DEBENTURE AND THE CORRESPONDING WARRANT IN WHICH
SUCH HOLDER HAS A BENEFICIAL INTEREST AS A SINGLE UNITARY INSTRUMENT, (II) TO
TREAT SUCH UNITARY INSTRUMENT AS INDEBTEDNESS OF THE COMPANY, (III) TO TREAT
SUCH INDEBTEDNESS AS SUBJECT TO SECTION 1.1275-4(b) OF THE TREASURY REGULATIONS
(THE "CONTINGENT DEBT REGULATIONS"), (IV) TO BE BOUND BY THE COMPANY'S
DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE," WITHIN
THE MEANING OF THE CONTINGENT DEBT REGULATIONS, WITH RESPECT TO SUCH HOLDER'S
TRUST PIERS, AND (V) TO USE SUCH "COMPARABLE YIELD" AND "PROJECTED PAYMENT
SCHEDULE" IN DETERMINING ITS INTEREST ACCRUALS WITH RESPECT TO SUCH HOLDER'S
TRUST PIERS AND IN DETERMINING ADJUSTMENTS THERETO. FOR PURPOSES OF THE
FOREGOING, THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" IS 7.410% PER
ANNUM, COMPOUNDED QUARTERLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE
COMPANY, IS ATTACHED TO AS EXHIBIT B TO THE INDENTURE FOR THE DEBENTURES. A
HOLDER OF TRUST PIERS MAY OBTAIN THE ISSUE DATE, YIELD TO MATURITY, COMPARABLE
YIELD AND A COPY OF THE PROJECTED PAYMENT SCHEDULE FOR THE DEBENTURES AND
WARRANTS BY TELEPHONING THE COMPANY'S INVESTOR RELATIONS DEPARTMENT AT (610)
320-8400 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO INVESTOR
RELATIONS DEPARTMENT, SOVEREIGN BANK, MAIL CODE 11-900-IR5, P.O. BOX 12646,
READING, PA 19612, ATTN: MARK R. MCCOLLOM.
A-1-2
Certificate Number: Aggregate Liquidation Amount:
CUSIP 846048205
Certificate Evidencing Trust PIERS
of
Sovereign Capital Trust IV
4.375% Trust PIERS
(liquidation amount $50.00 per Trust PIERS)
Sovereign Capital Trust IV, a statutory trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of [$_________ in aggregate liquidation amount
of Trust PIERS of the Trust](1) [the aggregate liquidation amount of Trust PIERS
of the Trust specified in Schedule A hereto](2) representing undivided
beneficial interests in the assets of the Trust designated the 4.375% Contingent
Convertible Trust Preferred Income Equity Redeemable Securities (liquidation
amount $50.00 per Trust PIERS) (the "Trust PIERS"). The Trust PIERS are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Trust PIERS represented hereby
are issued and shall in all respects be subject to the provisions of the Amended
and Restated Declaration of Trust of the Trust dated as of February 26, 2004, as
the same may be amended from time to time (the "Trust Agreement"), including the
designation of the terms of the Trust PIERS as set forth in Annex I to the Trust
Agreement. Capitalized terms used but not defined herein shall have the meaning
given them in the Trust Agreement. The Sponsor will provide a copy of the Trust
Agreement, the Trust PIERS Guarantee, and the Indenture (including any
supplemental indenture) to a Holder without charge upon written request to the
Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder and to the benefits of the
Trust PIERS Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures and Warrants as indebtedness of the Sponsor
subject to the rules for contingent payment debt instruments and the Trust PIERS
as evidence of indirect beneficial ownership in the Debentures and the Warrants.
[SIGNATURES ON FOLLOWING PAGE]
- -----------------------
(1) Insert in Definitive Trust PIERS only.
(2) Insert in Global Trust PIERS only.
A-1-3
[SIGNATURES FROM PRECEDING PAGE]
IN WITNESS WHEREOF, the Trust has executed this certificate this ______
day of February, 2004.
SOVEREIGN CAPITAL TRUST IV
By:_____________________________________
Name:
Administrative Trustee
By:_____________________________________
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust PIERS referred to in the within-mentioned
Trust Agreement.
Dated: February 26, 2004
THE BANK OF NEW YORK, as Property Trustee
By:______________________________________
Name:
Title:
A-1-4
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Trust PIERS will be fixed at a rate per
annum of 4.375% (the "Distribution Rate") of the liquidation amount of $50.00
per Trust PIERS, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the Distribution Rate
(to the extent permitted by applicable law). The term "Distributions", as used
herein, includes such cash distributions and any such interest unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Property Trustee and to the extent the
Property Trustee has funds on hand legally available therefor.
Subject to the accrual and record date provisions specified herein and
in the Trust Agreement, the Trust shall pay contingent distributions
("Contingent Distributions") to the Holders during any quarterly period (each, a
"Contingent Distribution Period") from March 1 to May 31, June 1 to August 31,
September 1 to November 31 or December 1 to February 28 (or February 29 in a
leap year), other than the Contingent Distribution Period beginning on December
1, 2033, commencing with the Contingent Distribution Period beginning March 1,
2007, if the average of the Trading Prices of the Trust PIERS for the five
consecutive Trading Days immediately preceding the first Trading Day of such
Contingent Interest Period equals $65.00 or more.
The amount of Contingent Distribution payable in respect of any
Contingent Distribution Period will equal $0.08 per $50 liquidation amount at
maturity of Trust PIERS, and such Contingent Distribution will accrue and be
payable to Holders in the same manner as regular Distributions. Regular
Distributions will continue to accrue at the rate of 4.375% per year on the
liquidation amount of the Trust PIERS whether or not Contingent Distributions
are paid.
Distributions on the Trust PIERS will be cumulative, will accumulate
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from February 26, 2004 and will be payable
quarterly in arrears, on March 1, June 1, September 1, and December 1 of each
year, commencing on June 1, 2004, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month.
As long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest (other than Contingent Interest) by extending the interest
payment period at any time and from time to time on the Debentures for a period
not exceeding 20 consecutive quarterly periods, including the first such quarter
during such extension period (each an "Extension Period"), provided that no
Extension Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions (other than Contingent
Distributions) will also be deferred. Despite such deferral, quarterly
Distributions (other than Contingent Distributions) will continue to accumulate
with interest thereon (to the extent permitted by applicable law, but not at a
rate exceeding the rate of interest then accruing on the Debentures) at the
Distribution Rate compounded quarterly during
A-1-5
any such Extension Period. Prior to the termination of any such Extension
Period, the Debenture Issuer may further defer payments of interest (other than
Contingent Interest) by further extending such Extension Period; provided that
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 20 consecutive quarters, including
the first quarter during such Extension Period, end on a date other than an
Interest Payment Date for the Debentures or extend beyond the Maturity Date of
the Debentures. Payments of accumulated Distributions will be payable to Holders
as they appear on the books and records of the Trust on the first record date
after the end of the Extension Period. Upon the termination of any Extension
Period and the payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above requirements.
Subject to receipt by the Sponsor of any required regulatory approval
and to certain other conditions set forth in the Trust Agreement and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time following a Special Event liquidate the Trust and cause the Debentures and
Warrants to be distributed to the holders of the Securities in liquidation of
the Trust or, simultaneous with any redemption of the Debentures, cause a Like
Amount of the Securities to be redeemed by the Trust.
The Trust PIERS shall be redeemable as provided in the Trust Agreement.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Trust PIERS
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________agent
to transfer this Trust PIERS Certificate on the books of the Trust. The agent
may substitute another to act for him or her.
Date:__________________________
Signature:_____________________
A-1-6
(Sign exactly as your name appears on the other side of this Trust PIERS
Certificate)
Signature Guarantee***: _____________________________________________
- ----------------------
*** Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities and
Exchange Act of 1934, as amended.
A-1-7
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST
AGREEMENT REFERRED TO HEREIN.
Certificate Evidencing Common Securities
of
Sovereign Capital Trust IV
4.375% Common Securities
(liquidation amount $50.00 per Common Security)
Sovereign Capital Trust IV, a statutory trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that Sovereign Bancorp,
Inc. (the "Holder") is the registered owner of [432,990](3) Common Securities of
the Trust, representing undivided beneficial interests in the assets of the
Trust designated the 4.375% Common Securities (liquidation amount $50.00 per
Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of February 26,
2004, as the same may be amended from time to time (the "Trust Agreement"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Trust Agreement. Capitalized terms used but not defined herein
shall have the meaning given them in the Declaration. The Sponsor will provide a
copy of the Trust Agreement, the Trust PIERS Guarantee and the Indenture
(including any supplemental indenture) to a Holder without charge upon written
request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder and to the benefit of the
Common Securities Guarantee Agreement to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures and Warrants as indebtedness of the Sponsor
subject to the rules for contingent payment debt instruments and the Trust PIERS
as evidence of indirect beneficial ownership in the Debentures and the Warrants.
[SIGNATURES ON FOLLOWING PAGE]
- ----------------------
(3) or up to 494,846 Common Securities of the Trust if the Underwriters exercise
in full their option under the Underwriting Agreement to purchase additional
Trust PIERS.
A-2-1
[SIGNATURES FROM PRECEDING PAGE]
IN WITNESS WHEREOF, the Trust has executed this certificate this _____
day of February, 2004.
SOVEREIGN CAPITAL TRUST IV
By:_____________________________________
Name:
Administrative Trustee
By:_____________________________________
Name:
Administrative Trustee:
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Common Securities referred to in the
within-mentioned Trust Agreement.
Dated: February 26, 2004 THE BANK OF NEW YORK, as Property Trustee
By:______________________________________
Name:
Title:
A-2-2
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate
per annum of 4.375% (the "Distribution Rate") of the liquidation amount of
$50.00 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly at the
Distribution Rate (to the extent permitted by applicable law). The term
"Distributions", as used herein, includes such cash distributions and any such
interest unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Property Trustee
and to the extent the Property Trustee has funds available therefor.
Subject to the accrual and record date provisions specified herein and
in the Trust Agreement, the Trust shall pay contingent distributions
("Contingent Distributions") to the Holders during any quarterly period (each, a
"Contingent Distribution Period") from March 1 to May 31, June 1 to August 31,
September 1 to November 31 or December 1 to February 28 (or February 29 in a
leap year), other than the Contingent Distribution Period beginning on December
1, 2033, commencing with the Contingent Distribution Period beginning March 1,
2007, if the average of the Trading Prices of the Trust PIERS for the five
consecutive Trading Days immediately preceding the first Trading Day of such
Contingent Interest Period equals $65.00 or more.
The amount of Contingent Distribution payable in respect of any
Contingent Distribution Period will equal $0.08 per $50 liquidation amount at
maturity of Common Securities, and such Contingent Distribution will accrue and
be payable to Holders in the same manner as regular Distributions. Regular
Distributions will continue to accrue at the rate of 4.375% per year on the
liquidation amount of the Common Securities whether or not Contingent
Distributions are paid.
Distributions on the Common Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from February 26, 2004 and will be payable
quarterly in arrears, on March 1, June 1, September 1, and December 1 of each
year, commencing on June 1, 2004, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month.
As long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest (other than Contingent Interest) by extending the interest
payment period at any time and from time to time on the Debentures for a period
not exceeding 20 consecutive quarters, including the first quarter during such
extension period (each an "Extension Period"), provided that no Extension Period
shall end on a date other than an Interest Payment Date for the Debentures or
extend beyond the Maturity Date of the Debentures. As a consequence of such
deferral, Distributions (other than Contingent Distributions) will also be
deferred. Despite such deferral, Distributions (other than Contingent
Distributions) will continue to accumulate with interest thereon (to the extent
permitted by applicable law, but not at a rate exceeding the rate of interest
then accruing on the
A-2-3
Debentures) at the Distribution Rate compounded quarterly during any such
Extension Period. Prior to the termination of any such Extension Period, the
Debenture Issuer may further defer payments of interest (other than Contingent
Interest) by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 20 consecutive quarters, including the
first quarter during such Extension Period, or end on a date other than an
Interest Payment Date for the Debentures or extend beyond the Maturity Date of
the Debentures. Payments of accrued Distributions will be payable to Holders as
they appear on the books and records of the Trust on the first record date after
the end of the Extension Period. Upon the termination of any Extension Period
and the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
Subject to receipt by the Sponsor of any required regulatory approval
and to certain other conditions set forth in the Trust Agreement and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time following a Special Event liquidate the Trust and cause the Debentures to
be distributed to the holders of the Securities in liquidation of the Trust or,
simultaneous with any redemption of the Debentures, cause a Like Amount of the
Securities to be redeemed by the Trust.
Under certain circumstances, the right of the holders of the Common
Securities shall be subordinate to the rights of the holders of the Trust PIERS
(as defined in the Trust Agreement), as provided in the Declaration.
The Common Securities shall be redeemable as provided in the
Trust Agreement.
A-2-4
CONVERSION REQUEST
To: The Bank of New York,
as Property Trustee of
Sovereign Capital Trust IV
The undersigned owner of these Trust PIERS hereby irrevocably exercises
the option to convert these Trust PIERS, or the portion below designated, into
Common Stock (as such term is defined in the Warrant Agreement, dated as of
February 26, 2004, between Sovereign Bancorp, Inc. and The Bank of New York, as
Warrant Agent (the "Warrant Agreement"), in accordance with the terms of the
Warrant Agreement and the Amended and Restated Declaration of Trust (as amended
from time to time, the "Trust Agreement"), dated as of February 26, 2004, by
Mark R. McCollum, James D. Hogan and Thomas Brugger, as Administrative Trustees,
The Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Property Trustee, Sovereign Bancorp, Inc., as Sponsor, and by the Holders, from
time to time, of undivided beneficial interests in the assets of the Trust to be
issued pursuant to the Trust Agreement. Pursuant to the aforementioned exercise
of the option to convert these Trust PIERS, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Trust Agreement) to (i)
exchange such Trust PIERS for a portion of the Debentures and the Warrants (as
those term are defined in the Trust Agreement) held by the Trust (at the rate of
exchange specified in Trust Agreement and the Warrant Agreement) and (ii)
immediately exercise such Warrants on behalf of the undersigned, into Common
Stock (at the Conversion Ratio as set forth in the Warrant Agreement).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: _________________
Number of Trust PIERS to be converted: ______________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
________________________
________________________
________________________
(Sign exactly as your name appears on the other side of this Trust PIERS
certificate) (for conversion of definitive Trust PIERS only)
Please print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number.
________________________
________________________
________________________
A-2-5
Signature Guarantee:* ______________________________________________
- ----------------------
* Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-6
CONVERSION REQUEST - CASH EXERCISE
To: The Bank of New York,
as Property Trustee of
Sovereign Capital Trust IV
The undersigned owner of these Trust PIERS hereby irrevocably exercises
the option to cash exercise its right to convert these Trust PIERS, or the
portion below designated, into Common Stock and to receive Short-Term Debentures
(as such terms are defined in the Warrant Agreement, dated as of February 26,
2004, between Sovereign Bancorp, Inc. and The Bank of New York, as Warrant Agent
(the "Warrant Agreement"), in accordance with the terms of the Warrant Agreement
and the Amended and Restated Declaration of Trust (as amended from time to time,
the "Trust Agreement"), dated as of February 26, 2004, by Mark R. McCollum,
James D. Hogan and Thomas Brugger, as Administrative Trustees, The Bank of New
York (Delaware), as Delaware Trustee, The Bank of New York, as Property Trustee,
Sovereign Bancorp, Inc., as Sponsor, and by the Holders, from time to time, of
undivided beneficial interests in the assets of the Trust to be issued pursuant
to the Trust Agreement. Pursuant to the aforementioned exercise of the Cash
Exercise option to convert these Trust PIERS, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Trust Agreement) to (i)
exchange such Trust PIERS for a portion of the Debentures and the Warrants (as
those term are defined in the Trust Agreement) held by the Trust (at the rate of
exchange specified in Trust Agreement and the Warrant Agreement) and (ii)
immediately cash exercise such Warrants on behalf of the undersigned, into
Common Stock (at the rate of the Exercise Amount as set forth in the Warrant
Agreement).
The undersigned does also hereby direct the Conversion Agent that the
Common Stock issuable and deliverable upon conversion, together with Short-Term
Debentures deliverable upon conversion and any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If Common Stock is to
be issued or Short-Term Debentures delivered in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Date: _________________
Number of Trust PIERS to be converted: ______________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
________________________
________________________
________________________
(Sign exactly as your name appears on the other side of this Trust PIERS
certificate) (for conversion of definitive Trust PIERS only)
A-2-7
Please print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number.
________________________
________________________
________________________
Signature Guarantee:* ________________________________________________
- ----------------------
* Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-8