UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to ________
Commission File Number - 0-20632
FIRST BANKS, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 43-1175538
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
135 North Meramec, Clayton, Missouri 63105
(Address of principal executive offices) (Zip code)
(314) 854-4600
(Registrant's telephone number, including area code)
------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
8.15% Cumulative Trust Preferred Securities
(issued by First Preferred Capital Trust IV New York Stock Exchange
and guaranteed by First Banks, Inc.)
Securities registered pursuant to Section 12(g) of the Act:
10.24% Cumulative Trust Preferred Securities
(issued by First Preferred Capital Trust II
and guaranteed by First Banks, Inc.)
(Title of class)
9.00% Cumulative Trust Preferred Securities
(issued by First Preferred Capital Trust III
and guaranteed by First Banks, Inc.)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ X ]
None of the voting stock of the Company is held by nonaffiliates. All
of the voting stock of the Company is owned by various trusts, which were
created by and for the benefit of Mr. James F. Dierberg, the Company's Chairman
of the Board of Directors, and members of his immediate family.
At March 25, 2005, there were 23,661 shares of the registrant's common
stock outstanding.
FIRST BANKS, INC.
2004 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
Part I
Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 16
Item 3. Legal Proceedings...................................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders.................................... 16
Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.......................................... 17
Item 6. Selected Financial Data................................................................ 18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................. 51
Item 8. Financial Statements and Supplementary Data............................................ 51
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................................... 51
Item 9A. Controls and Procedures................................................................ 51
Part III
Item 10. Directors and Executive Officers of the Registrant..................................... 52
Item 11. Executive Compensation................................................................. 56
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.................................................... 57
Item 13. Certain Relationships and Related Transactions......................................... 58
Item 14. Principal Accountant Fees and Services................................................. 59
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................... 60
Signatures ....................................................................................... 106
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking
statements with respect to our financial condition, results of operations and
business. Generally, forward-looking statements may be identified through the
use of words such as: "believe," "expect," "anticipate," "intend," "plan,"
"estimate," or words of similar meaning or future or conditional terms such as:
"will," "would," "should," "could," "may," "likely," "probably," or "possibly."
Examples of forward looking statements include, but are not limited to,
estimates or projections with respect to our future financial condition,
expected or anticipated revenues with respect to our results of operations and
our business. These forward-looking statements are subject to certain risks and
uncertainties, not all of which can be predicted or anticipated. Factors that
may cause our actual results to differ materially from those contemplated by the
forward-looking statements herein include market conditions as well as
conditions affecting the banking industry generally and factors having a
specific impact on us, including but not limited to: fluctuations in interest
rates and in the economy, including the threat of future terrorist activities,
existing and potential wars and/or military actions related thereto, and
domestic responses to terrorism or threats of terrorism; the impact of laws and
regulations applicable to us and changes therein; the impact of accounting
pronouncements applicable to us and changes therein; competitive conditions in
the markets in which we conduct our operations, including competition from
banking and non-banking companies with substantially greater resources than us,
some of which may offer and develop products and services not offered by us; our
ability to control the composition of our loan portfolio without adversely
affecting interest income; the credit risk associated with consumers who may not
repay loans; the geographic dispersion of our offices; the impact our hedging
activities may have on our operating results; the highly regulated environment
in which we operate; and our ability to respond to changes in technology. With
regard to our efforts to grow through acquisitions, factors that could affect
the accuracy or completeness of forward-looking statements contained herein
include the competition of larger acquirers with greater resources; fluctuations
in the prices at which acquisition targets may be available for sale; the impact
of making acquisitions without using our common stock; and possible asset
quality issues, unknown liabilities or integration issues with the businesses
that we have acquired. We do not have a duty to and will not update these
forward-looking statements. Readers of this Annual Report on Form 10-K should
therefore consider these risks and uncertainties in evaluating forward looking
statements and should not place undue reliance on these statements.
PART I
Item 1. Business
General. We are a registered bank holding company incorporated in Missouri and
headquartered in St. Louis County, Missouri. We operate through our wholly-owned
subsidiary bank holding company, The San Francisco Company, or SFC,
headquartered in San Francisco, California, and its wholly-owned subsidiary
bank, First Bank, headquartered in St. Louis County, Missouri. First Bank
currently operates 167 branch offices in California, Illinois, Missouri and
Texas. Since 1994, our organization has grown significantly, primarily as a
result of our acquisition strategy, as well as through internal growth. At
December 31, 2004, we had total assets of $8.73 billion, total loans, net of
unearned discount, of $6.14 billion, total deposits of $7.15 billion and total
stockholders' equity of $600.9 million.
Through First Bank, we offer a broad range of commercial and personal
deposit products, including demand, savings, money market and time deposit
accounts. In addition, we market combined basic services for various customer
groups, including packaged accounts for more affluent customers, and sweep
accounts, lock-box deposits and cash management products for commercial
customers. We also offer both consumer and commercial loans. Consumer lending
includes residential real estate, home equity and installment lending.
Commercial lending includes commercial, financial and agricultural loans, real
estate construction and development loans, commercial real estate loans,
asset-based loans and trade financing. Other financial services include mortgage
banking, debit cards, brokerage services, credit-related insurance, internet
banking, automated teller machines, telephone banking, safe deposit boxes and
trust, private banking and institutional money management services.
Primary responsibility for managing our banking units rests with the
officers and directors of each unit, but we centralize overall corporate
policies, procedures and administrative functions and provide centralized
operational support functions for our subsidiaries. This practice allows us to
achieve various operating efficiencies while allowing our banking units to focus
on customer service.
Since 1996, we have formed nine financing entities that operate as
affiliated business or statutory trusts. These trusts were created for the sole
purpose of issuing trust preferred securities, and the sole assets of the trusts
are our subordinated debentures. In conjunction with the formation of our
financing entities and their issuance of the trust preferred securities, we
issued subordinated debentures to each of our financing entities in amounts
equivalent to the respective trust preferred securities plus the amount of the
common securities of the individual trusts, as outlined in the following table
and more fully described in Note 12 to our Consolidated Financial Statements. We
pay interest on our subordinated debentures to our respective financing
entities. In turn, our financing entities pay distributions to the holders of
the trust preferred securities. These interest and distribution payments are
paid quarterly in arrears, in March, June, September, and December of each year,
with the exception of the trust preferred securities and related subordinated
debentures of First Bank Capital Trust, which are payable semi-annually in
arrears on April 22nd and October 22nd of each year. The distributions payable
on our subordinated debentures are included in interest expense in our
consolidated statements of income.
A summary of the outstanding trust preferred securities issued by our
affiliated statutory and business trusts, and our related subordinated
debentures issued to the respective trusts in conjunction with the trust
preferred securities offerings, is as follows:
Interest Preferred Subordinated
Name of Trust Date Formed Type of Offering Rate Securities Debentures
------------- ----------- ---------------- ---- ---------- ----------
First Preferred Capital Trust II October 2000 Publicly Underwritten 10.24 57,500,000 59,278,375
First Preferred Capital Trust III November 2001 Publicly Underwritten 9.00 55,200,000 56,907,250
First Bank Capital Trust April 2002 Private Placement Variable 25,000,000 25,774,000
First Bank Statutory Trust March 2003 Private Placement 8.10 25,000,000 25,774,000
First Preferred Capital Trust IV January 2003 Publicly Underwritten 8.15 46,000,000 47,422,700
First Bank Statutory Trust II September 2004 Private Placement Variable 20,000,000 20,619,000
First Bank Statutory Trust III November 2004 Private Placement Variable 40,000,000 41,238,000
Each of our existing financing entities operates as a Delaware business
trust with the exception of First Bank Statutory Trust, which operates as a
Connecticut statutory trust. The trust preferred securities issued by First
Preferred Capital Trust II and First Preferred Capital Trust III are publicly
held and traded on the Nasdaq Stock Market's National Market system. The trust
preferred securities issued by First Preferred Capital Trust IV are publicly
held and traded on the New York Stock Exchange. The trust preferred securities
issued by First Bank Capital Trust, First Bank Statutory Trust, First Bank
Statutory Trust II and First Bank Statutory Trust III were issued in private
placements and rank equal to the trust preferred securities issued by First
Preferred Capital Trust II and First Preferred Capital Trust IV, and junior to
the trust preferred securities issued by First Preferred Capital Trust III. The
trust preferred securities have no voting rights except in certain limited
circumstances.
Various trusts, which were created by and are administered by and for
the benefit of Mr. James F. Dierberg, our Chairman of the Board, and members of
his immediate family, own all of our voting stock. Mr. Dierberg and his family,
therefore, control our management and policies.
Strategy. In the development of our banking franchise, we acquire other
financial institutions as one means of achieving our growth objectives.
Acquisitions may serve to enhance our presence in a given market, to expand the
extent of our market area or to enable us to enter new or noncontiguous markets.
Due to the nature of our ownership, we have elected to only engage in those
acquisitions that can be accomplished for cash, rather than by issuing
securities. However, by using cash in our acquisitions, the characteristics of
the acquisition arena may, at times, place us at a competitive disadvantage
relative to other acquirers offering stock transactions. This results from the
market attractiveness of other financial institutions' stock and the advantages
of tax-free exchanges to the selling shareholders. Our acquisition activities
are generally somewhat sporadic because we may consummate multiple transactions
in a particular period, followed by a substantially less active acquisition
period. Furthermore, the intangible assets recorded in conjunction with these
acquisitions create an immediate reduction in our regulatory capital. This
reduction, as required by regulatory policy, provides further financial
disincentives to paying large premiums in cash acquisitions.
Recognizing these facts, we follow certain patterns in our
acquisitions. First, we generally acquire several smaller institutions,
sometimes over an extended period of time, rather than a single larger one. We
attribute this approach to the constraints imposed by the amount of funds
required for a larger transaction, as well as the opportunity to minimize the
aggregate premium required through smaller individual transactions. However, we
may periodically acquire larger institutions that provide us with the
opportunity to rapidly expand our market presence in a highly desired market
area. Secondly, in some acquisitions, we may acquire institutions having
significant asset-quality, ownership, regulatory or other problems. We seek to
address the risks of these issues by adjusting the acquisition pricing,
accompanied by appropriate remedial attention after consummation of the
transaction. In these institutions, these issues may diminish their
attractiveness to other potential acquirers, and therefore may reduce the amount
of acquisition premium required. Finally, we may pursue our acquisition strategy
in other geographic areas, or pursue internal growth more aggressively because
cash transactions may not be economically viable in extremely competitive
acquisition markets.
During the five years ended December 31, 2004, we primarily
concentrated our acquisitions in Illinois and California, completing 12
acquisitions of banks, one acquisition of a loan origination business, one
acquisition of a leasing company, and two purchases of branch offices, which
provided us with an aggregate of $3.23 billion in total assets and 52 banking
locations as of the dates of the acquisitions. Additionally, certain of our
acquisitions have occurred in our other geographic markets of Missouri and
Texas. In 2003, we further expanded our Midwest banking franchise with our
acquisition of Bank of Ste. Genevieve in Ste. Genevieve, Missouri. In 2002, we
completed our acquisition of a bank holding company in Des Plaines, Illinois, as
well as the purchase of two branch offices in Denton and Garland, Texas. On July
30, 2004, we expanded our Chicago, Illinois banking franchise with our
acquisition of Continental Mortgage Corporation - Delaware, or CMC in Aurora,
Illinois. On August 31, 2004, we acquired substantially all of the assets of
Small Business Loan Source, Inc. in Houston, Texas, which originates, sells and
services loans to small business concerns. On November 30, 2004, we
significantly expanded our Chicago, Illinois banking franchise with our
acquisition of Hillside Investors, Ltd., or Hillside, and its wholly-owned
banking subsidiary, CIB Bank (collectively, CIB). The acquisition of CIB
represented the largest acquisition in our history, providing us with total
assets of $1.20 billion and expanding our branch banking network in the Chicago
metropolitan area by an additional 16 branches. These acquisitions have allowed
us to significantly expand our presence throughout our geographic areas, improve
operational efficiencies, convey a more consistent image and quality of service
and more cohesively market and deliver our products and services.
Following our acquisitions, various undertakings are necessary to
effectively integrate the acquired entities into our business systems and
culture. While the activities required are specifically dependent upon the
individual circumstances surrounding each acquisition, the majority of our
efforts have been concentrated in various areas including, but not limited to:
>> improving asset quality;
>> reducing unnecessary, duplicative and/or excessive expenses
including personnel, information technology and certain other
operational and administrative expenses;
>> maintaining, repairing and, in some cases, refurbishing bank
premises necessitated by the deferral of such projects by some of
the acquired entities;
>> renegotiating long-term leases that provide space in excess of
that necessary for banking activities and/or at rates in excess
of current market rates, or subleasing excess space to third
parties;
>> relocating branch offices which are not adequate, conducive or
convenient for banking operations; and
>> managing actual or potential litigation that existed with respect
to acquired entities to minimize the overall costs of
negotiation, settlement or litigation.
The post-acquisition process also includes the combining of separate
and distinct entities together to form a cohesive organization with common
objectives and focus. We have invested significant resources to reorganize
staff, recruit personnel where needed, and establish the direction and focus
necessary for the combined entity to take advantage of the opportunities
available to it. This investment contributed to the increases in noninterest
expense, and resulted in the creation of new banking units within the newly
integrated combined entity, which conveyed a more consistent image and quality
of service. The new banking units provided a broad array of banking products to
their customers and compete effectively in their marketplaces, even in the
presence of other financial institutions with much greater resources. While some
of these modifications did not contribute to reductions of noninterest expense,
they contributed to the commercial and retail business development efforts of
the banks, and ultimately to their prospects for improving future profitability.
In 2002 and 2003, our acquisition prospects were somewhat limited
primarily due to the market environment requiring significantly higher premiums
in order to transact financial institution acquisitions. As a result, we
expanded our business strategy to include the opening of de novo branch offices
as another means of further achieving our growth objectives. Our de novo branch
strategy also provides similar opportunities to our acquisition strategy by
allowing us to enhance our presence in our existing markets and enter new
markets. Additionally, we generally have more flexibility in selecting the most
opportunistic sites for our de novo branches, constructing the branch offices in
accordance with our standard business model and marketing and promoting our
customized products and services under our long-established trade name. In 2004,
we opened de novo branches in Houston and McKinney, Texas, Wildwood, Missouri,
which is located in West St. Louis County, and in San Diego, California.
Furthermore, in January 2005, we opened an additional de novo branch in
Farmington, Missouri, which has experienced substantial growth during its first
few weeks of operation. We expect to further concentrate our efforts on this
portion of our business strategy while continuing to identify viable acquisition
candidates at more reasonable acquisition premiums that are commensurate with
our established acquisition strategy.
In conjunction with our de novo and acquisition strategy, we have also
focused on building and reorganizing the infrastructure necessary to accomplish
our objectives for internal growth. This process has required significant
increases in the resources dedicated to commercial and consumer business
development, financial service product line and delivery systems, branch
development and training, advertising and marketing programs, and administrative
and operational support. In addition, during 1999, we began an internal
restructuring process designed to better position us for future growth and
opportunities expected to become available as consolidation and changes continue
in the delivery of financial services. The magnitude of this project was
extensive and covered almost every area of our organization. We continue to
focus on modifying and effectively repositioning our internal and external
resources to better serve the markets in which we operate. Although these
efforts have led to certain increased capital expenditures and noninterest
expenses, we expect that they will lead to additional internal growth, more
efficient operations and improved profitability over the long term, in
accordance with our long-term corporate vision.
Lending Activities. Our enhanced business development resources assisted in the
realignment of certain acquired loan portfolios, which were skewed toward loan
types that reflected the abilities and experiences of the management of the
acquired entities. In order to achieve a more diversified portfolio, to address
asset-quality issues in the portfolios and to achieve a higher interest yield on
our loan portfolio, we reduced a substantial portion of the loans which were
acquired during this time through payments, refinancing with other financial
institutions, charge-offs and, in certain instances, sales of loans. As a
result, our portfolio of consumer and installment loans, net of unearned
discount, decreased significantly from $225.3 million, or 5.69% of total loans,
excluding loans held for sale, at December 31, 1999 to $49.7 million, or 0.83%
of total loans, excluding loans held for sale, at December 31, 2004. The
decrease primarily reflects reductions in our indirect auto, credit card and
student loan portfolios. The sale of our student loan and credit card portfolios
in 2001, which totaled approximately $16.9 million and $13.5 million,
respectively, at the time of sale, was consistent with our objective of reducing
the amount of less profitable loans and expanding our commercial lending and
other consumer loans, including home equity loans. We do not have any continuing
involvement in the transferred assets relating to the student loan and credit
card portfolios sold in 2001. Our expansion of other consumer loans is reflected
in our portfolio of one-to-four family residential real estate mortgage loans,
excluding loans held for sale, which increased from $720.6 million, or 18.2% of
total loans, excluding loans held for sale, at December 31, 1999 to $870.9
million, or 14.50% of total loans, excluding loans held for sale, at December
31, 2004. Loans held for sale increased from $37.4 million at December 31, 1999
to $133.1 million at December 31, 2004.
As these components of our loan portfolio decreased, we replaced them
with higher yielding loans that were internally generated by our business
development function. With our acquisitions, we expanded our business
development function into the new market areas in which we were then operating.
We have continued to grow through internal growth and acquisitions, and recently
completed the largest acquisition in our history in November 2004. Consequently,
in spite of relatively large reductions in certain acquired portfolios, our
aggregate loan portfolio, net of unearned discount, increased 53.59% from $4.00
billion at December 31, 1999 to $6.14 billion at December 31, 2004.
Our business development efforts are primarily focused on the
origination of loans in three general types: commercial, financial and
agricultural loans, which totaled $1.57 billion, or 25.57% of total loans, at
December 31, 2004; commercial real estate mortgage loans, which totaled $2.09
billion, or 34.02% of total loans, at December 31, 2004; and construction and
land development loans, which totaled $1.32 billion, or 21.48% of total loans,
at December 31, 2004. We have also focused our efforts on retaining certain
residential real estate mortgage loans in our loan portfolio. Such loans totaled
approximately $871,000, or 14.12% of total loans, at December 31, 2004.
The primary component of commercial, financial and agricultural loans
is commercial loans which are made based on the borrowers' general credit
strength and ability to generate cash flows for repayment from income sources.
Most of these loans are made on a secured basis, generally involving the use of
company equipment, inventory and/or accounts receivable, and, from time to time,
real estate, as collateral. Regardless of collateral, substantial emphasis is
placed on the borrowers' ability to generate cash flow sufficient to operate the
business and provide coverage of debt servicing requirements. Commercial loans
are frequently renewable annually, although some terms may be as long as five
years. These loans typically require the borrower to maintain certain operating
covenants appropriate for the specific business, such as profitability, debt
service coverage and current asset and leverage ratios, which are generally
reported and monitored on a quarterly basis and subject to more detailed annual
reviews.
Commercial loans are made to customers primarily located in First
Bank's primary geographic trade areas of Missouri, Illinois, California and
Texas who are engaged in manufacturing, retailing, wholesaling and service
businesses. This portfolio is not concentrated in large specific industry
segments that are characterized by sufficient homogeneity that would result in
significant concentrations of credit exposure. Rather, it is a highly
diversified portfolio that encompasses many industry segments. The largest
general concentration in this portfolio, that is not homogeneous in nature, is
agricultural which totals approximately $30.9 million, representing 1.97% of the
commercial, financial and agricultural portfolio at December 31, 2004. This
portfolio, however, is diverse in geography and collateral, secured by a mixture
of agricultural equipment, livestock and crop production. The largest
homogeneous industry segment included within this portfolio is the fast-food
restaurant segment, in which we had total loans outstanding of approximately
$54.4 million, representing 3.47% of this portfolio at December 31, 2004.
Diversity in this segment of our portfolio is represented by both geography and
a mixture of loans to both franchisees and franchisors, with 77.29% of the
portfolio involving loans to franchisees and 22.71% to franchisors. Within both
our real estate and commercial lending portfolios, we strive for the highest
degree of diversity that is practicable. We also emphasize the development of
other service relationships with our commercial borrowers, particularly deposit
accounts.
Commercial real estate loans include loans for which the intended
source of repayment is the rental and other income from the real estate,
including commercial real estate developed for both lease and owner occupied
commercial real estate. The underwriting of owner occupied commercial real
estate loans generally follows the procedures for commercial lending described
above, except that the collateral is real estate, and the loan term may be
longer. The primary emphasis in underwriting loans for which the source of
repayment is the performance of the collateral is the projected cash flow from
the real estate and its adequacy to cover the operating costs of the project and
the debt service requirements. Secondary emphasis is placed on the appraised
value of the real estate, although the appraised liquidation value of the
collateral must be adequate to repay the debt and related interest in the event
the cash flow becomes insufficient to service the debt. Generally, underwriting
terms require the loan principal not to exceed 80% of the appraised value of the
collateral and the loan maturity not to exceed seven years. Commercial real
estate loans are made for commercial office space, retail properties,
hospitality, industrial and warehouse facilities and recreational properties. We
rarely finance commercial real estate or rental properties that do not have
lease commitments for a majority of the rentable space.
Construction and land development loans include commitments for
construction of both residential and commercial properties. Commercial real
estate projects require commitments for permanent financing from other lenders
upon completion of the project and, more typically, may include a short-term
amortizing component of the financing from the bank. Commitments for
construction of multi-tenant commercial and retail projects require lease
commitments from a substantial primary tenant or tenants prior to commencement
of construction. We finance some projects for borrowers whose home office is
within our trade area for which the particular project may be outside our normal
trade area. However, we generally do not engage in developing commercial and
residential construction lending business outside of our trade area. Residential
real estate construction and development loans are made based on the cost of
land acquisition and development, as well as the construction of the residential
units. Although we finance the cost of display units and units held for sale, a
substantial portion of the loans for individual residential units have purchase
commitments prior to funding. Residential condominium projects are funded as the
building construction progresses, but funding of unit finishing is generally
based on firm sales contracts.
In addition to underwriting based on estimates and projection of
financial strength, collateral values and future cash flows, most loans to
borrowing entities other than individuals require the personal guarantees of the
principals of the borrowing entity.
Our commercial leasing portfolio totaled $5.9 million and $67.3 million
at December 31, 2004 and 2003, respectively. This portfolio consisted of leases
originated by our former subsidiary, First Capital Group, Inc., headquartered in
Albuquerque, New Mexico, primarily through third parties, on commercial
equipment including aircraft parts and equipment. During 2002, we changed the
nature of this business, ultimately deciding to discontinue the operations of
First Capital Group, Inc. and the transfer of all responsibilities for the
existing portfolio to a new leasing staff in St. Louis, Missouri. Our commercial
leasing portfolio at December 31, 2001 was comprised of approximately 40% of
leases of parts and equipment to the commercial airline industry and related
aircraft service providers. This equipment consisted primarily of engines,
landing gear and replacement parts, most of which was used in maintenance
operations by commercial airlines or by third party vendors performing
maintenance for the airlines, in addition to several leases for smaller aircraft
used by charter services. Earlier in 2001, the airline industry in general was
experiencing problems with overcapacity, and as a result, had begun reducing its
requirements for new and replacement aircraft. This was evidenced by airlines
taking portions of their fleets, particularly older less efficient aircraft, out
of service and reducing orders for new equipment. This affected maintenance
operations because as the usage of aircraft decreased, the maintenance
requirements were also reduced. Consequently, by late 2001, we discontinued new
leases of equipment related to the airline industry. While some of the leases in
our portfolio had evidenced problems by early 2001, overcapacity problems and
resulting financial distress in the commercial airline industry became more
critical after the terrorist attacks of 2001. Following these events, we
re-evaluated our aviation related lease portfolio to examine our overall
exposure to the industry, the effects of recent trends on valuations of
equipment and the financial strength of our lessees. As a result of our review,
we incurred significant charge-offs during 2002 and 2003 in connection with the
aircraft leasing portfolio, resulting in a reduction of the aviation related
lease portfolio from $60.1 million at December 31, 2001 to $19.6 million at
December 31, 2003. This portfolio has been further reduced to $4.1 at December
31, 2004. Furthermore, we recorded net lease charge-offs of $5.5 million in 2003
related to three equipment leases that were unrelated to the airline industry.
On June 30, 2004, we completed the sale of a significant portion of our
commercial leasing portfolio, resulting in a reduction of the commercial leasing
portfolio by $33.1 million to $9.6 million. The portfolio has been further
reduced to $5.9 million at December 31, 2004, including $907,000 of
nonperforming leases, reflecting our overall business strategy to reduce our
commercial leasing activities.
Our expanded level of commercial lending carries with it greater credit
risk, which we manage through uniform loan policies, procedures, underwriting
and credit administration. As a consequence of such greater risk, the growth of
our loan portfolio must also be accompanied by adequate allowances for loan
losses. Nonperforming loans increased $10.4 million in 2004, remained relatively
constant in 2003, with a $199,000 increase from December 31, 2002, and increased
$7.9 million and $14.1 million for the years ended December 31 2002 and 2001,
respectively. We associate the higher-than-historical level of nonperforming
loans during these periods with our acquisitions and increased commercial
lending activities. During 2004, we showed substantial improvement in our
existing portfolio of nonperforming loans as a result of significant loan
payoffs, the sale of a portion of our commercial leasing portfolio and
management's decision to sell certain nonperforming loans to reduce the level of
such assets, as further discussed under "--Loans and Allowance for Loan Losses."
However, this improvement was offset by a significant increase in nonperforming
loans acquired with the loan portfolios of CMC, Small Business Loan Source,
Inc., or SBLS, and CIB. Nonperforming loans at December 31, 2004 attributable to
these acquisitions were $58.6 million, or approximately 68% of total
nonperforming loans. Of this amount, $50.5 million was attributable to the loan
portfolio of CIB. In addition, the loan portfolios of Millennium Bank and Union
Financial Group, Ltd., or Union, which we acquired in 2000 and 2001,
respectively, exhibited significant distress, which further contributed to the
overall increase in nonperforming loans over historical levels.
Millennium Bank, which operated a factoring business for doctors,
hospitals and other health care professionals, had approximately $11.0 million
of receivables at the time of our acquisition in late 2000. Due to the
relatively short life of this operation, the portfolio did not exhibit signs of
problems at that time. Consequently, we allowed the business to continue after
the acquisition to determine whether it would be an appropriate line of business
in the future. However, in late 2001, the factoring receivables began to exhibit
signs of distress, and in early 2002, we determined one of the larger borrowers
was incorrectly accounting for its receivables, causing the factored balance to
be substantially over-funded. During 2002, other asset quality issues arose and
we charged off approximately $2.6 million, or 24.8%, of the health care
factoring portfolio. At December 31, 2002, we had $10.2 million of factoring
business receivables, which further declined to $2.1 million at December 31,
2003. The remaining balance of the factoring business receivables was reduced to
zero during 2004, reflecting our decision to discontinue this line of business.
Since no value was assigned to goodwill or other intangible assets of this line
of business in the acquisition, we determined that this did not create an
impairment of the goodwill that we recorded in connection with the acquisition.
In evaluating the loan portfolios of Union's two subsidiary banks prior
to its acquisition, it was clear that substantial problems existed in those
portfolios. Generally, credit documentation was poor, underwriting standards
were lax and loan terms were aggressive. As we conducted our due diligence
review, we applied the same asset quality standards, risk rating system and
allowance methodology that we apply to our own loan portfolio. Based on this
review, and to address concerns we had regarding Union's loan portfolios and the
level of its allowance for loan and lease losses, an escrow account of
approximately $1.6 million was established at the time of the acquisition by
withholding that amount from the purchase price. This escrow account was
available to absorb losses during the two-year period following the acquisition
from Union's loan portfolio that were in excess of Union Bank's allowance for
loan and lease losses at the time of the due diligence review. Union's
consolidated allowance for loan and lease losses was $8.6 million relative to an
aggregate loan portfolio of $262.3 million at December 31, 2001, the date of
acquisition. While we believed there were substantial problems with the Union
loan portfolio, few of these had been identified or addressed by Union as of
December 31, 2001. Consequently, when we assimilated these loans into our
systems and procedures, the problems in the portfolio surfaced, causing an
increase in the amount of problem assets, as well as contributing to the level
of loans charged-off during 2002. Loan charge-offs from the Union portfolios
were $1.8 million, $1.4 million and $5.2 million for the years ended December
31, 2004, 2003 and 2002, respectively, including an amount within the Union Bank
portfolio that was in excess of the allowance at the date of our due diligence
review and the entire $1.6 million escrow account. Nonperforming loans in the
Union portfolio have decreased to $3.0 million at December 31, 2004, from $7.5
million and $6.9 million at December 31, 2003 and 2002, respectively.
SBLS holds a significant concentration of assets associated with the
shrimping vessel industry, reflected in both loans and other repossessed assets.
Our purchase of substantially all of the assets of SBLS resulted in an increase
to nonperforming loans of $8.8 million, which represented approximately 37% of
SBLS's loan portfolio at the time of acquisition. The shrimping vessel industry
concentration and its currently depressed status were reflected in our net asset
purchase price. SBLS's nonperforming loans have declined slightly since the date
of acquisition to $6.2 million at December 31, 2004.
As with our Union acquisition, the results of our due diligence reviews
of the loan portfolios of CMC and CIB prior to their acquisition indicated
significant asset quality problems and, particularly with respect to CIB, a
significant concentration in commercial real estate loans outstanding to a
relatively small number of borrowers. The acquisition of CMC on July 30, 2004
resulted in a $2.5 million increase in our nonperforming loans, which declined
to $1.9 million at December 31, 2004. The acquisition of CIB resulted in a
significant increase in our nonperforming loans. As of the date of acquisition,
November 30, 2004, CIB had $60.3 million of nonperforming loans, which
represented approximately 9% of CIB's total loan portfolio. The level of
nonperforming loans related to our CIB acquisition declined to $50.5 million at
December 31, 2004, primarily as a result of loan payoffs. Nonperforming loans
from the CIB acquired loan portfolio represent approximately 59% of our total
nonperforming loans at December 31, 2004. While we had anticipated these
problems in negotiating the acquisition price, in conjunction with our
acquisition of CIB, we adjusted CIB's allowance for loan losses by reclassifying
specific reserves of $21.7 million, which had been allocated within CIB's
allowance for loan losses, as a reduction of the basis of the individual loan
relationships in order to conform to our allowance for loan and lease
methodology, which is based upon a risk rating system that applies loss factors
to individual loans and homogenous pools of loans, as further discussed under
"--Loans and Allowance for Loan Losses." The reclassification of the specific
reserves had no impact on the net loan balances acquired. Additionally, we
transferred $18.3 million of CIB's nonperforming loans to loans held for sale
and recorded a corresponding charge of $5.4 million to the allowance for loan
losses to reduce the loans held for sale to their estimated fair value, net of
broker costs, that is expected to be realized at the time of the sale. While CIB
had utilized a long-term workout strategy to address certain nonperforming
assets, our strategy is to address problem assets in a more accelerated manner.
Accordingly, we elected to hold for sale a portion of the problem assets
acquired from CIB and we are actively marketing these assets through an
independent third party. Furthermore, we increased the allowance for loan losses
by $15.7 million to reflect the additional reserves associated with the loans
transferred to loans held for sale and the application of our loss factors to
CIB's loan portfolio risk ratings, reflecting our use of strategies for more
rapid disposition and recovery of certain acquired classified and nonperforming
assets. These nonperforming loans will continue to be a primary focus of members
of our Credit Administration function as we work to resolve the individual
issues surrounding these credit relationships that led to their deterioration.
For the years ended December 31, 2004, 2003 and 2002, our nonperforming
assets were $89.8 million, $86.5 million and $82.8 million, respectively.
Nonperforming loans were $85.8 million at December 31, 2004, compared to $75.4
million and $75.2 million at December 31, 2003 and 2002, respectively. Our
nonperforming assets, exclusive of the 2004 acquisitions previously discussed,
exhibited substantial improvement throughout 2004, primarily as a result of
significant loan payoffs, the liquidation of certain real property that had been
acquired through foreclosure, the sale of a portion of our commercial leasing
portfolio, and our continued efforts to improve asset quality. However, as we
continued to further analyze the CIB acquisition, we determined the level of
problem loans that we expected to acquire with this acquisition would, when
combined with our existing portfolio of such loans, result in level of problem
loans that was unacceptable to management. Consequently, during the fourth
quarter of 2004, we completed the sale of approximately $50.2 million of problem
loans, including $19.1 million of nonperforming loans, which include loans on
nonaccrual status and restructured loans. Additionally, at December 31, 2004, we
had $12.9 million of loans classified as held for sale that we acquired from
CIB, as discussed above. The increase in nonperforming loans in 2002 and 2003
was primarily attributable to general economic conditions, additional problems
identified in certain acquired loan portfolios and the continued deterioration
of the portfolio of leases in our commercial leasing portfolio, particularly the
segment related to the airline industry. Furthermore, in January 2003, we
foreclosed on a residential and recreational development property that had been
placed on nonaccrual status during the second quarter of 2002. The relationship
related to a residential and recreational development project that had
significant financial difficulties and experienced inadequate project financing,
project delays and weak project management. We sold this property in February
2004, thereby reducing our nonperforming assets by $9.2 million, and realizing a
gain of $2.7 million, before applicable income taxes. We believe these increases
in nonperforming assets, while partially attributable to our acquisitions and
the overall risk in our loan portfolio, are reflective of cyclical trends
experienced within the banking industry as a result of weak economic conditions
within our market areas. Loan charge-offs, net of recoveries, decreased to $24.8
million for 2004, compared to $32.7 million for 2003 and $54.6 million for 2002,
as further discussed under "--Loans and Allowance for Loan Losses."
During 2001 and 2002, the nation generally experienced a relatively
mild, but prolonged economic slow down that affected much of the banking
industry, including us. This was exacerbated by the terrorist attacks in late
2001 and the effects the attacks and related governmental responses had on
economic activity. In 2003, we continued to experience weak economic conditions
in our market areas, despite some slight economic improvements in certain
sectors. The overall effects of the economic downturn have been inconsistent
between various geographic areas of the country, as well as different segments
of the economy. To us, the effects of the downturn can be observed in generally
lower interest rates, which have a negative impact on our net interest income,
and on the performance of our loan portfolio, which is reflected in higher
delinquencies, nonperforming assets, charge-offs and provisions for loan losses,
as well as reduced loan demand from customers. The impact of lower interest
rates was significantly reduced through the use of various derivative financial
instruments that provide hedges of this interest rate risk. However, the benefit
of these derivative financial instruments was substantially reduced in late 2004
with the maturity of certain interest rate swap agreements and increases in the
overall interest rates in 2004, as further discussed under "--Interest Rate Risk
Management." During 2002 and 2003, we incurred continued asset quality issues
that were at least partially attributable to economic conditions. During 2004,
certain sectors of the economy have stabilized, which contributed to the overall
improvement in our asset quality, exclusive of our 2004 acquisition
transactions.
Within our market areas, the impact of the economy has become evident
at different times. In our Midwestern markets, a perceptible increase in loan
delinquencies began in late 2000 and continued throughout 2001, with some modest
improvement in 2002 and 2003. The increase in delinquencies was primarily
focused in commercial, financial and agricultural loans, lease financing loans
and, to a lesser extent, commercial real estate loans, and initially involved
borrowers that had already encountered some operating problems that continued to
deteriorate as the economy became weaker. Included in this were loans on hotels
and leases to the commercial airline industry. In both instances, the industry
had been suffering from overcapacity prior to 2001, which then became much worse
with the economic downturn and the effects of terrorist attacks. As the
recession continued, the effects expanded to companies that had been stronger,
but succumbed to the ongoing effects of slowed economic activity. Net loan
charge-offs for our Midwest banking region were $11.2 million for the year ended
December 31, 2004, compared to $25.7 million and $22.1 million for the years
ended December 31, 2003 and 2002, respectively. The decrease in 2004 is
attributable to a $14.7 million decrease in net loan charge-offs associated with
our commercial leasing business, partially offset by a $3.0 million increase in
net loan charge-offs associated with our CMC loan portfolio. The increase for
2003 is attributable to a $6.4 million increase in net loan charge-offs in our
commercial leasing portfolio. Nonperforming loans and leases for this region
were $76.0 million at December 31, 2004, compared to $56.2 million and $50.5
million at December 31, 2003 and 2002, respectively. The significant improvement
in nonperforming assets that was reflected during most of 2004 was offset by the
previously-discussed increase in nonperforming assets resulting from our
acquisitions of CMC and CIB.
Generally, the effects on us of the economic downturn in California
have been limited to the San Francisco Bay area, including the area known as
"Silicon Valley." Although we have a substantial banking presence in the San
Francisco Bay area, we have relatively little direct exposure to the high
technology companies. Consequently, the decline in that industry beginning in
2000 had little direct effect on our California operations. However, as the
magnitude of the problems in the high technology sector increased, the effects
spread to companies that were suppliers and servicers of the high technology
sector, and to commercial real estate in the area. As a result, our asset
quality issues in California have been concentrated within the San Francisco Bay
area, and generally do not involve Southern California or the
Sacramento-Roseville area in Northern California. These issues primarily arose
during 2002 and consequently, our California banking region incurred net loan
charge-offs of $27.6 million for the year ended December 31, 2002, in comparison
to net loan recoveries of $680,000 in 2003. In 2004, we experienced certain
problems with two significant commercial credit relationships concentrated in a
single lending unit in the southern California region. As a result, net loan
charge-offs in our California banking region for the year ended December 31,
2004 were $8.6 million, and included $6.9 million of charge-offs related to
these two individual relationships. Nonperforming loans for our California
banking region decreased to $1.6 million at December 31, 2004, from $13.0
million and $17.2 million at December 31, 2003 and 2002, respectively.
Our Texas banking operation represents a somewhat smaller portion of
our overall lending function. However, the Texas economy has generally continued
to be fairly strong, resulting in relatively few asset quality issues. We
recorded net loan charge-offs of $4.9 million for the year ended December 31,
2004, which included $3.4 million on two credit relationships and $690,000 of
net loan charge-offs related to our recent purchase of assets from SBLS. We
recorded net loan charge-offs of $7.7 million for the year ended December 31,
2003, which included $6.6 million on three credit relationships. Net loan
charge-offs were $4.9 million for the year ended December 31, 2002, and included
a charge-off of $5.3 million on a single loan to a company engaged in leasing
equipment, primarily to manufacturers. This company encountered significant
operating problems from rapid expansion, principally through acquisition,
accompanied by the economic downturn, which particularly affected the
manufacturing sector. Total nonperforming loans for this region were $8.2
million at December 31, 2004, of which $6.2 million were associated with SBLS,
whose loan portfolio included a significant concentration of assets associated
with the shrimping vessels industry. Total nonperforming loans for the Texas
region were $6.2 million and $5.5 million at December 31, 2003 and 2002,
respectively.
In addition to restructuring our loan portfolio, we also have changed
the composition of our deposit base. The deposit mix of 2004 reflects our
continued efforts in this regard as a majority of our deposit development
programs are directed toward increased transaction accounts, such as demand and
savings accounts, rather than time deposits. We have also expanded our
development of multiple account relationships with individual customers. This
growth is accomplished by cross-selling various products and services, packaging
account types and offering incentives to deposit customers on other deposit or
non-deposit services. In addition, commercial borrowers are encouraged to
maintain their operating deposit accounts with us. Although time deposits have
increased to $2.83 billion at December 31, 2004, they represented 39.6% of total
deposits, as compared to $2.03 billion, or 47.8% of total deposits at December
31, 1999. Total demand and savings accounts have increased to $4.32 billion, or
60.4% of total deposits, at December 31, 2004, from $2.22 billion or 52.2% of
total deposits at December 31, 1999, reflecting our continued focus on
transactional accounts and full service deposit relationships with our
customers.
Despite the significant expenses we incurred in the amalgamation of the
acquired entities into our corporate culture and systems, and in the expansion
of our organizational capabilities, the earnings of the acquired entities and
the increased net interest income resulting from the transition in the
composition of our loan and deposit portfolios have contributed to improving net
income. For the years ended December 31, 2004 and 2003, net income was $82.9
million and $62.8 million, respectively, compared to $45.2 million, $64.5
million and $56.1 million in 2002, 2001 and 2000, respectively. Factors that led
to the decline in our earnings for 2002 included the interest rate environment,
asset quality issues requiring additional provisions for loan losses, and
increased operating expenses. The higher-than-historical provisions for loan
losses in 2002 and 2003 reflect the current economic environment and
significantly increased loan charge-off, delinquency and nonperforming trends as
further discussed under "--Comparison of Results of Operations for 2003 and 2002
- - Provision for Loan Losses." The reduced provision for loan losses in 2004
reflects recent loan sales of problem credits and, exclusive of 2004 acquisition
activity, an overall improvement in asset quality, reduced levels of
nonperforming loans and lower net loan charge-offs, as further discussed under
"--Comparison of Results of Operations for 2004 and 2003 - Provision for Loan
Losses." Although we anticipate certain short-term adverse effects on our
operating results associated with acquisitions, we believe the long-term
benefits of our acquisition program will exceed the short-term issues
encountered with some acquisitions. Accordingly, in addition to concentrating on
internal growth through continued efforts to further develop our corporate
infrastructure and product and service offerings, we expect to continue to
identify and pursue opportunities for further growth through acquisitions and
expansionary de novo branch activities.
Acquisitions. In the development of our banking franchise, we emphasize
acquiring other financial institutions as one means of achieving our growth
objectives. Acquisitions may serve to enhance our presence in a given market, to
expand the extent of our market area or to enable us to enter new or
noncontiguous market areas. After we consummate an acquisition, we expect to
enhance the franchise of the acquired entity by supplementing the marketing and
business development efforts to broaden the customer bases, strengthening
particular segments of the business or filling voids in the overall market
coverage. We have primarily utilized cash, borrowings and the issuance of
subordinated debentures through our various statutory and business trusts, which
serve as financing entities, to meet our growth objectives under our acquisition
program.
During the three years ended December 31, 2004, we completed four
acquisitions of banks and two branch office purchases. We also completed the
purchase of substantially all of the assets and assumption of certain
liabilities of a company that originates, sells and services U.S. Small Business
Administration loans to small business concerns. As demonstrated in the
following table, our acquisitions during the three years ended December 31, 2004
have primarily served to increase our presence in the metropolitan Chicago,
Illinois market and to further augment our existing markets and our Midwest
banking franchise. These transactions are summarized as follows:
Number
Loans, Net of of
Total Unearned Investment Banking
Entity Closing Date Assets Discount Securities Deposits Locations
------ ------------ ------ -------- ---------- --------- ---------
(dollars expressed in thousands)
2004
----
Hillside Investors, Ltd.
Hillside, Illinois November 30, 2004 $ 1,196,700 683,300 393,200 1,102,000 16
Small Business Loan
Source, Inc.
Houston, Texas August 31, 2004 47,100 24,000 -- -- --
Continental Mortgage
Corporation - Delaware
Aurora, Illinois July 30, 2004 140,700 73,600 44,800 104,600 2
----------- -------- ------- ---------- ----
$ 1,384,500 780,900 438,000 1,206,600 18
=========== ======== ======= ========== ====
2003
----
Bank of Ste. Genevieve
Ste. Genevieve, Missouri March 31, 2003 $ 115,100 43,700 47,800 93,700 2
=========== ======== ======= ========== ====
2002
----
Union Planters Bank, N.A.
Denton and Garland, Texas
branch offices June 22, 2002 $ 63,700 600 -- 64,900 2
Plains Financial Corporation
Des Plaines, Illinois January 15, 2002 256,300 150,400 81,000 213,400 4
----------- -------- ------- ---------- ----
$ 320,000 151,000 81,000 278,300 6
=========== ======== ======= ========== ====
We funded the completed acquisitions from available cash reserves,
borrowings under our revolving credit agreement, proceeds from the issuance of
subordinated debentures and proceeds from the exchange, sales and maturities of
available-for-sale investment securities.
Completed Acquisitions and Other Corporate Transactions
On March 31, 2003, we completed our acquisition of Bank of Ste.
Genevieve, or BSG, Ste. Genevieve, Missouri, from Allegiant Bancorp, Inc., or
Allegiant, in exchange for approximately 974,150 shares of Allegiant common
stock that we previously held. The purpose of the transaction was to further
expand our Midwest banking franchise. At the time of the acquisition, BSG had
$115.1 million in total assets, $43.7 million in loans, net of unearned
discount, $47.8 million in investment securities, and $93.7 million in deposits
and operated two locations in Ste. Genevieve, Missouri. The transaction was
accounted for using the purchase method of accounting. We recorded a gain of
$6.3 million on the exchange of the Allegiant common stock and goodwill of
approximately $3.4 million. The core deposit intangibles, which are not
deductible for tax purposes, were approximately $3.5 million and are being
amortized over seven years utilizing the straight-line method. BSG was merged
with and into First Bank. Subsequent to the acquisition, we continued to own
231,779 shares, or approximately 1.52% of the issued and outstanding shares of
Allegiant common stock. In October 2003, we contributed our remaining shares of
Allegiant common stock to a previously established charitable foundation. In
conjunction with this transaction, we recorded charitable contribution expense
of $5.1 million, which was partially offset by a gain on the contribution of
these available-for-sale investment securities of $2.3 million, representing the
difference between the cost basis and the fair value of the common stock on the
date of the contribution. In addition, we recorded a tax benefit of $2.5 million
associated with this transaction. The contribution of this stock eliminated our
investment in Allegiant.
On March 31, 2003, we completed the merger of our two wholly-owned bank
subsidiaries, First Bank and First Bank & Trust, or FB&T, to allow certain
administrative and operational economies not available while the two banks
maintained separate charters.
On October 17, 2003, First Bank completed its divestiture of three
branch offices in the northern and central Illinois market area, and on December
5, 2003, First Bank completed its divestiture of one branch office in eastern
Missouri. These branch divestitures resulted in a reduction of First Bank's
deposit base of approximately $88.3 million, and a pre-tax gain of approximately
$4.0 million.
On February 6, 2004, First Bank completed its divestiture of one branch
office in rural Missouri. On April 16, 2004, First Bank completed its
divestiture of one branch office in southern Illinois. These branch divestitures
resulted in a reduction of the deposit base of approximately $23.4 million, and
a pre-tax gain of approximately $1.0 million.
During the year ended December 31, 2004, First Bank opened the
following four de novo branch offices:
Branch Office Location Date Opened
---------------------- -----------
Houston, Texas February 9, 2004
Wildwood, Missouri February 20, 2004
McKinney, Texas July 19, 2004
San Diego, California August 16, 2004
On June 30, 2004, First Bank completed the sale of a significant
portion of the leases in its commercial leasing portfolio. The sale reduced our
commercial leasing portfolio by approximately $33.1 million to $9.6 million at
June 30, 2004. No gain or loss was recorded on the transaction. In conjunction
with the transaction, First Bank established a $2.0 million liability associated
with the related recourse obligations for certain leases sold, as further
discussed in Note 24 to our Consolidated Financial Statements. Our commercial
leasing portfolio has further declined to $5.9 million at December 31, 2004,
reflecting our overall business strategy to reduce commercial leasing
activities.
On July 30, 2004, we completed our acquisition of CMC, and its
wholly-owned banking subsidiary, Continental Community Bank and Trust Company,
or CCB, acquiring all of the outstanding common stock of CMC in exchange for
$4.2 million in cash. In addition, we redeemed in full all of the outstanding
subordinated promissory notes of CMC, including accumulated accrued and unpaid
interest, totaling $4.5 million in aggregate. The transaction was funded through
internally generated funds. CMC, through CCB, operated two banking offices in
the Chicago suburban communities of Aurora and Villa Park. At the time of the
transaction, CMC had total assets of $140.7 million, loans, net of unearned
discount, of $73.6 million and total deposits of $104.6 million. Goodwill, which
is not deductible for tax purposes, was approximately $1.5 million and the core
deposit intangibles, which are not deductible for tax purposes and are being
amortized over seven years utilizing the straight-line method, were
approximately $2.0 million. CMC was merged with and into SFC and CCB was merged
with and into First Bank.
On August 31, 2004, Small Business Loan Source LLC, or SBLS LLC, a
newly formed Nevada-based limited liability company and subsidiary of First
Bank, purchased substantially all of the assets and assumed certain liabilities
of SBLS, headquartered in Houston, Texas, in exchange for cash and certain
payments contingent on future valuations of specifically identified assets,
including servicing assets and retained interests in securitizations, as further
described in Note 24 to our Consolidated Financial Statements. The transaction
was funded through internally generated funds. At the time of the transaction,
SBLS LLC purchased from SBLS assets of $47.1 million, including $24.0 million of
United States Small Business Administration, or SBA, loans, net of unearned
discount, and $15.1 million of SBA servicing rights, and assumed $1.5 million of
liabilities, resulting in a net cash payment of $45.6 million. Goodwill was
approximately $5.9 million and is deductible for tax purposes. In conjunction
with this transaction, on August 30, 2004, First Bank granted to First Capital
America, Inc. (FCA), a corporation owned by First Banks' Chairman and members of
his immediate family, an option to purchase Membership Interests of SBLS LLC.
This option to purchase was extended on December 31, 2004. Upon exercise of this
option, SBLS LLC will become 51.0% owned by First Bank and 49.0% owned by FCA,
as further discussed in Note 19 to our Consolidated Financial Statements.
On November 30, 2004, we completed our acquisition of CIB,
headquartered in Hillside, Illinois, for approximately $67.4 million in cash.
The transaction was funded through the issuance of subordinated debentures
associated with two private placements of $60.0 million in aggregate of trust
preferred securities, of which $20.0 million was issued on September 20, 2004
through our newly formed affiliated statutory trust, First Bank Statutory Trust
II, or FBST II, and an additional $40.0 million was issued on November 23, 2004
through our newly formed affiliated statutory trust, First Bank Statutory Trust
III, or FBST III, as further discussed in Note 12 to our Consolidated Financial
Statements. In addition, the acquisition was also funded through borrowings
under our revolving line of credit with a group of unaffiliated financial
institutions. CIB operated 16 banking offices in the Chicago, Illinois
metropolitan area, including ten offices in Cook County, three offices in Lake
County, two offices in Will County and one office in DuPage County. At the time
of the transaction, CIB had total assets of $1.20 billion, loans, net of
unearned discount, of $683.3 million, investment securities of $393.2 million
and total deposits of $1.10 billion. Preliminary goodwill, which is not
deductible for tax purposes, was approximately $4.3 million and the core deposit
intangibles, which are not deductible for tax purposes and are being amortized
over seven years utilizing the straight-line method, were approximately $13.4
million. Hillside was merged with and into SFC and CIB Bank was merged with and
into First Bank.
Pending Acquisitions
On January 10, 2005, we executed an Agreement and Plan of
Reorganization providing for the acquisition of FBA Bancorp, Inc. and its wholly
owned subsidiary, First Bank of the Americas, S.S.B. FBA Bancorp, Inc. is
headquartered in Chicago, Illinois, and through First Bank of the Americas,
operates three banking offices in the southwestern Chicago metropolitan area.
Under the terms of the agreement, we will acquire FBA Bancorp, Inc. for
approximately $10.5 million in cash. The transaction, which is subject to
regulatory approvals, is expected to be completed during the second quarter of
2005. At December 31, 2004, FBA Bancorp, Inc. reported consolidated assets of
$75.0 million, loans, net of unearned discount, of $48.6 million, deposits of
$55.9 million and stockholders' equity of $7.4 million.
Acquisition and Integration Costs
We accrue certain costs associated with our acquisitions as of the
respective consummation dates. Essentially all of these accrued costs relate
either to adjustments to the staffing levels of the acquired entities or to the
anticipated termination of information technology or item processing contracts
of the acquired entities prior to their stated contractual expiration dates. The
most significant costs that we incur relate to salary continuation agreements,
or other similar agreements, of executive management and certain other employees
of the acquired entities that were in place prior to the acquisition dates.
These agreements provide for payments over periods ranging from two to 15 years
and are triggered as a result of the change in control of the acquired entity.
Other severance benefits for employees that are terminated in conjunction with
the integration of the acquired entities into our existing operations are
normally paid to the recipients within 90 days of the respective consummation
date. Our accrued severance balance of $761,000, as further described in Note 2
to our Consolidated Financial Statements, is comprised of contractual
obligations under salary continuation agreements to six individuals that have
remaining terms ranging from approximately two years to 11 years. Payments made
under these agreements are paid from accrued liabilities and consequently do not
have any impact on our consolidated statements of income.
A summary of acquisition and integration costs attributable to the
acquisitions included in the foregoing table, which were accrued as of the
consummation dates of the respective acquisition, is included in Note 2 to our
Consolidated Financial Statements. Acquisition and integration costs are
reflected in accrued expenses and other liabilities in our consolidated
financial statements.
As further discussed and quantified under "--Comparison of Results of
Operations for 2004 and 2003," and "--Comparison of Results of Operations for
2003 and 2002," we also incur costs associated with our acquisitions that are
expensed in our consolidated statements of income. These costs relate
exclusively to additional costs incurred in conjunction with the information
technology conversions of the respective entities.
Market Area. As of December 31, 2004, First Bank's 167 banking
facilities were located in Illinois, California, eastern Missouri and Texas.
First Bank operates in the St. Louis metropolitan area, in eastern Missouri and
throughout Illinois, including Chicago. First Bank also operates in southern
California, including the greater Los Angeles metropolitan area, including
Ventura County, Riverside County and Orange County; in Santa Barbara County; in
northern California, including the greater San Francisco, San Jose and
Sacramento metropolitan areas; and in Texas in the Houston, Dallas, Irving,
McKinney and Denton metropolitan areas. Through our recent expansion in the
Chicago metropolitan area, our primary market area is northern Illinois. Our
second and third largest market areas are southern California and the St. Louis,
Missouri metropolitan area, and our fourth largest market area is northern
California.
The following table lists the market areas in which First Bank
operates, total deposits, deposits as a percentage of total deposits and the
number of locations as of December 31, 2004:
Total Deposits Number
Deposits as a Percentage of
Geographic Area (in millions) of Total Deposits Locations
--------------- ----------- ----------------- ---------
Northern Illinois.................................................... $ 1,580.0 22.1% 31
Southern California.................................................. 1,408.5 19.7 32
St. Louis, Missouri metropolitan area................................ 1,318.5 18.4 29
Northern California.................................................. 1,070.3 15.0 16
Central and southern Illinois........................................ 988.7 13.8 34
Eastern Missouri..................................................... 458.6 6.4 15
Texas................................................................ 327.4 4.6 10
--------- ----- ---
Total deposits.................................................. $ 7,152.0 100.0% 167
========= ===== ===
Competition and Branch Banking. First Bank engages in highly competitive
activities. Those activities and the geographic markets served primarily involve
competition with other banks, some of which are affiliated with large regional
or national holding companies. Financial institutions compete based upon
interest rates offered on deposit accounts, interest rates charged on loans and
other credit and service charges, the quality of services rendered, the
convenience of banking facilities and, in the case of loans to large commercial
borrowers, relative lending limits.
Our principal competitors include other commercial banks, savings
banks, savings and loan associations, mutual funds, finance companies, trust
companies, insurance companies, leasing companies, credit unions, mortgage
companies, private issuers of debt obligations and suppliers of other investment
alternatives, such as securities firms and financial holding companies. Many of
our non-bank competitors are not subject to the same degree of regulation as
that imposed on bank holding companies, federally insured banks and national or
state chartered banks. As a result, such non-bank competitors have advantages
over us in providing certain services. We also compete with major multi-bank
holding companies, which are significantly larger than us and have greater
access to capital and other resources.
We believe we will continue to face competition in the acquisition of
independent banks and savings banks from banks and financial holding companies.
We often compete with larger financial institutions that have substantially
greater resources available for making acquisitions.
Subject to regulatory approval, commercial banks operating in
California, Illinois, Missouri and Texas are permitted to establish branches
throughout their respective states, thereby creating the potential for
additional competition in our service areas.
Supervision and Regulation
General. Along with First Bank, we are extensively regulated by Federal and
state laws and regulations which are designed to protect depositors of First
Bank and the safety and soundness of the U.S. banking system, not our
stockholders. To the extent this discussion refers to statutory or regulatory
provisions, it is not intended to summarize all such provisions and is qualified
in its entirety by reference to the relevant statutory and regulatory
provisions. Changes in applicable laws, regulations or regulatory policies may
have a material effect on our business and prospects. We are unable to predict
the nature or extent of the effects on our business and earnings that new
federal and state legislation or regulation may have. The enactment of the
legislation described below has significantly affected the banking industry
generally and is likely to have ongoing effects on First Bank and us in the
future.
As a registered bank holding company under the Bank Holding Company Act
of 1956, we are subject to regulation and supervision of the Board of Governors
of the Federal Reserve System, or Federal Reserve. We file annual reports with
the Federal Reserve and provide to the Federal Reserve additional information as
it may require.
Since First Bank is an institution chartered by the State of Missouri
and a member of the Federal Reserve, both the State of Missouri Division of
Finance and the Federal Reserve supervise, regulate and examine First Bank.
First Bank is also regulated by the Federal Deposit Insurance Corporation, or
FDIC, which provides deposit insurance of up to $100,000 for each insured
depositor.
Bank Holding Company Regulation. The activities of bank holding companies are
generally limited to the business of banking, managing or controlling banks, and
other activities that the Federal Reserve has determined to be so closely
related to banking or managing or controlling banks as to the proper incident
thereto. In addition, under the Gramm-Leach-Bliley Act, or GLB Act, which was
enacted in November 1999 and is further discussed below, a bank holding company,
whose control depository institutions are "well-capitalized" and "well-managed"
(as defined in Federal Banking Regulations), and which obtains "satisfactory"
Community Reinvestment Act (discussed briefly below) ratings, may declare itself
to be a "financial holding company" and engage in a broader range of activities.
As of this date, we are not a "financial holding company."
We are also subject to capital requirements applied on a consolidated
basis, which are substantially similar to those required of First Bank (briefly
summarized below). The Bank Holding Company Act also requires a bank holding
company to obtain approval from the Federal Reserve before:
>> acquiring, directly or indirectly, ownership or control of any
voting shares of another bank or bank holding company if, after
such acquisition, it would own or control more than 5% of such
shares (unless it already owns or controls a majority of such
shares);
>> acquiring all or substantially all of the assets of another bank
or bank holding company; or
>> merging or consolidating with another bank holding company.
The Federal Reserve will not approve any acquisition, merger or
consolidation that would have a substantially anti-competitive result, unless
the anti-competitive effects of the proposed transaction are clearly outweighed
by a greater public interest in meeting the convenience and needs of the
community to be served. The Federal Reserve also considers capital adequacy and
other financial and managerial factors in reviewing acquisitions and mergers.
Safety and Soundness and Similar Regulations. We are subject to various
regulations and regulatory policies directed at the financial soundness of First
Bank. These include, but are not limited to, the Federal Reserve's source of
strength policy, which obligates a bank holding company such as us to provide
financial and managerial strength to its subsidiary banks; restrictions on the
nature and size of certain affiliate transactions between a bank holding company
and its subsidiary depository institutions and restrictions on extensions of
credit by its subsidiary banks to executive officers, directors, principal
stockholders and the related interests of such persons.
Regulatory Capital Standards. The federal bank regulatory agencies have adopted
substantially similar risk-based and leverage capital guidelines for banking
organizations. Risk-based capital ratios are determined by classifying assets
and specified off-balance sheet obligations and financial instruments into
weighted categories, with higher levels of capital being required for categories
deemed to represent greater risk. Federal Reserve policy also provides that
banking organizations generally, and particularly those that are experiencing
internal growth or actively making acquisitions, are expected to maintain
capital positions that are substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
Under the risk-based capital standard, the minimum consolidated ratio
of total capital to risk-adjusted assets required for bank holding companies is
8%. At least one-half of the total capital must be composed of common equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a limited
amount of qualifying cumulative perpetual preferred stock and minority interests
in the equity accounts of consolidated subsidiaries, less certain items such as
goodwill and certain other intangible assets, which amount is referred to as
"Tier I capital." The remainder may consist of qualifying hybrid capital
instruments, perpetual debt, mandatory convertible debt securities, a limited
amount of subordinated debt, preferred stock that does not qualify as Tier I
capital and a limited amount of loan and lease loss reserves, which amount,
together with Tier I capital, is referred to as "Total Risk-Based Capital."
In addition to the risk-based standard, we are subject to minimum
requirements with respect to the ratio of our Tier I capital to our average
assets less goodwill and certain other intangible assets, or the Leverage Ratio.
Applicable requirements provide for a minimum Leverage Ratio of 3% for bank
holding companies that have the highest supervisory rating, while all other bank
holding companies must maintain a minimum Leverage Ratio of at least 4% to 5%.
The Office of the Comptroller of the Currency, or OCC, and the FDIC have
established capital requirements for banks under their respective jurisdictions
that are consistent with those imposed by the Federal Reserve on bank holding
companies.
Information regarding our capital levels and First Bank's capital
levels under the federal capital requirements is contained in Note 21 to our
Consolidated Financial Statements appearing elsewhere in this report. As further
described in Note 21 and Note 25 to our Consolidated Financial Statements, on
March 1, 2005, the Federal Reserve adopted a final rule, Risk-Based Capital
Standards: Trust Preferred Securities and the Definition of Capital, which
allows for the continued inclusion, on a limited basis, of trust preferred
securities in Tier I capital. Under the final rule, trust preferred securities
and other restricted core capital elements will be subject to stricter
quantitative limits. The Federal Reserve's final rule limits restricted core
capital elements to 25% of the sum of all core capital elements, including
restricted core capital elements, net of goodwill less any associated deferred
tax liability.
Prompt Corrective Action. The FDIC Improvement Act requires the federal bank
regulatory agencies to take prompt corrective action in respect to depository
institutions that do not meet minimum capital requirements. A depository
institution's status under the prompt corrective action provisions depends upon
how its capital levels compare to various relevant capital measures and other
factors as established by regulation.
The federal regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels. Under the regulations, a
bank will be:
>> "well capitalized" if it has a total risk-based capital ratio of
10% or greater, a Tier I capital ratio of 6% or greater and a
Leverage Ratio of 5% or greater and is not subject to any order
or written directive by any such regulatory authority to meet and
maintain a specific capital level for any capital measure;
>> "adequately capitalized" if it has a total risk-based capital
ratio of 8% or greater, a Tier I capital ratio of 4% or greater
and a Leverage Ratio of 4% or greater (3% in certain
circumstances);
>> "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I capital ratio of less than 4% or a
Leverage Ratio of less than 4% (3% in certain circumstances);
>> "significantly undercapitalized" if it has a total risk-based
capital ratio of less than 6%, a Tier I capital ratio of less
than 3% or a Leverage Ratio of less than 3%; and
>> "critically undercapitalized" if its tangible equity is equal to
or less than 2% of its average quarterly tangible assets.
Under certain circumstances, a depository institution's primary federal
regulatory agency may use its authority to lower the institution's capital
category. The banking agencies are permitted to establish individual minimum
capital requirements exceeding the general requirements described above.
Generally, failing to maintain the status of "well capitalized" or "adequately
capitalized" subjects a bank to restrictions and limitations on its business
that become progressively more severe as the capital levels decrease.
A bank is prohibited from making any capital distribution (including
payment of a dividend) or paying any management fee to its holding company if
the bank would thereafter be "undercapitalized." Limitations exist for
"undercapitalized" depository institutions regarding, among other things, asset
growth, acquisitions, branching, new lines of business, acceptance of brokered
deposits and borrowings from the Federal Reserve System. These institutions are
also required to submit a capital restoration plan that includes a guarantee
from the institution's holding company. "Significantly undercapitalized"
depository institutions may be subject to a number of requirements and
restrictions, including orders to sell sufficient voting stock to become
"adequately capitalized," requirements to reduce total assets and cessation of
receipt of deposits from correspondent banks. The appointment of a receiver or
conservator may be required for "critically undercapitalized" institutions.
Dividends. Our primary source of funds in the future is the dividends, if any,
paid by First Bank. The ability of First Bank to pay dividends is limited by
federal laws, by regulations promulgated by the bank regulatory agencies and by
principles of prudent bank management.
Customer Protection. First Bank is also subject to consumer laws and regulations
intended to protect consumers in transactions with depository institutions, as
well as other laws or regulations affecting customers of financial institutions
generally. These laws and regulations mandate various disclosure requirements
and substantively regulate the manner in which financial institutions must deal
with their customers. First Bank must comply with numerous regulations in this
regard and is subject to periodic examinations with respect to its compliance
with the requirements.
Community Reinvestment Act. The Community Reinvestment Act of 1977 requires
that, in connection with examinations of financial institutions within their
jurisdiction, the federal banking regulators evaluate the record of the
financial institutions in meeting the credit needs of their local communities,
including low and moderate income neighborhoods, consistent with the safe and
sound operation of those banks. These factors are also considered in evaluating
mergers, acquisitions and other applications to expand.
The Gramm-Leach-Bliley Act. The GLB Act, enacted in 1999, amended and repealed
portions of the Glass-Steagall Act and other federal laws restricting the
ability of bank holding companies, securities firms and insurance companies to
affiliate with each other and to enter new lines of business. The GLB Act
established a comprehensive framework to permit financial companies to expand
their activities, including through such affiliations, and to modify the federal
regulatory structure governing some financial services activities. This
authority of financial firms to broaden the types of financial services offered
to customers and to affiliates with other types of financial services companies
may lead to further consolidation in the financial services industry. However,
it may lead to additional competition in the markets in which we operate by
allowing new entrants into various segments of those markets that are not the
traditional competitors in those segments. Furthermore, the authority granted by
the GLB Act may encourage the growth of larger competitors.
The GLB Act also adopted consumer privacy safeguards requiring
financial services providers to disclose their policies regarding the privacy of
customer information to their customers and, subject to some exceptions,
allowing customers to "opt out" of policies permitting such companies to
disclose confidential financial information to non-affiliated third parties.
The Sarbanes-Oxley Act. In July 2002, the Sarbanes-Oxley Act of 2002 was
enacted. The Sarbanes-Oxley Act imposes a myriad of corporate governance and
accounting measures designed to ensure that the shareholders of corporate
America are treated fairly and have full and accurate information about the
public companies in which they invest. All public companies, including companies
such as First Banks, that file periodic reports with the Securities and Exchange
Commission, or SEC, are affected by the Sarbanes-Oxley Act.
Certain provisions of the Sarbanes-Oxley Act became effective
immediately, while other provisions will become effective as the SEC adopts
rules to implement those provisions. Some of the principal provisions of the
Sarbanes-Oxley Act which may affect us include:
>> the creation of an independent accounting oversight board to
oversee the audit of public companies and auditors who perform
such audits;
>> auditor independence provisions which restrict non-audit services
that independent accountants may provide to their audit clients;
>> additional corporate governance and responsibility measures which
(i) require the chief executive officer and chief financial
officer to certify financial statements and to forfeit salary and
bonuses in certain situations, and (ii) protect whistleblowers
and informants;
>> expansion of the audit committee's authority and responsibility
by requiring that the audit committee (i) have direct control of
the outside auditor, (ii) be able to hire and fire the auditor,
and (iii) approve all non-audit services;
>> mandatory disclosure by analysts of potential conflicts of
interest; and
>> enhanced penalties for fraud and other violations.
The Sarbanes-Oxley Act is expected to increase the administrative costs
and burden of doing business for public companies; however, we cannot predict
the significance of such increase at this time.
The USA Patriot Act. In October 2001, the Patriot Act was enacted in response to
the terrorist attacks in New York, Pennsylvania and Washington, D.C. that
occurred on September 11, 2001. The Patriot Act is intended to strengthen the
ability of U.S. law enforcement agencies and the intelligence communities to
work cohesively to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial institutions of all kinds is significant and
wide ranging. The Patriot Act contains sweeping anti-money laundering and
financial transparency laws and imposes various regulations, including standards
for verifying client identification at account opening, and rules to promote
cooperation among financial institutions, regulators and law enforcement
entities in identifying parties that may be involved in terrorism or money
laundering. The Patriot Act is expected to increase the administrative costs and
burden of doing business for financial institutions; however, while we cannot
predict the full impact of such an increase at this time, we do not expect it to
differ from that of other financial institutions.
Reserve Requirements; Federal Reserve System and Federal Home Loan Bank System.
The Federal Reserve requires all depository institutions to maintain reserves
against their transaction accounts and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve may
be used to satisfy liquidity requirements. Institutions are authorized to borrow
from the Federal Reserve Bank "discount window," but Federal Reserve regulations
require institutions to exhaust other reasonable alternative sources of funds,
including advances from Federal Home Loan Banks, before borrowing from the
Federal Reserve Bank.
First Bank is a member of the Federal Reserve System and the Federal
Home Loan Bank System. As members, First Bank is required to hold investments in
regional banks within those systems. First Bank was in compliance with these
requirements at December 31, 2004, with investments of $8.8 million in stock of
the Federal Home Loan Bank of Des Moines, $1.8 million in stock of the Federal
Home Loan Bank of Chicago (associated with several acquisitions completed in the
state of Illinois) and $18.4 million in stock of the Federal Reserve Bank of St.
Louis.
Monetary Policy and Economic Control. The commercial banking business is
affected by legislation, regulatory policies and general economic conditions as
well as the monetary policies of the Federal Reserve. The instruments of
monetary policy available to the Federal Reserve include the following:
>> changes in the discount rate on member bank borrowings and the
targeted federal funds rate;
>> the availability of credit at the "discount window;"
>> open market operations;
>> the imposition of changes in reserve requirements against
deposits of domestic banks;
>> the imposition of changes in reserve requirements against
deposits and assets of foreign branches; and
>> the imposition of and changes in reserve requirements against
certain borrowings by banks and their affiliates.
These monetary policies are used in varying combinations to influence
overall growth and distributions of bank loans, investments and deposits, and
this use may affect interest rates charged on loans or paid on liabilities. The
monetary policies of the Federal Reserve have had a significant effect on the
operating results of commercial banks and are expected to do so in the future.
Such policies are influenced by various factors, including inflation,
unemployment, and short-term and long-term changes in the international trade
balance and in the fiscal policies of the U.S. Government. We cannot predict the
effect that changes in monetary policy or in the discount rate on member bank
borrowings will have on our future business and earnings or those of First Bank.
Employees
As of March 25, 2005, we employed approximately 2,350 employees. None
of the employees are subject to a collective bargaining agreement. We consider
our relationships with our employees to be good.
Item 2. Properties
We own our office building, which houses our principal place of
business, located at 135 North Meramec, Clayton, Missouri 63105. The property is
in good condition and consists of approximately 60,353 square feet, of which
approximately 8,177 square feet is currently leased to others. Of our other 166
offices and three operations and administrative facilities, 94 are located in
buildings that we own and 75 are located in buildings that we lease.
We consider the properties at which we do business to be in good
condition generally and suitable for our business conducted at each location. To
the extent our properties or those acquired in connection with our acquisition
of other entities provide space in excess of that effectively utilized in the
operations of First Bank, we seek to lease or sub-lease any excess space to
third parties. Additional information regarding the premises and equipment
utilized by First Bank appears in Note 7 to our Consolidated Financial
Statements appearing elsewhere in this report.
Item 3. Legal Proceedings
In the ordinary course of business, we and our subsidiaries become
involved in legal proceedings. Our management, in consultation with legal
counsel, believes the ultimate resolution of existing proceedings will not have
a material adverse effect on our business, financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Market Information. There is no established public trading market for our common
stock. Various trusts, which were created by and are administered by and for the
benefit of Mr. James F. Dierberg, our Chairman of the Board, and members of his
immediate family, own all of our voting stock.
Dividends. In recent years, we have paid minimal dividends on our Class A
Convertible Adjustable Rate Preferred Stock and our Class B Non-Convertible
Adjustable Rate Preferred Stock, and have paid no dividends on our Common Stock.
Our ability to pay dividends is limited by regulatory requirements and by the
receipt of dividend payments from First Bank, which is also subject to
regulatory requirements. The dividend limitations are included in Note 22 to our
Consolidated Financial Statements appearing elsewhere in this report.
Item 6. Selected Financial Data
The selected consolidated financial data set forth below are derived
from our consolidated financial statements, which have been audited by KPMG LLP.
This information is qualified by reference to our consolidated financial
statements appearing elsewhere in this report. This information should be read
in conjunction with such consolidated financial statements, the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
As of or For the Year Ended December 31, (1)
------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(dollars expressed in thousands, except share and per share data)
Income Statement Data:
Interest income..................................... $ 394,782 391,153 425,721 445,385 423,294
Interest expense.................................... 94,767 104,026 157,551 210,246 201,320
----------- --------- --------- --------- ---------
Net interest income................................. 300,015 287,127 268,170 235,139 221,974
Provision for loan losses........................... 25,750 49,000 55,500 23,510 14,127
----------- --------- --------- --------- ---------
Net interest income after provision
for loan losses................................... 274,265 238,127 212,670 211,629 207,847
Noninterest income.................................. 83,486 87,708 67,511 89,095 37,414
Noninterest expense................................. 229,505 227,069 210,812 202,157 152,626
----------- --------- --------- --------- ---------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change in
accounting principle.............................. 128,246 98,766 69,369 98,567 92,635
Provision for income taxes.......................... 45,338 35,955 22,771 30,048 34,482
----------- --------- --------- --------- ---------
Income before minority interest in income
of subsidiary and cumulative effect of
change in accounting principle.................... 82,908 62,811 46,598 68,519 58,153
Minority interest in income of subsidiary........... -- -- 1,431 2,629 2,046
----------- --------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle.............................. 82,908 62,811 45,167 65,890 56,107
Cumulative effect of change in accounting
principle, net of tax............................. -- -- -- (1,376) --
----------- --------- --------- --------- ---------
Net income.......................................... $ 82,908 62,811 45,167 64,514 56,107
=========== ========= ========= ========= =========
Dividends:
Preferred stock..................................... $ 786 786 786 786 786
Common stock........................................ -- -- -- -- --
Ratio of total dividends declared to net income..... 0.95% 1.25% 1.74% 1.22% 1.40%
Per Share Data:
Earnings per common share:
Basic:
Income before cumulative effect of change
in accounting principle........................ $ 3,470.80 2,621.39 1,875.69 2,751.54 2,338.04
Cumulative effect of change in
accounting principle, net of tax............... -- -- -- (58.16) --
----------- --------- --------- --------- ---------
Basic............................................ $ 3,470.80 2,621.39 1,875.69 2,693.38 2,338.04
=========== ========= ========= ========= =========
Diluted:
Income before cumulative effect of change
in accounting principle........................ $ 3,421.58 2,588.31 1,853.64 2,684.93 2,267.41
Cumulative effect of change in accounting
principle, net of tax.......................... -- -- -- (58.16) --
----------- --------- --------- --------- ---------
Diluted.......................................... $ 3,421.58 2,588.31 1,853.64 2,626.77 2,267.41
=========== ========= ========= ========= =========
Weighted average common stock outstanding........... 23,661 23,661 23,661 23,661 23,661
Balance Sheet Data:
Investment securities............................... $ 1,813,349 1,049,714 1,145,670 638,644 569,403
Loans, net of unearned discount..................... 6,137,968 5,328,075 5,432,588 5,408,869 4,752,265
Total assets........................................ 8,732,841 7,106,940 7,351,177 6,786,045 5,882,706
Total deposits...................................... 7,151,970 5,961,615 6,172,820 5,683,904 5,012,415
Note payable........................................ 15,000 17,000 7,000 27,500 83,000
Subordinated debentures............................. 273,300 209,320 278,389 243,457 188,718
Common stockholders' equity......................... 587,830 536,752 505,978 435,594 339,783
Total stockholders' equity.......................... 600,893 549,815 519,041 448,657 352,846
Earnings Ratios:
Return on average total assets...................... 1.10% 0.87% 0.64% 1.08% 1.09%
Return on average total stockholders' equity........ 14.44 11.68 9.44 15.96 17.43
Efficiency ratio (2)................................ 59.84 60.58 62.80 62.35 58.84
Net interest margin (3)............................. 4.36 4.45 4.23 4.34 4.65
Asset Quality Ratios:
Allowance for loan losses to loans.................. 2.46 2.19 1.83 1.80 1.72
Nonperforming loans to loans (4).................... 1.40 1.41 1.38 1.24 1.12
Allowance for loan losses to
nonperforming loans (4)........................... 175.65 154.52 132.29 144.36 153.47
Nonperforming assets to loans and
other real estate (5)............................. 1.46 1.62 1.52 1.32 1.17
Net loan charge-offs to average loans............... 0.45 0.61 1.01 0.45 0.17
Capital Ratios:
Average total stockholders' equity to
average total assets.............................. 7.61 7.48 6.78 6.74 6.25
Total risk-based capital ratio...................... 10.61 10.27 10.68 10.53 10.21
Leverage ratio...................................... 7.89 7.62 6.45 7.24 7.46
- -----------------------------
(1) The comparability of the selected data presented is affected by the acquisitions of 12 banks, a loan origination
business, a leasing company and two branch offices during the five-year period ended December 31, 2004. These
acquisitions were accounted for as purchases and, accordingly, the selected data includes the financial position
and results of operations of each acquired entity only for the periods subsequent to its respective date of
acquisition.
(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(3) Net interest rate margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average
interest-earning assets.
(4) Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms.
(5) Nonperforming assets consist of nonperforming loans and other real estate.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following presents management's discussion and analysis of our
financial condition and results of operations as of the dates and for the
periods indicated. You should read this discussion in conjunction with our
"Selected Financial Data," our Consolidated Financial Statements and the related
notes thereto, and the other financial data contained elsewhere in this report.
This discussion set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements with respect to our financial condition, results of operations and
business. These forward-looking statements are subject to certain risks and
uncertainties, not all of which can be predicted or anticipated. Various factors
may cause our actual results to differ materially from those contemplated by the
forward-looking statements herein. We do not have a duty to and will not update
these forward-looking statements. Readers of our Annual Report on Form 10-K
should therefore consider these risks and uncertainties in evaluating forward
looking statements and should not place undue reliance on forward-looking
statements. See "Special Note Regarding Forward-Looking Statements" appearing at
the beginning of this report.
RESULTS OF OPERATIONS
Overview
Net income was $82.9 million, $62.8 million and $45.2 million for the
years ended December 31, 2004, 2003 and 2002, respectively. Our return on
average assets and our return on average stockholders' equity increased to 1.10%
and 14.44%, respectively, for the year ended December 31, 2004, compared to
0.87% and 11.68%, respectively, for 2003 and 0.64% and 9.44%, respectively, for
2002. Results for 2004 reflect increased net interest income and a reduced
provision for loan losses, partially offset by decreased noninterest income and
increased noninterest expense and provision for income taxes. For the three
months ended December 31, 2004 and 2003, our net income was $18.9 million and
$15.4 million, respectively.
The increase in net income for 2004 over 2003 was primarily
attributable to a significant reduction in our provision for loan losses as well
as increased net interest income resulting from higher-yielding investment
portfolio securities and reduced deposit rates, partially offset by decreased
earnings on our loan portfolio attributable to reduced earnings on our interest
rate swap agreements associated with our interest rate risk management program.
Results for 2004 also included a gain of $2.7 million, before applicable income
taxes, recorded in February 2004 relating to the sale of a residential and
recreational development property that was foreclosed on in January 2003, and
gains, net of expenses, totaling $1.0 million, before applicable income taxes,
recorded in February and April 2004 on the sale of two Midwest branch banking
offices. The increase in net income for 2003 over 2002 was primarily
attributable to increased net interest income resulting from reduced deposit
rates and earnings on our interest rate swap agreements associated with our
interest rate risk management program in addition to increased gains on mortgage
loans sold and held for sale. Results for 2003 also included gains totaling $4.0
million, before applicable income taxes, on the sale of four branch banking
offices, a nonrecurring gain of $6.3 million, before applicable income taxes,
recorded in the first quarter relating to the partial exchange of our investment
in Allegiant Bancorp, Inc., or Allegiant, for a 100% ownership interest in Bank
of Ste. Genevieve, or BSG, located in Ste. Genevieve, Missouri. Our remaining
investment in the common stock of Allegiant was contributed in full to a
previously established charitable foundation in the fourth quarter of 2003. In
conjunction with that transaction, we recorded nonrecurring charitable
contribution expense of $5.1 million, which was partially offset by the gain
realized on the increase in the market value of the Allegiant common stock and
the related income tax effects of the transaction. Throughout 2003, we continued
to address residual problems in our loan and lease portfolio stemming from the
reduced interest rate environment and the 2002 and 2003 decline in asset quality
that was primarily a result of weak economic conditions within our markets. Our
provision for loan losses in 2003 declined from 2002 levels but remained at
higher-than-historical levels. Our provision for loan losses in 2004 reflects a
significant reduction from 2003 and is primarily attributable to loan sales of
problem credits completed in late 2004 and, exclusive of recent acquisition
activity, substantial improvement in asset quality, reduced levels of
nonperforming loans and lower net loan charge-offs. We continue to closely
monitor asset quality and address ongoing challenges posed by the current
economic environment and expect nonperforming assets to remain at somewhat
elevated levels in the near future due to the significant increase in
nonperforming loans associated with our acquisition of CIB that was completed on
November 30, 2004. Our net interest margin decreased to 4.36% for the year ended
December 31, 2004, compared to 4.45% for 2003. Noninterest income decreased
4.81% to $83.5 million in 2004, from $87.7 million in 2003. Our efficiency ratio
improved to 59.84% in 2004 from 60.58% in 2003, reflecting the results of
management's ongoing cost containment objectives.
Financial Condition and Average Balances
Our average total assets were $7.54 billion for the year ended December
31, 2004, compared to $7.18 billion and $7.06 billion for the years ended
December 31, 2003 and 2002, respectively. Total assets were $8.73 billion, $7.11
billion and $7.35 billion at December 31, 2004, 2003 and 2002, respectively. We
attribute the $1.63 billion increase in total assets primarily to our
acquisition of CIB on November 30, 2004, which provided assets of $1.20 billion,
and our acquisitions of CCB and SBLS in the third quarter of 2004, which
provided assets of $187.8 million, in aggregate, as well as the intangible
assets associated with these transactions. Additionally, exclusive of the loans
provided by the acquisitions, our commercial and residential real estate lending
portfolios increased $124.1 million in 2004, reflecting internal growth within
these portfolios. The overall increase in total assets was partially offset by a
$44.6 million decrease in the fair value of our derivative instruments to $4.7
million at December 31, 2004 from $49.3 million at December 31, 2003, primarily
resulting from the maturity of a significant notional amount of our interest
rate swap agreements in March and September 2004. We attribute the $244.2
million decrease in total assets for 2003 to weak loan demand from our
commercial customers, a reduction in loans and bank premises and equipment
related to the divestiture of four branch offices, an anticipated level of
deposit attrition associated with lower deposit rates, maturities and exchanges
of investment securities and a decline in derivative financial instruments,
partially offset by our acquisition of BSG on March 31, 2003, which provided
assets of $115.1 million.
The increase in average assets for 2004 was primarily funded by an
increase in average deposits of $114.8 million to $6.17 billion for the year
ended December 31, 2004, and an increase of $266.7 million in average other
borrowings to $486.0 million for the year ended December 31, 2004, primarily
attributable to term reverse repurchase agreements. The increase in average
assets for 2003 was primarily funded by an increase in average deposits of $98.1
million to $6.05 billion for the year ended December 31, 2003, and an increase
of $25.2 million in average other borrowings to $219.3 million for the year
ended December 31, 2003. We utilized the majority of the funds generated from
our deposit growth to invest in available-for-sale investment securities, and
the remaining funds were temporarily invested in federal funds sold, resulting
in increases in average investment securities and average federal funds sold of
$135.5 million and $19.8 million, respectively, to $957.4 million and $143.0
million, respectively, for the year ended December 31, 2003. Interest-earning
assets averaged $6.91 billion for the year ended December 31, 2004, compared to
$6.49 billion and $6.37 billion for the years ended December 31, 2003 and 2002,
respectively, while interest-bearing liabilities averaged $5.78 billion for the
year ended December 31, 2004, compared to $5.53 billion and $5.52 billion for
the years ended December 31, 2003 and 2002, respectively.
Average loans, net of unearned discount, were $5.51 billion, $5.39
billion and $5.42 billion for the years ended December 31, 2004, 2003 and 2002,
respectively. The acquisitions we completed during 2004 and 2003 provided total
loans, net of unearned discount, of $780.9 million and $43.7 million,
respectively. Our acquisitions of CIB, CCB and SBLS provided total loans, net of
unearned discount, of $683.3 million, $73.6 million and $24.0 million,
respectively. Additionally, internal loan growth contributed to a $91.8 million
increase in commercial loans and a $32.3 million increase in residential real
estate mortgage loans, partially offset by a decrease in consumer loans of $11.9
million. The overall increase in our loan portfolio was partially offset by a
decrease in our loan portfolio of $83.2 million resulting from the sale of a
portion of our commercial leasing portfolio and management's business decision
to reduce our level of nonperforming assets through the sale of certain
nonperforming loans in November and December 2004, as further discussed under
"--Loans and Allowance for Loan Losses." We attribute the decrease in average
loans in 2003 to general economic conditions resulting in continued weak loan
demand and lower prevailing interest rates as well as increased competition
within our markets areas. In addition to growth provided by acquisitions, for
2003, internal loan growth was provided by a $73.6 million increase in our real
estate construction and development portfolio and a $100.6 million increase in
our residential real estate mortgage portfolio due to increased volumes
resulting from the current interest rate environment and our business strategy
decision to retain a portion of our residential mortgage loan production that
would have previously been sold in the secondary mortgage market. These
increases were offset by a $204.2 million decline in our loans held for sale
resulting from the timing of loan sales in the secondary mortgage market and
reduced loan volumes in the fourth quarter of 2003, a continued decline in our
lease financing portfolio of $59.5 million that is consistent with our overall
business strategy to de-emphasize our commercial leasing activities, a $56.1
million decline in commercial, financial and agricultural loans and a $22.4
million decline in consumer and installment loans, net of unearned discount.
Investment securities averaged $1.28 billion, $957.4 million and $821.9
million for the years ended December 31, 2004, 2003 and 2002, respectively,
reflecting increases of $325.6 and $135.5 million for the years ended December
31, 2004 and 2003, respectively. We attribute the increase in 2004 primarily to
the investment of additional funds provided by an increase in our other
borrowings as well as our acquisitions of CIB and CCB, which provided us with
$393.2 million and $44.8 million of investment securities, respectively.
Additionally, a portion of excess short-term investments were utilized to
purchase higher-yielding available-for-sale investment securities, resulting in
a decline in average short-term investments of $23.7 million to $119.4 million
for the year ended December 31, 2004, from $143.0 million in 2003. The increase
in 2003 was primarily associated with purchases of available-for-sale investment
securities due to deposit growth and our acquisition of BSG, which provided us
with $47.8 million of investment securities. The overall increase in 2003 was
partially offset by the exchange of our Allegiant common stock for our ownership
in BSG and the subsequent charitable contribution of our remaining Allegiant
shares.
Nonearning assets averaged $633.2 million for the year ended December
31, 2004, compared to $698.7 million and $687.8 million for the years ended
December 31, 2003 and 2002, respectively. Derivative financial instruments
averaged $25.9 million for the year ended December 31, 2004, compared to $78.7
million and $72.8 million for the years ended December 31, 2003 and 2002,
respectively, consistent with a decline in the fair value of certain derivative
financial instruments and the maturity of $800.0 million notional amount of
interest rate swap agreements during 2004, as further discussed under
"--Interest Rate Risk Management" and Note 5 to our Consolidated Financial
Statements. In 2004, the acquisitions of CIB and CCB, the opening of four de
novo branch banking offices, partially offset by continued depreciation and
amortization and the divestiture of two branch banking offices, contributed to
the overall increase in bank premises and equipment. In addition, our
liquidation of certain parcels of other real estate, as further discussed under
"--Loans and Allowance for Loan Losses," further contributed to the overall
decline in average nonearning assets in 2004. In 2003, lower capital
expenditures, continued depreciation and amortization, and the divestiture of
four branch offices contributed to the overall decrease in bank premises and
equipment. Intangible assets increased $24.0 million in 2004 and primarily
relate to goodwill associated with our acquisitions of CIB, CCB and SBLS, and
core deposit intangibles associated with our acquisitions of CIB and CCB.
Intangible assets increased $6.6 million in 2003 and were primarily attributable
to goodwill and core deposit intangibles associated with our acquisition of BSG.
We use deposits as our primary funding source and acquire them from a
broad base of local markets, including both individual and corporate customers.
Deposits averaged $6.17 billion, $6.05 billion and $5.96 billion for the years
ended December 31, 2004, 2003 and 2002, respectively. Total deposits increased
by $1.19 billion to $7.15 billion at December 31, 2004 from $5.96 billion at
December 31, 2003. The increase is primarily attributable our acquisitions of
CIB and CCB, which provided total deposits of $1.10 billion and $104.6 million,
respectively, as well as the expansion of our banking franchise with the opening
of four de novo branch offices in 2004, in West St. Louis County, Missouri,
Houston, Texas, McKinney, Texas and San Diego, California. The increase was
partially offset by a $23.4 million reduction in our deposit base associated
with our divestiture of two Midwest branch banking offices during the first and
second quarters of 2004, as well as an anticipated level of attrition associated
with our acquisitions. Our continued deposit marketing efforts and efforts to
further develop multiple account relationships with our customers, in additional
to slightly higher deposit rates on certain products, have contributed to
deposit growth despite continued aggressive competition within our market areas
and an anticipated level of attrition associated with ongoing low deposit rates.
The deposit mix reflects our continued efforts to restructure the composition of
our deposit base as the majority of our deposit development programs are
directed toward increased transaction accounts, such as demand and savings
accounts, rather than time deposits. Total deposits decreased by $211.2 million
to $5.96 billion at December 31, 2003, and primarily reflect an anticipated
level of attrition associated with ongoing low deposit rates and continued
aggressive competition within our market areas as well as an $88.3 million
reduction in our deposit base associated with our divestiture of four branch
offices in late 2003. The overall decline in deposits was partially offset by
$93.7 million of deposits acquired from BSG.
Other borrowings averaged $486.0 million, $219.3 million and $194.1
million for the years ended December 31, 2004, 2003 and 2002, respectively. The
increase in the average balance for 2004 reflects $250.0 million of term
securities sold under agreements to repurchase that we entered into in
conjunction with our interest rate risk management program during the first and
second quarters of 2004, as further discussed in Note 5 and Note 10 to our
Consolidated Financial Statements. The increase also reflects a $42.6 million
increase in daily securities sold under agreements to repurchase principally in
connection with the cash management activities of our commercial deposit
customers, as well as a $28.6 million increase in Federal Home Loan Bank
advances that we assumed in conjunction with our acquisitions of CIB and CCB.
The increase in the average balance for 2003 reflects $100.0 million of term
securities sold under agreements to repurchase that we entered into during the
third quarter of 2003, offset by a $55.0 million reduction in federal funds
purchased, a $30.2 million decrease in daily securities sold under agreements to
repurchase and a $7.0 million reduction in Federal Home Loan Bank advances.
Our note payable averaged $3.7 million, $15.4 million and $17.9 million
for the years ended December 31, 2004, 2003 and 2002, respectively. Our note
payable was $15.0 million at December 31, 2004 and resulted from a single
advance drawn under our revolving credit line on November 30, 2004 to partially
fund our acquisition of CIB. The balance of our note payable at December 31,
2003 was $17.0 million and resulted from a $34.5 million advance in June 2003 to
partially fund the redemption of $47.4 million of our subordinated debentures.
This advance was subsequently repaid in April 2004 through dividends from our
subsidiary bank.
Subordinated debentures issued to our statutory and business trusts
averaged $220.4 million, $249.1 million and $265.5 million for the years ended
December 31, 2004, 2003 and 2002, respectively. Our subordinated debentures
increased $61.9 million during 2004 due to the issuance of $20.6 million of
subordinated debentures to First Bank Statutory Trust II, or FBST II, a newly
formed affiliated statutory trust, on September 20, 2004, and the issuance of
$41.2 million of subordinated debentures to First Bank Statutory Trust III, or
FBST III, a newly formed affiliated statutory trust, on November 23, 2004, as
further discussed in Note 12 to our Consolidated Financial Statements. The
proceeds from the issuance of these subordinated debentures were utilized to
partially fund our acquisition of CIB. Our subordinated debentures decreased
$69.1 during 2003 due primarily to a net reduction of $63.1 million in
outstanding subordinated debentures. In March 2003, we issued $25.8 million of
8.10% subordinated debentures to First Bank Statutory Trust, or FBST, in a
private placement and in April 2003, we issued $47.4 million of 8.15%
subordinated debentures to First Preferred Capital Trust IV, or First Preferred
IV, in a publicly underwritten offering. Proceeds from the 2003 issuances of
subordinated debentures, in addition to approximately $30.9 million of available
cash reserves and a $34.5 million advance on our note payable, were used for the
May 2003 redemption of $88.9 million of 9.25% subordinated debentures that were
issued to First Preferred Capital Trust in 1997, and the June 2003 redemption of
$47.4 million of 8.50% subordinated debentures that were issued to First America
Capital Trust in 1998.
Stockholders' equity averaged $574.3 million, $537.6 million and $478.6
million for the years ended December 31, 2004, 2003 and 2002, respectively. We
primarily attribute the increase for 2004 to net income of $82.9 million,
partially offset by dividends paid on our Class A and Class B preferred stock,
and a $31.0 million decrease in accumulated other comprehensive income, which
was comprised of $25.2 million associated with the change in the fair value of
our derivative financial instruments and $5.8 million associated with the change
in our unrealized gains and losses on available-for-sale investment securities.
These decreases are reflective of changes in prevailing interest rates, a
decline in the fair value of our derivative financial instruments, and the
maturity of $800.0 million notional amount of our interest rate swap agreements
throughout 2004, as further discussed under "--Interest Rate Risk Management"
and Note 5 to our Consolidated Financial Statements. The increase for 2003 is
attributable to net income of $62.8 million, partially offset by dividends paid
on our Class A and Class B preferred stock, and a $31.3 million decrease in
accumulated other comprehensive income that was comprised of $21.3 million
associated with the change in the fair value of our derivative financial
instruments and $10.0 million associated with the change in our unrealized gains
and losses on available-for-sale investment securities.
The following table sets forth, on a tax-equivalent basis, certain
information relating to our average balance sheets, and reflects the average
yield earned on interest-earning assets, the average cost of interest-bearing
liabilities and the resulting net interest income for the periods indicated.
Years Ended December 31,
--------------------------------------------------------------------------------------
2004 2003 2002
----------------------------- -------------------------- --------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ---- ------- ------- ----
(dollars expressed in thousands)
ASSETS
------
Interest-earning assets:
Loans: (1) (2) (3)
Taxable........................ $5,493,867 340,660 6.20% $5,369,046 354,649 6.61% $5,408,018 389,090 7.19%
Tax-exempt (4)................. 15,187 1,260 8.30 16,317 1,266 7.76 16,490 1,495 9.07
Investment securities:
Taxable........................ 1,245,226 50,170 4.03 914,357 32,442 3.55 773,871 31,845 4.12
Tax-exempt (4)................. 37,775 2,292 6.07 43,074 2,672 6.20 48,078 2,869 5.97
Short-term investments............ 119,370 1,643 1.38 143,046 1,502 1.05 123,285 1,949 1.58
---------- ------- ---------- -------- ---------- -------
Total interest-
earning assets............. 6,911,425 396,025 5.73 6,485,840 392,531 6.05 6,369,742 427,248 6.71
------- -------- -------
Nonearning assets..................... 633,154 698,740 687,843
---------- ---------- ----------
Total assets................. $7,544,579 $7,184,580 $7,057,585
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing
demand deposits.............. $ 856,765 3,472 0.41% $ 852,104 5,470 0.64% $ 755,879 7,551 1.00%
Savings deposits............... 2,175,425 20,128 0.93 2,147,573 23,373 1.09 1,991,510 35,668 1.79
Time deposits (3).............. 2,036,323 49,467 2.43 2,046,741 54,276 2.65 2,295,431 85,049 3.71
---------- ------- ---------- -------- ---------- -------
Total interest-
bearing deposits........... 5,068,513 73,067 1.44 5,046,418 83,119 1.65 5,042,820 128,268 2.54
Other borrowings.................. 485,994 6,102 1.26 219,264 2,243 1.02 194,077 3,450 1.78
Note payable (5).................. 3,657 506 13.84 15,418 785 5.09 17,947 1,032 5.75
Subordinated debentures (3) ...... 220,428 15,092 6.85 249,146 17,879 7.18 265,503 24,801 9.34
---------- ------- ---------- -------- ---------- -------
Total interest-
bearing liabilities........ 5,778,592 94,767 1.64 5,530,246 104,026 1.88 5,520,347 157,551 2.85
------- -------- -------
Noninterest-bearing liabilities:
Demand deposits................... 1,100,072 1,007,400 912,915
Other liabilities................. 91,660 109,357 145,731
---------- --------- ----------
Total liabilities............ 6,970,324 6,647,003 6,578,993
Stockholders' equity.................. 574,255 537,577 478,592
---------- --------- ----------
Total liabilities and
stockholders' equity....... $7,544,579 $7,184,580 $7,057,585
========== ========== ==========
Net interest income................... 301,258 288,505 269,697
======= ======== =======
Interest rate spread.................. 4.09 4.17 3.86
Net interest margin (6)............... 4.36% 4.45% 4.23%
===== ==== ====
- ----------------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income and interest expense includes the effects of interest rate swap agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
approximately $1.2 million, $1.4 million and $1.5 million for the years ended December 31, 2004, 2003 and 2002,
respectively.
(5) Interest expense on our note payable includes commitment, arrangement and renewal fees. Exclusive of these fees,
the interest rates paid were 2.87%, 2.35% and 2.96% for the years ended December 31, 2004, 2003 and 2002,
respectively.
(6) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-
earning assets.
The following table indicates, on a tax-equivalent basis, the changes
in interest income and interest expense that are attributable to changes in
average volume and changes in average rates, in comparison with the preceding
year. The change in interest due to the combined rate/volume variance has been
allocated to rate and volume changes in proportion to the dollar amounts of the
change in each.
Increase (Decrease) Attributable to Change in:
------------------------------------------------------------------
December 31, 2004 Compared December 31, 2003 Compared
to December 31, 2003 to December 31, 2002
----------------------------- -------------------------------
Net Net
Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------
(dollars expressed in thousands)
Interest earned on:
Loans: (1) (2) (3)
Taxable............................. $ 8,189 (22,178) (13,989) (2,824) (31,617) (34,441)
Tax-exempt (4)...................... (91) 85 (6) (16) (213) (229)
Investment securities:
Taxable............................. 12,906 4,822 17,728 5,345 (4,748) 597
Tax-exempt (4)...................... (325) (55) (380) (305) 108 (197)
Short-term investments................. (277) 418 141 278 (725) (447)
------- ------- ------- ------- ------- -------
Total interest income........... 20,402 (16,908) 3,494 2,478 (37,195) (34,717)
------- ------- ------- ------- ------- -------
Interest paid on:
Interest-bearing demand deposits....... 29 (2,027) (1,998) 878 (2,959) (2,081)
Savings deposits....................... 294 (3,539) (3,245) 2,602 (14,897) (12,295)
Time deposits (3) ..................... (278) (4,531) (4,809) (8,461) (22,312) (30,773)
Other borrowings....................... 3,234 625 3,859 406 (1,613) (1,207)
Note payable (5)....................... (915) 636 (279) (136) (111) (247)
Subordinated debentures (3)............ (1,993) (794) (2,787) (1,456) (5,466) (6,922)
------- ------- ------- ------- ------- -------
Total interest expense.......... 371 (9,630) (9,259) (6,167) (47,358) (53,525)
------- ------- ------- ------- ------- -------
Net interest income............. $20,031 (7,278) 12,753 8,645 10,163 18,808
======= ======= ======= ======= ======= =======
- ------------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income and interest expense includes the effect of interest rate swap agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%.
(5) Interest expense on our note payable includes commitment, arrangement and renewal fees.
Net Interest Income
The primary source of our income is net interest income. Net interest
income (expressed on a tax-equivalent basis) increased to $301.3 million for the
year ended December 31, 2004, from $288.5 million and $269.7 million for the
years ended December 31, 2003 and 2002, respectively. Net interest margin was
4.36% for the year ended December 31, 2004, compared to 4.45% and 4.23% for the
years ended December 31, 2003 and 2002, respectively. Net interest income is the
difference between the interest earned on our interest-earning assets, such as
loans and investment securities, and the interest paid on our interest-bearing
liabilities, such as deposits and borrowings. Net interest income is affected by
the level and composition of assets, liabilities and stockholders' equity, as
well as the general level of interest rates and changes in interest rates.
Interest income on a tax-equivalent basis includes the additional amount of
interest income that would have been earned if our investment in certain
tax-exempt interest-earning assets had been made in assets subject to federal,
state and local income taxes yielding the same after-tax income. Net interest
margin is determined by dividing net interest income on a tax-equivalent basis
by average interest-earning assets. The interest rate spread is the difference
between the average equivalent yield earned on interest-earning assets and the
average rate paid on interest-bearing liabilities.
We credit the increased net interest income for 2004 primarily to the
net interest-earning assets provided by our acquisitions completed in 2003 and
2004, increased average investment securities with higher yields, partially
offset by increased rates on other borrowings, lower rates paid on deposits,
increased average investment securities with higher yields, and increased
average loan balances associated with our acquisitions and internal growth. The
improved net interest income is also attributable to a $63.1 million net
reduction in our outstanding subordinated debentures during 2003 and reduced
rates associated with our outstanding subordinated debentures. As more fully
described in Note 12 to our Consolidated Financial Statements, in 2003, we
redeemed $136.3 million of subordinated debentures that were issued during 1997
and 1998, and we issued $25.8 million of subordinated debentures to FBST and
$47.4 million of subordinated debentures to First Preferred IV. On September 20,
2004, we issued $20.6 million of subordinated debentures to FBST II and on
November 23, 2004, we issued $41.2 million of subordinated debentures to FBST
III. These transactions, coupled with the use of additional derivative financial
instruments, have allowed us to reduce our overall interest expense associated
with our subordinated debentures. Earnings on our interest rate swap agreements
that we entered into in conjunction with our interest rate risk management
program to mitigate the effects of decreasing interest rates also contributed to
the maintenance of our net interest margin in 2004 and an increase in our net
interest margin in 2003. These derivative financial instruments used to hedge
our interest rate risk contributed $50.1 million, $64.6 million and $53.0
million, respectively, to net interest income for the years ended December 31,
2004, 2003 and 2002. We attribute the decreased earnings on our interest rate
swap agreements for 2004 to increasing interest rates and the maturity of $50.0
million, $150.0 million and $600.0 million notional amount of interest rate swap
agreements in January, March and September 2004, respectively. Specifically, the
net interest income associated with the swap agreements that matured in
September 2004 declined by $9.0 million during 2004. Although the Company is
implementing other methods to offset the reduction in net interest income,
including the funding of investment security purchases through the issuance of
term reverse repurchase agreements, the maturity of the swap agreements has
resulted and will continue to result in a sizeable reduction of future net
interest income, which may be further adversely affected if prevailing interest
rates decrease. In addition, earning assets increased as a result of our
acquisitions of BSG in 2003, which provided assets of $115.1 million, and Plains
Financial Corporation, or Plains, and two Texas branch purchases in 2002, which
provided assets of $256.3 million and $63.7 million, respectively. The increase
in net interest income in 2003, however, was partially offset by prevailing
lower interest rates, generally weak loan demand and overall economic conditions
that continue to exert pressure on our net interest margin.
Average total loans, net of unearned discount, were $5.51 billion for
the year ended December 31, 2004, in comparison to $5.39 billion and $5.42
billion for the years ended December 31, 2003 and 2002, respectively. The yield
on our loan portfolio decreased to 6.21% for the year ended December 31, 2004,
in comparison to 6.61% for 2003 and 7.20% for 2002. We attribute the overall
increase in average loans in 2004 to our acquisitions and to internal loan
growth, partially offset by reductions in our loans held for sale portfolio, the
sale of a portion of our commercial leasing portfolio on June 30, 2004 and the
sale of certain nonperforming loans late in the fourth quarter of 2004 as a
result of management's business decision to reduce our overall level of
nonperforming assets through the sale of certain nonperforming loans. In
addition, increased competition and general economic conditions within our
market areas have contributed to continued weak loan demand and generally low
prevailing interest rates, despite the recent increases in the prime lending
rate experienced in the third and fourth quarters of 2004. In 2004, the prime
rate of interest increased to 5.25% at December 31, 2004 from 4.00% at January
1, 2004. We attribute the overall decline in yields in 2003 primarily to the
decreases in prevailing interest rates. During the period from January 1, 2002
through December 31, 2003, the Board of Governors of the Federal Reserve System
decreased the targeted federal funds rate two times, resulting in two decreases
in the prime rate of interest from 4.75% to 4.00%. This is reflected not only in
the rate of interest earned on loans that are indexed to the prime rate, but
also in other assets and liabilities which either have variable or adjustable
rates, or which matured or repriced during this period. As discussed above and
under "--Interest Rate Risk Management," the reduced level of interest income
earned on our loan portfolio as a result of the interest rate environment and
increased competition within our market areas was partially mitigated by the
earnings associated with our interest rate swap agreements and the net reduction
of our outstanding subordinated debentures.
For the years ended December 31, 2004, 2003 and 2002, the aggregate
weighted average rate paid on our interest-bearing deposit portfolio was 1.44%,
1.65% and 2.54%, respectively. We attribute the decline primarily to
significantly decreased rates paid on our savings and time deposits, which have
continued to decline in conjunction with the interest rate reductions previously
discussed. However, the continued competitive pressures on deposits within our
market areas precluded us from fully reflecting the general interest rate
decreases in our deposit pricing while still providing an adequate funding
source for our loan portfolio. The earnings associated with certain of our
interest rate swap agreements designated as fair value hedges further
contributed to the overall reduction in deposit rates paid on time deposits;
however, as further discussed in Note 5 and Note 25 to our Consolidated
Financial Statements, the earnings associated with certain of our interest rate
swap agreements were significantly reduced in 2003 and 2004 due to a
substantially increasing level of ineffectiveness experienced in the hedging
relationships as the underlying hedged liabilities neared maturity that
ultimately led to management's decision to terminate the remaining $150.0
million of fair value hedges that hedged a portion of our other time deposits,
effective February 25, 2005.
The aggregate weighted average rate on our note payable was 13.84% for
the year ended December 31, 2004, compared to 5.09% and 5.75% for the years
ended December 31, 2003 and 2002, respectively. The overall changes in the
weighted average rates paid reflect changing market interest rates during these
periods. Amounts outstanding under our $75.0 million revolving line of credit
with a group of unaffiliated financial institutions bear interest at the lead
bank's corporate base rate or, at our option, at the London Interbank Offering
Rate plus a margin determined by the outstanding balance and our profitability
for the preceding four calendar quarters. Thus, our revolving credit line
represents a relatively high-cost funding source as increased advances have the
effect of increasing the weighted average rate of non-deposit liabilities. The
overall cost of this funding source during 2004 was higher due to fees
associated with the credit facility coupled with minimal borrowings under the
revolving credit line during 2004 as compared to 2003. The overall cost of this
funding source during 2003 however, was mitigated by the reductions in the prime
lending rate and in the average outstanding balance of our note payable in 2003
as compared to 2002. The balance of our note payable at December 31, 2003
resulted from a $34.5 million advance drawn in June 2003 to partially fund our
redemption of $47.4 million of subordinated debentures, and was subsequently
reduced by $17.5 million of internally funded repayments. This advance was
repaid in April 2004 and no additional advances were drawn in 2004 until
November 30, 2004, when an advance was drawn to partially fund our acquisition
of CIB, resulting in the outstanding balance of our note payable being increased
to $15.0 million at December 31, 2004. In January 2005, we reduced this advance
by $11.0 million through dividends from our subsidiary bank. The aggregate
weighted average rate paid on our other borrowings was 1.26% for the year ended
December 31, 2004, as compared to 1.02% and 1.78% for the years ended December
31, 2003 and 2002, respectively, reflecting changes in the current interest rate
environment during these periods.
The aggregate weighted average rate paid on our subordinated debentures
was 6.85%, 7.18% and 9.34% for the years ended December 31, 2004, 2003 and 2002,
respectively. The aggregate weighted average rates paid for 2004 and 2003
reflect the issuance of $61.9 million of subordinated debentures in late 2004
associated with our acquisition of CIB, the redemption of $136.3 million of
subordinated debentures and the issuance of $73.2 million of subordinated
debentures at lower interest rates in 2003, as well as the earnings impact of
our interest rate swap agreements entered into in 2002 and in March and April
2003. The rate for 2002 reflects the net interest differential earnings impact
of $4.5 million associated with our interest rate swap agreements entered into
in May and June 2002. The decline was partially offset by the additional expense
of our subordinated debentures issued in November 2001 and April 2002 as well as
a change in estimate regarding the period over which the deferred issuance costs
associated with these obligations are being amortized. The change in estimate
resulted in a reduction of net income in the amount of approximately $2.8
million for the year ended December 31, 2002, as compared to what results would
have been without the change.
Comparison of Results of Operations for 2004 and 2003
Net Income. Net income was $82.9 million for the year ended December
31, 2004, compared to $62.8 million for 2003. Our return on average assets and
our return on average stockholders' equity were 1.10% and 14.44%, respectively,
for the year ended December 31, 2004, compared to 0.87% and 11.68%,
respectively, for 2003. Results for 2004 reflect increased net interest income
and a reduced provision for loan losses, partially offset by decreased
noninterest income, increased noninterest expense and an increased provision for
income taxes. The provision for loan losses for 2004, which was significantly
lower than the higher-than-historical amounts reflected in 2003 and 2002,
reflects an overall improvement in asset quality, reduced levels of
nonperforming loans and lower net loan charge-offs than experienced in recent
years, as further discussed under "--Provision for Loan Losses" and exclusive of
our 2004 acquisition. Increased net interest income is primarily attributable to
our 2004 acquisitions, reduced deposit rates and earnings on our interest rate
swap agreements, as further discussed under "--Net Interest Income." We
attribute the decreased noninterest income to a nonrecurring gain on the sale of
our investment in Allegiant for a 100% ownership interest in BSG in 2003 and
decreased gains on the divestiture of branch offices in 2004 as compared to
2003, partially offset by increased service charges on deposit accounts, gains
on mortgage loans sold and held for sale, and investment management income, as
further discussed under "--Noninterest Income." The overall increase in
operating expenses for 2004, as further discussed under "--Noninterest Expense,"
was primarily due to increases in salaries and employee benefit expenses that
were partially offset by a decrease in write-downs on operating leases
associated with our commercial leasing business and a nonrecurring charitable
contribution expense related to the contribution of our shares of Allegiant
common stock in the fourth quarter of 2003.
Provision for Loan Losses. The provision for loan losses was $25.8
million and $49.0 million for the years ended December 31, 2004 and 2003,
respectively. Net loan charge-offs were $24.8 million and $32.7 million for the
years ended December 31, 2004 and 2003, respectively. In 2003, we continued to
experience the higher level of problem loans, related charge-offs and past due
loans that we began to experience in early 2002. This was a result of economic
conditions within our market areas, additional problems identified in certain
acquired loan portfolios and continuing deterioration in our commercial leasing
portfolio, particularly the segment of the portfolio relating to the airline
industry. These factors necessitated higher provisions for loan losses than in
prior periods. The reduced provision for loan losses in 2004 resulted from loan
sales completed late in the fourth quarter of 2004 and, exclusive of recent
acquisition activity, substantial improvement in asset quality, reduced levels
of nonperforming loans, primarily resulting from significant loan payoffs, and
lower net loan charge-offs, as further discussed under "--Lending Activities"
and "--Loans and Allowance for Loan Losses." Our nonperforming loans increased
to $85.8 million at December 31, 2004 from $75.4 million at December 31, 2003,
reflecting the acquisition of a significant amount of nonperforming loans
associated with our 2004 acquisitions, particularly CIB which provided
nonperforming loans of $60.3 million. In addition, our acquisitions of CCB, SBLS
and CIB provided $4.4 million, $3.0 million and $26.4 million, respectively, in
additional allowance for loan losses. Our loan policy requires all loans to be
placed on a nonaccrual status once principal or interest payments become 90 days
past due. Our general procedures for monitoring these loans allow individual
loan officers to submit a written request for approval to continue the accrual
of interest on loans that become 90 days past due. These requests must be
submitted for approval consistent with the authority levels provided in our
credit approval policies, and they are only granted if an expected near term
future event, such as a pending renewal or expected payoff, exists at the time
the loan becomes 90 days past due. If the expected near term future event does
not occur as anticipated, the loan is placed on nonaccrual status. Management
expects nonperforming assets to remain at higher levels in the near term because
of our CIB and CCB acquisitions and considered these trends in its overall
assessment of the adequacy of the allowance for loan losses.
Tables summarizing nonperforming assets, past due loans and charge-off
and recovery experience are presented under "--Loans and Allowance for Loan
Losses."
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 2004
and 2003:
December 31, Increase (Decrease)
------------ -------------------
2004 2003 Amount %
---- ---- ------ --
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees..... $ 38,230 36,113 2,117 5.86%
Gain on loans sold and held for sale.............................. 18,497 15,645 2,852 18.23
Net gain on sales of available-for-sale investment securities..... 257 8,761 (8,504) (97.07)
Gain on sales of branches, net of expenses........................ 1,000 3,992 (2,992) (74.95)
Bank-owned life insurance investment income....................... 5,201 5,469 (268) (4.90)
Investment management income...................................... 6,870 4,762 2,108 44.27
Other............................................................. 13,431 12,966 465 3.59
--------- -------- --------
Total noninterest income.................................... $ 83,486 87,708 (4,222) (4.81)
========= ======== ======== ========
Noninterest expense:
Salaries and employee benefits.................................... $ 117,492 95,441 22,051 23.10%
Occupancy, net of rental income................................... 19,882 20,940 (1,058) (5.05)
Furniture and equipment........................................... 17,017 18,286 (1,269) (6.94)
Postage, printing and supplies.................................... 5,010 5,100 (90) (1.76)
Information technology fees....................................... 32,019 32,136 (117) (0.36)
Legal, examination and professional fees.......................... 7,412 8,131 (719) (8.84)
Amortization of intangibles associated with the purchase of
subsidiaries................................................... 2,912 2,506 406 16.20
Communications.................................................... 1,866 2,667 (801) (30.03)
Advertising and business development.............................. 5,493 4,271 1,222 28.61
Charitable contributions.......................................... 577 5,334 (4,757) (89.18)
Other............................................................. 19,825 32,257 (12,432) (38.54)
--------- -------- --------
Total noninterest expense................................... $ 229,505 227,069 2,436 1.07
========= ======== ======== ========
Noninterest Income. Noninterest income was $83.5 million for the year
ended December 31, 2004, compared to $87.7 million for 2003. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees, mortgage-banking revenues, net gain on sales of available-for-sale
investment securities, bank-owned life insurance investment income, investment
management income and other income.
Service charges on deposit accounts and customer service fees increased
to $38.2 million for 2004, from $36.1 million for 2003. We attribute the
increase in service charges and customer service fees to:
>> our acquisitions completed during 2003 and 2004;
>> increased demand deposit account balances;
>> additional products and services available and utilized by our
retail and commercial customers;
>> increased fee income resulting from revisions of customer service
charges for non-sufficient fund and returned check fee rates that
became effective in December 2003, and enhanced control of fee
waivers; and
>> increased fee income associated with automated teller machine
services and debit cards.
The gain on loans sold and held for sale increased to $18.5 million
from $15.6 million for the years ended December 31, 2004 and 2003, respectively.
The change reflects the continued slowdown in 2004 in the volume of mortgage
loans originated and sold that was initially experienced in the fourth quarter
of 2003, management's decision to retain a portion of new mortgage loan
production in the real estate mortgage portfolio in mid-2003 and a decrease in
the allocation of direct mortgage loan origination costs from salary and
employee benefits expense to gain on loans sold and held for sale since late
2003, and a change in the fallout percentage associated with the allocation. The
fallout percentage represents the percentage of the number of loan applications
that do not result in the ultimate origination of a loan divided by the total
number of loan applications received.
Noninterest income for the years ended December 31, 2004 and 2003
includes net gains on sales of available-for-sale investment securities of
$257,000 and $8.8 million, respectively. The net gain for 2004 resulted
primarily from the sales of certain investment securities held by acquired
institutions that did not meet our overall investment objectives. The net gain
for 2003 includes a $6.3 million gain on the exchange of our Allegiant common
stock for a 100% ownership interest in BSG in the first quarter of 2003 and a
$2.3 million gain realized on the subsequent contribution of our remaining
shares of Allegiant common stock to a previously established charitable
foundation in the fourth quarter of 2003, partially offset by a $431,000
impairment loss resulting from a permanent decline in the fair value of an
equity fund investment.
Gains, net of expenses, on the sale of two Midwest banking offices in
2004 totaled $1.0 million and reflect a $392,000 gain, net of expenses on the
sale of one of our Missouri branch banking offices on February 6, 2004, and a
$630,000 gain, net of expenses, on the sale of one of our Illinois banking
offices on April 16, 2004. The additional adjustment to gains, net of expenses,
in 2004 relates to an adjustment to the fourth quarter 2003 gain recorded on the
divestiture of four banking offices due to an expense incurred to correct
certain environmental issues associated with one of the banking offices. During
the fourth quarter of 2003, we recorded a $4.0 million gain, net of expenses, on
the sale of the four branch offices in eastern Missouri and central and northern
Illinois, as further discussed in Note 2 to our Consolidated Financial
Statements.
Bank-owned life insurance income was $5.2 million for the year ended
December 31, 2004, in comparison to $5.5 million in 2003 and reflects a reduced
return on this product primarily associated with the reduced interest rate
environment and overall market conditions.
Investment management income was $6.9 million for the year ended
December 31, 2004, in comparison to $4.8 million in 2003. The increase in 2004
reflects increased portfolio management fee income associated with our
Institutional Money Management division.
Other income was $13.4 million and $13.0 million for the years ended
December 31, 2004 and 2003, respectively. We attribute the primary components of
the increase in other income to:
>> increased loan servicing fees of $3.0 million primarily
attributable to increased fees from loans serviced for others,
including fees from the SBA assets purchased from SBLS, decreased
amortization of mortgage servicing rights and a lower level of
interest shortfall. Interest shortfall is the difference between
the interest collected from a loan-servicing customer upon
prepayment of the loan and a full month's interest that is
required to be remitted to the security owner. Loan servicing
fees for 2004 also included an impairment charge of $459,000 on
the SBA servicing asset;
>> an increase of $665,000 in fees from fiduciary activities, which
were $2.8 million and $2.1 million for the years ended December
31, 2004 and 2003, respectively;
>> our acquisitions completed during 2003 and 2004;
>> increased income of $512,000 from standby letters of credit; and
>> an increase of $375,000 reflecting the reduction of a contingent
liability recorded in conjunction with the sale of a portion of
our leasing portfolio as a result of reductions in related lease
balances for the specific pools of leases sold, as further
discussed in Note 24 to our Consolidated Financial Statements;
partially offset by
>> decreased net gains on derivative instruments of $2.0 million.
The net loss on derivative instruments was $1.5 million for the
year ended December 31, 2004, in comparison to a net gain of
$496,000 in 2003. The decrease in the net gain on derivative
instruments reflects changes in the fair value of our interest
rate cap agreements, fair value hedges and underlying hedged
liabilities. The decrease reflects the discontinuation, in 2003,
of hedge accounting treatment on two interest rate swap
agreements that matured in January 2004, resulting from the loss
of our highly correlated hedge positions between the swap
agreements and the underlying hedged liabilities, as further
discussed under "--Interest Rate Risk Management" and Note 5 to
our Consolidated Financial Statements;
>> a decrease of $1.1 million in rental income associated with our
reduced commercial leasing activities;
>> a $282,000 write-off of fixed assets associated with the
remodeling of a branch office facility to accommodate our St.
Louis based mortgage banking operation;
>> a decline of $265,000 in brokerage revenue primarily associated
with overall market conditions and reduced customer demand; and
>> a net increase of $643,000 in losses on sales or reductions in
valuations of repossessed assets, primarily related to leasing
equipment associated with our commercial leasing business. Net
losses for 2004 were $1.6 million and included a $750,000
write-down on repossessed aircraft equipment and a $1.3 million
write-down on repossessed equipment unrelated to the airline
industry. These write-downs were partially offset by a $350,000
gain on the sale of other repossessed aircraft equipment
associated with our commercial leasing portfolio. Net losses for
2003 were $950,000 and included write-downs of $855,000 on the
disposition of certain aircraft and aircraft equipment parts.
Noninterest Expense. Noninterest expense was $229.5 million for the
year ended December 31, 2004, in comparison to $227.1 million for 2003. Our
efficiency ratio was 59.84% for the year ended December 31, 2004, compared to
60.58% for 2003. The efficiency ratio is used by the financial services industry
to measure an organization's operating efficiency. The efficiency ratio
represents the ratio of noninterest expense to the sum of net interest income
and noninterest income. The net increase in noninterest expense for 2004
primarily reflects the noninterest expense of our acquisitions completed during
2003 and 2004, as well as increases in salaries and employee benefits expenses,
partially offset by the nonrecurring $5.1 million charitable contribution
expense recognized in the fourth quarter of 2003 on the contribution of our
Allegiant common stock, a decline in expenses and losses, net of gains, on other
real estate owned, a decrease in write-downs on various operating leases
associated with our commercial leasing business, and a decrease in occupancy,
net of rental income, and furniture and equipment expense.
We record the majority of integration costs attributable to our
acquisitions as of the consummation date of our purchase business combinations.
These costs include, but are not limited to, items such as:
>> write-downs and impairment of assets of the acquired entities
that will no longer be usable subsequent to the consummation
date, primarily data processing equipment, incompatible hardware
and software, bank signage, etc. These adjustments are generally
recorded as of the consummation date as an allocation of the
purchase price with the offsetting adjustment recorded as an
increase to goodwill. For all periods presented, these
adjustments are not material to our operations;
>> costs associated with a planned exit of an activity of the
acquired entity that is not associated with or is not expected to
generate revenues after the consummation date, such as credit
card lending. These costs are generally recorded as of the
consummation date through the establishment of an accrued
liability with the offsetting adjustment recorded as an increase
to goodwill. These costs are infrequently encountered and, for
all periods presented, are not material to our operations;
>> planned involuntary employee termination benefits (severance
costs) as further discussed under "--Acquisitions - Acquisition
and Integration Costs" and Note 2 to our Consolidated Financial
Statements; and
>> contractual obligations of the acquired entities that existed
prior to the consummation date that either have no economic
benefit to the combined entity or have a penalty that we will
incur to cancel the contractual obligation. These contractual
obligations generally relate to existing information technology
and item processing contracts of the acquired entities that
include penalties for early termination. In conjunction with the
merger and integration of our acquisitions, the acquired entities
are converted to our existing information technology and item
processing systems. Consequently, the costs associated with
terminating the existing contracts of the acquired entities are
generally recorded as of the consummation date through the
establishment of an accrued liability with the offsetting
adjustment recorded as an increase to goodwill as further
discussed under "--Acquisitions - Acquisition and Integration
Costs" and Note 2 to our Consolidated Financial Statements.
We make adjustments to the fair value of the acquired entities' assets
and liabilities for these items as of the consummation date and include them in
the allocation of the overall acquisition cost. We also incur costs associated
with our acquisitions that are expensed in our consolidated statements of
income. These costs relate specifically to additional costs incurred in
conjunction with the information technology and item processing conversions of
the acquired entities as further described and quantified below.
Salaries and employee benefits increased by $22.1 million to $117.5
million for the year ended December 31, 2004, from $95.4 million in 2003. We
primarily associate the overall increase with our 2003 and 2004 acquisitions;
generally higher salary and employee benefit costs associated with employing and
retaining qualified personnel; and additions to staff to enhance senior
management expertise and expand our product lines. The increase is also
attributable to a lower allocation of direct mortgage loan origination costs
from salaries and employee benefits expense to gain on loans sold and held for
sale due to a slowdown in the volume of mortgage loans originated and sold,
management's decision to retain a portion of new mortgage loan production in our
real estate mortgage portfolio in mid-2003 and a change in the fallout
percentage associated with the allocation.
Occupancy, net of rental income, and furniture and equipment expense
totaled $36.9 million and $39.2 million for the years ended December 31, 2004
and 2003, respectively. We primarily attribute the continued higher levels of
expense to acquisitions, technology equipment expenditures, continued expansion
and renovation of various corporate and branch offices and the relocation of
certain branches and operational areas. The decrease in 2004 is partially
attributable to decreased rent expense associated with various lease
terminations in 2003, including a $1.0 million lease termination obligation
associated with the relocation of our San Francisco-based loan administration
department to southern California and a $200,000 lease buyout on a California
branch facility recorded in the first quarter of 2003, a $979,000 decrease in
depreciation expense on leased equipment associated with our reduced commercial
leasing activities, partially offset by an increase attributable to our 2004
acquisitions.
Information technology fees were $32.0 million and $32.1 million for
the years ended December 31, 2004 and 2003, respectively. As discussed in Note
19 to our Consolidated Financial Statements, First Services, L.P., a limited
partnership indirectly owned by our Chairman and members of his immediate
family, provides information technology and various operational support services
to our subsidiaries and us. We attribute the level of fees to growth and
technological advancements consistent with our product and service offerings,
and continued expansion and upgrades to technological equipment, networks and
communication channels, partially offset by expense reductions resulting from
the information technology conversion of BSG completed in 2003, as well as the
achievement of certain efficiencies associated with the implementation of
various technology projects. The information technology conversion of CCB was
completed in September 2004.
Legal, examination and professional fees were $7.4 million and $8.1
million for the years ended December 31, 2004 and 2003, respectively. The
decrease in these fees in 2004 is primarily associated with higher legal fees
paid in 2003 related to an ongoing lawsuit that reached final resolution in the
second quarter of 2004. The continued expansion of overall corporate activities,
the ongoing professional services utilized by certain of our acquired entities,
and increased legal fees associated with commercial loan documentation,
collection efforts and certain defense litigation related to acquired entities
have all contributed to the overall expense levels in 2003 and 2004.
Amortization of intangibles associated with the purchase of
subsidiaries was $2.9 million and $2.5 million for the years ended December 31,
2004 and 2003, respectively. We attribute the increase to the core deposit
intangibles associated with our 2003 and 2004 acquisitions.
Communications and advertising and business development expenses were
$7.4 million and $6.9 million for the years ended December 31, 2004 and 2003,
respectively. The expansion of our sales, marketing and product group in 2004
and broadened advertising campaigns have contributed to higher expenditures and
are consistent with our continued focus on expanding our banking franchise and
the products and services available to our customers. We continue our efforts to
manage these expenses through renegotiation of contracts, enhanced focus on
advertising and promotional activities in markets that offer greater benefits,
as well as ongoing cost containment efforts.
Charitable contribution expense was $577,000 and $5.3 million for the
years ended December 31, 2004 and 2003, respectively. We recorded contribution
expense of $5.1 million in the fourth quarter of 2003 related to the
contribution of our remaining shares of Allegiant common stock, as further
discussed under "--Overview" and "--Acquisitions - Closed Acquisitions and Other
Corporate Transactions."
Other expense was $19.8 million and $32.3 million for the years ended
December 31, 2004 and 2003, respectively. Other expense encompasses numerous
general and administrative expenses including insurance, freight and courier
services, correspondent bank charges, miscellaneous losses and recoveries,
expenses on other real estate owned, memberships and subscriptions, transfer
agent fees, sales taxes and travel, meals and entertainment. We attribute the
majority of the decrease in other expense for 2004, as compared to 2003, to:
>> a decrease of $5.2 million on expenditures and losses, net of
gains, on other real estate. Expenditures and losses, net of
gains, on other real estate reflected net gains of $3.3 million
for the year ended December 31, 2004, in comparison to net
expenses and losses of $1.9 million in 2003. Net gains on sales
of other real estate in 2004 include a $2.7 million gain on the
sale of a residential and recreational development property that
was transferred to other real estate in January 2003, as further
discussed under "--Loans and Allowance for Loan Losses," and
approximately $454,000 in gains recorded on the sale of two
additional holdings of other real estate. Net expenditures on
other real estate for 2003 primarily included expenditures
associated with the operation of the residential and recreational
development property that was sold in February 2004 as well as a
$200,000 expenditure associated with an unrelated residential
real estate property located in the northern California region;
>> decreased write-downs of $6.1 million on various operating leases
associated with our commercial leasing business, which were
primarily a result of reductions in estimated residual values. We
recorded write-downs of $664,000 for the year ended December 31,
2004, compared to $6.8 million in 2003; and
>> a $1.0 million specific reserve established in December 2003 for
the estimated loss associated with a $5.3 million unfunded letter
of credit that we subsequently funded as a loan in January 2004;
partially offset by
>> higher expenses associated with our acquisitions completed during
2003 and 2004, including increased travel, meals and
entertainment expenses incurred by our conversion team members in
anticipation of the information technology conversion of CIB that
occurred in February 2005; and
>> continued growth and expansion of our banking franchise.
Provision for Income Taxes. The provision for income taxes was $45.3
million for the year ended December 31, 2004, representing an effective income
tax rate of 35.4%, in comparison to $36.0 million, representing an effective
income tax rate of 36.4%, for the year ended December 31, 2003. The decrease in
the effective income tax rate is primarily attributable to the reversal of a
$2.8 million tax reserve in the second quarter of 2004 that was no longer deemed
necessary as a result of the resolution of a potential tax liability. Excluding
this transaction, the effective income tax rate was 37.5% for the year ended
December 31, 2004, reflecting higher taxable income and the merger of our two
bank charters on March 31, 2003, which has resulted in higher taxable income
allocations in states where we file separate tax returns.
Comparison of Results of Operations for 2003 and 2002
Net Income. Net income was $62.8 million for the year ended December
31, 2003, compared to $45.2 million for 2002. Our return on average assets and
our return on average stockholders' equity were 0.87% and 11.68%, respectively,
for the year ended December 31, 2003, compared to 0.64% and 9.44%, respectively,
for 2002. Results for 2003 reflect increased net interest income and noninterest
income and decreased provisions for loan losses, partially offset by higher
operating expenses and increased provisions for income taxes. The provision for
loan losses, although higher than historical averages, is indicative of the
current economic environment, reflected in continued higher loan charge-off,
past due and nonperforming trends as further discussed under "--Provision for
Loan Losses." Increased net interest income is primarily attributable to reduced
deposit rates and earnings on our interest rate swap agreements, as further
discussed under "--Net Interest Income." We attribute the increased noninterest
income to gains on mortgage loans sold and held for sale, net gain on sales of
available-for-sale investment securities and net gains on the divestiture of
four branch offices as further discussed under "--Noninterest Income," partially
offset by reduced other income and net gain on derivative instruments as further
discussed under "--Interest Rate Risk Management." The overall increase in
operating expenses for 2003, as further discussed under "--Noninterest Expense,"
was primarily due to general increases in salaries and employee benefit
expenses, write-downs on operating leases associated with our commercial leasing
business and charitable contribution expense related to the contribution of our
shares of Allegiant common stock in late 2003.
Provision for Loan Losses. The provision for loan losses was $49.0
million and $55.5 million for the years ended December 31, 2003 and 2002,
respectively. We experienced a higher level of problem loans, related
charge-offs and past due loans during 2002 due to overall economic conditions
within our market areas, problems identified in two acquired loan portfolios and
deterioration in our commercial leasing portfolio, particularly the segment of
the portfolio relating to the airline industry. We experienced further
deterioration in our commercial leasing portfolio in 2003, contributing to
continued higher-than-historical provisions for loan losses as further discussed
under "--Lending Activities" and "--Loans and Allowance for Loan Losses." Net
loan charge-offs were $32.7 million and $54.6 million for the years ended
December 31, 2003 and 2002, respectively. Net loan charge-offs, unrelated to our
commercial leasing portfolio, included a $6.1 million net charge-off on one
significant credit relationship in 2003 and $38.6 million on ten significant
credit relationships in 2002. Our nonperforming loans increased to $75.4 million
at December 31, 2003 from $75.2 million at December 31, 2002, further
contributing to the need for higher-than-historical provisions for loan losses
in 2003. Management expects nonperforming assets to remain at the higher levels
recently experienced and considered these trends in its overall assessment of
the adequacy of the allowance for loan losses. In addition, our acquisition of
BSG provided $757,000 of additional allowance for loan losses.
Tables summarizing nonperforming assets, past due loans and charge-off
and recovery experience are presented under "--Loans and Allowance for Loan
Losses."
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 2003
and 2002:
December 31, Increase (Decrease)
-------------------- -------------------
2003 2002 Amount %
---- ---- ------ --
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees..... $ 36,113 30,978 5,135 16.58%
Gain on loans sold and held for sale.............................. 15,645 6,471 9,174 141.77
Net gain on sales of available-for-sale investment securities..... 8,761 90 8,671 9,634.44
Gain on sales of branches, net of expenses........................ 3,992 -- 3,992 100.00
Bank-owned life insurance investment income....................... 5,469 5,928 (459) (7.74)
Investment management income...................................... 4,762 4,157 605 14.55
Other............................................................. 12,966 19,887 (6,921) (34.80)
--------- -------- -------
Total noninterest income.................................... $ 87,708 67,511 20,197 29.92
========= ======== ======= ========
Noninterest expense:
Salaries and employee benefits.................................... $ 95,441 89,569 5,872 6.56%
Occupancy, net of rental income................................... 20,940 21,030 (90) (0.43)
Furniture and equipment........................................... 18,286 17,495 791 4.52
Postage, printing and supplies.................................... 5,100 5,556 (456) (8.21)
Information technology fees....................................... 32,136 32,135 1 --
Legal, examination and professional fees.......................... 8,131 9,284 (1,153) (12.42)
Amortization of intangibles associated with the
purchase of subsidiaries....................................... 2,506 2,012 494 24.55
Communications.................................................... 2,667 3,166 (499) (15.76)
Advertising and business development.............................. 4,271 5,023 (752) (14.97)
Charitable contributions.......................................... 5,334 204 5,130 2,514.71
Other............................................................. 32,257 25,338 6,919 27.31
--------- -------- -------
Total noninterest expense................................... $ 227,069 210,812 16,257 7.71
========= ======== ======= ========
Noninterest Income. Noninterest income was $87.7 million for the year
ended December 31, 2003, compared to $67.5 million for 2002. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees, mortgage-banking revenues, net gain on sales of available-for-sale
investment securities, bank-owned life insurance investment income and other
income.
Service charges on deposit accounts and customer service fees increased
to $36.1 million for 2003, from $31.0 million for 2002. We attribute the
increase in service charges and customer service fees to:
>> our acquisitions completed during 2002 and 2003;
>> additional products and services available and utilized by our
retail and commercial customers;
>> increased fee income resulting from revisions of customer service
charge rates effective July 1, 2002, and enhanced control of fee
waivers; and
>> increased income associated with automated teller machine
services and debit cards.
The gain on loans sold and held for sale increased to $15.6 million
from $6.5 million for the years ended December 31, 2003 and 2002, respectively.
The increase reflects the continued growth of our mortgage banking activities in
addition to overall reductions in mortgage loan rates that contributed to higher
volumes of new originations and refinancings, partially offset by increased
commissions paid to mortgage loan originators associated with the higher loan
volumes. We experienced a slowdown in overall loan volumes in the fourth quarter
of 2003 resulting in a decline in gains on mortgage loans sold and held for
sale.
Noninterest income for the years ended December 31, 2003 and 2002
includes net gains on sales of available-for-sale investment securities of $8.8
million and $90,000, respectively. The net gain for 2003 includes a $6.3 million
gain on the exchange of our Allegiant common stock for a 100% ownership interest
in BSG in the first quarter of 2003 and a $2.3 million gain realized on the
subsequent contribution of our remaining shares of Allegiant common stock to a
previously established charitable foundation in the fourth quarter of 2003,
partially offset by a $431,000 impairment loss resulting from a permanent
decline in the fair value of an equity fund investment. The net gain for 2002
resulted primarily from the sales of certain investment securities held by
acquired institutions that did not meet our overall investment objectives.
During the fourth quarter of 2003, we recorded a $4.0 million gain, net
of expenses, on the sale of four branch offices in eastern Missouri and central
and northern Illinois, as further discussed in Note 2 to our Consolidated
Financial Statements.
Bank-owned life insurance income was $5.5 million for the year ended
December 31, 2003, in comparison to $5.9 million in 2002. The decrease for 2003
reflects a reduced return on this product primarily associated with the reduced
interest rate environment and overall market conditions.
Investment management fees were $4.8 million for the year ended
December 31, 2003, in comparison to $4.2 million in 2002. The increase reflects
increased portfolio management fee income associated with our Institutional
Money Management Division.
Other income was $13.0 million and $19.9 million for the years ended
December 31, 2003 and 2002, respectively. We attribute the primary components of
the decrease in other income to:
>> decreased loan servicing fees of $4.2 million primarily
attributable to increased amortization of mortgage servicing
rights and a higher level of interest shortfall. This decline
partially offsets the continued growth of our mortgage banking
activities due to overall reductions in mortgage loan rates and
higher origination and refinancing volumes;
>> a net gain on derivative instruments, which was $496,000 for the
year ended December 31, 2003, in comparison to $2.2 million in
2002. The decrease in the net gain on derivative instruments
reflects changes in the fair value of our interest rate cap
agreements, fair value hedges and underlying hedged liabilities.
The lower 2003 net gain also reflects the discontinuation of
hedge accounting treatment on two interest rate swap agreements
that mature in January 2004, resulting from the loss of our
highly correlated hedge positions between the swap agreements and
the underlying hedged liabilities, as further discussed under
"--Interest Rate Risk Management;"
>> a decline of $419,000 in brokerage revenue primarily associated
with overall market conditions and reduced customer demand;
>> a decrease of $830,000 in rental income associated with our
reduced commercial leasing activities;
>> a gain of approximately $448,000 in 2002 on the sale of certain
operating lease equipment associated with equipment leasing
activities that we acquired in conjunction with our acquisition
of Bank of San Francisco in December 2000; and
>> a loss of $386,000 on the sale of a vacant branch office building
in 2003; partially offset by
>> a decrease in net losses of approximately $393,000 associated
with the sale or write-down of repossessed assets, primarily
related to leasing equipment associated with our commercial
leasing business. Leasing equipment write-downs related solely to
certain aircraft and aircraft equipment and parts were $855,000
and $1.2 million in 2003 and 2002, respectively;
>> increased income of $569,000 from standby letters of credit;
>> higher earnings associated with our international banking
products;
>> increased rental fees from First Services, L.P. of approximately
$385,000 for the use of data processing and other equipment owned
by First Bank; and
>> our acquisitions completed during 2002 and 2003.
Noninterest Expense. Noninterest expense was $227.1 million for the
year ended December 31, 2003, in comparison to $210.8 million for 2002. The
increase for 2003 reflects the noninterest expense of our acquisitions completed
during 2002 and 2003, as well as general increases in salaries and employee
benefit expenses, occupancy and furniture and equipment expenses, write-downs on
operating leases associated with our commercial leasing business and charitable
contributions expense.
Salaries and employee benefits increased by $5.9 million to $95.4
million from $89.6 million for the years ended December 31, 2003 and 2002,
respectively. We primarily associate the increase with our 2002 and 2003
acquisitions; overall higher salary and employee benefit costs associated with
employing and retaining qualified personnel; additions to staff to enhance
senior management expertise and expand our product lines, partially offset by
staff realignments surrounding our core business strategies; and increased
medical benefit costs associated with an overall increase in medical claims and
increasing costs.
Occupancy, net of rental income, and furniture and equipment expense
totaled $39.2 million and $38.5 million for the years ended December 31, 2003
and 2002, respectively. We primarily attribute the continued higher levels of
expense to acquisitions, technology equipment expenditures, continued expansion
and renovation of various corporate and branch offices, the relocation of
certain branches and operational areas and increased depreciation expense
associated with capital expenditures. Included in these expenses are a $1.0
million lease termination obligation incurred in 2003 associated with the
relocation of our San Francisco-based loan administration department to southern
California and a $1.4 million lease buyout obligation in 2002 on a California
facility acquired through a previous acquisition.
Information technology fees were $32.1 million for the years ended
December 31, 2003 and 2002. We attribute the consistently higher level of fees
to growth and technological advancements consistent with our product and service
offerings, and continued expansion and upgrades to technological equipment,
networks and communication channels. These increases were partially offset by
expense reductions of $554,000 associated with the information technology
conversions of Union, Plains and the Denton and Garland, Texas branch purchases
in 2002.
Legal, examination and professional fees were $8.1 million and $9.3
million for the years ended December 31, 2003 and 2002, respectively. The
decrease is primarily attributable to various fees paid in 2002 related to our
commercial leasing portfolio. This decrease was partially offset by a slight
increase in other legal, examination and professional fees associated with our
continued expansion of overall corporate activities, the ongoing professional
services utilized by certain of our acquired entities and increased legal fees
associated with commercial loan documentation, collection efforts, expanded
corporate activities and certain defense litigation related to acquired
entities.
Amortization of intangibles associated with the purchase of
subsidiaries was $2.5 million and $2.0 million for the years ended December 31,
2003 and 2002, respectively. The increase is due to the core deposit intangibles
associated with our 2002 and 2003 acquisitions.
Communications and advertising and business development expenses
decreased $1.3 million to $6.9 million from $8.2 million for the years ended
December 31, 2003 and 2002, respectively, primarily as a result of our continued
efforts to reduce these expenses through renegotiation of contracts, reductions
in the level of advertising and promotional activities and ongoing cost
containment efforts.
Charitable contribution expense was $5.3 million and $204,000 for the
years ended December 31, 2003 and 2002, respectively. We recorded contribution
expense of $5.1 million in the fourth quarter of 2003 related to the
contribution of our remaining shares of Allegiant common stock as further
discussed under "--Overview" and "--Acquisitions - Closed Acquisitions and Other
Corporate Transactions."
Other expense was $32.3 million and $25.3 million for the years ended
December 31, 2003 and 2002, respectively. Other expense encompasses numerous
general and administrative expenses including insurance, freight and courier
services, correspondent bank charges, miscellaneous losses and recoveries,
expenses on other real estate owned, memberships and subscriptions, transfer
agent fees, sales taxes and travel, meals and entertainment. We attribute the
majority of the increase in other expense for 2003, as compared to 2002, to:
>> increased write-downs of $4.2 million on various operating leases
associated with our commercial leasing business, which were
primarily a result of reductions in estimated residual values.
These write-downs were $6.8 million for the year ended December
31, 2003, compared to $2.6 million in 2002;
>> increased expenses on other real estate of $1.6 million,
including gains and losses on sales of other real estate
properties. The majority of these increased expenditures were
associated with the operation of the residential and recreational
development property transferred to other real estate in January
2003 and further discussed under "--Loans and Allowance for Loan
Losses;"
>> a $1.0 million specific reserve established in December 2003 for
the estimated loss associated with a $5.3 million unfunded letter
of credit that we subsequently funded as a loan in January 2004;
>> expenses associated with our acquisitions completed during 2002
and 2003; and
>> continued growth and expansion of our banking franchise;
partially offset by
>> reductions in various expenses, primarily including travel, meals
and entertainment, director's fees and transfer agent fees
associated with economies achieved from completion of our
purchase of the minority interest in First Banks America, Inc.,
San Francisco, California, or FBA, on December 31, 2002,
resulting in the elimination of the requirements for separate
public financial reporting of this subsidiary.
Provision for Income Taxes. The provision for income taxes was $36.0
million for the year ended December 31, 2003, representing an effective income
tax rate of 36.4%, in comparison to $22.8 million, representing an effective
income tax rate of 32.8%, for the year ended December 31, 2002. The increase in
the effective income tax rate is primarily attributable to higher taxable income
and the merger of our two bank charters, which has resulted in higher taxable
income allocations in states where we file separate state tax returns.
Interest Rate Risk Management
For financial institutions, the maintenance of a satisfactory level of
net interest income is a primary factor in achieving acceptable income levels.
However, the maturity and repricing characteristics of the institution's loan
and investment portfolios may differ significantly from those within its deposit
structure. The nature of the loan and deposit markets within which a financial
institution operates and its objectives for business development within those
markets at any point in time, influence these characteristics. In addition, the
ability of borrowers to repay loans and depositors to withdraw funds prior to
stated maturity dates introduces divergent option characteristics that operate
primarily as interest rates change. These factors cause various elements of the
institution's balance sheet to react in different manners and at different times
relative to changes in interest rates, potentially leading to increases or
decreases in net interest income over time. Depending upon the direction and
magnitude of interest rate movements and their effect on the specific components
of the institution's balance sheet, the effects on net interest income can be
substantial. Consequently, managing a financial institution requires
establishing effective control over the exposure of the institution to changes
in interest rates.
We strive to manage our interest rate risk by:
>> maintaining an Asset Liability Committee, or ALCO, responsible to
our Board of Directors, to review the overall interest rate risk
management activity and approve actions taken to reduce risk;
>> employing a financial simulation model to determine our exposure
to changes in interest rates;
>> coordinating the lending, investing and deposit-generating
functions to control the assumption of interest rate risk; and
>> utilizing various financial instruments, including derivatives,
to offset inherent interest rate risk should it become excessive.
The objective of these procedures is to limit the adverse impact that
changes in interest rates may have on our net interest income.
The ALCO has overall responsibility for the effective management of
interest rate risk and the approval of policy guidelines. The ALCO includes our
President and Chief Executive Officer, Chief Operating Officer, Chief Credit
Officer, Chief Investment Officer and the senior officers of finance and risk
management, and certain other officers. The Asset Liability Management Group,
which monitors interest rate risk, supports the ALCO, prepares analyses for
review by the ALCO and implements actions that are either specifically directed
by the ALCO or established by policy guidelines.
In managing sensitivity, we strive to reduce the adverse impact on
earnings by managing interest rate risk within internal policy constraints. Our
policy is to manage exposure to potential risks associated with changing
interest rates by maintaining a balance sheet posture in which annual net
interest income is not significantly impacted by reasonably possible near-term
changes in interest rates. To measure the effect of interest rate changes, we
project our net income over a two-year horizon on a pro forma basis. The
analysis assumes various scenarios for increases and decreases in interest rates
including both instantaneous and gradual, and parallel and non-parallel shifts
in the yield curve, in varying amounts. For purposes of arriving at reasonably
possible near-term changes in interest rates, we include scenarios based on
actual changes in interest rates, which have occurred over a two-year period,
simulating both a declining and rising interest rate scenario.
We are "asset-sensitive," indicating that our assets would generally
reprice with changes in interest rates more rapidly than our liabilities, and
our simulation model indicates a loss of projected net interest income should
interest rates decline. While a decline in interest rates of less than 100 basis
points has a relatively minimal impact on our net interest income, an
instantaneous parallel decline in the interest yield curve of 100 basis points
indicates a pre-tax projected loss of approximately 8.9% of net interest income,
based on assets and liabilities at December 31, 2004. Although we do not
anticipate that instantaneous shifts in the yield curve as projected in our
simulation model are likely, these are indications of the effects that changes
in interest rates would have over time.
We also prepare and review a more traditional interest rate sensitivity
position in conjunction with the results of our simulation model. The following
table presents the projected maturities and periods to repricing of our rate
sensitive assets and liabilities as of December 31, 2004, adjusted to account
for anticipated prepayments:
Over Over
Three Six Over
Three through through One Over
Months Six Twelve through Five
or Less Months Months Five Years Years Total
------- ------ ------ ---------- ----- -----
(dollars expressed in thousands)
Interest-earning assets:
Loans (1)...................................... $4,300,725 279,785 424,911 1,050,703 81,844 6,137,968
Investment securities.......................... 239,087 172,893 236,803 978,584 185,982 1,813,349
Short-term investments......................... 117,505 -- -- -- -- 117,505
---------- ---------- -------- --------- --------- ---------
Total interest-earning assets.............. 4,657,317 452,678 661,714 2,029,287 267,826 8,068,822
Effect of interest rate swap agreements........ (300,000) -- -- 300,000 -- --
---------- ---------- -------- --------- --------- ---------
Total interest-earning assets after
the effect of interest
rate swap agreements..................... $4,357,317 452,678 661,714 2,329,287 267,826 8,068,822
========== ========= ======== ========= ========= =========
Interest-bearing liabilities:
Interest-bearing demand accounts............... $ 323,932 201,362 131,323 96,304 122,568 875,489
Money market accounts.......................... 1,749,981 -- -- -- -- 1,749,981
Savings accounts............................... 84,943 69,953 59,960 84,942 199,865 499,663
Time deposits.................................. 641,748 421,632 709,072 1,024,268 35,455 2,832,175
Other borrowings............................... 215,106 -- 144 368,500 11,000 594,750
Note payable................................... -- -- 15,000 -- -- 15,000
Subordinated debentures........................ -- -- -- -- 273,300 273,300
---------- --------- -------- --------- --------- ---------
Total interest-bearing liabilities......... 3,015,710 692,947 915,499 1,574,014 642,188 6,840,358
Effect of interest rate swap agreements........ 276,200 -- -- (150,000) (126,200) --
---------- --------- -------- --------- --------- ---------
Total interest-bearing liabilities
after the effect of interest
rate swap agreements..................... $3,291,910 692,947 915,499 1,424,014 515,988 6,840,358
========== ========= ======== ========= ========= =========
Interest-sensitivity gap:
Periodic....................................... $1,065,407 (240,269) (253,785) 905,273 (248,162) 1,228,464
=========
Cumulative..................................... 1,065,407 825,138 571,353 1,476,626 1,228,464
========== ========= ======== ========= =========
Ratio of interest-sensitive assets to
interest-sensitive liabilities:
Periodic..................................... 1.32 0.65 0.72 1.64 0.52 1.18
=========
Cumulative................................... 1.32 1.21 1.12 1.23 1.18
========== ========= ======== ========= =========
--------------------------------
(1) Loans are presented net of unearned discount.
Management made certain assumptions in preparing the foregoing table.
These assumptions included:
>> loans will repay at projected repayment rates;
>> mortgage-backed securities, included in investment securities,
will repay at projected repayment rates;
>> interest-bearing demand accounts and savings accounts will behave
in a projected manner with regard to their interest rate
sensitivity; and
>> fixed maturity deposits will not be withdrawn prior to maturity.
A significant variance in actual results from one or more of these
assumptions could materially affect the results reflected in the table.
At December 31, 2004, our asset-sensitive position on a cumulative
basis through the twelve-month time horizon was $571.4 million, or 6.54% of
total assets, in comparison to our asset-sensitive position on a cumulative
basis through the twelve-month time horizon of $361.1 million, or 5.08% of total
assets, at December 31, 2003. We attribute the increase for 2004 to changes in
customer preferences related to the current low interest rate environment and
economic conditions and growth. This is observed in the shifting of deposits
from time deposits to transactional accounts and in continued low loan demand
resulting in increases in the amount of short-term investments. This was
partially offset by our interest rate swap agreements entered into in
conjunction with our interest rate risk management program.
The interest-sensitivity position is one of several measurements of the
impact of interest rate changes on net interest income. Its usefulness in
assessing the effect of potential changes in net interest income varies with the
constant change in the composition of our assets and liabilities and changes in
interest rates. For this reason, we place greater emphasis on our simulation
model for monitoring our interest rate risk exposure.
As previously discussed, we utilize derivative financial instruments to
assist in our management of interest rate sensitivity by modifying the
repricing, maturity and option characteristics of certain assets and
liabilities. The derivative financial instruments we held as of December 31,
2004 and 2003 are summarized as follows:
December 31, 2004 December 31, 2003
------------------------- -----------------------
Notional Credit Notional Credit
Amount Exposure Amount Exposure
------ -------- ------ --------
(dollars expressed in thousands)
Cash flow hedges............................ $ 500,000 1,233 1,250,000 2,857
Fair value hedges........................... 276,200 9,609 326,200 12,614
Interest rate cap agreements................ -- -- 450,000 --
Interest rate lock commitments.............. 5,400 -- 15,500 --
Forward commitments to sell
mortgage-backed securities................ 34,000 -- 58,500 --
========== ====== ========== =======
The notional amounts of our derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
our credit exposure through our use of these instruments. The credit exposure
represents the accounting loss we would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral held to support the credit exposure was of no
value.
During 2004, 2003 and 2002, we realized net interest income on
derivative financial instruments of $50.1 million, $64.6 million and $53.0
million, respectively. In addition, we recorded a net loss on derivative
instruments, which is included in noninterest income in the consolidated
statements of income, of $1.5 million for the year ended December 31, 2004, in
comparison to net gains of $496,000 and $2.2 million for the years ended
December 31, 2003 and 2002, respectively. Information regarding our various
derivative financial instruments is further discussed in detail in Note 5 to our
Consolidated Financial Statements appearing elsewhere in this report.
Mortgage Banking Activities
Our mortgage banking activities consist of the origination, purchase
and servicing of residential mortgage loans. The purchase of loans to be held
for sale is primarily limited to loans that we acquire in conjunction with our
acquisition of other financial institutions. Generally, we sell our production
of residential mortgage loans in the secondary loan markets. However, in
mid-2003, we made a business strategy decision to retain a portion of new
residential mortgage loan production in our real estate mortgage portfolio
primarily as a result of continued weak loan demand in other sectors of our loan
portfolio, as further discussed in "--Loans and Allowance for Loan Losses." In
general, new residential mortgage loan production originated in our St. Louis
production offices is retained in portfolio, with the exception of 20 and
30-year fixed rate loans, which are typically sold in the secondary loan
markets. Servicing rights may either be retained or released with respect to
conventional, FHA and VA conforming fixed-rate and conventional adjustable rate
residential mortgage loans.
For the three years ended December 31, 2004, 2003 and 2002, we
originated loans for resale totaling $1.14 billion, $2.16 billion and $1.95
billion and sold loans totaling $983.2 million, $2.00 billion and $1.60 billion,
respectively. The origination and purchase of residential mortgage loans and the
related sale of the loans provides us with additional sources of income
including the gain or loss realized upon sale, the interest income earned while
the loan is held awaiting sale and the ongoing loan servicing fees from the
loans sold with servicing rights retained. Mortgage loans serviced for investors
aggregated $1.06 billion, $1.22 billion and $1.29 billion at December 31, 2004,
2003 and 2002, respectively.
The gain on mortgage loans originated for resale, including loans sold
and held for sale, was $17.8 million, $15.6 million and $6.5 million for the
years ended December 31, 2004, 2003 and 2002, respectively. We determine these
gains, net of losses, on a lower of cost or market basis. These gains are
realized at the time of sale. The cost basis reflects both the adjustments of
the carrying values of loans held for sale to the lower of cost, adjusted to
include the cost of hedging the loans held for sale, or current market values,
as well as the adjustments for any gains or losses on loan commitments for which
the interest rate has been established, net of anticipated underwriting
"fallout," (loans not funded due to issues discovered during the underwriting
process or withdrawal of the loan request by the customer) adjusted for the cost
of hedging these loan commitments. The increases for 2004 and 2003 are primarily
attributable to the continued growth of our mortgage banking activities and the
relatively high volume of loans originated and sold commensurate with the
prevailing interest rate environment experienced throughout 2002 and 2003,
partially offset by the continued slowdown in 2004 in the volume of mortgage
loans originated and sold that we initially experienced in the fourth quarter of
2003. During the third quarter of 2003, we recognized impairment of $800,000
through a valuation allowance associated with a decline in the fair value of an
individual mortgage servicing rights stratum below its carrying value, net of
the valuation allowance. We subsequently reversed the $800,000 impairment
valuation allowance during the third and fourth quarters of 2003 based upon an
increase in the fair value of the mortgage servicing rights stratum above the
carrying value, net of the valuation allowance, as further discussed in Note 6
to our Consolidated Financial Statements appearing elsewhere in this report.
Interest income on loans held for sale was $8.8 million for the year
ended December 31, 2004, in comparison to $17.0 million and $15.1 million for
the years ended December 31, 2003 and 2002, respectively. The amount of interest
income realized on loans held for sale is a function of the average balance of
loans held for sale, the period for which the loans are held and the prevailing
interest rates when the loans are made. The average balance of loans held for
sale was $133.3 million, $273.0 million and $206.0 million for the years ended
December 31, 2004, 2003 and 2002, respectively. On an annualized basis, our
yield on the portfolio of loans held for sale was 6.61%, 6.21% and 7.32% for the
years ended December 31, 2004, 2003 and 2002, respectively. This compares with
our cost of funds, as a percentage of average interest-bearing liabilities, of
1.64%, 1.88% and 2.85% for the years ended December 31, 2004, 2003 and 2002,
respectively.
We report mortgage loan servicing fees net of amortization of mortgage
servicing rights, interest shortfall and mortgage-backed security guarantee fee
expense in other noninterest income. Interest shortfall equals the difference
between the interest collected from a loan-servicing customer upon prepayment of
the loan and a full month's interest that is required to be remitted to the
security owner. Loan servicing fees, net, are included in other noninterest
income in the consolidated statements of operations. Net mortgage loan servicing
fees decreased other noninterest income by $1.5 million and $3.8 million for the
years ended December 31, 2004 and 2003, respectively, whereas such net fees
increased other noninterest income by $321,000 for the year ended December 31,
2002. Amortization of mortgage servicing rights was $6.5 million, $7.5 million
and $3.8 million for the years ended December 31, 2004, 2003 and 2002,
respectively. We attribute the decrease in net loan servicing fees in 2004 and
2003 primarily to increased amortization of mortgage servicing rights, resulting
from the high volumes of loan refinancings and payoffs associated with continued
low mortgage interest rates experienced in 2002 and 2003, a higher level of
interest shortfall in 2003, and increased unused commitment fees in 2004.
Our interest rate risk management policy provides certain hedging
parameters to reduce the interest rate risk exposure arising from changes in
loan prices from the time of commitment until the sale of the security or loan.
To reduce this exposure, we use forward commitments to sell fixed-rate
mortgage-backed securities at a specified date in the future. At December 31,
2004, 2003 and 2002, we had $35.3 million, $58.2 million and $234.6 million,
respectively, of loans held for sale and related commitments, net of committed
loan sales and estimated underwriting fallout, of which $34.0 million, $58.5
million and $245.0 million, respectively, were hedged through the use of such
forward commitments.
Investment Securities
We classify the securities within our investment portfolio as held to
maturity or available for sale. We do not engage in the trading of investment
securities. Our investment security portfolio consists primarily of securities
designated as available for sale. The investment security portfolio was $1.81
billion at December 31, 2004, compared to $1.05 billion and $1.15 billion at
December 31, 2003 and 2002, respectively. The significant increase in the
investment securities portfolio in 2004 is attributable to securities acquired
through acquisitions and funds provided by an increase in other borrowings,
primarily term reverse repurchase agreements, combined with the overall level of
loan demand within our market areas, which affects the amount of funds available
for investment.
Loans and Allowance for Loan Losses
Interest earned on our loan portfolio represents the principal source
of income for First Bank. Interest and fees on loans were 86.5%, 90.9% and 91.6%
of total interest income for the years ended December 31, 2004, 2003 and 2002,
respectively. We recognize interest and fees on loans as income using the
interest method of accounting. Loan origination fees are deferred and accreted
to interest income over the estimated life of the loans using the interest
method of accounting. The accrual of interest on loans is discontinued when it
appears that interest or principal may not be paid in a timely manner in the
normal course of business. We generally record payments received on nonaccrual
and impaired loans as principal reductions, and defer the recognition of
interest income on loans until all principal has been repaid or an improvement
in the condition of the loan has occurred which would warrant the resumption of
interest accruals.
Loans, net of unearned discount, represented 70.3% of total assets as
of December 31, 2004, compared to 75.0% of total assets at December 31, 2003.
Total loans, net of unearned discount, increased $809.9 million to $6.14 billion
at December 31, 2004 from $5.33 billion at December 31, 2003. Our acquisitions
of CIB, CCB and SBLS provided loans, net of unearned discount, of $683.3
million, $73.6 million and $24.0 million, respectively, or $780.9 million in
aggregate. In addition, we reduced our loans and leases by $83.2 million in 2004
from the sale of a portion of our commercial leasing portfolio in June and the
sale of certain nonperforming loans in November and December, resulting from
management's business decision to reduce the level of our nonperforming assets
through the sale of certain nonperforming loans. Exclusive of these acquisitions
and loan sales completed in 2004, our loans, net of unearned discount, increased
$112.2 million from internal growth in 2004. Total loans, net of unearned
discount, decreased $104.5 million to $5.33 billion for the year ended December
31, 2003. Exclusive of our acquisition of BSG in 2003, which provided loans, net
of unearned discount, of $43.7 million, loans, net of unearned discount,
decreased $148.2 million in 2003. The overall increase in loans, net of unearned
discount, in 2004 primarily results from:
>> an increase of $479.3 million in our real estate mortgage
portfolio, primarily attributable to internal growth, and our
acquisitions completed during 2004 which provided real estate
mortgage loans of $460.5 million, as well as management's
business strategy decision in mid-2003 to retain a portion of our
new residential mortgage loan production in our real estate
mortgage portfolio as a result of continued weak loan demand in
other sectors of our loan portfolio, as previously discussed, and
a home equity product line campaign that we held in mid-2004.
These increases were partially offset by a decrease associated
with the sale of certain nonperforming loans in the fourth
quarter of 2004, as previously discussed;
>> an increase of $254.5 million in our real estate construction and
development portfolio resulting from internal growth, seasonal
increases on existing and available credit lines and an $85.2
million increase associated with our acquisitions completed in
2004, partially offset by a slight decrease associated with the
sale of certain nonperforming loans in the fourth quarter of
2004, as previously discussed, and
>> an increase of $161.7 million in our commercial, financial and
agricultural portfolio, that we attribute to a $235.2 million
increase from our acquisitions completed during 2004, partially
offset by (a) a decline in our internal loan volumes resulting
from an anticipated amount of attrition associated with our
acquisitions completed during 2002 and 2003, (b) general runoff
of the balances within this portfolio, and (c) a $19.2 million
reduction related to two significant nonperforming commercial
credits, as further discussed below; partially offset by
>> a continued decline of $61.4 million in our lease financing
portfolio to $5.9 million at December 31, 2004. The decline
primarily resulted from the sale of a significant portion of our
commercial leasing portfolio, reducing the portfolio by
approximately $33.1 million to $9.6 million on June 30, 2004. The
remaining decline in the balance of this portfolio was consistent
with the discontinuation of our New Mexico based leasing
operation in 2002, the transfer of all responsibilities for the
existing portfolio to a new leasing staff in St. Louis, Missouri,
a change in our overall business strategy resulting in reduced
commercial leasing activities, and repayment of leases from
borrowers;
>> a decline of $12.7 million in loans held for sale resulting from
the timing of loan sales in the secondary mortgage market,
combined with management's business strategy decision in mid-2003
to retain a portion of the new residential mortgage loan
production in our portfolio, and an overall slowdown in loan
origination volumes initially experienced during the fourth
quarter of 2003 and continuing through 2004; and
>> a decline of $11.6 million in consumer and installment loans,
reflecting the continued decline of new non-real estate consumer
lending and the repayment of principal on our existing portfolio.
In our evaluation of acquisitions, it is anticipated that as we apply
our standards for credit structuring, underwriting, documentation and approval,
a portion of the existing borrowers will elect to refinance with another
financial institution, because: (a) there may be an aggressive effort by other
financial institutions to attract them; (b) they do not accept the changes
involved, or (c) they are unable to meet our credit requirements. In addition,
another portion of the portfolio may either enter our remedial collection
process to reduce undue credit exposure or improve problem loans, or may be
charged-off. The amount of this attrition will vary substantially among
acquisitions depending on the strength and discipline within the credit function
of the acquired institution; the magnitude of problems contained in the acquired
portfolio; the aggressiveness of competing institutions to attract business; and
the significance of the acquired institution to the overall banking market.
Typically, in acquisitions of institutions that have strong credit cultures
prior to their acquisitions and operate in relatively large markets, there is
relatively little attrition that occurs after the acquisition. However, in those
acquisitions in which the credit discipline has been weak, and particularly
those in small metropolitan or rural areas, we can experience substantially
greater attrition. Generally, this process occurs within approximately six to 12
months after completion of the acquisition.
During the five years ended December 31, 2004, total loans, net of
unearned discount, increased significantly from $4.00 billion at December 31,
1999 to $6.14 billion at December 31, 2004. Throughout this period, we have
substantially enhanced our capabilities for achieving and managing internal
growth. A key element of this process has been the expansion of our corporate
business development staff, which is responsible for the internal development
and management of both loan and deposit relationships with commercial customers.
While this process was occurring, in an attempt to achieve more diversification,
a higher level of interest yield and a reduction in interest rate risk within
our loan portfolio, we also focused on repositioning our portfolio. As the
corporate business development effort continued to originate a substantial
volume of new loans, substantially all of our conforming residential mortgage
loan production has been historically sold in the secondary mortgage market
until management's decision in 2003 to retain a portion of the new loan
production in our real estate mortgage portfolio to offset continued weak loan
demand in other sectors of our loan portfolio. We have also substantially
reduced our consumer lending by discontinuing the origination of indirect
automobile loans and selling our student loan and credit card loan portfolios.
This allowed us to fund part of the growth in corporate lending through
reductions in indirect automobile and other consumer-related loans.
In addition, our acquisitions have contributed to a substantial
increase in the portfolios of new loans. Typically, these acquired portfolios
contained significant loan problems, which we had anticipated and attempted to
consider in our acquisition pricing. As we resolved the asset quality issues,
the portfolios of the acquired entities tended to decline due to the elimination
of problem loans and because many of the resources that would otherwise be
directed toward generating new loans were concentrated on improving or
eliminating existing relationships. We continue to experience this trend as a
result of our acquisitions of CCB and CIB, completed in July and November 2004,
respectively, and expect the resolution of certain problem credits acquired from
CIB to continue in the near term.
The following table summarizes the components of changes in our loan
portfolio, net of unearned discount, for the five years ended December 31, 2004:
Increase (Decrease) For the Year Ended December 31,
----------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(dollars expressed in thousands)
Internal loan volume increase (decrease):
Commercial lending................................ $ 91,760 (22,211) (119,295) 174,568 360,410
Residential real estate lending (1) .............. 32,348 (103,573) 36,074 48,616 20,137
Consumer lending, net of unearned discount........ (11,900) (22,429) (44,060) (75,280) (64,606)
Loans and leases sold................................. (83,216) -- -- -- --
Loans provided by acquisitions........................ 780,901 43,700 151,000 508,700 440,000
---------- --------- --------- --------- ---------
Total increase (decrease)......................... $ 809,893 (104,513) 23,719 656,604 755,941
========== ========= ========= ========= =========
--------------------------------
(1) Includes loans held for sale, which decreased $12.7 million for the year ended December 31, 2004.
Our lending strategy emphasizes quality, growth and diversification.
Throughout our organization, we employ a common credit underwriting policy. Our
commercial lenders focus principally on small to middle-market companies.
Consumer lenders focus principally on residential loans, including home equity
loans, automobile financing and other consumer financing opportunities arising
out of our branch banking network.
Commercial, financial and agricultural loans include loans that are
made primarily based on the borrowers' general credit strength and ability to
generate cash flows for repayment from income sources even though such loans may
also be secured by real estate or other assets. Real estate construction and
development loans, primarily relating to residential properties and commercial
properties, represent financing secured by real estate under construction. Real
estate mortgage loans consist primarily of loans secured by single-family,
owner-occupied properties and various types of commercial properties on which
the income from the property is the intended source of repayment. Consumer and
installment loans are loans to individuals and consist primarily of loans
secured by automobiles. Loans held for sale are primarily fixed and adjustable
rate residential mortgage loans pending sale in the secondary mortgage market in
the form of a mortgage-backed security, or to various private third-party
investors.
The following table summarizes the composition of our loan portfolio by
major category and the percent of each category to the total portfolio as of the
dates presented:
December 31,
------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------------- --------------- -------------- ------------- -----------------
Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
(dollars expressed in thousands)
Commercial, financial
and agricultural............. $1,569,321 26.1% $1,407,626 27.1% $1,443,016 28.4% $1,532,875 29.5% $1,372,196 29.3%
Real estate construction
and development.............. 1,318,413 22.0 1,063,889 20.5 989,650 19.5 954,913 18.4 809,682 17.3
Real estate mortgage:
One-to-four-family
residential loans.......... 870,889 14.5 811,650 15.7 694,604 13.7 798,089 15.3 726,474 15.5
Multi-family residential
loans...................... 102,447 1.7 108,163 2.1 112,517 2.2 148,684 2.9 80,220 1.7
Commercial real estate
loans...................... 2,088,245 34.8 1,662,451 32.1 1,637,001 32.2 1,499,074 28.8 1,396,163 29.8
Lease financing.................. 5,911 0.1 67,282 1.3 126,738 2.5 148,971 2.8 124,088 2.7
Consumer and installment, net
of unearned discount......... 49,677 0.8 61,268 1.2 79,097 1.5 122,057 2.3 174,337 3.7
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total loans, excluding
loans held for sale... 6,004,903 100.0% 5,182,329 100.0% 5,082,623 100.0% 5,204,663 100.0% 4,683,160 100.0%
===== ===== ===== ===== =====
Loans held for sale.............. 133,065 145,746 349,965 204,206 69,105
---------- ---------- ---------- ---------- ----------
Total loans.............. $6,137,968 $5,328,075 $5,432,588 $5,408,869 $4,752,265
========== ========== ========== ========== ==========
Loans at December 31, 2004 mature as follows:
Over One Year
Through Five
Years Over Five Years
--------------------- ----------------
One Year Fixed Floating Fixed Floating
or Less Rate Rate Rate Rate Total
------- ---- ---- ---- ---- -----
(dollars expressed in thousands)
Commercial, financial and agricultural.................... $ 985,464 161,071 318,337 29,746 74,703 1,569,321
Real estate construction and development.................. 867,387 25,678 405,683 590 19,075 1,318,413
Real estate mortgage:
One-to-four family residential loans.................. 147,643 124,317 109,256 184,884 304,789 870,889
Multi-family residential loans........................ 11,838 25,536 49,647 397 15,029 102,447
Commercial real estate loans.......................... 514,802 527,275 685,642 107,480 253,046 2,088,245
Lease financing........................................... 611 5,300 -- -- -- 5,911
Consumer and installment, net of unearned discount........ 15,897 29,226 2,528 1,558 468 49,677
Loans held for sale....................................... 133,065 -- -- -- -- 133,065
---------- --------- --------- ------- ------- ---------
Total loans......................................... $2,676,707 898,403 1,571,093 324,655 667,110 6,137,968
========== ========= ========= ======= ======= =========
Nonperforming assets include nonaccrual loans, restructured loans and
other real estate. The following table presents the categories of nonperforming
assets and certain ratios as of the dates indicated:
December 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(dollars expressed in thousands)
Commercial, financial and agricultural:
Nonaccrual........................................ $ 10,147 26,876 15,787 17,141 21,424
Restructured terms................................ 4 -- -- -- 22
Real estate construction and development:
Nonaccrual........................................ 13,435 6,402 23,378 3,270 11,068
Real estate mortgage:
One-to-four family residential loans:
Nonaccrual...................................... 9,881 21,611 14,833 20,780 5,645
Restructured terms.............................. 11 13 15 20 28
Multi-family residential loans:
Nonaccrual...................................... 434 804 772 476 593
Restructured terms.............................. -- -- -- -- 908
Commercial real estate loans:
Nonaccrual...................................... 50,671 13,994 8,890 20,642 10,286
Restructured terms.............................. -- -- 1,907 1,993 2,016
Lease financing:
Nonaccrual........................................ 907 5,328 8,723 2,185 1,013
Consumer and installment:
Nonaccrual........................................ 310 336 860 794 155
Restructured terms................................ -- -- -- 7 8
---------- --------- --------- --------- ---------
Total nonperforming loans................ 85,800 75,364 75,165 67,308 53,166
Other real estate................................... 4,030 11,130 7,609 4,316 2,487
---------- --------- --------- --------- ---------
Total nonperforming assets............... $ 89,830 86,494 82,774 71,624 55,653
========== ========= ========= ========= =========
Loans, net of unearned discount..................... $6,137,968 5,328,075 5,432,588 5,408,869 4,752,265
========== ========= ========= ========= =========
Loans past due 90 days or more and still accruing... $ 28,689 2,776 4,635 15,156 3,009
========== ========= ========= ========= =========
Ratio of:
Allowance for loan losses to loans................ 2.46% 2.19% 1.83% 1.80% 1.72%
Nonperforming loans to loans...................... 1.40 1.41 1.38 1.24 1.12
Allowance for loan losses to
nonperforming loans............................. 175.65 154.52 132.29 144.36 153.47
Nonperforming assets to loans and
other real estate............................... 1.46 1.62 1.52 1.32 1.17
========== ========= ========= ========== =========
Nonperforming loans, consisting of loans on nonaccrual status and
certain restructured loans, were $85.8 million at December 31, 2004, in
comparison to $75.4 million and $75.2 million at December 31, 2003 and 2002,
respectively. As further discussed under "--Lending Activities," the increase in
nonperforming loans in 2004 is primarily associated with our 2004 acquisitions,
partially offset by a substantial improvement in our existing portfolio of
nonperforming assets as a result of significant loan payoffs, the liquidation of
foreclosed property, the sale of certain nonperforming loans and the sale of a
portion of our commercial leasing portfolio. The increase in nonperforming loans
in 2003 and 2002 is primarily attributable to the current economic conditions as
previously discussed, additional problems identified in two acquired loan
portfolios and continuing deterioration in our commercial leasing portfolio,
particularly the segment of the portfolio related to the airline industry. Other
real estate owned was $4.0 million, $11.1 million and $7.6 million at December
31, 2004, 2003 and 2002, respectively. Nonperforming assets, consisting of
nonperforming loans and other real estate owned, were $89.8 million, $86.5
million and $82.8 million for the years ended December 31, 2004, 2003 and 2002,
respectively. The 3.86% net increase in nonperforming assets during 2004
reflects the following significant changes:
>> Our recent acquisition of CIB on November 30, 2004, which
resulted in a significant increase in nonperforming assets,
primarily attributable to an increase in nonaccrual loans of
$60.3 million and an increase in other real estate owned of $1.9
million. At December 31, 2004, nonperforming assets related to
our CIB acquisition included $50.5 million of nonaccrual loans
and $1.9 million of other real estate owned;
>> Our acquisition of SBLS on August 31, 2004, which resulted in an
increase in nonperforming assets of $8.8 million. At December 31,
2004, nonperforming assets related to this acquisition primarily
included $6.2 million of nonaccrual loans. SBLS has a significant
concentration of assets associated with the shrimping vessels
industry, which are reflected in both loans and other repossessed
assets. Although we adjusted our asset purchase price to reflect
this concentration, asset quality issues will likely continue in
the near future as a result of this industry concentration and
its currently depressed status; and
>> Our acquisition of CCB on July 30, 2004, which resulted in an
increase in nonperforming assets of $2.5 million. At December 31,
2004, nonperforming assets related to this acquisition included
$1.9 million of nonaccrual loans; partially offset by
>> The sale of certain problem loans in the fourth quarter of 2004
totaling approximately $50.2 million, including approximately
$19.1 million of loans that were on nonaccrual status.
Additionally, at December 31, 2004, we had $12.9 million of loans
classified as loans held for sale that we acquired from CIB and
are being actively marketed for sale through an independent
third-party broker;
>> On June 30, 2004, we completed the sale of a significant portion
of our commercial leasing portfolio, reducing the portfolio by
$33.1 million. The level of nonperforming loans related to the
remaining lease portfolio was $907,000 at December 31, 2004,
compared to $5.3 million at December 31, 2003;
>> In March 2004, we placed a $13.9 million commercial credit
relationship in the southern California region on nonaccrual
status, representing approximately 15.9% of nonperforming loans
at March 31, 2004. In April 2004, we recorded a $3.9 million
charge-off on this credit relationship as a result of workout
negotiations with the borrower and in May 2004, the remaining net
balance of $10.0 million was repaid in cash;
>> In February 2004, we sold a residential and recreational
development property that had been held as other real estate
since January 2003. Prior to foreclosure, the real estate
construction and development loan had been on nonaccrual status
due to significant financial difficulties, inadequate project
financing, project delays and weak project management. At the
time of sale, the property had a carrying value of $9.2 million,
representing approximately 83.0% of our total other real estate
assets. We recorded a gain, before applicable income taxes, of
approximately $2.7 million on the sale of this property; and
>> In January 2004, we funded a $5.3 million letter of credit
associated with a commercial credit relationship in the St. Louis
region and subsequently recorded a $750,000 charge-off on this
credit relationship and placed the remaining balance on
nonaccrual status, bringing the total commercial credit
relationship on nonaccrual status to approximately $7.3 million.
In April 2004, we sold the entire $7.3 million commercial credit
relationship to an independent third party for $9.6 million and
recorded a $2.3 million recovery of previously recorded
charge-offs.
Loans past due 90 days or more and still accruing increased to $28.7
million at December 31, 2004, from $2.8 million and $4.6 million at December 31,
2003 and 2002, respectively, resulting almost solely from our acquisitions of
CIB and CCB, which comprised $27.2 million of our loans past due 90 days or more
and still accruing at December 31, 2004. A significant portion of these loans
were past due as to contractual maturity and pending renewal at December 31,
2004; however, the majority of the loan payments were current and in accordance
with the contractual terms of the underlying credit agreements. Our allowance
for loan losses as a percentage of loans, net of unearned discount, was 2.46%,
2.19% and 1.83% at December 31, 2004, 2003 and 2002, respectively. Our allowance
for loan losses as a percentage of nonperforming loans increased to 175.65% at
December 31, 2004, from 154.52% and 132.29% at December 31, 2003 and 2002,
respectively. The allowance for loan losses was $150.7 million at December 31,
2004, compared to $116.5 million and $99.4 million at December 31, 2003 and
2002, respectively. As reflected in the table below, a $1.0 million specific
reserve was established in December 2003 for the estimated loss associated with
a $5.3 million unfunded letter of credit. The letter of credit was subsequently
funded as a loan in January 2004, and the related $1.0 million specific reserve
was transferred to the allowance for loan losses. In addition, on June 30, 2004,
we transferred approximately $1.5 million from the allowance for loan losses to
a contingent liability related to recourse obligations associated with the sale
of certain leases in our commercial leasing portfolio, as further described in
Note 2 and Note 24 to our Consolidated Financial Statements. As further
described in the table below and under "--Business - Lending Activities," the
allowance for loan losses also reflects an increase in 2004 of $33.8 million of
balances acquired in conjunction with our acquisitions, including a $15.7
million increase to reflect the application of our loss factors to CIB's loan
portfolio risk ratings, reflecting our strategies for more rapid resolution of
certain acquired classified and nonperforming assets. This adjustment was
partially offset by our reclassification, at the time of acquisition, of CIB's
specific reserves of $21.7 million as a reduction of the basis of the individual
loan relationships (which had no impact on our net loan balances), and the
transfer of $18.3 million of nonperforming loans to loans held for sale,
resulting in a corresponding charge of $5.4 million to the allowance for loan
losses to reduce the loans held for sale to their estimated fair value, net of
broker costs, that is expected to be realized at the time of sale.
Loan charge-offs were $50.6 million, $55.8 million and $70.5 million
for the years ended December 31, 2004, 2003 and 2002, respectively. Loan
charge-offs, net of recoveries, decreased to $24.8 million for 2004, compared to
$32.7 million for 2003 and $54.6 million for 2002. Net loan charge-offs for 2004
reflect $2.5 million in net charge-offs related to certain nonperforming and
problem loans that were sold in the fourth quarter of 2004. In addition, net
loan recoveries associated with our commercial leasing portfolio were $342,000
in 2004, compared to net loan charge-offs of $14.4 million in 2003. We continue
to closely monitor our loan and leasing portfolios and address the ongoing
challenges posed by the current economic environment, including reduced loan
demand within our markets and generally low prevailing interest rates. We
consider this in our overall assessment of the adequacy of the allowance for
loan losses. While we have made substantial improvement in reducing our existing
portfolio of problem assets in 2004, nonperforming assets continue to remain at
somewhat elevated levels that initially began in late 2001 with the decline in
economic conditions. Furthermore, the level of nonperforming assets from our
recent acquisitions have significantly contributed to increased levels of
problem loans and past due loans, and we anticipate the level of nonperforming
and delinquent loans to continue in the near term as we work to resolve the
underlying issues associated with the nonperforming assets of CCB and CIB.
As of December 31, 2004, 2003, 2002, 2001 and 2000, $161.8 million,
$109.4 million, $98.2 million, $123.2 million and $50.2 million, respectively,
of loans not included in the table above were identified by management as having
potential credit problems (problem loans). The significant increase in the level
of problem loans for the year ended December 31, 2004 is primarily attributable
to our acquisitions of CCB and CIB, in addition to internal portfolio growth and
economic conditions within the markets in which we operate. The significant
level of problem loans for the years ended December 31, 2003 and 2002 are
primarily due to continuing deterioration of our commercial leasing portfolio,
portfolio growth (both internal and external), the gradual slow down and
uncertainties that occurred in the economy in the markets in which we operate,
as well as residual problem loans stemming from our acquisitions of Millenium
Bank and Union, completed in December 2000 and 2001, respectively,. As
previously discussed under "--Lending Activities," certain acquired loan
portfolios exhibited varying degrees of distress prior to their acquisition.
While these problems had been identified and considered in our acquisition
pricing, the acquisitions led to an increase in nonperforming assets and problem
loans. Management continues its efforts to reduce nonperforming and problem
loans and re-define overall strategy and business plans with respect to our loan
portfolio as deemed necessary.
Our credit management policies and procedures focus on identifying,
measuring and controlling credit exposure. These procedures employ a
lender-initiated system of rating credits, which is ratified in the loan
approval process and subsequently tested in internal credit reviews, external
audits and regulatory bank examinations. The system requires rating all loans at
the time they are originated, except for homogeneous categories of loans, such
as residential real estate mortgage loans and consumer loans. These homogeneous
loans are assigned an initial rating based on our experience with each type of
loan. We adjust these ratings based on payment experience subsequent to their
origination.
We include adversely rated credits, including loans requiring close
monitoring which would not normally be considered classified credits by
regulators, on our monthly loan watch list. Loans may be added to our watch list
for reasons that are temporary and correctable, such as the absence of current
financial statements of the borrower or a deficiency in loan documentation.
Other loans are added whenever any adverse circumstance is detected which might
affect the borrower's ability to meet the terms of the loan. The delinquency of
a scheduled loan payment, deterioration in the borrower's financial condition
identified in a review of periodic financial statements, a decrease in the value
of the collateral securing the loan, or a change in the economic environment
within which the borrower operates could initiate the addition of a loan to our
watch list. Loans on our watch list require periodic detailed loan status
reports prepared by the responsible officer, which are discussed in formal
meetings with credit review and credit administration staff members. Upgrades
and downgrades of loan risk ratings may be initiated by the responsible loan
officer. However, upgrades of risk ratings associated with significant credit
relationships and/or problem credit relationships may only be made with the
concurrence of appropriate senior or regional credit officers.
Each month, the credit administration department provides management
with detailed lists of loans on the watch list and summaries of the entire loan
portfolio by risk rating. These are coupled with analyses of changes in the risk
profiles of the portfolio, changes in past-due and nonperforming loans and
changes in watch list and classified loans over time. In this manner, we
continually monitor the overall increases or decreases in the levels of risk in
the portfolio. Factors are applied to the loan portfolio for each category of
loan risk to determine acceptable levels of the allowance for loan losses. In
addition, a quarterly evaluation of each lending unit is performed based on
certain factors, such as lending personnel experience, recent credit reviews,
loan concentrations and other factors. Based on this evaluation, additional
provisions may be required due to the perceived risk of particular portfolios.
The calculated allowance required for the portfolio is then compared to the
actual allowance balance to determine the provisions necessary to maintain the
allowance at appropriate levels. In addition, management exercises a certain
degree of judgment in its analysis of the overall adequacy of the allowance for
losses. In its analysis, management considers the change in the portfolio,
including growth, composition, the ratio of net loans to total assets, and the
economic conditions of the regions in which we operate. Based on this
quantitative and qualitative analysis, provisions are made to the allowance for
loan losses. Such provisions are reflected in our consolidated statements of
income.
The allocation of the allowance for loan losses by loan category is a
result of the application of our risk rating system augmented by qualitative
analysis. The same procedures we employ to determine the overall risk in our
loan portfolio and our requirements for the allowance for loan losses determine
the distribution of the allowance by loan category. Consequently, the
distribution of the allowance will change from period to period due to (a)
changes in the aggregate loan balances by loan category; (b) changes in the
identified risk in each loan in the portfolio over time, excluding those
homogeneous categories of loans such as consumer and installment loans and
residential real estate loans for which risk ratings are changed based on
payment performance; and (c) changes in loan concentrations by borrower.
Since the methods of calculating the allowance requirements have not
significantly changed over time, the reallocations among different categories of
loans that appear between periods are the result of the redistribution of the
individual loans that comprise the aggregate portfolio due to the factors listed
above. However, the perception of risk with respect to particular loans within
the portfolio will change over time as a result of the characteristics and
performance of those loans, as well as the overall economic trends and market
trends, including our actual and expected trends in nonperforming loans.
Consequently, while there are no specific allocations of the allowance resulting
from economic or market conditions or actual or expected trends in nonperforming
loans, these factors are considered in the initial assignment of risk ratings to
loans and in subsequent changes to those risk ratings.
The following table is a summary of loan loss experience for the five
years ended December 31, 2004:
As of or For the Years Ended December 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(dollars expressed in thousands)
Allowance for loan losses, beginning of year......... $ 116,451 99,439 97,164 81,592 68,611
Acquired allowances for loan losses.................. 33,752 757 1,366 14,046 6,062
Other adjustments (1) (2)............................ (479) -- -- -- --
---------- --------- --------- --------- ---------
149,724 100,196 98,530 95,638 74,673
---------- --------- --------- --------- ---------
Loans charged-off:
Commercial, financial and agricultural........... (26,550) (23,476) (45,697) (21,085) (9,690)
Real estate construction and development......... (3,481) (5,825) (7,778) (108) (2,229)
Real estate mortgage:
One-to-four family residential loans.......... (4,891) (4,167) (2,697) (802) (452)
Multi-family residential loans................ (139) (87) (109) (4) --
Commercial real estate loans.................. (9,995) (1,708) (2,747) (1,012) (1,761)
Lease financing.................................. (4,536) (19,160) (8,426) (6,749) (78)
Consumer and installment......................... (1,051) (1,350) (3,070) (1,693) (2,840)
---------- --------- --------- --------- ---------
Total...................................... (50,643) (55,773) (70,524) (31,453) (17,050)
---------- --------- --------- --------- ---------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural........... 14,983 10,147 8,331 4,015 5,556
Real estate construction and development......... 748 1,659 631 1,171 319
Real estate mortgage:
One-to-four family residential loans.......... 1,597 781 628 755 536
Multi-family residential loans................ 27 99 792 15 93
Commercial real estate loans.................. 2,659 4,174 3,491 1,332 1,308
Lease financing.................................. 4,878 4,805 494 435 65
Consumer and installment......................... 984 1,363 1,566 1,746 1,965
---------- --------- --------- --------- ---------
Total...................................... 25,876 23,028 15,933 9,469 9,842
---------- --------- --------- --------- ---------
Net loans charged-off...................... (24,767) (32,745) (54,591) (21,984) (7,208)
---------- --------- --------- --------- ---------
Provision for loan losses............................ 25,750 49,000 55,500 23,510 14,127
---------- --------- --------- --------- ---------
Allowance for loan losses, end of year............... $ 150,707 116,451 99,439 97,164 81,592
========== ========= ========= ========= =========
Loans outstanding, net of unearned discount:
Average.......................................... $5,509,054 5,385,363 5,424,508 4,884,299 4,290,958
End of year...................................... 6,137,968 5,328,075 5,432,588 5,408,869 4,752,265
End of year, excluding loans held for sale....... 6,004,903 5,182,329 5,082,623 5,204,663 4,683,160
========== ========= ========= ========= =========
Ratio of allowance for loan losses
to loans outstanding:
Average.......................................... 2.74% 2.16% 1.83% 1.99% 1.90%
End of year...................................... 2.46 2.19 1.83 1.80 1.72
End of year, excluding loans held for sale....... 2.51 2.25 1.96 1.87 1.74
Ratio of net charge-offs to
average loans outstanding.......................... 0.45 0.61 1.01 0.45 0.17
Ratio of current year recoveries to
preceding year's total charge-offs............... 46.40 32.65 50.66 55.54 55.54
========== ========= ========= ========= =========
- ---------------
(1) In December 2003, we established a $1.0 million specific reserve for estimated losses on a $5.3 million letter
of credit that was recorded in accrued and other liabilities in the consolidated balance sheets. On January 5,
2004, the letter of credit was fully funded as a loan and the related $1.0 million specific reserve was
reclassified from accrued and other liabilities to the allowance for loan losses.
(2) On June 30, 2004, we reclassified $1.5 million from the allowance for loan losses to accrued and other
liabilities to establish a specific reserve associated with the commercial leasing portfolio sale and related
recourse obligations for certain leases sold.
The following table is a summary of the allocation of the allowance for
loan losses for the five years ended December 31, 2004:
2004 2003 2002 2001 2000
--------------- ---------------- --------------- ---------------- ---------------
Percent Percent Percent Percent Percent
of of of of of
Category Category Category Category Category
to to to to to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(dollars expressed in thousands)
Commercial, financial
and agricultural.................. $ 46,195 25.57% $ 37,142 26.42% $34,915 26.56% $40,161 28.34% $32,130 28.87%
Real estate construction
and development................... 38,525 21.48 26,782 19.97 22,667 18.22 21,598 17.65 14,667 17.04
Real estate mortgage:
One-to-four family
residential loans................ 8,466 14.19 9,684 15.23 7,913 12.79 5,349 14.76 4,334 15.29
Multi-family residential loans.... 20 1.67 186 2.03 32 2.07 81 2.75 12 1.69
Commercial real estate loans...... 55,922 34.01 36,632 31.20 28,477 30.13 25,167 27.71 20,345 29.38
Lease financing..................... 628 0.10 4,830 1.26 3,649 2.33 3,062 2.75 1,114 2.61
Consumer and installment............ 617 0.81 668 1.15 703 1.46 937 2.26 2,028 3.67
Loans held for sale................. 334 2.17 527 2.74 1,083 6.44 809 3.78 222 1.45
Unallocated (1)..................... -- -- -- -- -- -- -- -- 6,740 --
-------- ------ -------- ------ ------- ------ ------- ------ ------- ------
Total.......................... $150,707 100.00% $116,451 100.00% $99,439 100.00% $97,164 100.00% $81,592 100.00%
======== ====== ======== ====== ======= ====== ======= ====== ======= ======
- ----------------------
(1) During 2001, we reviewed our practice of maintaining unallocated reserves in light of continuing refinement in our loss
estimation processes. We concluded the use of unallocated reserves would be discontinued. Consequently, all reserves
were aligned with their respective portfolios.
Deposits
Deposits are the primary source of funds for First Bank. Our deposits
consist principally of core deposits from our local market areas, including
individual and corporate customers.
The following table sets forth the distribution of our average deposit
accounts for the years indicated and the weighted average interest rates on each
category of deposits:
Year Ended December 31,
-------------------------------------------------------------------------------------
2004 2003 2002
-------------------------- -------------------------- ----------------------------
Percent Percent Percent
of of of
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
------ -------- ---- ------ -------- ---- ------ -------- ----
(dollars expressed in thousands)
Noninterest-bearing
demand deposits.................. $1,100,072 17.83% --% $1,007,400 16.64% --% $ 912,915 15.33% --%
Interest-bearing demand deposits... 856,765 13.89 0.41 852,104 14.08 0.64 755,879 12.69 1.00
Savings deposits................... 2,175,425 35.27 0.93 2,147,573 35.47 1.09 1,991,510 33.44 1.79
Time deposits ..................... 2,036,323 33.01 2.43 2,046,741 33.81 2.65 2,295,431 38.54 3.71
---------- ------ ==== ---------- ------ ==== ---------- ------ ====
Total average deposits....... $6,168,585 100.00% $6,053,818 100.00% $5,955,735 100.00%
========== ====== ========== ====== ========== ======
Capital and Dividends
Historically, we have accumulated capital to support our acquisitions
by retaining most of our earnings. We pay relatively small dividends on our
Class A convertible, adjustable rate preferred stock and our Class B adjustable
rate preferred stock, totaling $786,000 for the years ended December 31, 2004,
2003 and 2002.
Management believes as of December 31, 2004 and 2003, First Bank and we
were "well capitalized," as defined in regulations adopted pursuant to the
Federal Deposit Insurance Corporation Improvement Act of 1991.
We have formed nine statutory and business trusts, which were created
for the sole purpose of issuing trust preferred securities. As further described
in Note 12 to our Consolidated Financial Statements, the sole assets of the
statutory and business trusts are our subordinated debentures. Initially, the
trusts served as financing subsidiaries, however, as discussed in Note 1 to our
Consolidated Financial Statements, on December 31, 2003, we implemented
Financial Accounting Standards Board, or FASB, Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,
which resulted in the deconsolidation of these financing subsidiaries.
Consequently, the trusts now serve as affiliated statutory and business trusts.
The implementation of this Interpretation had no material effect on our
consolidated financial position or results of operations.
A summary of the outstanding trust preferred securities issued by our
affiliated statutory and business trusts, and our related subordinated
debentures issued to the respective trusts in conjunction with the trust
preferred securities offerings, is as follows:
Preferred Subordinated
Name of Trust Date Formed Type of Offering Securities Debentures
------------- ----------- ---------------- ---------- ----------
First Preferred Capital Trust II October 2000 Publicly Underwritten 57,500,000 59,278,375
First Preferred Capital Trust III November 2001 Publicly Underwritten 55,200,000 56,907,250
First Bank Capital Trust April 2002 Private Placement 25,000,000 25,774,000
First Bank Statutory Trust March 2003 Private Placement 25,000,000 25,774,000
First Preferred Capital Trust IV January 2003 Publicly Underwritten 46,000,000 47,422,700
First Bank Statutory Trust II September 2004 Private Placement 20,000,000 20,619,000
First Bank Statutory Trust III November 2004 Private Placement 40,000,000 41,238,000
For regulatory reporting purposes, the trust preferred securities are
eligible for inclusion, subject to certain limitations, in our Tier 1 capital.
Because of these limitations, as of December 31, 2004, $67.8 million of the
trust preferred securities were not includable in our Tier 1 capital, although
this amount was included in our total risk-based capital.
Liquidity
Our liquidity is the ability to maintain a cash flow that is adequate
to fund operations, service debt obligations and meet obligations and other
commitments on a timely basis. We receive funds for liquidity from customer
deposits, loan payments, maturities of loans and investments, sales of
investments and earnings. In addition, we may avail ourselves of other sources
of funds by issuing certificates of deposit in denominations of $100,000 or
more, borrowing federal funds, selling securities under agreements to repurchase
and utilizing borrowings from the Federal Home Loan Banks and other borrowings,
including our revolving credit line. The aggregate funds acquired from these
sources were $1.42 billion and $726.9 million at December 31, 2004 and 2003,
respectively.
The following table presents the maturity structure of these other
sources of funds, which consists of certificates of deposit of $100,000 or more
and other borrowings, including our note payable, at December 31, 2004:
Certificates of Deposit Other
of $100,000 or More Borrowings Total
------------------- ---------- -----
(dollars expressed in thousands)
Three months or less.................................... $218,909 215,106 434,015
Over three months through six months.................... 107,883 -- 107,883
Over six months through twelve months................... 183,894 15,144 199,038
Over twelve months...................................... 296,534 379,500 676,034
-------- -------- ---------
Total.............................................. $807,220 609,750 1,416,970
======== ======== =========
In addition to these sources of funds, First Bank has established a
borrowing relationship with the Federal Reserve Bank of St. Louis. This
borrowing relationship, which is secured by commercial loans, provides an
additional liquidity facility that may be utilized for contingency purposes. At
December 31, 2004 and 2003, First Bank's borrowing capacity under the agreement
was approximately $778.7 million and $909.3 million, respectively. In addition,
First Bank's borrowing capacity through its relationship with the Federal Home
Loan Bank was approximately $505.2 million and $449.5 million at December 31,
2004 and 2003, respectively. Exclusive of the Federal Home Loan Bank advances
outstanding of $35.6 million and $7.0 million at December 31, 2004 and 2003,
respectively, which represent advances assumed in conjunction with various
acquisitions, First Bank had no amounts outstanding under its borrowing
arrangement with the Federal Home Loan Bank at December 31, 2004 and 2003.
In addition to our owned banking facilities, we have entered into
long-term leasing arrangements to support our ongoing activities. The required
payments under such commitments and other obligations at December 31, 2004 are
as follows:
Less Than 1-3 3-5 Over
1 Year Years Years 5 Years Total
--------- ----- ----- ------- -----
(dollars expressed in thousands)
Operating leases........................ $ 10,024 15,467 10,702 18,395 54,588
Certificates of deposit................. 1,761,966 855,850 169,050 45,309 2,832,175
Other borrowings........................ 215,250 356,000 12,500 11,000 594,750
Note payable............................ 15,000 -- -- -- 15,000
Subordinated debentures................. -- -- -- 273,300 273,300
Other contractual obligations........... 2,422 366 126 26 2,940
---------- --------- ------- ------- ---------
Total.............................. $2,004,662 1,227,683 192,378 348,030 3,772,753
========== ========= ======= ======= =========
Management believes the available liquidity and operating results of
First Bank will be sufficient to provide funds for growth and to permit the
distribution of dividends to us sufficient to meet our operating and debt
service requirements, both on a short-term and long-term basis, and to pay the
interest on the subordinated debentures that we issued to our affiliated
statutory and business financing trusts.
Critical Accounting Policies
Our financial condition and results of operations presented in our
Consolidated Financial Statements, accompanying notes to our Consolidated
Financial Statements, selected consolidated and other financial data appearing
elsewhere in this report, and management's discussion and analysis of financial
condition and results of operations are, to a large degree, dependent upon our
accounting policies. The selection and application of our accounting policies
involve judgments, estimates and uncertainties that are susceptible to change.
We have identified the following accounting policies that we believe
are the most critical to the understanding of our financial condition and
results of operations. These critical accounting policies require management's
most difficult, subjective and complex judgments about matters that are
inherently uncertain. In the event that different assumptions or conditions were
to prevail, and depending upon the severity of such changes, the possibility of
a materially different financial condition and/or results of operations could be
a reasonable likelihood. The impact and any associated risks related to our
critical accounting policies on our business operations is discussed throughout
"--Management's Discussion and Analysis of Financial Condition and Results of
Operations," where such policies affect our reported and expected financial
results. For a detailed discussion on the application of these and other
accounting policies, see Note 1 to our Consolidated Financial Statements
appearing elsewhere in this report.
Loans and Allowance for Loan Losses. We maintain an allowance for loan
losses at a level we consider adequate to provide for probable losses in our
loan portfolio. The determination of our allowance for loan losses requires
management to make significant judgments and estimates based upon a periodic
analysis of our loans held for portfolio and held for sale considering, among
other factors, current economic conditions, loan portfolio composition, past
loan loss experience, independent appraisals, the fair value of underlying loan
collateral, our customers' ability to repay their loans and selected key
financial ratios. If actual events prove the estimates and assumptions we used
in determining our allowance for loan losses were incorrect, we may need to make
additional provisions for loan losses. See further discussion under "--Loans and
Allowance for Loan Losses" and Note 4 to our Consolidated Financial Statements
appearing elsewhere in this report.
Derivative Financial Instruments. We utilize derivative financial
instruments to assist in our management of interest rate sensitivity by
modifying the repricing, maturity and option characteristics of certain assets
and liabilities. The judgments and assumptions that are most critical to the
application of this critical accounting policy are those affecting the
estimation of fair value and hedge effectiveness. Fair value is based on quoted
market prices where available. If quoted market prices are unavailable, fair
value is based on quoted market prices of comparable derivative instruments.
Factors that affect hedge effectiveness include the initial selection of the
derivative that will be used as a hedge and how well changes in its cash flow or
fair value have correlated and are expected to correlate with changes in the
cash flow or fair value of the underlying hedged asset or liability. Past
correlation is easy to demonstrate, but expected correlation depends upon
projections and trends that may not always hold true within acceptable limits.
Changes in assumptions and conditions could result in greater than expected
inefficiencies that, if large enough, could reduce or eliminate the economic
benefits anticipated when the hedges were established and/or invalidate
continuation of hedge accounting. Greater inefficiency and/or discontinuation of
hedge accounting are likely to result in increased volatility to our reported
earnings. For cash flow hedges, this would result as more or all of the change
in the fair value of the affected derivative being reported in noninterest
income. For fair value hedges, there may be some impact on our reported earnings
as the change in the fair value of the affected derivative may not be offset by
changes in the fair value of the underlying hedged asset or liability. See
further discussion under "--Effects of New Accounting Standards," "--Interest
Rate Risk Management" and Note 5 to our Consolidated Financial Statements
appearing elsewhere in this report.
Deferred Tax Assets. We recognize deferred tax assets and deferred tax
liabilities for the estimated future tax effects of temporary differences, net
operating loss carryforwards and tax credits. We recognize deferred tax assets
subject to management's judgment based upon available evidence that realization
is more likely than not. Our deferred tax assets are reduced, if necessary, by a
deferred tax asset valuation allowance. In the event that we determine we would
not be able to realize all or part of our net deferred tax assets in the future,
we would need to adjust the recorded value of our deferred tax assets, which
would result in a direct charge to our provision for income taxes in the period
in which such determination is made. See further discussion under "--Comparison
of Results of Operations for 2004 and 2003 - Provision for Income Taxes" and
Note 13 to our Consolidated Financial Statements appearing elsewhere in this
report.
Business Combinations. We emphasize acquiring other financial
institutions as one means of achieving our growth objectives. The determination
of the fair value of the assets and liabilities acquired in these transactions
as well as the returns on investment that may be achieved requires management to
make significant judgments and estimates based upon detailed analyses of the
existing and future economic value of such assets and liabilities and/or the
related income streams, including the resulting intangible assets. If actual
events prove the estimates and assumptions we used in determining the fair
values of the acquired assets and liabilities or the projected income streams
were incorrect, we may need to make additional adjustments to the recorded
values of such assets and liabilities, which could result in increased
volatility to our reported earnings. In addition, we may need to make additional
adjustments to the recorded value of our intangible assets, which directly
impacts our regulatory capital levels. See further discussion under
"--Acquisitions" and Note 2, Note 8 and Note 21 to our Consolidated Financial
Statements appearing elsewhere in this report.
Effects of New Accounting Standards
In November 2003, the Emerging Issues Task Force, or EITF, reached a
consensus on certain disclosure requirements under EITF Issue No 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. The new disclosure requirements apply to investment in debt and
marketable equity securities that are accounted under SFAS No. 115, Accounting
for Certain Investments in Debt and Equity Securities, and SFAS No. 124,
Accounting for Certain Investments Held by Not-for-Profit Organizations.
Effective for fiscal years ending after December 15, 2003, companies are
required to disclose information about debt or marketable equity securities with
market values below carrying values. We adopted the disclosure requirements of
EITF Issue No. 03-1, which are included in Note 3 to our Consolidated Financial
Statements. In March 2004, the EITF came to a consensus regarding EITF 03-1.
Securities in scope are those subject to SFAS 115 and SFAS 124. The EITF adopted
a three-step model that requires management to determine if impairment exists,
decide whether it is other than temporary, and record other-than-temporary
losses in earnings. In September 2004, the FASB approved issuing a Staff
Position to delay the requirement to record impairment losses under EITF 03-1,
but broadened the scope to include additional types of securities. As proposed,
the delay would have applied only to those debt securities described in
paragraph 16 of EITF 03-1, the Consensus that provides guidance for determining
whether an investment's impairment is other than temporary and should be
recognized in income. The approved delay will apply to all securities within the
scope of EITF 03-1 and is expected to end when new guidance is issued and comes
into effect.
In December 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, a
revision to FASB Interpretation No. 46, Consolidation of Variable Interest
Entities issued in January 2003. This Interpretation is intended to achieve more
consistent application of consolidation policies to variable interest entities
and, thus to improve comparability between enterprises engaged in similar
activities even if some of those activities are conducted through variable
interest entities. The provisions of this Interpretation are effective for
financial statements issued for fiscal years ending after December 15, 2003. We
have several statutory and business trusts that were formed for the sole purpose
of issuing trust preferred securities. As further described in Note 1 and Note
12 to our Consolidated Financial Statements appearing elsewhere in this report,
on December 31, 2003, we implemented FASB Interpretation No. 46, as amended,
which resulted in the deconsolidation of our all of our statutory and business
trusts. The implementation of this Interpretation had no material effect on our
consolidated financial position or results of operations. Furthermore, in March
2005, the Board of Governors of the Federal Reserve System issued a final rule
instructing bank holding companies to continue to include the trust preferred
securities in their Tier I capital for regulatory capital purposes, subject to
stricter quantitative and qualitative limits. As discussed in Note 21 and Note
25 to our Consolidated Financial Statements, we have evaluated the impact of the
final rule on our financial condition and results of operations, and determined
the implementation of the final rule, as adopted, will reduce our bank holding
company's Tier 1 regulatory capital ratios, however the overall reduction will
not result in a situation where we would fall below the well capitalized
thresholds under the regulatory framework for prompt corrective action.
In December 2003, the Accounting Standards Executive Committee, or
AcSEC, issued SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired
in a Transfer, effective for loans acquired in fiscal years beginning after
December 15, 2004. The scope of SOP 03-3 applies to problem loans that have been
acquired, either individually in a portfolio, or in an acquisition. These loans
must have evidence of credit deterioration and the purchaser must not expect to
collect contractual cash flows. SOP 03-3 updates Practice Bulletin No. 6,
Amortization of Discounts on Certain Acquired Loans, for more recently issued
literature, including FASB Statements No. 114, Accounting by Creditors for
Impairment of a Loan; No. 115, Accounting for Certain Investments in Debt and
Equity Securities; and No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. Additionally, it addresses
FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated
with Originating or Acquiring Loans and Initial Direct Costs of Leases, which
requires that discounts be recognized as an adjustment of yield over a loan's
life. SOP 03-3 states that an institution may no longer display discounts on
purchased loans within the scope of SOP 03-3 on the balance sheet and may not
carry over the allowance for loan losses. For those loans within the scope of
SOP 03-3, this statement clarifies that a buyer cannot carry over the seller's
allowance for loan losses for the acquisition of loans with credit
deterioration. Loans acquired with evidence of deterioration in credit quality
since origination will need to be accounted for under a new method using an
income recognition model. This prohibition also applies to purchases of problem
loans not included in a purchase business combination, which would include
syndicated loans purchased in the secondary market and loans acquired in
portfolio sales. We are currently evaluating the requirements of SOP 03-3 to
determine its impact on our consolidated financial statements and results of
operations.
In March 2004, the SEC issued Staff Accounting Bulletin No. 105 --
Application of Accounting Principles to Loan Commitments, or SAB 105, which
provides guidance regarding the application of U.S. generally accepted
accounting principles to loan commitments accounted for as derivative
instruments. Through specific guidance on valuation-recognition model inputs to
measure loan commitments accounted for at fair value, SAB 105 limits the
opportunity for recognition of an asset related to a commitment to originate a
mortgage loan that will be held for sale prior to funding. SAB 105 requires that
the measurement of fair value include only differences between the guaranteed
interest rate in the loan commitment and a market interest rate, excluding any
expected future cash flows related to the customer relationship or loan
servicing. SAB 105 is effective for all mortgage loan commitments that are
accounted for as derivative instruments that are entered into after March 31,
2004, and permits continued use of previously applied accounting policies to
loan commitments entered into on or before March 31, 2004. On April 1, 2004, we
implemented SAB 105, which did not have a material impact on our consolidated
financial statements or results of operations.
In July 2004, the FASB's Derivatives Implementation Group issued
guidance on Statement of Financial Accounting Standards, or SFAS, No. 133
Implementation Issue No. G25, Cash Flow Hedges: Using the
First-Payments-Received Technique in Hedging the Variable Interest Payments on a
Group of Non-Benchmark-Rate-Based Loans, or DIG Issue G25. DIG Issue G25
clarifies the FASB's position on the ability of entities to hedge the
variability in interest receipts or overall changes in cash flows on a group of
prime-rate-based loans. The new guidance permits the use of the
first-payments-received technique in a cash flow hedge of the variable
prime-rate-based or other variable non-benchmark-rate-based interest payments
for a rolling portfolio of prepayable interest-bearing loans, provided the
hedging relationship meets all other conditions in SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, for cash flow hedge accounting.
If a pre-existing cash flow hedging relationship has identified the hedged
transactions in a manner inconsistent with the guidance in DIG Issue G25, the
hedging relationship must be de-designated at the effective date, as further
discussed below, and any derivative gains or losses in accumulated other
comprehensive income related to the de-designated hedging relationships should
be accounted for under paragraphs 31 and 32 of SFAS No. 133. We had pre-existing
cash flow hedging relationships that were inconsistent with the guidance in DIG
Issue G25. As of September 30, 2004, our accumulated other comprehensive income
included a $4.1 million net gain attributable to these pre-existing cash flow
hedging relationships. DIG Issue G25 is effective for the fiscal quarter
beginning after August 9, 2004, and shall be applied to all hedging
relationships as of the effective date. On October 1, 2004, we implemented DIG
Issue G25 and de-designated all of our specific cash flow hedging relationships
that were inconsistent with the guidance in DIG Issue G25. Consequently, the
$4.1 million net gain associated with the de-designated cash flow hedging
relationships is being amortized over the remaining lives of the respective
hedging relationships, which range from approximately six months to three years.
We elected to prospectively re-designate new cash flow hedging relationships
based upon minor revisions to the underlying hedged items as required by the
guidance in DIG Issue G25. The implementation of DIG Issue G25 did not and is
not expected to have a material impact on our consolidated financial statements,
results of operations or our interest rate risk management program.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The quantitative and qualitative disclosures about market risk are
included under "Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Interest Rate Risk Management" appearing
on pages 35 through 37 of this report.
Effects of Inflation
Inflation affects financial institutions less than other types of
companies. Financial institutions make relatively few significant asset
acquisitions that are directly affected by changing prices. Instead, the assets
and liabilities are primarily monetary in nature. Consequently, interest rates
are more significant to the performance of financial institutions than the
effect of general inflation levels. While a relationship exists between the
inflation rate and interest rates, we believe this is generally manageable
through our asset-liability management program.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data appear on pages 61
through 102 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
Our Chief Executive Officer, who is our principal executive and
principal financial officer, has evaluated the effectiveness of our "disclosure
controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, or the Exchange Act), as of the end of the
period covered by this report. Based on such evaluation, our Chief Executive
Officer has concluded that, as of the end of such period, our disclosure
controls and procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act. There
have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fourth quarter of 2004 that have materially effected,
or are reasonably likely to materially affect, the Company's control over
financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
Board of Directors and Committees of the Board
We are a "controlled company" as defined in Rule 4350(c)(5) of the
NASDAQ Marketplace Rules because more than 50% of our voting power is held by
James F. Dierberg, our Chairman of the Board, as more fully discussed under
"Item 12 - Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters." Therefore, we are not subject to certain
requirements of Rule 4350.
Our Board of Directors consists of eight members, four of whom the
Board of Directors determined to be independent. Each of our directors
identified in the following table was elected or appointed to serve a one-year
term and until his successor has been duly qualified for office.
Director Principal Occupation(s) During Last Five Years
Name Age Since and Directorships of Public Companies
---- --- ----- -------------------------------------
James F. Dierberg (1) 67 1979 Chairman of the Board of Directors of First Banks, Inc. since 1988;
Chief Executive Officer of First Banks, Inc. from 1988 to April
2003; President of First Banks, Inc. from 1979 to 1992 and from
1994 to October 1999; Chairman of the Board of Directors, President
and Chief Executive Officer of FBA from 1994 until its merger with
First Banks on December 31, 2002.
Allen H. Blake 62 1988 President of First Banks, Inc. since October 1999; Chief Executive
Officer of First Banks, Inc. since April 2003; Chief Financial
Officer of First Banks, Inc. from 1984 to September 1999 and since
May 2001; Chief Operating Officer of First Banks, Inc. from 1998
to July 2002; Director and Secretary of First Banks, Inc. since
1988; Director, Executive Vice President, Chief Operating Officer
and Secretary of FBA from 1998 until its merger with First Banks
on December 31, 2002; Chief Financial Officer of FBA from 1994 to
September 1999 and from May 2001 until December 2002.
Terrance M. McCarthy 50 2003 Senior Executive Vice President and Chief Operating Officer of
First Banks, Inc. since August 2002; Director of First Banks, Inc.
since April 2003; Director of FBA from July 2001 until its merger
with First Banks on December 31, 2002; Executive Vice President of
FBA from 1999 to December 2002; Chairman of the Board of Directors
of First Bank since January 2003; President and Chief Executive
Officer of First Bank since August 2002; Chairman of the Board of
Directors, President and Chief Executive Officer of FB&T from
April 2000 until its merger with and into First Bank on March 31,
2003; Director of FB Commercial Finance, Inc. since March 2003;
Chairman of the Members, President and Chief Executive Officer of
SBLS LLC since September 2004.
Steven F. Schepman (1) 32 2004 Director of First Banks, Inc. since July 2004; Director of First
Bank from April 2001 to October 2004; Senior Vice President -
Private Banking, Wealth Management and Trust Services of First
Bank since November 2000; From May 1999, to November 2000, Mr.
Schepman was employed in various other senior management
capacities with First Banks, Inc.
Gordon A. Gundaker (2) 71 2001 President and Chief Executive Officer of Coldwell Banker Gundaker,
a full-service real estate brokerage company, in St. Louis,
Missouri.
David L. Steward (2) 53 2000 Chairman of the Board of Directors of World Wide Technology
Holding Company, an electronic procurement and logistics company
in the information technology industry, in St. Louis, Missouri;
Director of Centene Corporation, Civic Progress of St. Louis, the
St. Louis Regional Commerce and Growth Association, the Regional
Business Council, Webster University, Barnes Jewish Hospital, St.
Louis Science Center, the United Way of Greater St. Louis, Greater
St. Louis Area Council - Boy Scouts of America and Harris-Stowe
State College African American Business Leadership Council.
Hal J. Upbin (2) 66 2001 Director of Kellwood Company, a manufacturer and marketer of
apparel and related soft goods, in St. Louis, Missouri since 1995;
Chairman of the Board of Directors and Chief Executive Officer of
Kellwood Company since 1997; President of Kellwood Company from
1997 to December 2003; President and Chief Operating Officer of
Kellwood Company from 1994 to 1997; Executive Vice President
Corporate Development from 1992 to 1994; Vice President Corporate
Development from 1990 to 1992; Director of Brown Shoe Company.
Douglas H. Yaeger (2)(3) 56 2000 Chairman of the Board of Directors, President and Chief Executive
Officer of The Laclede Group, Inc., an exempt public utility
holding company in St. Louis, Missouri since 2001; Chairman of the
Board of Directors, President and Chief Executive Officer of
Laclede Gas Company since 1999; President of Laclede Gas Company
since 1997; Director and Chief Operating Officer of Laclede Gas
Company from 1997 to 1999; Executive Vice President - Operations
and Marketing of Laclede Gas Company from 1995 to 1997; Former
Chairman of the Board of Directors of the St. Louis Regional
Commerce and Growth Association; Chairman of Southern Gas
Association, Trustee of the St. Louis Science Center, President of
Civic Progress, and Director of Greater St. Louis Area Council -
Boy Scouts of America, The Municipal Theatre Association of St.
Louis and Webster University.
- ----------------------------------
(1) Mr. Steven F. Schepman is the son-in-law of Mr. James F. Dierberg.
(2) Member of the Audit Committee.
(3) Mr. Douglas H. Yaeger serves as Chairman of the Audit Committee and the audit committee financial expert.
Committees and Meetings of the Board of Directors
Four members of our Board of Directors serve on the Audit Committee,
all of whom the Board of Directors determined to be independent as of October
31, 2004; there are no other committees of the Board of Directors. The Audit
Committee assists the Board of Directors in fulfilling the Board's oversight
responsibilities with respect to the quality and integrity of the consolidated
financial statements, financial reporting process and systems of internal
controls. The Audit Committee also assists the Board of Directors in monitoring
the independence and performance of the independent auditors, the internal audit
department and the operation of ethics programs. The Audit Committee operates
under a written charter adopted by the Board of Directors.
The members of the Audit Committee as of March 25, 2005 were Mr. Gordon
A. Gundaker, Mr. David L. Steward, Mr. Hal J. Upbin and Mr. Douglas H. Yaeger,
who serves as the Chairman of the Audit Committee and the audit committee
financial expert. Mr. Steward, Mr. Upbin and Mr. Yaeger have served as
independent members of the Audit Committee since their respective committee
appointment dates. Mr. Gundaker currently serves as an independent member of the
Audit Committee and previously served as an independent member of the Audit
Committee from his committee appointment date on July 24, 2001 to August 1,
2003. In 2003, one of Mr. Gundaker's related business interests maintained
commercial real estate and development loans with First Bank that resulted in
interest and fee payments of approximately $298,000 to First Bank in accordance
with the respective loan terms. These interest and fee payments exceeded 5% of
Mr. Gundaker's related business interest's gross revenues, or $204,000, in 2003.
Consequently, at the time the interest and fee payments exceeded $204,000, Mr.
Gundaker was no longer deemed to be independent in accordance with the
then-existing rules of the National Association of Securities Dealers, or NASD.
The Board of Directors subsequently appointed Mr. Gundaker to the Audit
Committee as a non-independent member in accordance with the then-existing NASD
rules, which allowed one director who is not independent, and is not a current
employee or an immediate family member of an employee, to be appointed to the
Audit Committee. The Board of Directors determined, under the exceptional and
limited circumstances exemption allowed by the then-existing NASD rules, that
Mr. Gundaker's membership on the Audit Committee was desirable by First Banks'
interests and the interests of First Banks' shareholders, based upon his
business expertise, his previous contributions to First Banks as a member of the
Audit Committee and other relevant considerations. Furthermore, the Board of
Directors took into account that Mr. Gundaker was expected to meet the
newly-enacted audit committee member independence requirements of the NASD and
the New York Stock Exchange, or NYSE that would become effective for First Banks
on October 31, 2004. On October 18, 2004, the Board of Directors reviewed Mr.
Gundaker's independence under the newly-enacted audit committee member
independence requirements of the NASD and the NYSE and approved Mr. Gundaker's
appointment as an independent member of the Audit Committee, effective October
31, 2004.
Audit Committee Report
The Audit Committee is responsible for oversight of our financial
reporting process on behalf of the Board of Directors. Management has primary
responsibility for our financial statements and financial reporting, including
internal controls, subject to the oversight of the Audit Committee and the Board
of Directors. In fulfilling its responsibilities, the Audit Committee reviewed
the audited consolidated financial statements with management and discussed the
acceptability of the accounting principles used, the reasonableness of
significant judgments made and the clarity of the disclosures.
The Audit Committee reviewed with the Independent Registered Public
Accounting Firm who is responsible for planning and carrying out a proper audit
and expressing an opinion on the conformity of our audited consolidated
financial statements with U.S. generally accepted accounting principles, their
judgments as to the acceptability of the accounting principles we use, and such
other matters as are required to be discussed with the Audit Committee by
Statement on Auditing Standards No. 61, Communications with Audit Committees, as
amended. In addition, the Audit Committee discussed with the Independent
Registered Public Accounting Firm its independence from management and the
Company, including the matters required by Standard No. 1 of the Independence
Standards Board, and the Audit Committee considered the compatibility of
non-audit services provided by the Independent Registered Public Accounting Firm
with the firm's independence. KPMG LLP has provided the Audit Committee with the
written disclosures and letter required by Standard No. 1 of the Independent
Standards Board.
The Audit Committee discussed with our internal and Independent
Registered Public Accounting Firm the overall scope and plans for their
respective audits. The Audit Committee met with the internal and Independent
Registered Public Accounting Firm with and without management present, to
discuss the results of their examinations, their evaluations of our internal
controls and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, that the audited consolidated
financial statements be included in the Annual Report on Form 10-K as of and for
the year ended December 31, 2004 for filing with the SEC.
Audit Committee
---------------
Douglas H. Yaeger, Chairman of the Audit Committee
Gordon A. Gundaker
David L. Steward
Hal J. Upbin
Code of Ethics for Principal Executive Officer and Financial Professionals
The Board of Directors has approved a Code of Ethics for Principal
Executive Officer and Financial Professionals that covers the Principal
Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the
Chief Credit Officer, the Chief Investment Officer, the Senior Vice President
and Controller, the Senior Vice President - Director of Taxes, the Senior Vice
President - Director of Management Accounting, and all professionals serving in
a Corporate Finance, Accounting, Treasury, Tax or Investor Relations role. These
individuals are also subject to the policies and procedures adopted by First
Banks that govern the conduct of all of its employees. The Code of Ethics for
Principal Executive Officer and Financial Professionals is included as an
exhibit to this Annual Report on Form 10-K.
Code of Conduct for Employees, Officers and Directors
The Board of Directors has approved a Code of Conduct applicable to all
employees, officers and directors of First Banks that addresses conflicts of
interest, honesty and fair dealing, accounting and auditing matters, political
activities and application and enforcement of the Code of Conduct. The Code of
Conduct is available on First Banks' website, www.firstbanks.com, under "About
us." -------------------
Executive Officers
Our executive officers, each of whom was elected to the office(s)
indicated by the Board of Directors, as of March 25, 2005, were as follows:
Current First Banks Principal Occupation(s)
Name Age Office(s) Held During Last Five Years
---- --- -------------- ----------------------
James F. Dierberg 67 Chairman of the Board of Directors. See Item 10 - "Directors and Executive
Officers of the Registrant - Board of
Directors."
Allen H. Blake 62 President, Chief Executive Officer, See Item 10 - "Directors and Executive
Chief Financial Officer and Officers of the Registrant - Board of
Director. Directors."
Terrance M. McCarthy 50 Senior Executive Vice President, See Item 10 - "Directors and Executive
Chief Operating Officer and Officers of the Registrant - Board of
Director; Chairman of the Board of Directors."
Directors, President and Chief
Executive Officer of First Bank.
Russell L. Goldammer 48 Executive Vice President and Chief Executive Vice President and Chief
Information Officer. Information Officer since November
2004; Chief Information Officer of
Outsourcing Solutions, Inc., St. Louis,
Missouri, from April 2001 to October
2004; Senior Vice President of U.S.
Bank in Milwaukee, Wisconsin, from
October 1999 to April 2001.
Daniel W. Jasper 59 Executive Vice President and Chief Executive Vice President and Chief
Credit Officer; Director and Credit Officer of First Banks, Inc.
Executive Vice President of First since October 2003; Senior Vice
Bank. President and Acting Chief Credit
Officer of First Banks, Inc. from May
2003 to October 2003; Senior Vice
President - Credit Administration of
First Banks, Inc. from 1995 to May 2003.
F. Christopher McLaughlin 51 Executive Vice President and Director Executive Vice President and Director of
of Sales, Marketing and Products; Sales, Marketing and Products of First
Director of First Bank. Banks, Inc. since September 2003;
Director of First Bank since October
2004, Executive Vice President-Personal
Banking Division, HSBC Bank USA in
Buffalo, New York from 1998 to June 2002
Independent Consultant from July 2002 to
August 2003.
Mary P. Sherrill 50 Executive Vice President and Executive Vice President and Director
Director of Operations; Director of of Operations of First Banks, Inc.
First Bank. since April 2003; Director of First
Bank since April 2003, Director, Vice
Chairman and Chief of Bank Operations,
Southwest Bank in St. Louis, Missouri
from 1999 to March 2003.
Item 11. Executive Compensation
The following table sets forth certain information regarding
compensation earned by the named executive officers for the years ended December
31, 2004, 2003 and 2002:
SUMMARY COMPENSATION TABLE
--------------------------
All Other
Name and Principal Position(s) Year Salary Bonus Compensation (1)
------------------------------ ---- ------ ----- ----------------
James F. Dierberg 2004 $ 610,000 -- 6,200
Chairman of the Board of Directors 2003 610,000 -- 6,000
2002 605,000 35,000 5,500
Allen H. Blake 2004 426,000 -- 5,200
President, Chief Executive Officer and Chief Financial Officer 2003 397,300 -- 6,000
2002 360,500 45,000 5,590
Terrance M. McCarthy 2004 367,500 -- 5,200
Senior Executive Vice President and Chief Operating Officer 2003 323,500 -- 6,000
2002 269,000 50,000 3,200
Daniel W. Jasper (2) 2004 209,500 -- 5,200
Executive Vice President and Chief Credit Officer 2003 152,000 15,000 4,700
F. Christopher McLaughlin (3) 2004 180,300 32,500 51,900 (4)
Executive Vice President and Director of Sales, Marketing 2003 55,100 -- 29,000 (4)
and Products
- -----------------------
(1) All other compensation reported includes matching contributions to our 401(k) Plan for the year indicated.
(2) Mr. Jasper became an Executive Officer of the Company in October 2003.
(3) Mr. McLaughlin became an Executive Officer of the Company in September 2003.
(4) All other compensation reported for Mr. McLaughlin in 2004 and 2003 includes $46,700 and $29,000, respectively,
associated with a corporate relocation package. Additionally, for 2004, all other compensation includes matching
contributions to our 401(K) Plan of $5,000 and a single ownership interest in the amount of $200 granted in Star
Lane Trust, our unit investment trust.
Compensation of Directors. Only those directors who are neither our employees
nor employees of any of our subsidiaries receive remuneration for their services
as directors. Such non-employee directors (currently Messrs. Gordon Gundaker,
David Steward, Hal Upbin and Douglas Yaeger) received a fee of $3,000 for each
Board meeting attended and $1,000 for each Audit Committee meeting attended in
2004. Messr. Yaeger also received a fee of $4,000 per calendar quarter for his
service as Chairman of the Audit Committee, and Messrs. Gundaker, Steward and
Upbin also received a fee of $3,000 per calendar quarter for their service as
members of the Audit Committee. The Audit Committee is currently the only
committee of our Board of Directors. Messrs. Gundaker, Steward, Upbin and Yaeger
received $31,000, $27,000, $26,000 and $35,000, respectively, in director's
compensation in 2004. Our non-employee directors are also eligible to
participate in our nonqualified deferred compensation plan.
Our executive officers that are also directors do not receive
remuneration other than salaries and bonuses for serving on our Board of
Directors.
Compensation Committee Interlocks and Insider Participation. Messrs. Dierberg,
Blake and McCarthy serve as executive officers and members of our Board of
Directors. First Banks does not have a compensation committee, but its Board of
Directors performs the functions of such a committee. Except for the foregoing,
none of our executive officers served during 2004 as a member of the
compensation committee, or any other committee performing similar functions, or
as a director of another entity, any of whose executive officers or directors
served on our Board of Directors.
See further information regarding transactions with related parties in
Note 19 to our Consolidated Financial Statements appearing on pages 96 and 97 of
this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The following table sets forth, as of March 25, 2005, certain
information with respect to the beneficial ownership of all classes of our
voting capital stock by each person known to us to be the beneficial owner of
more than five percent of the outstanding shares of the respective classes of
our stock:
Percent of
Number of Total
Title of Class Shares Percent Voting
and Name of Owner Owned of Class Power
----------------- ----- -------- -----
Common Stock ($250.00 par value)
- --------------------------------
James F. Dierberg II Family Trust (1)........................ 7,714.677 (2) 32.605% *
Ellen C. Dierberg Family Trust (1)........................... 7,714.676 (2) 32.605 *
Michael J. Dierberg Family Trust (1)......................... 4,255.319 (2) 17.985 *
Michael J. Dierberg Irrevocable Trust (1).................... 3,459.358 (2) 14.621 *
First Trust (Mary W. Dierberg and First Bank, Trustees) (1).. 516.830 (3) 2.184 *
Class A Convertible Adjustable Rate Preferred Stock
- ---------------------------------------------------
($20.00 par value)
- ------------------
James F. Dierberg, Trustee of the James F. Dierberg
Living Trust (1)......................................... 641,082 (4)(5) 100% 77.7%
Class B Non-Convertible Adjustable Rate Preferred Stock
- -------------------------------------------------------
($1.50 par value)
- -----------------
James F. Dierberg, Trustee of the James F. Dierberg
Living Trust (1)......................................... 160,505 (5) 100% 19.4%
All executive officers and directors
other than Mr. James F. Dierberg
and members of his immediate family........................... 0 0% 0.0%
- --------------------
* Represents less than 1.0%.
(1) Each of the above-named trustees and beneficial owners are United States citizens, and the business address
for each such individual is 135 North Meramec Avenue, Clayton, Missouri 63105. Mr. James F. Dierberg, our
Chairman of the Board, and Mrs. Mary W. Dierberg, are husband and wife, and Messrs. James F. Dierberg II,
Michael J. Dierberg and Mrs. Ellen D. Schepman, formerly Ms. Ellen C. Dierberg, are their adult children.
(2) Due to the relationship between Mr. James F. Dierberg, his wife and their children, Mr. Dierberg is deemed
to share voting and investment power over these shares.
(3) Due to the relationship between Mr. James F. Dierberg, his wife and First Bank, Mr. Dierberg is deemed to
share voting and investment power over these shares.
(4) Convertible into common stock, based on the appraised value of the common stock at the date of conversion.
Assuming an appraised value of the common stock equal to the book value, the number of shares of common
stock into which the Class A Preferred Stock is convertible at December 31, 2004 is 516, which shares are
not included in the above table.
(5) Sole voting and investment power.
Item 13. Certain Relationships and Related Transactions
Outside of normal customer relationships, no directors, executive
officers or shareholders holding over 5% of our voting securities, and no
corporations or firms with which such persons or entities are associated,
currently maintain or have maintained since the beginning of the last full
fiscal year, any significant business or personal relationship with our
subsidiaries or us, other than that which arises by virtue of such position or
ownership interest in our subsidiaries or us, except as set forth in Item 11 -
"Executive Compensation - Compensation of Directors," or as described in the
following paragraphs.
First Bank has had in the past, and may have in the future, loan
transactions and related banking services in the ordinary course of business
with our directors or their affiliates. These loan transactions have been made
on the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with unaffiliated persons and did not
involve more than the normal risk of collectibility or present other unfavorable
features. First Bank does not extend credit to our officers or to officers of
First Bank, except extensions of credit secured by mortgages on personal
residences, loans to purchase automobiles and personal credit card accounts.
Certain of our shareholders, directors and officers and their
respective affiliates have deposit accounts and related banking services with
First Bank. It is First Bank's policy not to permit any of its officers or
directors or their affiliates to overdraw their respective deposit accounts.
Deposit account overdraft protection may be approved for persons under a plan
whereby a credit limit has been established in accordance with First Bank's
standard credit criteria.
Transactions with related parties, including transactions with
affiliated persons and entities, are described in Note 19 to our Consolidated
Financial Statements on pages 96 and 97 of this report.
Item 14. Principal Accountant Fees and Services
Fees of Independent Registered Public Accounting Firm
During 2004 and 2003, KPMG LLP served as our Independent Registered
Public Accounting Firm and provided additional services to our affiliates and
us. The following table sets forth fees for professional audit services rendered
by KPMG LLP for the audit of our consolidated financial statements in 2004 and
2003:
2004 2003
---- ----
Audit fees, excluding audit related fees (1)......................... $ 781,550 475,000
Audit related fees................................................... -- --
Tax fees (2)......................................................... 87,221 84,957
All other fees....................................................... -- --
--------- ---------
Total......................................................... $ 868,771 559,957
========= =========
------------------------
(1) For 2004, audit fees include the audits of the consolidated financial statements of First Banks
and Star Lane Trust, SBLS LLC and Hillside Investors, Ltd. and subsidiaries, as well as services
provided for reporting requirements under FDICIA and mortgage banking activities, which are included
in the audit fees of First Banks, as these services are closely related to the audit of First Banks'
consolidated financial statements. Audit fees also include additional fees related to work performed
under FDICIA requirements as of December 31, 2003 but billed in 2004, and other accounting and
reporting consultations. For 2003, audit fees include the audits of the consolidated financial
statements of First Banks and Star Lane Trust, as well as services provided for reporting
requirements under FDICIA and mortgage banking activities.
(2) Tax services include tax compliance and general tax planning and advice.
Policy Regarding the Approval of Independent Auditor Provision of Audit and
Non-Audit Services
Consistent with the Securities and Exchange Commission requirements
regarding auditor independence, the Audit Committee recognizes the importance of
maintaining the independence, in fact and appearance, of our independent
auditors. As such, the Audit Committee has adopted a policy for pre-approval of
all audit and permissible non-audit services provided by the independent
auditor. Under the policy, the Audit Committee, or its designated member, must
pre-approve services prior to commencement of the specified service. The
requests for pre-approval are submitted to the Audit Committee or its designated
member by the Director of Audit with a statement as to whether in his view the
request is consistent with the Securities and Exchange Commission's rules on
auditor independence. The Audit Committee reviews the pre-approval requests and
the fees paid for such services at their regularly scheduled quarterly meetings.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Supplementary Data - The
financial statements and supplementary data filed as part
of this Report are included in Item 8.
2. Financial Statement Schedules - These schedules are omitted
for the reason they are not required or are not applicable.
3. Exhibits - The exhibits are listed in the index of exhibits
required by Item 601 of Regulation S-K at Item (c) below
and are incorporated herein by reference.
(b) Reports on Form 8-K.
During the quarter ended December 31, 2004, we filed three
Current Reports on Form 8-K as follows:
1. Current Report on Form 8-K, filed October 28, 2004 -
Item 2.02 of the report referenced a press release
announcing First Banks, Inc.'s financial results for
the three and nine months ended September 30, 2004. A
copy of the press release was included as Exhibit
99.1.
2. Current Report on Form 8-K, filed November 29, 2004 -
Item 1.01 and Item 2.03 of the report described the
Company's entry into a material definitive agreement
and creation of a direct financial obligation
associated with First Banks, Inc.'s issuance of $41.2
million of subordinated debentures in a private
placement transaction that occurred on November 23,
2004.
3. Current Report on Form 8-K, filed December 1, 2004 -
Item 2.01 and Item 9.01 of the report described the
completion of the Company's acquisition of Hillside
Investors, Ltd., and its wholly-owned banking
subsidiary, CIB Bank. A copy of the press release
announcing the completion of the acquisition of
Hillside Investors, Ltd. on November 30, 2004 was
included as Exhibit 99.1.
(c) The index of required exhibits is included beginning on page 107
of this Report.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
First Banks, Inc.:
We have audited the accompanying consolidated balance sheets of First Banks,
Inc. and subsidiaries (the Company) as of December 31, 2004 and 2003, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Banks, Inc.
and subsidiaries as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets."
/s/ KPMG LLP
------------
KPMG LLP
St. Louis, Missouri
March 17, 2005
CONSOLIDATED BALANCE SHEETS
(dollars expressed in thousands, except share and per share data)
December 31,
----------------------------
2004 2003
---- ----
ASSETS
------
Cash and cash equivalents:
Cash and due from banks............................................................ $ 149,605 179,802
Short-term investments............................................................. 117,505 33,735
---------- ---------
Total cash and cash equivalents............................................... 267,110 213,537
---------- ---------
Investment securities:
Available for sale................................................................. 1,788,063 1,038,787
Held to maturity (fair value of $25,586 and $11,341, respectively)................. 25,286 10,927
---------- ---------
Total investment securities................................................... 1,813,349 1,049,714
---------- ---------
Loans:
Commercial, financial and agricultural............................................. 1,575,232 1,474,908
Real estate construction and development........................................... 1,318,413 1,063,889
Real estate mortgage............................................................... 3,061,581 2,582,264
Consumer and installment........................................................... 54,546 71,652
Loans held for sale................................................................ 133,065 145,746
---------- ---------
Total loans................................................................... 6,142,837 5,338,459
Unearned discount.................................................................. (4,869) (10,384)
Allowance for loan losses.......................................................... (150,707) (116,451)
---------- ---------
Net loans..................................................................... 5,987,261 5,211,624
---------- ---------
Bank premises and equipment, net of accumulated depreciation and amortization........... 144,486 136,739
Goodwill................................................................................ 156,849 145,548
Bank-owned life insurance............................................................... 102,239 97,521
Deferred income taxes................................................................... 127,397 102,844
Other assets............................................................................ 134,150 149,413
---------- ---------
Total assets.................................................................. $8,732,841 7,106,940
========== =========
LIABILITIES
-----------
Deposits:
Noninterest-bearing demand......................................................... $1,194,662 1,034,367
Interest-bearing demand............................................................ 875,489 843,001
Savings............................................................................ 2,249,644 2,128,683
Time deposits of $100 or more...................................................... 807,220 436,439
Other time deposits................................................................ 2,024,955 1,519,125
---------- ---------
Total deposits................................................................ 7,151,970 5,961,615
Other borrowings........................................................................ 594,750 273,479
Note payable............................................................................ 15,000 17,000
Subordinated debentures................................................................. 273,300 209,320
Deferred income taxes................................................................... 34,812 41,683
Accrued expenses and other liabilities.................................................. 62,116 54,028
---------- ---------
Total liabilities............................................................. 8,131,948 6,557,125
---------- ---------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock:
$1.00 par value, 5,000,000 shares authorized, no shares issued and outstanding..... -- --
Class A convertible, adjustable rate, $20.00 par value, 750,000
shares authorized, 641,082 shares issued and outstanding......................... 12,822 12,822
Class B adjustable rate, $1.50 par value, 200,000 shares authorized,
160,505 shares issued and outstanding............................................ 241 241
Common stock, $250.00 par value, 25,000 shares authorized,
23,661 shares issued and outstanding............................................... 5,915 5,915
Additional paid-in capital.............................................................. 5,910 5,910
Retained earnings....................................................................... 577,836 495,714
Accumulated other comprehensive (loss) income........................................... (1,831) 29,213
---------- ---------
Total stockholders' equity.................................................... 600,893 549,815
---------- ---------
Total liabilities and stockholders' equity.................................... $8,732,841 7,106,940
========== =========
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(dollars expressed in thousands, except share and per share data)
Years Ended December 31,
---------------------------------
2004 2003 2002
---- ---- ----
Interest income:
Interest and fees on loans.......................................... $ 341,479 355,472 390,062
Investment securities:
Taxable........................................................... 50,170 32,442 31,845
Nontaxable........................................................ 1,490 1,737 1,865
Short-term investments.............................................. 1,643 1,502 1,949
--------- -------- --------
Total interest income.......................................... 394,782 391,153 425,721
--------- -------- --------
Interest expense:
Deposits:
Interest-bearing demand........................................... 3,472 5,470 7,551
Savings........................................................... 20,128 23,373 35,668
Time deposits of $100 or more..................................... 13,762 13,075 19,047
Other time deposits............................................... 35,705 41,201 66,002
Other borrowings.................................................... 6,102 2,243 3,450
Note payable........................................................ 506 785 1,032
Subordinated debentures............................................. 15,092 17,879 24,801
--------- -------- --------
Total interest expense......................................... 94,767 104,026 157,551
--------- -------- --------
Net interest income............................................ 300,015 287,127 268,170
Provision for loan losses.............................................. 25,750 49,000 55,500
--------- -------- --------
Net interest income after provision for loan losses............ 274,265 238,127 212,670
--------- -------- --------
Noninterest income:
Service charges on deposit accounts and customer service fees....... 38,230 36,113 30,978
Gain on loans sold and held for sale................................ 18,497 15,645 6,471
Net gain on sales of available-for-sale investment securities....... 257 8,761 90
Gain on sales of branches, net of expenses.......................... 1,000 3,992 --
Bank-owned life insurance investment income......................... 5,201 5,469 5,928
Investment management income........................................ 6,870 4,762 4,157
Other............................................................... 13,431 12,966 19,887
--------- -------- --------
Total noninterest income....................................... 83,486 87,708 67,511
--------- -------- --------
Noninterest expense:
Salaries and employee benefits...................................... 117,492 95,441 89,569
Occupancy, net of rental income..................................... 19,882 20,940 21,030
Furniture and equipment............................................. 17,017 18,286 17,495
Postage, printing and supplies...................................... 5,010 5,100 5,556
Information technology fees......................................... 32,019 32,136 32,135
Legal, examination and professional fees............................ 7,412 8,131 9,284
Amortization of intangibles associated with the
purchase of subsidiaries.......................................... 2,912 2,506 2,012
Communications...................................................... 1,866 2,667 3,166
Advertising and business development................................ 5,493 4,271 5,023
Charitable contributions............................................ 577 5,334 204
Other............................................................... 19,825 32,257 25,338
--------- -------- --------
Total noninterest expense...................................... 229,505 227,069 210,812
--------- -------- --------
Income before provision for income taxes and minority
interest in income of subsidiary.............................. 128,246 98,766 69,369
Provision for income taxes............................................. 45,338 35,955 22,771
--------- -------- --------
Income before minority interest in income of subsidiary....... 82,908 62,811 46,598
Minority interest in income of subsidiary.............................. -- -- 1,431
--------- -------- --------
Net income..................................................... 82,908 62,811 45,167
Preferred stock dividends.............................................. 786 786 786
--------- -------- --------
Net income available to common stockholders.................... $ 82,122 62,025 44,381
========= ======== ========
Basic earnings per common share........................................ $3,470.80 2,621.39 1,875.69
========= ======== ========
Diluted earnings per common share...................................... $3,421.58 2,588.31 1,853.64
========= ======== ========
Weighted average shares of common stock outstanding.................... 23,661 23,661 23,661
========= ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Three Years Ended December 31, 2004
(dollars expressed in thousands, except per share data)
Accu-
Adjustable Rate mulated
Preferred Stock Other
--------------- Compre- Total
Class A Additional Compre- hensive Stock-
Conver- Common Paid-in hensive Retained Income holders'
tible Class B Stock Capital Income Earnings (Loss) Equity
----- ------- ----- ------- ------ -------- ------ ------
Consolidated balances, January 1, 2002........... $12,822 241 5,915 6,074 389,308 34,297 448,657
Year ended December 31, 2002:
Comprehensive income:
Net income................................. -- -- -- -- 45,167 45,167 -- 45,167
Other comprehensive income, net of tax:
Unrealized gains on investment
securities, net of reclassification
adjustment (1)......................... -- -- -- -- 8,909 -- 8,909 8,909
Derivative instruments:
Current period transactions............ -- -- -- -- 17,258 -- 17,258 17,258
-------
Comprehensive income....................... 71,334
=======
Class A preferred stock dividends,
$1.20 per share.......................... -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share.......................... -- -- -- -- (17) -- (17)
Effect of capital stock transactions of
majority-owned subsidiary.................. -- -- -- (164) -- -- (164)
------- --- ----- ----- ------- ------- -------
Consolidated balances, December 31, 2002......... 12,822 241 5,915 5,910 433,689 60,464 519,041
Year ended December 31, 2003:
Comprehensive income:
Net income................................. -- -- -- -- 62,811 62,811 -- 62,811
Other comprehensive loss, net of tax:
Unrealized losses on
investment securities, net of
reclassification adjustment (1)........ -- -- -- -- (9,986) -- (9,986) (9,986)
Derivative instruments:
Current period transactions............ -- -- -- -- (21,265) -- (21,265) (21,265)
-------
Comprehensive income....................... 31,560
=======
Class A preferred stock dividends,
$1.20 per share............................ -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share............................ -- -- -- -- (17) -- (17)
------- --- ----- ----- ------- ------- -------
Consolidated balances, December 31, 2003......... 12,822 241 5,915 5,910 495,714 29,213 549,815
Year ended December 31, 2004:
Comprehensive income:
Net income................................. -- -- -- -- 82,908 82,908 -- 82,908
Other comprehensive loss, net of tax:
Unrealized losses on investment
securities, net of reclassification
adjustment (1)......................... -- -- -- -- (5,878) -- (5,878) (5,878)
Derivative instruments:
Current period transactions............ -- -- -- -- (25,166) -- (25,166) (25,166)
-------
Comprehensive income....................... 51,864
=======
Class A preferred stock dividends,
$1.20 per share............................ -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share............................ -- -- -- -- (17) -- (17)
------- --- ----- ----- ------- ------- -------
Consolidated balances, December 31, 2004......... $12,822 241 5,915 5,910 577,836 (1,831) 600,893
======= === ===== ===== ======= ======= =======
- --------------------------------------
(1) Disclosure of reclassification adjustment:
Years Ended December 31,
------------------------------
2004 2003 2002
---- ---- ----
Unrealized (losses) gains on investment securities arising during the year.......... $(5,711) (4,291) 8,968
Less reclassification adjustment for gains included in net income, net of tax....... 167 5,695 59
------- ------ -----
Unrealized (losses) gains on investment securities.................................. $(5,878) (9,986) 8,909
======= ====== =====
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars expressed in thousands)
Years ended December 31,
------------------------------------
2004 2003 2002
---- ---- ----
Cash flows from operating activities:
Net income................................................................. $ 82,908 62,811 45,167
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization of bank premises and equipment.......... 18,579 20,068 18,902
Amortization, net of accretion........................................ 17,102 24,996 17,769
Originations and purchases of loans held for sale..................... (1,152,003) (2,158,251) (1,954,346)
Proceeds from sales of loans held for sale............................ 1,038,636 2,003,574 1,602,500
Provision for loan losses............................................. 25,750 49,000 55,500
Provision for income taxes............................................ 45,338 35,955 22,771
Payments of income taxes.............................................. (42,701) (43,632) (34,287)
(Increase) decrease in accrued interest receivable.................... (696) 4,614 2,197
Interest accrued on liabilities....................................... 94,767 104,026 157,551
Payments of interest on liabilities................................... (93,406) (107,295) (162,825)
Gain on loans sold and held for sale.................................. (18,497) (15,645) (6,471)
Net gain on sales of available-for-sale investment securities......... (257) (8,761) (90)
Gain on sales of branches, net of expenses............................ (1,000) (3,992) --
Other operating activities, net....................................... (8,922) 6,894 (3,319)
Minority interest in income of subsidiary............................. -- -- 1,431
---------- ---------- ----------
Net cash provided by (used in) operating activities.............. 5,598 (25,638) (237,550)
---------- ---------- ----------
Cash flows from investing activities:
Cash received for acquired entities, net of
cash and cash equivalents paid........................................... 21,098 14,870 11,715
Proceeds from sales of investment securities available for sale............ 26,340 6,019 55,130
Maturities of investment securities available for sale..................... 748,280 1,499,476 1,085,993
Maturities of investment securities held to maturity....................... 4,632 5,573 6,829
Purchases of investment securities available for sale...................... (1,029,993) (1,209,592) (1,380,165)
Purchases of investment securities held to maturity........................ (19,031) (103) (2,680)
Proceeds from sales of leases.............................................. 35,544 -- --
Net (increase) decrease in loans........................................... (78,629) 18,786 199,051
Recoveries of loans previously charged-off................................. 25,876 23,028 15,933
Purchases of bank premises and equipment................................... (10,960) (4,359) (15,565)
Other investing activities, net............................................ 15,358 3,357 9,672
---------- ---------- ----------
Net cash (used in) provided by investing activities.............. (261,485) 357,055 (14,087)
---------- ---------- ----------
Cash flows from financing activities:
Increase in demand and savings deposits.................................... 23,355 13,287 450,541
Decrease in time deposits.................................................. (11,521) (223,555) (245,637)
Decrease in Federal Home Loan Bank advances................................ (29,020) (8,548) (16,600)
Decrease in federal funds purchased........................................ -- (55,000) (26,000)
Increase in securities sold under agreements to repurchase................. 286,928 69,835 46,989
Advances drawn on note payable............................................. 15,000 34,500 43,500
Repayments of note payable................................................. (17,000) (24,500) (64,000)
Proceeds from issuance of subordinated debentures.......................... 61,857 70,907 25,007
Payments for redemptions of subordinated debentures........................ -- (136,341) --
Cash paid for sales of branches, net of cash and cash equivalents sold..... (19,353) (60,930) --
Payment of preferred stock dividends....................................... (786) (786) (786)
---------- ---------- ----------
Net cash provided by (used in) financing activities.............. 309,460 (321,131) 213,014
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents............. 53,573 10,286 (38,623)
Cash and cash equivalents, beginning of year.................................... 213,537 203,251 241,874
---------- ---------- ----------
Cash and cash equivalents, end of year.......................................... $ 267,110 213,537 203,251
========== ========== --========
Noncash investing and financing activities:
Loans transferred to other real estate..................................... $ 5,142 13,525 7,607
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies
followed by First Banks, Inc. and subsidiaries (First Banks or the Company):
Basis of Presentation. The accompanying consolidated financial
statements of First Banks have been prepared in accordance with U.S. generally
accepted accounting principles and conform to predominant practices within the
banking industry. Management of First Banks has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare the consolidated
financial statements in conformity with U.S. generally accepted accounting
principles. Actual results could differ from those estimates.
Principles of Consolidation. The consolidated financial statements
include the accounts of the parent company and its subsidiaries, net of minority
interest, as more fully described below. All significant intercompany accounts
and transactions have been eliminated. Certain reclassifications of 2003 and
2002 amounts have been made to conform to the 2004 presentation.
First Banks operates through its wholly-owned subsidiary bank holding
company, The San Francisco Company (SFC), headquartered in San Francisco,
California, and SFC's wholly-owned subsidiary bank, First Bank, headquartered in
St. Louis County, Missouri.
On December 31, 2002, First Banks completed its acquisition of all of
the publicly held outstanding capital stock of First Banks America, Inc., San
Francisco, California (FBA), for a price of $40.54 per share, or approximately
$32.4 million. Prior to consummation of this transaction, First Banks owned
93.78% of FBA's outstanding stock, with approximately 6.22% or 798,753 shares of
FBA's outstanding stock held publicly. As a result, FBA became a wholly-owned
subsidiary of First Banks, was merged with and into First Banks and FBA's
subsidiaries, SFC and First Bank & Trust, became wholly-owned subsidiaries of
First Banks. On March 31, 2003, First Bank & Trust, headquartered in San
Francisco, California (FB&T), was merged with and into First Bank to allow
certain administrative and operational economies not available while the two
subsidiary banks maintained separate charters.
On December 31, 2003, First Banks implemented Financial Accounting
Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51, resulting in the deconsolidation of
First Banks' statutory and business trusts, which were created for the sole
purpose of issuing trust preferred securities. The implementation of this
Interpretation had no material effect on the Company's consolidated financial
position or results of operations. The implementation resulted in the Company's
$6.5 million investment in the common equity of the trusts being included in the
consolidated balance sheets as available-for-sale investment securities and the
interest income and interest expense received from and paid to the trusts,
respectively, being included in the consolidated statements of income as
interest income and interest expense. The increase to interest income and
interest expense totaled $696,000 for the year ended December 31, 2003. Prior
period results were restated to conform to the 2003 presentation.
Cash and Cash Equivalents. Cash, due from banks and short-term
investments, which include federal funds sold and interest-bearing deposits, are
considered to be cash and cash equivalents for purposes of the consolidated
statements of cash flows. Federal funds sold were $102.2 million and $32.5
million at December 31, 2004 and 2003, respectively, and interest-bearing
deposits were $15.3 million and $1.2 million at December 31, 2004 and 2003,
respectively.
First Bank is required to maintain certain daily reserve balances on
hand in accordance with regulatory requirements. These reserve balances
maintained in accordance with such requirements were $30.2 million and $34.0
million at December 31, 2004 and 2003, respectively.
Investment Securities. The classification of investment securities as
available for sale or held to maturity is determined at the date of purchase.
First Banks does not engage in the trading of investment securities.
Investment securities designated as available for sale, which represent
any security that First Banks has no immediate plan to sell but which may be
sold in the future under different circumstances, are stated at fair value.
Amortization of premiums and accretion of discounts is computed on the
level-yield method taking into consideration the level of current and
anticipated prepayments. Realized gains and losses are included in noninterest
income, based on the amortized cost of the individual security sold. Unrealized
gains and losses, net of related income tax effects, are recorded in accumulated
other comprehensive income. All previous fair value adjustments included in the
separate component of accumulated other comprehensive income are reversed upon
sale.
Investment securities designated as held to maturity, which represent
any security that First Banks has the positive intent and ability to hold to
maturity, are stated at cost, net of amortization of premiums and accretion of
discounts computed on the level-yield method taking into consideration the level
of current and anticipated prepayments.
A decline in the market value of any available-for-sale or
held-to-maturity investment security below its carrying value that is deemed to
be other-than-temporary results in a reduction in cost basis of the carrying
value to fair value. The other-than-temporary impairment is charged to
noninterest income and a new cost basis is established. When determining
other-than-temporary impairment, consideration is given as to whether First
Banks has the ability and intent to hold the investment security until a market
price recovery and whether evidence indicating the carrying value of the
investment security is recoverable outweighs evidence to the contrary.
Loans Held for Portfolio. Loans held for portfolio are carried at cost,
adjusted for amortization of premiums and accretion of discounts using the
interest method. Interest and fees on loans are recognized as income using the
interest method. Loan origination fees are deferred and accreted to interest
income over the estimated life of the loans using the interest method. Loans
held for portfolio are stated at cost as First Banks has the ability and it is
management's intention to hold them to maturity.
The accrual of interest on loans is discontinued when it appears that
interest or principal may not be paid in a timely manner in the normal course of
business or once principal or interest payments become 90 days past due under
the contractual terms of the loan agreement. Generally, payments received on
nonaccrual and impaired loans are recorded as principal reductions. Interest
income is recognized after all delinquent principal has been repaid or an
improvement in the condition of the loan has occurred which would warrant
resumption of interest accruals.
A loan is considered impaired when it is probable that First Banks will
be unable to collect all amounts due, both principal and interest, according to
the contractual terms of the loan agreement. Loans on nonaccrual status are
considered to be impaired loans. When measuring impairment, the expected future
cash flows of an impaired loan or lease are discounted at the loan's effective
interest rate. Alternatively, impairment is measured by reference to an
observable market price, if one exists, or the fair value of the collateral for
a collateral-dependent loan. Regardless of the historical measurement method
used, First Banks measures impairment based on the fair value of the collateral
when foreclosure is probable. Additionally, impairment of a restructured loan is
measured by discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement.
In addition, First Banks monitors the fair value of the underlying
collateral of its lease portfolio to identify any impairment as a result of a
decline in the residual value of the underlying collateral, which may not be
apparent from the payment performance of the lease.
Loans Held for Sale. Loans held for sale are carried at the lower of
cost or market value, which is determined on an individual loan basis. The
amount by which cost exceeds market value is recorded in a valuation allowance
as a reduction of loans held for sale. Changes in the valuation allowance are
reflected as part of the gain on loans sold and held for sale in the
consolidated statements of income in the periods in which the changes occur.
Gains or losses on the sale of loans held for sale are determined on a specific
identification method. Loans held for sale transferred to loans held for
portfolio or available-for-sale investment securities are transferred at fair
value.
Loan Servicing Income. Loan servicing income is included in noninterest
income and represents fees earned for servicing real estate mortgage loans owned
by investors and originated by First Bank's mortgage banking operation, as well
as U.S. Small Business Administration (SBA) loans to small business concerns
that are originated by a subsidiary of First Bank that originates, sells and
services SBA loans. These fees are net of federal agency guarantee fees,
interest shortfall, amortization of loan servicing rights and impairment
valuation allowances. Such fees are generally calculated on the outstanding
principal balance of the loans serviced and are recorded as income when earned.
Allowance for Loan Losses. The allowance for loan losses is maintained
at a level considered adequate to provide for probable losses. The provision for
loan losses is based on a periodic analysis of the loans held for portfolio and
held for sale, considering, among other factors, current economic conditions,
loan portfolio composition, past loan loss experience, independent appraisals,
loan collateral, payment experience and selected key financial ratios. As
adjustments become necessary, they are reflected in the results of operations in
the periods in which they become known. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowance for loan losses. Such agencies may require First Banks to modify
its allowance for loan losses based on their judgment about information
available to them at the time of their examination.
Derivative Instruments and Hedging Activities. First Banks utilizes
derivative instruments and hedging activities to assist in the management of
interest rate sensitivity and to modify the repricing, maturity and option
characteristics of certain assets and liabilities. First Banks uses such
derivative instruments solely to reduce its interest rate risk exposure. First
Banks accounts for derivative instruments and hedging activities in accordance
with Statement of Financial Accounting Standards (SFAS) No. 133 -- Accounting
for Derivative Instruments and Hedging Activities, as amended, which requires
all derivative instruments to be recorded in the consolidated balance sheets and
measured at fair value.
At inception of a derivative transaction, First Banks designates the
derivative instrument as either a hedge of the fair value of a recognized asset
or liability or of an unrecognized firm commitment (fair value hedges) or a
hedge of a forecasted transaction or the variability of cash flows to be
received or paid related to a recognized asset or liability (cash flow hedges).
For all hedging relationships, First Banks formally documents the hedging
relationship and its risk-management objectives and strategy for entering into
the hedging relationship including the hedging instrument, the hedged item(s),
the nature of the risk being hedged, how the hedging instrument's effectiveness
in offsetting the hedged risk will be assessed and a description of the method
the Company will utilize to measure hedge ineffectiveness. This process also
includes linking all derivative instruments that are designated as fair value
hedges or cash flow hedges to the underlying assets and liabilities or to
specific firm commitments or forecasted transactions. First Banks also assesses,
both at the hedge's inception and on an ongoing basis, whether the derivative
instruments that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of the hedged item(s).
First Banks discontinues hedge accounting prospectively when it is
determined that the derivative instrument is no longer effective in offsetting
changes in the fair value or cash flows of the hedged item(s), the derivative
instrument expires or is sold, terminated, or exercised, the derivative
instrument is de-designated as a hedging instrument, because it is unlikely that
a forecasted transaction will occur, a hedged firm commitment no longer meets
the definition of a firm commitment, or management determines that designation
of the derivative instrument as a hedging transaction is no longer appropriate.
A summary of First Banks' accounting policies for its various
derivative instruments and hedging activities is as follows:
>> Interest Rate Swap Agreements - Cash Flow Hedges. Interest rate
swap agreements designated as cash flow hedges are accounted for
at fair value. The effective portion of the change in the cash
flow hedge's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into
noninterest income when the underlying transaction affects
earnings. The ineffective portion of the change in the cash flow
hedge's gain or loss is recorded in noninterest income on each
monthly measurement date. The net interest differential is
recognized as an adjustment to interest income or interest
expense of the related asset or liability being hedged. In the
event of early termination, the net proceeds received or paid on
the interest rate swap agreements are recognized immediately in
noninterest income.
>> Interest Rate Swap Agreements - Fair Value Hedges. Interest rate
swap agreements designated as fair value hedges are accounted for
at fair value. Changes in the fair value of the swap agreements
are recognized currently in noninterest income. The change in the
fair value of the underlying hedged item attributable to the
hedged risk adjusts the carrying amount of the underlying hedged
item and is also recognized currently in noninterest income. All
changes in fair value are measured on a monthly basis. The net
interest differential is recognized as an adjustment to interest
income or interest expense of the related asset or liability. In
the event of early termination or ineffectiveness, the net
proceeds received or paid are recognized immediately in
noninterest income and the future net interest differential, if
any, is recognized prospectively in noninterest income. The
cumulative change in the fair value of the underlying hedged item
is deferred and amortized or accreted to interest income or
interest expense over the weighted average life of the related
asset or liability. If, however, the underlying hedged item is
repaid, the cumulative change in the fair value of the underlying
hedged item is recognized immediately in noninterest income.
>> Interest Rate Cap and Floor Agreements. Interest rate cap and
floor agreements are accounted for at fair value. Changes in the
fair value of interest rate cap and floor agreements are
recognized in noninterest income on each monthly measurement
date.
>> Interest Rate Lock Commitments. Commitments to originate loans
for subsequent sale in the secondary market (interest rate lock
commitments), which primarily consist of commitments to originate
fixed rate residential mortgage loans, are recorded at fair
value. Changes in the fair value are recognized in noninterest
income on a monthly basis.
>> Forward Commitments to Sell Mortgage-Backed Securities. Forward
commitments to sell mortgage-backed securities are recorded at
fair value. Changes in the fair value of forward commitments to
sell mortgage-backed securities are recognized in noninterest
income on a monthly basis.
Bank Premises and Equipment, Net. Bank premises and equipment are
carried at cost less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over the estimated useful lives of the
related assets. Amortization of leasehold improvements is calculated using the
straight-line method over the shorter of the useful life of the improvement or
term of the lease. Bank premises and improvements are depreciated over five to
40 years and equipment over three to seven years.
Intangibles Associated With the Purchase of Subsidiaries. Intangibles
associated with the purchase of subsidiaries include goodwill and core deposit
intangibles.
On January 1, 2002, First Banks adopted SFAS No. 142 -- Goodwill and
Other Intangible Assets, and SFAS No 144 -- Accounting for the Impairment or
Disposal of Long-Lived Assets. Pursuant to SFAS No. 142, goodwill and intangible
assets with indefinite useful lives are not amortized, but instead tested for
impairment at least annually. Intangible assets with definite useful lives are
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with SFAS No 144.
First Banks amortizes, on a straight-line basis, its core deposit intangibles
and goodwill associated with the purchase of branch offices. Core deposit
intangibles are amortized over the estimated periods to be benefited, which has
been estimated at seven years, and goodwill associated with the purchase of
branch offices is amortized over the estimated periods to be benefited, which
has been estimated at 15 years. Goodwill associated with the purchase of
subsidiaries is not amortized, but instead, is tested annually for impairment
following First Banks' existing methods of measuring and recording impairment
losses, as described below.
First Banks reviews intangible assets for impairment whenever events or
changes in circumstances indicate the carrying value of an underlying asset may
not be recoverable. First Banks measures recoverability based upon the future
cash flows expected to result from the use of the underlying asset and its
eventual disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying value of the underlying
asset, First Banks recognizes an impairment loss. The impairment loss recognized
represents the amount by which the carrying value of the underlying asset
exceeds the fair value of the underlying asset. If an asset being tested for
recoverability was acquired in a business combination accounted for using the
purchase method, goodwill that arose in the transaction is included as part of
the asset grouping in determining recoverability. If some but not all of the
assets acquired in that transaction are being tested, goodwill is allocated to
the assets being tested for recoverability on a pro rata basis using the
relative fair values of the long-lived assets and identifiable intangibles
acquired at the acquisition dates. In instances where goodwill is identified
with assets that are subject to an impairment loss, the carrying amount of the
identified goodwill is eliminated before reducing the carrying amounts of
impaired long-lived assets and identifiable intangibles. As such adjustments
become necessary, they are reflected in the results of operations in the periods
in which they become known.
Mortgage Servicing Rights. Mortgage servicing rights are capitalized by
allocating the total cost of the mortgage loans to mortgage servicing rights and
the loans (without mortgage servicing rights) based on the relative fair values
of the two components. Upon capitalizing the mortgage servicing rights, they are
amortized, in proportion to the related estimated net servicing income on a
basis that approximates the disaggregated, discounted basis, over the expected
lives of the related loans, which range from five to ten years. The weighted
average amortization period of mortgage servicing rights is approximately five
years.
The value of mortgage servicing rights is adversely affected when
mortgage interest rates decline which normally causes mortgage loan prepayments
to increase. When loans are prepaid or refinanced, the related unamortized
balance of the mortgage servicing rights is charged to amortization expense. The
determination of the fair value of the mortgage servicing rights is performed
quarterly based upon an independent third party valuation. Based on these
analyses, a comparison of the fair value of the mortgage servicing rights with
the carrying value of the mortgage servicing rights is made, with impairment, if
any, recognized at that time. The impairment analyses are prepared using
stratifications of the mortgage servicing rights based on the predominant risk
characteristics of the underlying mortgage loans, including size, interest rate,
weighted average original term, weighted average remaining term and estimated
prepayment speeds. As part of these analyses, the fair value of the mortgage
servicing rights for each stratum is compared to the carrying value of the
mortgage servicing rights for each stratum. To the extent the carrying value of
the mortgage servicing rights exceeds the fair value of the mortgage servicing
rights for a stratum, First Banks recognizes impairment equal to the amount by
which the carrying value of the mortgage servicing rights for a stratum exceeds
the fair value. Impairment is recognized through a valuation allowance that is
recorded as a reduction of mortgage servicing rights. Changes in the valuation
allowance are reflected in the consolidated statements of income in the periods
in which the change occurs. First Banks does not, however, recognize fair value
of the mortgage servicing rights in excess of the carrying value of mortgage
servicing rights for any stratum.
SBA Servicing Rights. SBA servicing rights are capitalized by
allocating the total cost of the SBA loans to servicing rights and the loans
(without servicing rights) based on the relative fair values of the two
components. The fair value of servicing rights is computed using the present
value of the estimated future servicing income in excess of such income
estimated at a normal servicing fee rate. The servicing rights, net of valuation
allowance, are amortized in proportion to, and over the period of, the estimated
net servicing revenue of the underlying SBA loans, which range from nine to 25
years. The weighted average amortization period of the SBA servicing rights is
approximately 22 years. The determination of the fair value of the SBA servicing
rights is performed monthly based upon an independent third party valuation.
Based on these analyses, a comparison of the fair value of the SBA servicing
rights with the carrying value of the SBA servicing rights is made, with
impairment, if any, recognized at that time. To the extent the carrying value of
the SBA servicing rights exceeds the fair value of the SBA servicing rights,
First Banks recognizes impairment equal to the amount by which the carrying
value of the SBA servicing rights exceeds the fair value. Impairment is
recognized through a valuation allowance that is recorded as a reduction of SBA
servicing rights. Changes in the valuation allowance are reflected in the
consolidated statements of income in the periods in which the change occurs.
First Banks does not, however, recognize fair value of the SBA servicing rights
in excess of the carrying value of SBA servicing rights for any stratum.
Other Real Estate. Other real estate, consisting of real estate
acquired through foreclosure or deed in lieu of foreclosure, is stated at the
lower of cost or fair value less applicable selling costs. The excess of cost
over fair value of the property at the date of acquisition is charged to the
allowance for loan losses. Subsequent reductions in carrying value, to reflect
current fair value or costs incurred in maintaining the properties, are charged
to expense as incurred. Other real estate was $4.0 million and $11.1 million at
December 31, 2004 and 2003, respectively.
Income Taxes. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in the tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes. First Banks,
Inc. and its eligible subsidiaries file a consolidated federal income tax return
and unitary or consolidated state income tax returns in all applicable states.
Financial Instruments With Off-Balance Sheet Risk. A financial
instrument is defined as cash, evidence of an ownership interest in an entity,
or a contract that conveys or imposes on an entity the contractual right or
obligation to either receive or deliver cash or another financial instrument.
First Banks utilizes financial instruments to reduce the interest rate risk
arising from its financial assets and liabilities. These instruments involve, in
varying degrees, elements of interest rate risk and credit risk in excess of the
amount recognized in the consolidated balance sheets. "Interest rate risk" is
defined as the possibility that interest rates may move unfavorably from the
perspective of First Banks. The risk that a counterparty to an agreement entered
into by First Banks may default is defined as "credit risk."
First Banks is a party to commitments to extend credit and commercial
and standby letters of credit in the normal course of business to meet the
financing needs of its customers. These commitments involve, in varying degrees,
elements of interest rate risk and credit risk in excess of the amount
recognized in the consolidated balance sheets.
Earnings Per Common Share. Basic earnings per common share (EPS) are
computed by dividing the income available to common stockholders (the numerator)
by the weighted average number of shares of common stock outstanding (the
denominator) during the year. The computation of dilutive EPS is similar except
the denominator is increased to include the number of additional shares of
common stock that would have been outstanding if the dilutive potential shares
had been issued. In addition, in computing the dilutive effect of convertible
securities, the numerator is adjusted to add back any convertible preferred
dividends.
(2) ACQUISITIONS, INTEGRATION COSTS AND OTHER CORPORATE TRANSACTIONS
During the three years ended December 31, 2004, First Banks completed
the following acquisitions:
Total Purchase
Entity Date Assets Price Goodwill
------ ---- ------ ----- --------
(dollars expressed in thousands)
2004
----
Hillside Investors, Ltd.
Hillside, Illinois November 30, 2004 $1,196,700 67,400 4,300
Small Business Loan Source, Inc.
Houston, Texas August 31, 2004 47,100 45,600 5,900
Continental Mortgage
Corporation - Delaware
Aurora, Illinois July 30, 2004 140,700 4,200 (1) 1,500
---------- ------- --------
$1,384,500 117,200 11,700
========== ======= ========
2003
----
Bank of Ste. Genevieve
Ste. Genevieve, Missouri March 31, 2003 $ 115,100 17,900 3,400
========== ======= ========
2002
----
Union Planters Bank N.A.
Denton and Garland, Texas
branch offices June 22, 2002 $ 63,700 65,100 --
Plains Financial Corporation
Des Plaines, Illinois January 15, 2002 256,300 36,500 12,600
---------- ------- --------
$ 320,000 101,600 12,600
========== ======= ========
---------------
(1) In conjunction with the acquisition of Continental Mortgage Corporation - Delaware (CMC), First Banks redeemed
in full all of the outstanding subordinated promissory notes of CMC, including accumulated accrued and unpaid
interest, totaling $4.5 million in aggregate.
Goodwill associated with the acquisitions included in the table above
is not deductible for tax purposes, with the exception of the goodwill
associated with the purchase of assets and assumption of liabilities of Small
Business Loan Source, Inc. (SBLS), which is deductible for tax purposes. For
2004, 2003 and 2002 acquisitions, goodwill in the amounts of $11.7 million, $3.4
million and $12.6 million, respectively, was assigned to First Bank.
The aforementioned transactions were accounted for using the purchase
method of accounting and, accordingly, the consolidated financial statements
include the financial position and results of operations for the periods
subsequent to the respective acquisition dates, and the assets acquired and
liabilities assumed were recorded at fair value at the acquisition dates. These
fair value adjustments for the acquisitions completed in 2004 represent current
estimates and are subject to further adjustments as the valuation data is
finalized. These acquisitions were funded from available cash reserves,
borrowings under First Banks' revolving credit agreement, proceeds from the
issuance of subordinated debentures and proceeds from exchanges, sales and
maturities of available-for-sale investment securities.
On March 31, 2003, First Banks completed its acquisition of Bank of
Ste. Genevieve (BSG), Ste. Genevieve, Missouri, from Allegiant Bancorp, Inc.,
(Allegiant), in exchange for approximately 974,150 shares of Allegiant common
stock previously held. The purpose of the transaction was to further expand the
Midwest banking franchise. At the time of the acquisition, BSG had $115.1
million in total assets, $43.7 million in loans, net of unearned discount, $47.8
million in investment securities, and $93.7 million in deposits and operated two
locations in Ste. Genevieve, Missouri. First Banks recorded a gain of $6.3
million on the exchange of the Allegiant common stock and goodwill of
approximately $3.4 million. The core deposit intangibles, which are not
deductible for tax purposes, were approximately $3.5 million and are being
amortized over seven years utilizing the straight-line method. BSG was merged
with and into First Bank. Subsequent to the acquisition, First Banks continued
to own 231,779 shares, or approximately 1.52% of the issued and outstanding
shares of Allegiant common stock. In October 2003, the remaining shares of
Allegiant common stock were contributed to a previously established charitable
foundation. In conjunction with this transaction, charitable contribution
expense was recorded of $5.1 million, which was partially offset by a gain on
the contribution of these available-for-sale investment securities of $2.3
million, representing the difference between the cost basis and the fair value
of the common stock on the date of the contribution. In addition, a tax benefit
of $2.5 million associated with this transaction. The contribution of this stock
eliminated the Company's investment in Allegiant.
On July 30, 2004, First Banks completed its acquisition of CMC, and its
wholly-owned banking subsidiary, Continental Community Bank and Trust Company,
(CCB), acquiring all of the outstanding common stock of CMC in exchange for $4.2
million in cash, and redeemed in full all of the outstanding subordinated
promissory notes of CMC, including accumulated accrued and unpaid interest,
totaling $4.5 million in aggregate. The transaction was funded through
internally generated funds. CMC, through CCB, operated two banking offices in
the Chicago suburban communities of Aurora and Villa Park. At the time of the
transaction, CMC had total assets of $140.7 million, loans, net of unearned
discount, of $73.6 million and total deposits of $104.6 million. Goodwill was
approximately $1.5 million and the core deposit intangibles, which are not
deductible for tax purposes and are being amortized over seven years utilizing
the straight-line method, were approximately $2.0 million. CMC was merged with
and into SFC and CCB was merged with and into First Bank.
On August 31, 2004, Small Business Loan Source LLC (SBLS LLC), a newly
formed Nevada-based limited liability company and subsidiary of First Bank,
purchased substantially all of the assets and assumed certain liabilities of
SBLS, headquartered in Houston, Texas, in exchange for cash and certain payments
contingent on future valuations of specifically identified assets, including
servicing assets and retained interests in securitizations, as further described
in Note 24 to the Consolidated Financial Statements. The transaction was funded
through internally generated funds. At the time of the transaction, SBLS LLC
purchased from SBLS assets of $47.1 million, including $24.0 million of United
States Small Business Administration (SBA), loans, net of unearned discount, and
$15.1 million of SBA servicing rights, and assumed $1.5 million of liabilities,
resulting in a net cash payment of $45.6 million. Goodwill was approximately
$5.9 million. In conjunction with this transaction, on August 30, 2004, First
Bank granted to First Capital America, Inc. (FCA), a corporation owned by First
Banks' Chairman and members of his immediate family, an option to purchase
Membership Interests of SBLS LLC. This option to purchase was extended on
December 31, 2004. Upon exercise of this option, SBLS LLC will become 51.0%
owned by First Bank and 49.0% owned by FCA, as further discussed in Note 19 to
the Consolidated Financial Statements.
On November 30, 2004, First Banks completed its acquisition of Hillside
Investors, Ltd. (Hillside) and its wholly-owned banking subsidiary, CIB Bank,
headquartered in Hillside, Illinois, for approximately $67.4 million in cash.
The acquisition served to significantly expand First Banks' banking franchise in
Chicago, Illinois. The transaction was funded through the issuance of
subordinated debentures associated with two private placements of $60.0 million
in aggregate of trust preferred securities, of which $20.0 million was issued on
September 20, 2004 through a newly formed affiliated statutory trust, and an
additional $40.0 million was issued on November 23, 2004 through a newly formed
affiliated statutory trust, as further discussed in Note 12 to the Consolidated
Financial Statements. In addition, the acquisition was also funded through
borrowings under the Company's revolving line of credit with a group of
unaffiliated financial institutions. CIB Bank operated 16 banking offices in the
Chicago, Illinois metropolitan area, including ten offices in Cook County, three
offices in Lake County, two offices in Will County and one office in DuPage
County. At the time of the transaction, CIB Bank had total assets of $1.20
billion, loans, net of unearned discount, of $683.3 million, investment
securities of $393.2 million and total deposits of $1.10 billion. Preliminary
goodwill was approximately $4.3 million and the core deposit intangibles, which
are not deductible for tax purposes and are being amortized over seven years
utilizing the straight-line method, were approximately $13.4 million. Hillside
was merged with and into SFC and CIB Bank was merged with and into First Bank.
The following table summarizes the estimated fair value of the Hillside
assets acquired and liabilities assumed at the date of acquisition. As
previously discussed, the fair value adjustments represent current estimates and
are subject to further adjustment as the valuation data is finalized.
November 30, 2004
(dollars expressed in thousands)
Cash and cash equivalents...................................................... $ 123,829
Investment securities.......................................................... 392,651
Loans, net of unearned discount................................................ 662,588
Allowance for loan losses...................................................... (26,373)
-------------
Net loans................................................................. 636,215
Bank premises and equipment.................................................... 11,449
Goodwill....................................................................... 4,285
Core deposit intangibles....................................................... 13,395
Deferred income taxes.......................................................... 13,348
Other assets................................................................... 20,836
-------------
Total assets acquired..................................................... $ 1,216,008
=============
Total deposits................................................................. $ 1,102,041
Other borrowings............................................................... 33,199
Deferred income taxes.......................................................... 1,375
Accrued expenses and other liabilities......................................... 12,010
-------------
Total liabilities assumed................................................. 1,148,625
-------------
Net assets acquired....................................................... $ 67,383
=============
The following information presents unaudited pro forma combined
condensed results of operations of First Banks, combined with the acquisition of
Hillside, as if First Banks had completed the transaction on January 1, 2003.
The pro forma combined condensed results of operations have been prepared based
on the historical operations of First Banks and Hillside.
Years Ended December 31,
------------------------
2004 2003
---- ----
(dollars expressed in thousands,
except share and per share data)
Net interest income.................................................... $ 324,095 333,769
========== ==========
Net income (loss)...................................................... $ 73,284 (4,260)
========== ==========
Weighted average common stock outstanding.............................. 23,661 23,661
========== ==========
Earnings (loss) per common share:
Basic.............................................................. $ 3,064.02 (213.27)
Diluted............................................................ 3,020.01 (213.27)
========== ==========
The unaudited pro forma combined condensed results of operations
reflect the application of the purchase method of accounting and certain other
assumptions. Purchase accounting adjustments have been applied to investment
securities, loans, net of unearned discount, allowance for loan losses,
derivative instruments, bank premises and equipment, deferred income tax assets,
goodwill, core deposit intangibles, other real estate, other assets and deferred
income tax liabilities to reflect the assets and liabilities assumed at fair
value. The resulting premiums and discounts are amortized or accreted to income
consistent with the accounting policies of First Banks. Due to the immaterial
effect on previously reported financial information, the pro forma combined
condensed results of operations do not reflect the impact of the other
aforementioned transactions completed in 2003 and 2004.
In addition, as previously discussed, on December 31, 2002, First Banks
completed its acquisition of all of the outstanding capital stock of FBA that it
did not already own. This transaction was accounted for using the purchase
method of accounting, and goodwill in the amount of $14.6 million was recorded
and assigned to First Bank. The goodwill is not deductible for tax purposes.
First Banks accrues certain costs associated with its acquisitions as
of the respective consummation dates. The accrued costs relate to adjustments to
the staffing levels of the acquired entities or to the anticipated termination
of information technology or item processing contracts of the acquired entities
prior to their stated contractual expiration dates. The most significant costs
that First Banks incurs relate to salary continuation agreements, or other
similar agreements, of executive management and certain other employees of the
acquired entities that were in place prior to the acquisition dates. These
agreements provide for payments over periods ranging from two to 15 years and
are triggered as a result of the change in control of the acquired entity. Other
severance benefits for employees that are terminated in conjunction with the
integration of the acquired entities into First Banks' existing operations are
normally paid to the recipients within 90 days of the respective consummation
date and are expensed in the consolidated statement of income as incurred. The
accrued severance balance of $761,000, as summarized in the following table, is
comprised of contractual obligations under salary continuation agreements to six
individuals with remaining terms ranging from approximately two to 11 years. As
the obligation to make payments under these agreements is accrued at the
consummation date, such payments do not have any impact on the consolidated
statements of income. First Banks also incurs integration costs associated with
acquisitions that are expensed in the consolidated statements of income. These
costs relate principally to additional costs incurred in conjunction with the
information technology conversions of the respective entities.
A summary of the cumulative acquisition and integration costs
attributable to the Company's acquisitions, which were accrued as of the
consummation dates of the respective acquisition, is listed below. These
acquisition and integration costs are reflected in accrued expenses and other
liabilities in the consolidated balance sheets.
Information
Severance Technology Fees Total
--------- --------------- -----
(dollars expressed in thousands)
Balance at December 31, 2001.................. $3,934 153 4,087
Year Ended December 31, 2002:
Amounts accrued at acquisition date......... 239 250 489
Payments.................................... (1,822) (375) (2,197)
------ ------ ------
Balance at December 31, 2002.................. 2,351 28 2,379
Year Ended December 31, 2003:
Amounts accrued at acquisition date......... 100 350 450
Reversal to goodwill........................ (39) (108) (147)
Payments.................................... (1,000) (270) (1,270)
------ ------ ------
Balance at December 31, 2003.................. 1,412 -- 1,412
------ ------ ------
Year Ended December 31, 2004:
Amounts accrued at acquisition date......... 180 496 676
Payments.................................... (831) (496) (1,327)
------ ------ ------
Balance at December 31, 2004.................. $ 761 -- 761
====== ====== ======
On October 17, 2003, First Bank completed its divestiture of three
branch offices in the northern and central Illinois market area, and on December
5, 2003, First Bank completed its divestiture of one branch office in regional
Missouri. These branch divestitures resulted in a reduction of the deposit base
of approximately $88.3 million, and a pre-tax gain of approximately $4.0
million, which is included in noninterest income.
On February 6, 2004, First Bank completed its divestiture of one branch
office in rural Missouri. On April 16, 2004, First Bank completed its
divestiture of one branch office in southern Illinois. These branch divestitures
resulted in a reduction of the deposit base of approximately $23.4 million, and
a pre-tax gain of approximately $1.0 million, which is included in noninterest
income.
During the year ended December 31, 2004, First Bank opened the
following four de novo branch offices:
Branch Office Location Date Opened
---------------------- -----------
Houston, Texas February 9, 2004
Wildwood, Missouri February 20, 2004
McKinney, Texas July 19, 2004
San Diego, California August 16, 2004
On June 30, 2004, First Bank completed the sale of a significant
portion of the leases in its commercial leasing portfolio. The sale reduced the
Company's commercial leasing portfolio by approximately $33.1 million to $9.6
million at June 30, 2004. No gain or loss was recorded on the transaction. In
conjunction with the transaction, First Bank established a $2.0 million
liability associated with the related recourse obligations for certain leases
sold, as further discussed in Note 24 to the Consolidated Financial Statements.
The commercial leasing portfolio has further declined to $5.9 million at
December 31, 2004, reflecting the Company's overall business strategy to reduce
its commercial leasing activities.
(3) INVESTMENTS IN DEBT AND EQUITY SECURITIES
Securities Available for Sale. The amortized cost, contractual
maturity, gross unrealized gains and losses and fair value of investment
securities available for sale at December 31, 2004 and 2003 were as follows:
Maturity
---------------------------------------
Total Gross
After Amor- Unrealized Weighted
1 Year 1-5 5-10 10 tized --------------- Fair Average
or Less Years Years Years Cost Gains Losses Value Yield
-------- ---- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2004:
Carrying value:
U.S. Treasury.................. $ 9,977 -- -- -- 9,977 -- (3) 9,974 2.31%
U.S. Government sponsored
agencies.................... 165,551 486,621 12,556 -- 664,728 529 (2,736) 662,521 3.11
Mortgage-backed securities..... 244 12,435 77,558 941,140 1,031,377 3,661 (6,863) 1,028,175 4.55
State and political
subdivisions................ 4,467 20,149 13,492 2,479 40,587 650 (10) 41,227 3.63
Corporate debt securities...... 6,218 -- -- -- 6,218 26 (1) 6,243 5.40
Equity investments ............ 367 -- -- 10,230 10,597 383 -- 10,980 6.72
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 28,943 -- -- -- 28,943 -- -- 28,943 4.98
-------- ------- ------- -------- --------- ------ ------ ---------
Total................... $215,767 519,205 103,606 953,849 1,792,427 5,249 (9,613) 1,788,063 4.01%
======== ======= ======= ======== ========= ====== ====== ========= ====
Fair value:
Debt securities................ $186,472 517,273 103,989 940,406
Equity securities.............. 29,310 -- -- 10,613
-------- ------- ------- --------
Total................... $215,782 517,273 103,989 951,019
======== ======= ======= ========
Weighted average yield............ 2.82% 3.28% 4.55% 4.61%
======== ======= ======= ========
December 31, 2003:
Carrying value:
U.S. Government sponsored
agencies.................... $ 50,048 81,227 1,293 -- 132,568 1,288 (533) 133,323 3.13%
Mortgage-backed securities..... 613 7,913 63,394 743,476 815,396 6,353 (3,725) 818,024 4.55
State and political
subdivisions................ 3,749 11,293 14,280 1,924 31,246 801 (11) 32,036 3.72
Corporate debt securities...... 17,029 5,772 -- -- 22,801 477 -- 23,278 5.47
Equity investments ............ 449 -- -- 7,457 7,906 78 -- 7,984 7.83
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 24,142 -- -- -- 24,142 -- -- 24,142 5.31
-------- ------- ------- -------- --------- ------ ------- ---------
Total................... $ 96,030 106,205 78,967 752,857 1,034,059 8,997 (4,269) 1,038,787 4.41%
======== ======= ======= ======== ========= ====== ====== ========= ====
Fair value:
Debt securities................ $ 72,247 106,999 80,558 746,857
Equity securities.............. 24,591 -- -- 7,535
-------- ------- ------- --------
Total................... $ 96,838 106,999 80,558 754,392
======== ======= ======= ========
Weighted average yield............ 4.65% 2.84% 4.51% 4.59%
======== ======= ======= ========
Securities Held to Maturity. The amortized cost, contractual maturity,
gross unrealized gains and losses and fair value of investment securities held
to maturity at December 31, 2004 and 2003 were as follows:
Maturity
---------------------------------------- Total Gross
After Amort- Unrealized Weighted
1 Year 1-5 5-10 10 tized ----------------- Fair Average
or Less Years Years Years Cost Gains Losses Value Yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2004:
Carrying value:
Mortgage-backed securities..... $ -- -- 7,060 10,288 17,348 96 (1) 17,443 5.01%
State and political
subdivisions................. 545 5,150 1,977 266 7,938 211 (6) 8,143 4.52
-------- ------- ------ ------ ------ ----- ----- -------
Total...................... $ 545 5,150 9,037 10,554 25,286 307 (7) 25,586 4.86
======== ======= ====== ====== ====== ===== ===== ======= ====
Fair value:
Debt securities................ $ 556 5,340 9,080 10,610
======== ======= ====== ======
Weighted average yield............ 4.93% 4.13% 5.22% 4.89%
======== ======= ====== ======
December 31, 2003:
Carrying value:
Mortgage-backed securities..... $ -- -- -- 576 576 26 -- 602 6.34%
State and political
subdivisions................. 3,098 2,968 4,285 -- 10,351 388 -- 10,739 4.93
-------- ------- ------ ------ ------ ----- ----- ------
Total...................... $ 3,098 2,968 4,285 576 10,927 414 -- 11,341 5.00
======== ======= ====== ====== ====== ===== ===== ======= ====
Fair value:
Debt securities................ $ 3,150 3,142 4,447 602
======== ======= ====== ======
Weighted average yield............ 5.22% 4.46% 5.04% 6.34%
======== ======= ====== ======
Proceeds from sales of available-for-sale investment securities were
$26.3 million, $6.0 million and $55.1 million for the years ended December 31,
2004, 2003 and 2002, respectively. Gross gains of $257,100, $576,600 and $91,000
were realized on these sales during the years ended December 31, 2004, 2003 and
2002, respectively. Gross losses of $1,600 were realized on these sales during
the year ended December 31, 2002. There were no gross losses realized on sales
of available-for-sale investment securities in 2004 and 2003.
In 2003, First Banks also recognized non-cash gains of $6.3 million on
the partial exchange of equity securities for a 100% ownership interest in Bank
of Ste. Genevieve, and a $2.3 million gain on the subsequent contribution of the
remaining shares of equity securities to a charitable foundation. In addition,
First Banks recognized a $431,000 impairment loss due to an other-than-temporary
decline in the fair value of an equity fund investment.
Proceeds from calls of investment securities were $63.1 million, $41.5
million and $64.0 million for the years ended December 31, 2004, 2003 and 2002,
respectively. Gross gains of $11,200 were realized on these called securities
during the year ended December 31, 2003. There were no gross gains realized on
called securities in 2004 and 2002. Gross losses of $1,900 were realized on
these called securities during the year ended December 31, 2003. There were no
gross losses realized on called securities in 2004 and 2002.
First Bank is a member of the Federal Home Loan Bank (FHLB) system and
the Federal Reserve Bank (FRB) system and maintains investments in FHLB and FRB
stock. These investments are recorded at cost, which represents redemption
value. The investment in FRB stock is maintained at a minimum of 6% of First
Bank's capital stock and capital surplus. The investments in FHLB of Chicago
stock is maintained at an amount equal to 5% of advances. The investment in FHLB
of Des Moines stock is maintained at an amount equal to 0.12% of First Bank's
total assets as of December 31, 2002 plus 4.45% of advances plus 0.15% of
outstanding standby letters of credit.
Investment securities with a carrying value of approximately $731.8
million and $379.4 million at December 31, 2004 and 2003, respectively, were
pledged in connection with deposits of public and trust funds, securities sold
under agreements to repurchase and for other purposes as required by law.
Gross unrealized losses on investment securities and the fair value of
the related securities, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss position,
at December 31, 2004, were as follows:
Less than 12 months 12 months or more Total
--------------------------- ---------------------- -------------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
--------------- ---------- --------- ---------- ----------- ------------
(dollars expressed in thousands)
Available for sale:
U.S. Treasury..................... $ 9,974 (3) -- -- 9,974 (3)
U.S. Government sponsored
agencies....................... 480,912 (2,736) -- -- 480,912 (2,736)
Mortgage-backed securities........ 657,939 (6,863) -- -- 657,939 (6,863)
State and political subdivisions.. 1,964 (10) -- -- 1,964 (10)
Corporate debt securities......... 510 (1) -- -- 510 (1)
---------- -------- ----- ------ ---------- ---------
Total.................... $1,151,299 (9,613) -- -- 1,151,299 (9,613)
========== ======== ===== ====== ========== =========
Held to maturity:
Mortgage-backed securities........ $ 3,161 (1) -- -- 3,161 (1)
State and political subdivisions.. 926 (6) -- -- 926 (6)
---------- -------- ----- ------ ---------- ---------
Total.................... $ 4,087 (7) -- -- 4,087 (7)
========== ======== ===== ====== ========== =========
U.S. Treasury, U.S. Government sponsored agencies and mortgage-backed
securities - The unrealized losses on investments in mortgage-backed securities,
U.S. Treasury securities and other agency securities were caused by fluctuations
in interest rates. The contractual terms of these securities are guaranteed by
government-sponsored enterprises. It is expected that the securities would not
be settled at a price less than the amortized cost. Because First Banks has the
ability and intent to hold these investments until a market price recovery or
maturity, these investments are not considered other-than-temporarily impaired.
State and political subdivisions and corporate debt securities - The
unrealized losses on investments in state and political subdivisions and
corporate debt securities were caused by fluctuations in interest rates. It is
expected that the securities would not be settled at a price less than the
amortized cost. Because the decline in fair value is attributable to changes in
interest rates and not credit quality, and because First Banks has the ability
and intent to hold these investments until a market price recovery or maturity,
these investments are not considered other-than-temporarily impaired.
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December
31, 2004, 2003 and 2002 were as follows:
2004 2003 2002
---- ---- ----
(dollars expressed in thousands)
Balance, beginning of year................................. $ 116,451 99,439 97,164
Acquired allowances for loan losses........................ 33,752 757 1,366
Other adjustments (1)(2)................................... (479) -- --
--------- -------- -------
149,724 100,196 98,530
--------- -------- -------
Loans charged-off.......................................... (50,643) (55,773) (70,524)
Recoveries of loans previously charged-off................. 25,876 23,028 15,933
--------- -------- -------
Net loans charged-off................................... (24,767) (32,745) (54,591)
--------- -------- -------
Provision for loan losses.................................. 25,750 49,000 55,500
--------- -------- -------
Balance, end of year....................................... $ 150,707 116,451 99,439
========= ======== =======
---------------
(1) In December 2003, First Banks established a $1.0 million specific reserve for estimated losses
on a $5.3 million letter of credit that was recorded in accrued and other liabilities in the
consolidated balance sheets. On January 5, 2004, the letter of credit was fully funded as a
loan and the related $1.0 million specific reserve was reclassified from accrued and other
liabilities to the allowance for loan losses.
(2) On June 30, 2004, First Banks reclassified $1.5 million from the allowance for loan losses to
accrued and other liabilities to establish a specific reserve associated with the commercial
leasing portfolio sale and related recourse obligations for certain leases sold.
At December 31, 2004 and 2003, First Banks had $85.8 million and $75.4
million of impaired loans, consisting of loans on nonaccrual status. Interest on
nonaccrual loans, which would have been recorded under the original terms of the
loans, was $4.4 million, $5.9 million and $7.1 million for the years ended
December 31, 2004, 2003 and 2002, respectively. Of these amounts, $716,000, $2.6
million and $2.2 million was actually recorded as interest income on such loans
in 2004, 2003 and 2002, respectively. The allowance for loan losses includes an
allocation for each impaired loan. The aggregate allocation of the allowance for
loan losses related to impaired loans was approximately $21.4 million and $17.7
million at December 31, 2004 and 2003, respectively. The average recorded
investment in impaired loans was $77.3 million, $69.6 million and $78.1 million
for the years ended December 31, 2004, 2003 and 2002, respectively. The amount
of interest income recognized using a cash basis method of accounting during the
time these loans were impaired was $717,000, $2.6 million and $4.6 million in
2004, 2003 and 2002, respectively. At December 31, 2004 and 2003, First Banks
had $28.7 million and $2.8 million, respectively, of loans past due 90 days or
more and still accruing interest. A significant portion of these loans were past
due as to contractual maturity and pending renewal at December 31, 2004;
however, the majority of the loan payments were current and in accordance with
the contractual terms of the underlying credit agreements.
First Banks' primary market areas are the states of Missouri, Illinois,
Texas and California. At December 31, 2004 and 2003, approximately 90% and 91%
of the total loan portfolio, respectively, and 82% and 80% of the commercial,
financial and agricultural loan portfolio, respectively, were made to borrowers
within these states.
Real estate lending constituted the only significant concentration of
credit risk. Real estate loans comprised approximately 74% and 71% of the loan
portfolio at December 31, 2004 and 2003, respectively, of which 22% and 25%,
respectively, were made to consumers in the form of residential real estate
mortgages and home equity lines of credit.
In general, First Banks is a secured lender. At December 31, 2004 and
2003, 99% of the loan portfolio was collateralized. Collateral is required in
accordance with the normal credit evaluation process based upon the
creditworthiness of the customer and the credit risk associated with the
particular transaction.
Loans to directors, their affiliates and executive officers of First
Banks, Inc. were approximately $31.0 million and $20.0 million at December 31,
2004 and 2003, respectively, as further discussed in Note 19 to the Consolidated
Financial Statements.
(5) DERIVATIVE INSTRUMENTS
First Banks utilizes derivative financial instruments to assist in the
management of interest rate sensitivity by modifying the repricing, maturity and
option characteristics of certain assets and liabilities. Derivative financial
instruments held by First Banks at December 31, 2004 and 2003 are summarized as
follows:
December 31,
---------------------------------------------------
2004 2003
------------------------ -------------------------
Notional Credit Notional Credit
Amount Exposure Amount Exposure
------ -------- ------ --------
(dollars expressed in thousands)
Cash flow hedges.............................. $ 500,000 1,233 1,250,000 2,857
Fair value hedges............................. 276,200 9,609 326,200 12,614
Interest rate cap agreements.................. -- -- 450,000 --
Interest rate lock commitments................ 5,400 -- 15,500 --
Forward commitments to sell
mortgage-backed securities.................. 34,000 -- 58,500 --
========== ====== ========== =======
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
First Banks' credit exposure through its use of these instruments. The credit
exposure represents the loss First Banks would incur in the event the
counterparties failed completely to perform according to the terms of the
derivative financial instruments and the collateral held to support the credit
exposure was of no value.
During 2004, 2003 and 2002, First Banks realized net interest income on
derivative financial instruments of $50.1 million, $64.6 million and $53.0
million, respectively. In addition, First Banks recorded a net loss on
derivative instruments, which is included in noninterest income in the
consolidated statements of income, of $1.5 million for the year ended December
31, 2004, in comparison to net gains of $496,000 and $2.2 million for the years
ended December 31, 2003 and 2002, respectively.
Cash Flow Hedges. First Banks entered into the following interest rate
swap agreements, designated as cash flow hedges, to effectively lengthen the
repricing characteristics of certain interest-earning assets to correspond more
closely with their funding source with the objective of stabilizing cash flow,
and accordingly, net interest income over time:
>> During September 2000, March 2001, April 2001, March 2002 and
July 2003, First Banks entered into interest rate swap agreements
of $600.0 million, $200.0 million, $175.0 million, $150.0 million
and $200.0 million notional amount, respectively. The underlying
hedged assets are certain loans within the commercial loan
portfolio. The swap agreements provide for First Banks to receive
a fixed rate of interest and pay an adjustable rate of interest
equivalent to the weighted average prime lending rate minus
2.70%, 2.82%, 2.82%, 2.80% and 2.85%, respectively. The terms of
the swap agreements provide for First Banks to pay and receive
interest on a quarterly basis. In November 2001, First Banks
terminated $75.0 million notional amount of the swap agreements
entered into in April 2001, which would have expired in April
2006, in order to appropriately modify its overall hedge position
in accordance with its interest rate risk management program. The
$150.0 million notional amount swap agreement that was entered
into in March 2002 matured on March 14, 2004 and the $600.0
million notional amount swap agreements that were entered into in
September 2000 matured on September 20, 2004. The amount
receivable under the swap agreements was $2.7 million and $3.9
million at December 31, 2004 and 2003, respectively, and the
amount payable under the swap agreements was $1.4 million and
$1.1 million at December 31, 2004 and 2003, respectively.
On October 1, 2004, First Banks implemented the guidance required by
the FASB's Derivatives Implementation Group on SFAS No. 133 Implementation Issue
No. G25, Cash Flow Hedges: Using the First-Payments-Received Technique in
Hedging the Variable Interest Payments on a Group of Non-Benchmark-Rate-Based
Loans, (DIG issue G25) and de-designated all of the specific pre-existing cash
flow hedging relationships that were inconsistent with the guidance in DIG Issue
G25. Consequently, the $4.1 million net gain associated with the de-designated
cash flow hedging relationships at September 30, 2004, is being amortized to
interest income over the remaining lives of the respective hedging
relationships, which ranged from approximately six months to three years at the
date of implementation. The Company elected to prospectively re-designate new
cash flow hedging relationships based upon minor revisions to the underlying
hedged items as required by the guidance in DIG Issue G25. The implementation of
DIG Issue G25 did not and is not expected to have a material impact on the
consolidated financial statements, results of operations or First Banks'
interest rate risk management program.
The maturity dates, notional amounts, interest rates paid and received
and fair value of First Banks' interest rate swap agreements designated as cash
flow hedges as of December 31, 2004 and 2003 were as follows:
Notional Interest Rate Interest Rate Fair
Maturity Date Amount Paid Received Value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
December 31, 2004:
March 21, 2005........................ $ 200,000 2.43% 5.24% $ 1,155
April 2, 2006......................... 100,000 2.43 5.45 2,678
July 31, 2007......................... 200,000 2.40 3.08 (2,335)
---------- --------
$ 500,000 2.42 4.42 $ 1,498
========== ===== ===== ========
December 31, 2003:
March 14, 2004........................ $ 150,000 1.20% 3.93% $ 879
September 20, 2004.................... 600,000 1.30 6.78 23,250
March 21, 2005........................ 200,000 1.18 5.24 8,704
April 2, 2006......................... 100,000 1.18 5.45 6,881
July 31, 2007......................... 200,000 1.15 3.08 501
---------- --------
$1,250,000 1.24 5.49 $ 40,215
========== ===== ===== ========
Fair Value Hedges. First Banks entered into the following interest rate
swap agreements, designated as fair value hedges, to effectively shorten the
repricing characteristics of certain interest-bearing liabilities to correspond
more closely with their funding source with the objective of stabilizing net
interest income over time:
>> During January 2001, First Banks entered into $50.0 million
notional amount of three-year interest rate swap agreements and
$150.0 million notional amount of five-year interest rate swap
agreements that provide for First Banks to receive a fixed rate
of interest and pay an adjustable rate of interest equivalent to
the three-month London Interbank Offering Rate. The underlying
hedged liabilities are a portion of First Banks' other time
deposits. The terms of the swap agreements provide for First
Banks to pay interest on a quarterly basis and receive interest
on a semiannual basis. The amount receivable under the swap
agreements was $3.9 million and $5.2 million at December 31, 2004
and 2003, respectively, and the amount payable under the swap
agreements was $695,000 and $537,000 at December 31, 2004 and
2003, respectively. During September 2003, First Banks
discontinued hedge accounting treatment on the $50.0 million
notional amount of three-year swap agreements entered into in
January 2001 due to the loss of the highly correlated hedge
positions between the swap agreements and the underlying hedged
liabilities. The related $1.3 million basis adjustment of the
underlying hedged liabilities was recorded as a reduction of
interest expense over the remaining weighted average maturity of
the underlying hedged liabilities of approximately three months.
In addition, the effect of the loss of the highly correlated
hedge position on the swap agreements resulted in the recognition
of a net loss of $291,000, which is included in noninterest
income. The $50.0 million notional swap agreement matured on
January 9, 2004. As further discussed in Note 25 to the
Consolidated Financial Statements, First Banks terminated the
remaining $150.0 million notional swap agreements, effective
February 25, 2005.
>> During May 2002, First Banks entered into $55.2 million notional
amount of interest rate swap agreements that provide for First
Banks to receive a fixed rate of interest and pay an adjustable
rate of interest equivalent to the three-month London Interbank
Offering Rate plus 2.30%. The underlying hedged liabilities are a
portion of First Banks' subordinated debentures. The terms of the
swap agreements provide for First Banks to pay and receive
interest on a quarterly basis. There were no amounts receivable
or payable under the swap agreements at December 31, 2004 and
2003.
>> During June 2002, First Banks entered into $86.3 million and
$46.0 million notional amount, respectively, of interest rate
swap agreements that provide for First Banks to receive a fixed
rate of interest and pay an adjustable rate of interest
equivalent to the three-month London Interbank Offering Rate plus
2.75% and 1.97%, respectively. The underlying hedged liabilities
were a portion of First Banks' subordinated debentures. The $86.3
million notional amount interest rate swap agreement was called
by its counterparty in November 2002 resulting in final
settlement of this interest rate swap agreement in December 2002.
The $46.0 million notional amount interest rate swap agreement
was called by its counterparty on May 21, 2003, resulting in
final settlement of this interest rate swap agreement on June 30,
2003. There was no gain or loss recorded as a result of these
transactions.
>> During March 2003 and April 2003, First Banks entered into $25.0
million and $46.0 million notional amount, respectively, of
interest rate swap agreements that provide for First Banks to
receive a fixed rate of interest and pay an adjustable rate of
interest equivalent to the three-month London Interbank Offering
Rate plus 2.55% and 2.58%, respectively. The underlying hedged
liabilities are a portion of First Banks' subordinated
debentures. The terms of the swap agreements provide for First
Banks to pay and receive interest on a quarterly basis. There
were no amounts receivable or payable under the swap agreements
at December 31, 2004 or 2003.
The maturity dates, notional amounts, interest rates paid and received
and fair value of First Banks' interest rate swap agreements designated as fair
value hedges as of December 31, 2004 and 2003 were as follows:
Notional Interest Rate Interest Rate Fair
Maturity Date Amount Paid Received Value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
December 31, 2004:
January 9, 2006 (1)...................... $150,000 2.06% 5.51% $ 3,610
December 31, 2031........................ 55,200 4.27 9.00 2,171
March 20, 2033........................... 25,000 4.52 8.10 (929)
June 30, 2033............................ 46,000 4.55 8.15 (1,689)
-------- --------
$276,200 3.14 6.88 $ 3,163
======== ===== ===== ========
December 31, 2003:
January 9, 2004 (2)...................... $ 50,000 1.15% 5.37% $ --
January 9, 2006.......................... 150,000 1.15 5.51 9,932
December 31, 2031........................ 55,200 3.44 9.00 2,499
March 20, 2033........................... 25,000 3.69 8.10 (1,270)
June 30, 2033............................ 46,000 3.72 8.15 (2,008)
-------- --------
$326,200 2.10 6.65 $ 9,153
======== ===== ===== ========
----------------------
(1) The interest rate swap agreements were terminated effective February 25, 2005, as further discussed in
Note 25 to the Consolidated Financial Statements.
(2) Hedge accounting treatment was discontinued in September 2003 as further discussed above.
Interest Rate Cap Agreements. In conjunction with the interest rate
swap agreements designated as cash flow hedges that matured in September 2004,
First Banks also entered into $450.0 million notional amount of four-year
interest rate cap agreements to limit the net interest expense associated with
the interest rate swap agreements in the event of a rising rate scenario. The
interest rate cap agreements matured on September 20, 2004. The interest rate
cap agreements provided for First Banks to receive a quarterly adjustable rate
of interest equivalent to the differential between the three-month London
Interbank Offering Rate and the strike price of 7.50% if the three-month London
Interbank Offering Rate would have exceeded the strike price. The carrying value
of these interest rate cap agreements included in derivative instruments in the
consolidated balance sheet at December 31, 2003 was zero.
During 2003 and 2004, First Banks entered into five term reverse
repurchase agreements under master repurchase agreements with unaffiliated third
parties, as further discussed in Note 10 to the Consolidated Financial
Statements. The term reverse repurchase agreements were entered into with the
objective of stabilizing net interest income over time and further protecting
net interest margin against changes in interest rates. The interest rate cap
agreements included within the term reverse repurchase agreements represent
embedded derivative instruments which, in accordance with existing accounting
literature governing derivative instruments, are not required to be separated
from the term reverse repurchase agreements and accounted for separately as a
derivative financial instrument. As such, the term reverse repurchase agreements
are reflected in other borrowings in the consolidated balance sheets and the
related interest expense is reflected as interest expense on other borrowings in
the consolidated statements of income.
The maturity dates, par amounts, interest rate paid and interest rate
spread on First Banks' term reverse repurchase agreements as of December 31,
2004 and 2003 were as follows:
Par Interest Rate
Maturity Date Amount Minus Spread (1) Strike Price (1)
------------- ------ ---------------- ----------------
(dollars expressed in thousands)
December 31, 2004:
August 15, 2006................................. $ 50,000 LIBOR - 0.5650% 3.00%
January 12, 2007................................ 150,000 LIBOR - 0.8350% 3.50%
June 14, 2007................................... 50,000 LIBOR - 0.6000% 5.00%
June 14, 2007................................... 50,000 LIBOR - 0.6100% 5.00%
August 1, 2007.................................. 50,000 LIBOR - 0.6800% 3.50%
---------
$ 350,000
=========
December 31, 2003:
August 15, 2006................................. $ 50,000 LIBOR - 0.5650% 3.00%
August 1, 2007.................................. 50,000 LIBOR - 0.6800% 3.50%
---------
$ 100,000
=========
-------------------------
(1) The interest rates paid on the term reverse repurchase agreements are based on the three-month London
Interbank Offering Rate reset in arrears minus the spread amount shown above plus a floating amount
equal to the differential between the three-month London Interbank Offering Rate reset in arrears and
the strike price shown above, if the three-month London Interbank Offering Rate reset in arrears exceeds
the strike price.
Pledged Collateral. At December 31, 2004 and 2003, First Banks had a
$5.0 million letter of credit issued on its behalf to the counterparty and had
pledged investment securities available for sale with a fair value of $527,000
and $229,000, respectively, in connection with the interest rate swap
agreements. In addition, at December 31, 2003, First Banks had pledged cash of
$700,000 as collateral in connection with its interest rate swap agreements. At
December 31, 2004 and 2003, First Banks had accepted, as collateral in
connection with the interest rate swap agreements, cash of $6.0 million and
$51.3 million, respectively.
Interest Rate Lock Commitments / Forward Commitments to Sell
Mortgage-Backed Securities. Derivative financial instruments issued by First
Banks consist of interest rate lock commitments to originate fixed-rate loans to
be sold. Commitments to originate fixed-rate loans consist primarily of
residential real estate loans. These net loan commitments and loans held for
sale are hedged with forward commitments to sell mortgage-backed securities. The
carrying value of these interest rate lock commitments included in derivative
instruments in the consolidated balance sheets was $20,000 and ($77,000) at
December 31, 2004 and 2003, respectively.
(6) SERVICING RIGHTS
Mortgage Banking Activities. At December 31, 2004 and 2003, First Banks
serviced mortgage loans for others amounting to $1.06 billion and $1.22 billion,
respectively. Borrowers' escrow balances held by First Banks on such loans were
$4.4 million and $4.7 million at December 31, 2004 and 2003, respectively.
Changes in mortgage servicing rights, net of amortization, for the
years ended December 31, 2004 and 2003 were as follows:
2004 2003
---- ----
(dollars expressed in thousands)
Balance, beginning of year........................................... $ 15,408 14,882
Servicing rights acquired during the period.......................... 155 --
Originated mortgage servicing rights................................. 1,221 8,062
Amortization......................................................... (6,542) (7,536)
Impairment valuation allowance....................................... -- (800)
Reversal of impairment valuation allowance........................... -- 800
--------- -------
Balance, end of year................................................. $ 10,242 15,408
========= =======
The fair value of mortgage servicing rights was $14.6 million and $18.3
million at December 31, 2004 and 2003, respectively. At December 31, 2004 and
2003, the excess of the fair value of mortgage servicing rights over the
carrying value was $4.4 million and $2.9 million, respectively. The predominant
risk characteristics of the underlying mortgage loans used to stratify mortgage
servicing rights for purposes of measuring impairment include size, interest
rate, weighted average original term, weighted average remaining term and
estimated prepayment speeds. During 2003, First Banks recognized impairment of
$800,000 through a valuation allowance associated with a decline in the fair
value of an individual mortgage servicing rights stratum below its carrying
value, net of the valuation allowance. Subsequently, First Banks reversed the
$800,000 impairment valuation allowance based upon an increase in the fair value
of the mortgage servicing rights stratum above the carrying value, net of the
valuation allowance. First Banks did not incur any impairment of mortgage
servicing rights during the years ended December 31, 2004 and 2002.
Amortization of mortgage servicing rights at December 31, 2004 has been
estimated in the following table:
(dollars expressed
in thousands)
Year ending December 31:
2005.............................................. $ 3,922
2006.............................................. 3,335
2007.............................................. 2,015
2008.............................................. 743
2009.............................................. 227
--------
Total......................................... $ 10,242
========
Other Servicing Activities. At December 31, 2004, First Banks serviced
SBA loans for others amounting to $174.7 million. Changes in SBA servicing
rights, net of amortization, for the year ended December 31, 2004 were as
follows:
(dollars expressed
in thousands)
Balance, beginning of year.......................... $ --
Servicing rights acquired during the year........... 13,983
Originated servicing rights......................... 373
Amortization ....................................... (884)
Impairment valuation allowance...................... (459)
--------
Balance, end of year................................ $ 13,013
========
The fair value of SBA servicing assets was $13.0 million at December
31, 2004. The predominant risk characteristics of the underlying SBA loans used
to stratify SBA servicing rights for purposes of measuring impairment include
size, interest rate, weighted average original term, weighted average remaining
term and estimated prepayment speeds.
Amortization of SBA servicing rights at December 31, 2004 has been
estimated in the following table:
(dollars expressed in thousands)
Year ending December 31:
2005....................................... $ 2,288
2006....................................... 1,923
2007....................................... 1,614
2008....................................... 1,350
2009....................................... 1,127
Thereafter................................. 4,711
--------
Total................................. $ 13,013
========
(7) BANK PREMISES AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION
Bank premises and equipment were comprised of the following at December
31, 2004 and 2003:
2004 2003
---- ----
(dollars expressed in thousands)
Land................................................................. $ 29,566 22,901
Buildings and improvements........................................... 114,447 103,053
Furniture, fixtures and equipment.................................... 109,756 109,403
Leasehold improvements............................................... 24,348 24,194
Construction in progress............................................. 4,074 4,056
--------- ---------
Total............................................................ 282,191 263,607
Less accumulated depreciation and amortization....................... 137,705 126,868
--------- ---------
Bank premises and equipment, net................................. $ 144,486 136,739
========= =========
Depreciation and amortization expense for the years ended December 31,
2004, 2003 and 2002 totaled $18.6 million, $20.1 million and $18.9 million,
respectively.
First Banks leases land, office properties and equipment under
operating leases. Certain of the leases contain renewal options and escalation
clauses. Total rent expense was $13.2 million, $14.1 million and $13.9 million
for the years ended December 31, 2004, 2003 and 2002, respectively. Future
minimum lease payments under noncancellable operating leases extend through 2084
as follows:
(dollars expressed in thousands)
Year ending December 31:
2005................................................................... $ 10,024
2006................................................................... 8,610
2007................................................................... 6,857
2008................................................................... 6,129
2009................................................................... 4,573
Thereafter............................................................. 18,395
--------
Total future minimum lease payments................................ $ 54,588
========
First Banks also leases to unrelated parties a portion of its banking
facilities. Total rental income was $5.8 million, $6.1 million and $5.8 million
for the years ended December 31, 2004, 2003 and 2002, respectively.
(8) INTANGIBLE ASSETS ASSOCIATED WITH THE PURCHASE OF SUBSIDIARIES, NET OF AMORTIZATION
Intangible assets associated with the purchase of subsidiaries, net of
amortization, were comprised of the following at December 31, 2004 and 2003:
2004 2003
---------------------------- ----------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------
(dollars expressed in thousands)
Amortized intangible assets:
Core deposit intangibles.............. $ 32,823 (7,003) 17,391 (4,233)
Goodwill associated with
purchases of branch offices......... 2,210 (1,003) 2,210 (861)
--------- ------- -------- -------
Total............................ $ 35,033 (8,006) 19,601 (5,094)
========= ======= ======== =======
Unamortized intangible assets:
Goodwill associated with the
purchase of subsidiaries............ $ 155,642 144,199
========= ========
Amortization of intangibles associated with the purchase of
subsidiaries and branch offices was $2.9 million, $2.5 million and $2.0 million
for the years ended December 31, 2004, 2003 and 2002, respectively. As of
December 31, 2004, the remaining estimated life of the amortization period for
goodwill associated with purchases of branch offices and core deposit
intangibles was 10 years and 6 years, respectively. Amortization of intangibles
associated with the purchase of subsidiaries, including amortization of core
deposit intangibles and branch office purchases, has been estimated in the
following table, and does not take into consideration any potential future
acquisitions or branch office purchases.
(dollars expressed in thousands)
Year ending December 31:
2005............................... $ 4,836
2006............................... 4,836
2007............................... 4,836
2008............................... 4,836
2009............................... 2,933
Thereafter......................... 4,750
---------
Total.................... $ 27,027
=========
Changes in the carrying amount of goodwill for the years ended December
31, 2004 and 2003 were as follows:
2004 2003
---- ----
(dollars expressed in thousands)
Balance, beginning of year.................................... $ 145,548 140,112
Goodwill acquired during the year............................. 11,665 1,026
Acquisition-related adjustments............................... (222) 4,553
Amortization - purchases of branch offices.................... (142) (143)
--------- -------
Balance, end of year.......................................... $ 156,849 145,548
========= =======
(9) MATURITIES OF TIME DEPOSITS
A summary of maturities of time deposits of $100,000 or more and other
time deposits as of December 31, 2004 is as follows:
Time deposits of Other time
$100,000 or more deposits Total
---------------- -------- -----
(dollars expressed in thousands)
Year ending December 31:
2005............................................... $ 510,686 1,251,280 1,761,966
2006............................................... 155,244 463,929 619,173
2007............................................... 76,013 160,664 236,677
2008............................................... 28,973 83,194 112,167
2009............................................... 11,905 44,978 56,883
Thereafter......................................... 24,399 20,910 45,309
--------- --------- ---------
Total........................................... $ 807,220 2,024,955 2,832,175
========= ========= =========
(10) OTHER BORROWINGS
Other borrowings were comprised of the following at December 31, 2004
and 2003:
2004 2003
---- ----
(dollars expressed in thousands)
Securities sold under agreements to repurchase:
Daily.............................................................. $ 209,106 166,479
Term............................................................... 350,000 100,000
FHLB advances........................................................ 35,644 7,000
--------- --------
Total other borrowings........................................... $ 594,750 273,479
========= ========
The average balance of other borrowings was $486.0 million and $219.3
million, respectively, and the maximum month-end balance of other borrowings was
$605.6 million and $294.1 million, respectively, for the years ended December
31, 2004 and 2003. The average rates paid on other borrowings during the years
ended December 31, 2004, 2003 and 2002 were 1.26%, 1.02% and 1.78%,
respectively. Interest expense on securities sold under agreements to repurchase
was $5.4 million, $1.6 million and $2.4 million for the years ended December 31,
2004, 2003 and 2002, respectively. Interest expense on FHLB advances was
$716,000, $535,000 and $1.0 million for the years ended December 31, 2004, 2003
and 2002, respectively. The assets underlying the daily securities sold under
agreements to repurchase and the FHLB advances are held by First Banks. The
underlying securities associated with the term repurchase agreements are
mortgage-backed securities and callable U.S. Government agency securities. The
assets underlying the term securities sold under agreements to repurchase are
held by other financial institutions under safekeeping agreements. The interest
rate cap agreements included within the term reverse repurchase agreements
represent embedded derivative instruments, as further discussed in Note 5 to the
Consolidated Financial Statements.
In conjunction with First Banks' interest rate risk management program,
First Banks entered into the following term reverse repurchase agreements with
the objective of stabilizing net interest income over time, as further discussed
in Note 5 to the Consolidated Financial Statements:
>> On July 30, 2003, First Banks entered into a $50.0 million
four-year reverse repurchase agreement under a master repurchase
agreement. Interest is paid quarterly and is equivalent to the
three-month London Interbank Offering Rate reset in arrears minus
0.68% plus a floating amount equal to the differential between
the three-month London Interbank Offering Rate reset in arrears
and the strike price of 3.50%, if the three-month London
Interbank Offering Rate reset in arrears exceeds 3.50%. The
underlying securities associated with the reverse repurchase
agreement are mortgage-backed securities and are held by other
financial institutions under safekeeping agreements.
>> On August 13, 2003, First Banks entered into a $50.0 million
three-year reverse repurchase agreement under a master repurchase
agreement. Interest is paid quarterly and is equivalent to the
three-month London Interbank Offering Rate reset in arrears minus
0.565% plus a floating amount equal to the differential between
the three-month London Interbank Offering Rate reset in arrears
and the strike price of 3.00%, if the three-month London
Interbank Offering Rate reset in arrears exceeds 3.00%. The
underlying securities associated with the reverse repurchase
agreement are mortgage-backed securities and are held by other
financial institutions under safekeeping agreements.
>> Effective January 12, 2004, First Banks consummated a $150.0
million three-year reverse repurchase agreement under a master
repurchase agreement with a single unaffiliated third party.
Interest is paid quarterly and is equivalent to the three-month
London Interbank Offering Rate reset in arrears minus 0.8350%
plus a floating amount equal to the differential between the
three-month London Interbank Offering Rate reset in arrears and
the strike price of 3.50%, if the three-month London Interbank
Offering Rate reset in arrears exceeds 3.50%. The underlying
securities associated with the reverse repurchase agreement are
callable U.S. Government agency securities and are held by other
financial institutions under safekeeping agreements. In
conjunction with this transaction, First Banks purchased $150.0
million of callable U.S. Government agency securities.
>> Effective June 14, 2004, First Banks consummated two $50.0
million three-year reverse repurchase agreements under a master
repurchase agreement with a single unaffiliated third party.
Interest is paid quarterly and is equivalent to the three-month
London Interbank Offering Rate reset in arrears minus 0.60% and
0.61%, respectively, plus a floating amount equal to the
differential between the three-month London Interbank Offering
Rate reset in arrears and the strike price of 5.00%, if the
three-month London Interbank Offering Rate reset in arrears
exceeds 5.00%. The underlying securities associated with the
reverse repurchase agreements are callable U.S. Government agency
securities and are held by other financial institutions under
safekeeping agreements. In conjunction with these transactions,
First Banks purchased $100.0 million of callable U.S. Government
agency securities.
(11) NOTE PAYABLE
On August 12, 2004, First Banks entered into a First Amendment to
Secured Credit Agreement that amended its Secured Credit Agreement dated August
14, 2003 with a group of unaffiliated financial institutions (collectively, the
Credit Agreement). The material changes in the Credit Agreement were amendments
to the termination date and an increase in the revolving credit line and letter
of credit facility. The Credit Agreement provides a $75.0 million revolving
credit line and a $25.0 million letter of credit facility. Interest is payable
on outstanding loan balances at a floating rate equal to either the lender's
prime rate or, at First Banks' option, the London Interbank Offering Rate plus a
margin determined by the outstanding loan balances and First Banks' net income
for the preceding four calendar quarters. If the loan balances outstanding under
the revolving credit line are accruing at the prime rate, interest is paid
monthly. If the loan balances outstanding under the revolving credit line are
accruing at the London Interbank Offering Rate, interest is payable based on the
one, two, three or six-month London Interbank Offering Rate, as selected by
First Banks. Amounts may be borrowed under the Credit Agreement until August 11,
2005, at which time the principal and interest outstanding are due and payable.
The Credit Agreement requires First Banks to comply with various
covenants, including maintenance of certain minimum capital ratios for First
Banks and First Bank, certain maximum nonperforming assets ratios for First Bank
and a minimum return on assets ratio for First Banks. In addition, it prohibits
the payment of dividends on First Banks' common stock. At December 31, 2004 and
2003, First Banks and First Bank were in compliance with all restrictions and
requirements of the Credit Agreement.
Loans under the Credit Agreement are secured by First Banks' ownership
interest in the capital stock of its subsidiaries. Under the Credit Agreement,
there were outstanding borrowings of $15.0 million and $17.0 million at December
31, 2004 and 2003, respectively. Letters of credit issued to unaffiliated third
parties on behalf of First Banks under the Credit Agreement were $6.3 million
and $5.4 million at December 31, 2004 and 2003, respectively, and had not been
drawn on by the counterparties. The interest rate for borrowings under the
Credit Agreement was 3.44% and 2.19% at December 31, 2004 and 2003,
respectively, and was based on the applicable London Interbank Offering Rate
plus a margin of 87.5 basis points and 100.0 basis points, respectively.
The average balance and maximum month-end balance of borrowings
outstanding under the Credit Agreement during the years ended December 31, 2004
and 2003 were as follows:
2004 2003
---- ----
(dollars expressed in thousands)
Average balance................................ $ 3,657 15,418
Maximum month-end balance...................... 15,000 34,500
======== =======
The average rates paid on the outstanding borrowings during the years
ended December 31, 2004, 2003 and 2002 were 13.84%, 5.09% and 5.75%,
respectively. Interest expense recognized on borrowings under the Credit
Agreement includes commitment, arrangement and renewal fees. During 2004, the
average rate paid on the outstanding borrowings reflects an increased level of
commitment, arrangement and renewal fees on a much smaller base of borrowings
outstanding during the year, thereby causing the average rate paid to be
significantly higher than in 2003 and 2002.
(12) SUBORDINATED DEBENTURES
In February 1997, First Preferred Capital Trust (First Preferred I), a
newly formed Delaware business trust, issued 3.45 million shares of 9.25%
cumulative trust preferred securities at $25 per share in an underwritten public
offering, and issued 106,702 shares of common securities to First Banks at $25
per share. First Banks owned all of First Preferred I's common securities. The
gross proceeds of the offering were used by First Preferred I to purchase $88.9
million of 9.25% subordinated debentures from First Banks, maturing on March 31,
2027. The maturity date could have been shortened, at the option of First Banks,
to a date not earlier than March 31, 2002 or extended to a date not later than
March 31, 2046 if certain conditions were met. The subordinated debentures were
the sole asset of First Preferred I. In connection with the issuance of the
preferred securities, First Banks made certain guarantees and commitments that,
in the aggregate, constituted a full and unconditional guarantee by First Banks
of the obligations of First Preferred I under the First Preferred I preferred
securities. First Banks' proceeds from the issuance of the subordinated
debentures to First Preferred I, net of underwriting fees and offering expenses,
were $85.8 million. On May 5, 2003, First Banks redeemed in full the $88.9
million of subordinated debentures. The funds necessary for the redemption were
provided by the net proceeds from the issuance of additional subordinated
debentures to First Bank Statutory Trust and First Preferred Capital Trust IV of
$25.3 million and $45.6 million, respectively, as further discussed below, and
approximately $18.0 million of available cash reserves. First Banks'
distributions on the subordinated debentures, which were payable quarterly in
arrears, were $2.9 million and $8.2 million for the years ended December 31,
2003 and 2002, respectively.
In July 1998, First America Capital Trust (FACT), a newly formed
Delaware business trust, issued 1.84 million shares of 8.50% cumulative trust
preferred securities at $25 per share in an underwritten public offering, and
issued 56,908 shares of common securities to First Banks at $25 per share. First
Banks owned all of FACT's common securities. The gross proceeds of the offering
were used by FACT to purchase $47.4 million of 8.50% subordinated debentures
from First Banks, maturing on June 30, 2028. The maturity date could have been
shortened, at the option of First Banks, to a date not earlier than June 30,
2003 or extended to a date not later than June 30, 2037 if certain conditions
were met. The subordinated debentures were the sole asset of FACT. In connection
with the issuance of the FACT preferred securities, First Banks made certain
guarantees and commitments that, in the aggregate, constituted a full and
unconditional guarantee by First Banks of the obligations of FACT under the FACT
preferred securities. First Banks' proceeds from the issuance of the
subordinated debentures to FACT, net of underwriting fees and offering expenses,
were $45.4 million. On June 30, 2003, First Banks redeemed in full the $47.4
million of subordinated debentures. The funds necessary for the redemption were
provided from available cash reserves of $12.9 million and an advance of $34.5
million on First Banks' note payable. First Banks' distributions on the
subordinated debentures, which were payable quarterly in arrears, were $2.0
million and $4.0 million for the years ended December 31, 2003 and 2002,
respectively.
In October 2000, First Preferred Capital Trust II (First Preferred II),
a newly formed Delaware business trust, issued 2.3 million shares of 10.24%
cumulative trust preferred securities at $25 per share in an underwritten public
offering, and issued 71,135 shares of common securities to First Banks at $25
per share. First Banks owns all of First Preferred II's common securities. The
gross proceeds of the offering were used by First Preferred II to purchase $59.3
million of 10.24% subordinated debentures from First Banks, maturing on
September 30, 2030. The maturity date may be shortened, at the option of First
Banks, to a date not earlier than September 30, 2005, if certain conditions are
met. The subordinated debentures are the sole asset of First Preferred II. In
connection with the issuance of the preferred securities, First Banks made
certain guarantees and commitments that, in the aggregate, constitute a full and
unconditional guarantee by First Banks of the obligations of First Preferred II
under the First Preferred II preferred securities. First Banks' proceeds from
the issuance of the subordinated debentures to First Preferred II, net of
underwriting fees and offering expenses, were $56.9 million. First Banks'
distributions on the subordinated debentures issued to First Preferred II, which
are payable quarterly in arrears, were $6.1 million for the years ended December
31, 2004, 2003 and 2002.
In November 2001, First Preferred Capital Trust III (First Preferred
III), a newly formed Delaware business trust, issued 2.2 million shares of 9.00%
cumulative trust preferred securities at $25 per share in an underwritten public
offering, and issued 68,290 shares of common securities to First Banks at $25
per share. First Banks owns all of First Preferred III's common securities. The
gross proceeds of the offering were used by First Preferred III to purchase
$56.9 million of 9.00% subordinated debentures from First Banks, maturing on
September 30, 2031. The maturity date may be shortened, at the option of First
Banks, to a date not earlier than September 30, 2006, if certain conditions are
met. The subordinated debentures are the sole asset of First Preferred III. In
connection with the issuance of the preferred securities, First Banks made
certain guarantees and commitments that, in the aggregate, constitute a full and
unconditional guarantee by First Banks of the obligations of First Preferred III
under the First Preferred III preferred securities. First Banks' proceeds from
the issuance of the subordinated debentures to First Preferred III, net of
underwriting fees and offering expenses, were $54.6 million. First Banks'
distributions on the subordinated debentures issued to First Preferred III,
which are payable quarterly in arrears, were $5.1 million for the years ended
December 2004, 2003 and 2002.
In April 2002, First Bank Capital Trust (FBCT), a newly formed Delaware
business trust, issued 25,000 shares of variable rate cumulative trust preferred
securities at $1,000 per share in a private placement, and issued 774 shares of
common securities to First Banks at $1,000 per share. First Banks owns all of
the common securities of FBCT. The gross proceeds of the offering were used by
FBCT to purchase $25.8 million of variable rate subordinated debentures from
First Banks, maturing on April 22, 2032. The maturity date of the subordinated
debentures may be shortened, at the option of First Banks to a date not earlier
than April 22, 2007, if certain conditions are met. The subordinated debentures
are the sole asset of FBCT. In connection with the issuance of the FBCT
preferred securities, First Banks made certain guarantees and commitments that,
in the aggregate, constitute a full and unconditional guarantee by First Banks
of the obligations of FBCT under the FBCT preferred securities. First Banks'
proceeds from the issuance of the subordinated debentures to FBCT, net of
offering expenses, were $25.0 million. The distribution rate on the FBCT
securities is equivalent to the six-month London Interbank Offering Rate plus
387.5 basis points, and is payable semi-annually in arrears on April 22 and
October 22. First Banks' distributions on the subordinated debentures issued to
FBCT were $1.4 million for the years ended December 31, 2004 and 2003 and $1.1
million for the year ended December 31, 2002.
In March 2003, First Bank Statutory Trust (FBST), a newly formed
Connecticut statutory trust, issued 25,000 shares of 8.10% cumulative trust
preferred securities at $1,000 per share in a private placement, and issued 774
shares of common securities to First Banks at $1,000 per share. First Banks owns
all of the common securities of FBST. The gross proceeds of the offering were
used by FBST to purchase $25.8 million of 8.10% subordinated debentures from
First Banks, maturing on March 20, 2033. The maturity date of the subordinated
debentures may be shortened, at the option of First Banks, to a date not earlier
than March 20, 2008, if certain conditions are met. The subordinated debentures
are the sole asset of FBST. In connection with the issuance of the FBST
preferred securities, First Banks made certain guarantees and commitments that,
in the aggregate, constitute a full and unconditional guarantee by First Banks
of the obligations of FBST under the FBST preferred securities. First Banks'
proceeds from the issuance of the subordinated debentures to FBST, net of
offering expenses, were $25.3 million. First Banks' distributions on the
subordinated debentures issued to FBST, which are payable quarterly in arrears,
were $2.1 million and $1.7 million for the years ended December 31, 2004 and
2003, respectively.
In April 2003, First Preferred Capital Trust IV (First Preferred IV), a
newly formed Delaware business trust, issued 1.84 million shares of 8.15%
cumulative trust preferred securities at $25 per share in an underwritten public
offering, and issued 56,908 shares of common securities to First Banks at $25
per share. First Banks owns all of First Preferred IV's common securities. The
gross proceeds of the offering were used by First Preferred IV to purchase
approximately $47.4 million of 8.15% subordinated debentures from First Banks,
maturing on June 30, 2033. The maturity date may be shortened, at the option of
First Banks, to a date not earlier than June 30, 2008, if certain conditions are
met. The subordinated debentures are the sole asset of First Preferred IV. In
connection with the issuance of the preferred securities, First Banks made
certain guarantees and commitments that, in the aggregate, constitute a full and
unconditional guarantee by First Banks of the obligations of First Preferred IV
under the First Preferred IV preferred securities. First Banks' proceeds from
the issuance of the subordinated debentures to First Preferred IV, net of
underwriting fees and offering expenses, were approximately $45.6 million. First
Banks' distributions on the subordinated debentures issued to First Preferred
IV, which are payable quarterly in arrears, were $3.9 million and $2.9 million
for the years ended December 31, 2004 and 2003, respectively.
On September 20, 2004, First Bank Statutory Trust II (FBST II), a newly
formed Delaware statutory trust, issued 20,000 shares of variable rate trust
preferred securities at $1,000 per share in a private placement, and issued 619
shares of common securities to First Banks at $1,000 per share. First Banks owns
all of the common securities of FBST II. The gross proceeds of the offering were
used by FBST II to purchase $20.6 million of variable rate subordinated
debentures from First Banks, maturing on September 20, 2034. The maturity date
of the subordinated debentures may be shortened, at the option of First Banks,
to a date not earlier than September 20, 2009, if certain conditions are met.
The subordinated debentures are the sole asset of FBST II. In connection with
the issuance of the FBST II preferred securities, First Banks made certain
guarantees and commitments that, in the aggregate, constitute a full and
unconditional guarantee by First Banks of the obligations of FBST II under the
FBST II preferred securities. Proceeds from the issuance of the subordinated
debentures to FBST II, net of offering expenses, were $20.6 million. The
distribution rate on the FBST II securities is equivalent to the three-month
London Interbank Offering Rate plus 205.0 basis points. First Banks'
distributions on the subordinated debentures issued to FBST II, which are
payable quarterly in arrears beginning on December 20, 2004, were $236,000 for
the year ended December 31, 2004.
On November 23, 2004, First Bank Statutory Trust III (FBST III), a
newly formed Delaware statutory trust, issued 40,000 shares of variable rate
trust preferred securities at $1,000 per share in a private placement, and
issued 1,238 shares of common securities to First Banks at $1,000 per share.
First Banks owns all of the common securities of FBST III. The gross proceeds of
the offering were used by FBST III to purchase $41.2 million of variable rate
subordinated debentures from First Banks, maturing on December 15, 2034. The
maturity date of the subordinated debentures may be shortened, at the option of
First Banks, to a date not earlier than December 15, 2009, if certain conditions
are met. The subordinated debentures are the sole asset of FBST III. In
connection with the issuance of the FBST III preferred securities, First Banks
made certain guarantees and commitments that, in the aggregate, constitute a
full and unconditional guarantee by First Banks of the obligations of FBST III
under the FBST III preferred securities. Proceeds from the issuance of the
subordinated debentures to FBST III, net of offering expenses, were $41.2
million. The distribution rate on the FBST III securities is equivalent to the
three-month London Interbank Offering Rate plus 218.0 basis points. First Banks'
distributions on the subordinated debentures issued to FBST III, which are
payable quarterly in arrears beginning on March 15, 2005, were $203,000 for the
year ended December 31, 2004.
The distributions payable on all of First Banks' subordinated
debentures are included in interest expense in the consolidated statements of
income. Deferred issuance costs associated with First Banks' subordinated
debentures are amortized on a straight-line basis.
The subordinated debentures were issued to First Banks in conjunction
with the formation of various financing entities and the issuance of trust
preferred securities by the financing entities. First Banks has seven issues of
trust preferred securities as of December 31, 2004. The structure of the trust
preferred securities currently satisfies the regulatory requirements for
inclusion, subject to certain limitations, in First Banks' capital base.
(13) INCOME TAXES
Provision for income taxes attributable to income from continuing
operations for the years ended December 31, 2004, 2003 and 2002 consists of:
2004 2003 2002
---- ---- ----
(dollars expressed in thousands)
Current provision for taxes:
Federal.................................................... $36,578 40,194 15,210
State...................................................... 9,507 12,717 3,510
------- ------- ------
46,085 52,911 18,720
------- ------- ------
Deferred provision for taxes:
Federal.................................................... 236 (12,463) 4,020
State...................................................... (983) (4,493) 31
------- ------- ------
(747) (16,956) 4,051
------- ------- ------
Total.................................................. $45,338 35,955 22,771
======= ======= ======
The effective rates of federal income taxes for the years ended
December 31, 2004, 2003 and 2002 differ from the federal statutory rates of
taxation as follows:
Years Ended December 31,
-----------------------------------------------------------
2004 2003 2002
----------------- ---------------- ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(dollars expressed in thousands)
Income before provision for income taxes and
minority interest in income of subsidiary.... $ 128,246 $98,766 $ 69,369
========= ======= ========
Provision for income taxes calculated
at federal statutory income tax rates........ $ 44,886 35.0% $34,568 35.0% $ 24,279 35.0%
Effects of differences in tax reporting:
Tax-exempt interest income, net of
tax preference adjustment................ (791) (0.6) (911) (0.9) (972) (1.4)
State income taxes........................... 5,541 4.3 5,346 5.4 2,302 3.3
Reduction in prior year contingency reserve.. (2,825) (2.2) -- -- -- --
Bank owned life insurance, net of premium.... (1,670) (1.3) (1,762) (1.8) (1,957) (2.8)
Other, net................................... 197 0.2 (1,286) (1.3) (881) (1.3)
--------- ----- ------- ------ -------- -----
Provision for income taxes............. $ 45,338 35.4% $35,955 36.4% $ 22,771 32.8%
========= ===== ======= ====== ======== =====
The $2.8 million reduction in the prior year contingency reserve is a
result of First Banks' participation in the state of California's voluntary
compliance initiative program. Consequently, First Banks amended several state
tax returns to report certain transactions the California Franchise Tax Board
might have challenged. Voluntary participation in this program removed the
possible assessment of certain tax penalties associated with these transactions.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2004 and 2003 are as follows:
December 31,
------------
2004 2003
---- ----
(dollars expressed in thousands)
Deferred tax assets:
Net operating loss carryforwards................................ $ 38,786 30,702
Deferred built-in loss carryforward............................. 8,988 --
Allowance for loan losses....................................... 62,242 49,680
Alternative minimum tax credits................................. 2,667 2,667
Quasi-reorganization adjustment of bank premises................ 1,231 1,076
Interest on nonaccrual loans.................................... 4,346 2,649
Servicing rights................................................ 8,366 6,250
Deferred compensation........................................... 4,541 2,977
Other real estate............................................... 436 24
Net fair value adjustment for available-for-sale
investment securities......................................... 1,527 --
Operating leases................................................ 2,606 --
Partnership investments......................................... 1,244 --
State taxes..................................................... 1,996 5,018
Other........................................................... 6,188 1,801
-------- --------
Gross deferred tax assets................................... 145,164 102,844
-------- --------
Valuation allowance............................................. (17,767) --
-------- --------
Deferred tax assets, net of valuation allowance............. 127,397 102,844
-------- --------
Deferred tax liabilities:
Depreciation on bank premises and equipment..................... 11,567 9,399
Net fair value adjustment for available-for-sale
investment securities......................................... -- 1,655
Net fair value adjustment for derivative instruments............ 524 14,075
Unrealized gains on investment securities....................... 3,386 3,156
Operating leases................................................ -- 1,812
Core deposit intangibles........................................ 7,859 4,328
Discount on loans............................................... 4,412 1,377
Equity investments.............................................. 6,415 5,405
FHLB stock dividends............................................ 555 181
Other........................................................... 94 295
-------- --------
Deferred tax liabilities.................................... 34,812 41,683
-------- --------
Net deferred tax assets..................................... $ 92,585 61,161
======== ========
The realization of First Banks' net deferred tax assets is based on the
availability of carrybacks to prior taxable periods, the expectation of future
taxable income and the utilization of tax planning strategies. Based on these
factors, management believes it is more likely than not that First Banks will
realize the recognized net deferred tax assets of $92.6 million at December 31,
2004.
There were no changes in the deferred tax asset valuation allowance for
the years ended December 31, 2003 and 2002. Changes in the deferred tax asset
valuation allowance for the year ended December 31, 2004 were as follows:
(dollars expressed in thousands)
Balance, beginning of year......................................... $ --
Purchase acquisitions.............................................. 17,767
--------
Balance, end of year............................................... $ 17,767
========
Upon completion of the acquisition of CIB Bank, the net deferred tax
assets associated with the acquisition were evaluated to determine whether it is
more likely than not that the net deferred tax assets will be recognized in the
future. The ability to utilize the net deferred tax assets recorded in
connection with the acquisition is subject to a number of limitations. Among
these limitations is the restriction that any built-in loss (the fair value was
less than tax basis) that existed at the date of acquisition, if realized within
the first five years subsequent to the date of acquisition, will be disallowed
and must be carried forward and subjected to rules similar to the rules for
carrying forward net operating losses. Based upon these factors, management
determined that a valuation allowance should be established for CIB Bank in the
amount of $17.8 million. Subsequent reductions in the valuation allowance will
be credited to intangible assets associated with the purchase of subsidiaries.
At December 31, 2004 and 2003, the accumulation of prior years'
earnings representing tax bad debt deductions was approximately $30.8 million.
If these tax bad debt reserves were charged for losses other than bad debt
losses, First Banks would be required to recognize taxable income in the amount
of the charge. It is not contemplated that such tax-restricted retained earnings
will be used in a manner that would create federal income tax liabilities.
At December 31, 2004 and 2003, for federal income taxes purposes, First
Banks had net operating loss carryforwards of approximately $110.8 million and
$87.7 million, respectively. At December 31, 2004, the net operating loss
carryforwards for First Banks expire as follows:
(dollars expressed in thousands)
Year ending December 31:
2005................................................. $ 4,442
2006................................................. 2,343
2007................................................. 4,391
2008................................................. 26,730
2009 - 2024.......................................... 72,912
---------
Total............................................ $ 110,818
=========
During 2004, First Banks recognized built-in losses associated with the
acquisition of CIB Bank. A portion of the recognized built-in losses was
disallowed for 2004 and is required to be carried forward subject to rules
similar to the rules for carrying forward net operating losses. Utilization of
the recognized built-in losses is allowed subsequent to the utilization of any
net operating loss carryforwards associated with the acquisition of CIB Bank.
Consequently, at December 31, 2004, First Banks had deferred built-in loss
carryforwards of approximately $21.4 million. Utilization of the deferred
built-in loss carryforwards is allowed beginning in the year 2016 and such
losses will expire as follows:
(dollars expressed in thousands)
Year ending December 31:
2005................................................. $ --
2006................................................. --
2007................................................. --
2008................................................. --
2009 - 2024.......................................... 21,400
---------
Total............................................ $ 21,400
=========
(14) EARNINGS PER COMMON SHARE
The following is a reconciliation of the basic and diluted earnings per
share computations for the years indicated:
Per Share
Income Shares Amount
------ ------ ------
(dollars in thousands, except share and per share data)
Year ended December 31, 2004:
Basic EPS - income available to common stockholders............. $ 82,123 23,661 $3,470.80
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 565 (49.22)
--------- ------- ---------
Diluted EPS - income available to common stockholders........... $ 82,892 24,226 $3,421.58
========= ======= =========
Year ended December 31, 2003:
Basic EPS - income available to common stockholders............. $ 62,025 23,661 $2,621.39
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 600 (33.08)
--------- ------- ---------
Diluted EPS - income available to common stockholders........... $ 62,794 24,261 $2,588.31
========= ======= =========
Year ended December 31, 2002:
Basic EPS - income available to common stockholders............. $ 44,381 23,661 $1,875.69
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 696 (22.05)
--------- ------- ---------
Diluted EPS - income available to common stockholders........... $ 45,150 24,357 $1,853.64
========= ======= =========
(15) CREDIT COMMITMENTS
First Banks is a party to commitments to extend credit and commercial
and standby letters of credit in the normal course of business to meet the
financing needs of its customers. These instruments involve, in varying degrees,
elements of credit risk and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The interest rate risk associated
with these credit commitments relates primarily to the commitments to originate
fixed-rate loans. As more fully discussed in Note 5 to the Consolidated
Financial Statements, the interest rate risk of the commitments to originate
fixed-rate loans has been hedged with forward commitments to sell
mortgage-backed securities. The credit risk amounts are equal to the contractual
amounts, assuming the amounts are fully advanced and the collateral or other
security is of no value. First Banks uses the same credit policies in granting
commitments and conditional obligations as it does for on-balance sheet items.
Commitments to extend fixed and variable rate credit and commercial and
standby letters of credit at December 31, 2004 and 2003 were as follows:
December 31,
-------------------------------
2004 2003
---- ----
(dollars expressed in thousands)
Commitments to extend credit.......................................... $ 2,311,529 2,269,311
Commercial and standby letters of credit.............................. 180,785 187,789
----------- ----------
$ 2,492,314 2,457,100
=========== ==========
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The standby letters of credit at December 31,
2004 expire within 12 years. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Each customer's creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of credit, is based on management's credit evaluation
of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant, equipment, income-producing commercial properties or
single family residential properties. In the event of nonperformance, First
Banks may obtain and liquidate the collateral to recover amounts paid under its
guarantees on these financial instruments.
Commercial and standby letters of credit are conditional commitments
issued to guarantee the performance of a customer to a third party. The letters
of credit are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. Most letters of credit extend for less than one year. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Upon issuance of the
commitments, First Banks typically holds marketable securities, certificates of
deposit, inventory, real property or other assets as collateral supporting those
commitments for which collateral is deemed necessary. At December 31, 2003,
First Banks had a $1.0 million specific reserve for estimated losses on a $5.3
million letter of credit that was subsequently funded as a loan in early January
2004, as discussed in Note 4 to the Consolidated Financial Statements.
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is management's estimate of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, other
significant assets are not considered financial assets including the mortgage
banking operation, deferred income tax assets, bank premises and equipment and
intangible assets associated with the purchase of subsidiaries. Further, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on the fair value estimates and have not been
considered in any of the estimates.
The estimated fair value of First Banks' financial instruments at
December 31, 2004 and 2003 were as follows:
2004 2003
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----- ---------- ----- ----------
(dollars expressed in thousands)
Financial Assets:
Cash and cash equivalents.......................... $ 267,110 267,110 213,537 213,537
Investment securities:
Available for sale............................... 1,788,063 1,788,063 1,038,787 1,038,787
Held to maturity................................. 25,286 25,586 10,927 11,341
Net loans.......................................... 5,987,261 5,986,880 5,211,624 5,229,213
Derivative instruments............................. 4,681 4,681 49,291 49,291
Bank-owned life insurance.......................... 102,239 102,239 97,521 97,521
Accrued interest receivable........................ 39,776 39,776 32,797 32,797
Interest rate lock commitments..................... 20 20 (77) (77)
Forward commitments to sell
mortgage-backed securities....................... (99) (99) (636) (636)
========== ========== ========== ==========
Financial Liabilities:
Deposits:
Noninterest-bearing demand....................... $1,194,662 1,194,662 1,034,367 1,034,367
Interest-bearing demand.......................... 875,489 875,489 843,001 843,001
Savings ......................................... 2,249,644 2,249,644 2,128,683 2,128,683
Time deposits.................................... 2,832,175 2,831,308 1,955,564 1,988,035
Other borrowings................................... 594,750 594,750 273,479 273,479
Note payable....................................... 15,000 15,000 17,000 17,000
Accrued interest payable........................... 14,376 14,376 8,799 8,799
Subordinated debentures............................ 273,300 283,337 209,320 225,227
========== ========== ========== ==========
Off-Balance Sheet Financial Instruments.............. $ -- -- -- --
========== ========== ========== ==========
The following methods and assumptions were used in estimating the fair
value of financial instruments:
Cash and cash equivalents and accrued interest receivable: The carrying
values reported in the consolidated balance sheets approximate fair value.
Investment securities: The fair value of investment securities
available for sale is the amount reported in the consolidated balance sheets.
The fair value of investment securities held to maturity is based on quoted
market prices where available. If quoted market prices were not available, the
fair value was based on quoted market prices of comparable instruments.
Net loans: The fair value of most loans held for portfolio was
estimated utilizing discounted cash flow calculations that applied interest
rates currently being offered for similar loans to borrowers with similar risk
profiles. The fair value of loans held for sale, which is the amount reported in
the consolidated balance sheets, is based on quoted market prices where
available. If quoted market prices were not available, the fair value was based
on quoted market prices of comparable instruments. The carrying value of loans
is net of the allowance for loan losses and unearned discount.
Derivative instruments and bank-owned life insurance: The fair value of
derivative instruments, including cash flow hedges, fair value hedges, interest
rate cap agreements and interest rate lock commitments, and bank-owned life
insurance is based on quoted market prices where available. If quoted market
prices were not available, the fair value was based on quoted market prices of
comparable instruments.
Forward commitments to sell mortgage-backed securities: The fair value
of forward commitments to sell mortgage-backed securities is based on quoted
market prices. The fair value of these commitments has been reflected in the
consolidated balance sheets in the carrying value of the loans held for sale
portfolio.
Deposits: The fair value disclosed for deposits generally payable on
demand (i.e., noninterest-bearing and interest-bearing demand and savings
accounts) is considered equal to their respective carrying amounts as reported
in the consolidated balance sheets. The fair value disclosed for demand deposits
does not include the benefit that results from the low-cost funding provided by
deposit liabilities compared to the cost of borrowing funds in the market. The
fair value disclosed for time deposits was estimated utilizing a discounted cash
flow calculation that applied interest rates currently being offered on similar
deposits to a schedule of aggregated monthly maturities of time deposits.
Other borrowings, note payable and accrued interest payable: The
carrying values reported in the consolidated balance sheets approximate fair
value.
Subordinated debentures: The fair value is based on quoted market
prices.
Off-Balance Sheet Financial Instruments: The fair value of commitments
to extend credit, standby letters of credit and financial guarantees is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements, the likelihood of the
counterparties drawing on such financial instruments and the credit worthiness
of the counterparties. These fees in aggregate are not considered material, and
as such, were not assigned a value for purposes of this disclosure.
(17) EMPLOYEE BENEFITS
First Banks' 401(k) plan is a self-administered savings and incentive
plan covering substantially all employees. Employer-match contributions are
determined annually under the plan by First Banks' Board of Directors. Employee
contributions are limited to $13,000 of gross compensation for 2004. Total
employer contributions under the plan were $2.1 million for the year ended
December 31, 2004 and $1.7 million for the years ended December 31, 2003 and
2002. The plan assets are held and managed under a trust agreement with First
Bank's trust department.
(18) PREFERRED STOCK
First Banks has two classes of preferred stock outstanding. The Class A
preferred stock is convertible into shares of common stock at a rate based on
the ratio of the par value of the preferred stock to the current market value of
the common stock at the date of conversion, to be determined by independent
appraisal at the time of conversion. Shares of Class A preferred stock may be
redeemed by First Banks at any time at 105.0% of par value. The Class B
preferred stock may not be redeemed or converted. The redemption of any issue of
preferred stock requires the prior approval of the Federal Reserve Board (the
Board).
The holders of the Class A and Class B preferred stock have full voting
rights. Dividends on the Class A and Class B preferred stock are adjustable
quarterly based on the highest of the Treasury Bill Rate or the Ten Year
Constant Maturity Rate for the two-week period immediately preceding the
beginning of the quarter. This rate shall not be less than 6.0% nor more than
12.0% on the Class A preferred stock, or less than 7.0% nor more than 15.0% on
the Class B preferred stock. The annual dividend rates for the Class A and Class
B preferred stock were 6.0% and 7.0%, respectively, for the years ended December
31, 2004, 2003 and 2002.
(19) TRANSACTIONS WITH RELATED PARTIES
Outside of normal customer relationships, no directors or officers of
First Banks, no shareholders holding over 5% of First Banks' voting securities
and no corporations or firms with which such persons or entities are associated
currently maintain or have maintained, since the beginning of the last full
fiscal year, any significant business or personal relationships with First Banks
or its subsidiaries, other than that which arises by virtue of such position or
ownership interest in First Banks or its subsidiaries, except as described in
the following paragraphs.
First Services, L.P., a limited partnership indirectly owned by First
Banks' Chairman and members of his immediate family, provides information
technology and various related services to First Banks, Inc. and its
subsidiaries. Fees paid under agreements with First Services, L.P. were $26.6
million for the year ended December 31, 2004, and $26.8 million for the years
ended December 31, 2003 and 2002. First Services, L.P. leases information
technology and other equipment from First Bank. During 2004, 2003 and 2002,
First Services, L.P. paid First Bank $4.3 million, $4.2 million and $3.9
million, respectively, in rental fees for the use of that equipment.
First Brokerage America, L.L.C., a limited liability company which is
indirectly owned by First Banks' Chairman and members of his immediate family,
received approximately $3.3 million, $3.2 million and $3.3 million for the years
ended December 31, 2004, 2003 and 2002, respectively, in commissions paid by
unaffiliated third-party companies. The commissions received were primarily in
connection with the sales of annuities, securities and other insurance products
to customers of First Bank.
First Title Guaranty LLC (First Title), a limited liability company
established and administered by and for the benefit of First Banks' Chairman and
members of his immediate family, received approximately $514,000, $492,000 and
$412,000 for the years ended December 31, 2004, 2003 and 2002, respectively, in
commissions for policies purchased by First Banks or customers of First Bank
from unaffiliated third-party insurers. The insurance premiums on which the
aforementioned commissions were earned were competitively bid, and First Banks
deems the commissions First Title earned from unaffiliated third-party companies
to be comparable to those that would have been earned by an unaffiliated
third-party agent.
First Bank leases certain of its in-store branch offices and ATM sites
from Dierbergs Markets, Inc., a grocery store chain headquartered in St. Louis,
Missouri that is owned and operated by Robert J. Dierberg and members of his
immediate family. Robert J. Dierberg is the brother of First Banks' Chairman.
Total rent expense incurred by First Bank under the lease obligation contracts
with Dierbergs Markets, Inc. was $297,000, $255,000 and $232,000 for the years
ended December 31, 2004, 2003 and 2002, respectively.
First Bank has had in the past, and may have in the future, loan
transactions in the ordinary course of business with its directors or
affiliates. These loan transactions have been on the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons and did not involve more than the normal
risk of collectibility or present other unfavorable features. Loans to
directors, their affiliates and executive officers of First Banks, Inc. were
approximately $31.0 million and $20.0 million at December 31, 2004 and 2003,
respectively. First Bank does not extend credit to its officers or to officers
of First Banks, Inc., except extensions of credit secured by mortgages on
personal residences, loans to purchase automobiles, personal credit card
accounts and deposit account overdraft protection under a plan whereby a credit
limit has been established in accordance with First Bank's standard credit
criteria.
First Banks pays compensation to its Chairman and certain members of
his immediate family. Mr. Steven F. Schepman, the son-in-law of First Banks'
Chairman, and Director of First Banks since July 2004 and Senior Vice President
- - Private Banking, Wealth Management and Trust Services of First Bank, received
salary and bonus compensation of $182,100 for the year ended December 31, 2004.
Mr. Michael J. Dierberg, the son of First Banks' Chairman, and Director and
General Counsel of First Banks until July 2004, received salary and bonus
compensation of $62,300 for the year ended December 31, 2004.
On August 30, 2004, First Bank granted to First Capital America, Inc.
(FCA), a corporation owned by First Banks' Chairman and members of his immediate
family, a written option to purchase 735 Membership Interests of SBLS LLC, a
newly organized and wholly owned limited liability company of First Bank, at a
price of $10,000 per Membership Interest, or $7.35 million. The option could
have been exercised at any time prior to December 31, 2004 by written notice to
First Bank of the intention to exercise the option and payment to First Bank of
$7.35 million. On December 31, 2004, First Bank extended the written option
under the same terms through March 31, 2005. First Bank anticipates that FCA
will exercise its option, upon which SBLS LLC will become 51.0% owned by First
Bank and 49% owned by FCA.
During 2003, First Banks contributed 231,779 shares of Allegiant
Bancorp, Inc. (Allegiant) common stock with a fair value of $5.1 million to The
Dierberg Foundation, a charitable trust created by and for the benefit of First
Banks' Chairman and members of his immediate family. In conjunction with this
transaction, First Banks recorded charitable contribution expense of $5.1
million, which was partially offset by a gain on the contribution of these
available-for-sale investment securities of $2.3 million, representing the
difference between the cost basis and the fair value of the common stock on the
date of the contribution. In addition, First Banks recorded a tax benefit of
$2.5 million associated with this transaction. The contribution of the common
stock eliminated First Banks' investment in Allegiant.
During 2002, FCA received approximately $1.0 million of origination and
servicing fees associated with commercial leases originated and serviced for
First Bank by the employees of FCA.
(20) BUSINESS SEGMENT RESULTS
First Banks' business segment is First Bank. The reportable business
segments are consistent with the management structure of First Banks, First Bank
and the internal reporting system that monitors performance. First Bank provides
similar products and services in its defined geographic areas through its branch
network. The products and services offered include a broad range of commercial
and personal deposit products, including demand, savings, money market and time
deposit accounts. In addition, First Bank markets combined basic services for
various customer groups, including packaged accounts for more affluent
customers, and sweep accounts, lock-box deposits and cash management products
for commercial customers. First Bank also offers both consumer and commercial
loans. Consumer lending includes residential real estate, home equity and
installment lending. Commercial lending includes commercial, financial and
agricultural loans, real estate construction and development loans, commercial
real estate loans, asset-based loans and trade financing. Other financial
services include mortgage banking, debit cards, brokerage services,
credit-related insurance, internet banking, automated teller machines, telephone
banking, safe deposit boxes and trust, private banking and institutional money
management services. The revenues generated by First Bank consist primarily of
interest income, generated from the loan and investment security portfolios, and
service charges and fees, generated from the deposit products and services. The
geographic areas include eastern Missouri, Illinois, southern and northern
California and Houston, Dallas, Irving, McKinney and Denton, Texas. The products
and services are offered to customers primarily within First Banks' respective
geographic areas.
The business segment results are consistent with First Banks' internal
reporting system and, in all material respects, with U.S. generally accepted
accounting principles and practices predominant in the banking industry. Such
principles and practices are summarized in Note 1 to the Consolidated Financial
Statements.
Corporate, Other
and Intercompany
First Bank Reclassifications (1) Consolidated Totals
------------------------------- ---------------------------- ---------------------------
2004 2003 2002 (2) 2004 2003 2002 2004 2003 2002
---- ---- ---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
Investment securities................ $1,803,454 1,042,809 1,114,479 9,895 6,905 31,191 1,813,349 1,049,714 1,145,670
Loans, net of unearned discount...... 6,137,968 5,328,075 5,432,589 -- -- (1) 6,137,968 5,328,075 5,432,588
Goodwill............................. 156,849 145,548 140,112 -- -- -- 156,849 145,548 140,112
Total assets......................... 8,720,331 7,097,635 7,357,155 12,510 9,305 (5,978) 8,732,841 7,106,940 7,351,177
Deposits............................. 7,161,636 5,977,042 6,189,928 (9,666) (15,427) (17,108) 7,151,970 5,961,615 6,172,820
Note payable......................... -- -- -- 15,000 17,000 7,000 15,000 17,000 7,000
Subordinated debentures.............. -- -- -- 273,300 209,320 278,389 273,300 209,320 278,389
Stockholders' equity................. 877,473 766,397 777,548 (276,580) (216,582) (258,507) 600,893 549,815 519,041
========== ========= ========= ======== ======== ======== ========= ========= =========
Income statement information:
Interest income...................... $ 394,196 390,340 424,358 586 813 1,363 394,782 391,153 425,721
Interest expense..................... 79,260 85,524 132,040 15,507 18,502 25,511 94,767 104,026 157,551
---------- --------- --------- -------- -------- -------- --------- --------- ---------
Net interest income............. 314,936 304,816 292,318 (14,921) (17,689) (24,148) 300,015 287,127 268,170
Provision for loan losses............ 25,750 49,000 55,500 -- -- -- 25,750 49,000 55,500
---------- --------- --------- -------- -------- -------- --------- --------- ---------
Net interest income after
provision for loan losses..... 289,186 255,816 236,818 (14,921) (17,689) (24,148) 274,265 238,127 212,670
Noninterest income................... 84,077 79,813 69,355 (591) 7,895 (1,844) 83,486 87,708 67,511
Noninterest expense.................. 226,183 216,373 207,576 3,322 10,696 3,236 229,505 227,069 210,812
---------- --------- --------- -------- -------- -------- --------- --------- ---------
Income before provision for
income taxes and minority
interest in income
of subsidiary................. 147,080 119,256 98,597 (18,834) (20,490) (29,228) 128,246 98,766 69,369
Provision for income taxes........... 54,682 44,871 35,332 (9,344) (8,916) (12,561) 45,338 35,955 22,771
---------- --------- --------- -------- -------- -------- --------- --------- ---------
Income before minority
interest in income
of subsidiary................. 92,398 74,385 63,265 (9,490) (11,574) (16,667) 82,908 62,811 46,598
Minority interest in income
of subsidiary................. -- -- -- -- -- 1,431 -- -- 1,431
---------- --------- --------- -------- -------- -------- --------- --------- ---------
Net income...................... $ 92,398 74,385 63,265 (9,490) (11,574) (18,098) 82,908 62,811 45,167
========== ========= ========= ======== ======== ======== ========= ========= =========
- ----------------------------------
(1) Corporate and other includes $9.8 million, $11.6 million and $16.1 million of interest expense on subordinated debentures,
after applicable income tax benefit of $5.3 million, $6.3 million and $8.7 million, for the years ended December 31, 2004,
2003 and 2002, respectively.
(2) First Bank & Trust was merged with and into First Bank on March 31, 2003. Accordingly, the 2002 amounts have been restated
to reflect this combination of entities under common control.
(21) REGULATORY CAPITAL
First Banks and First Bank are subject to various regulatory capital
requirements administered by the federal and state banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on First Banks' financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
First Banks and First Bank must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require First Banks and First Bank to maintain minimum amounts and
ratios of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets, and of Tier 1 capital to average assets. Management
believes, as of December 31, 2004 and 2003, First Banks and First Bank were each
well capitalized.
As of December 31, 2004, the most recent notification from First Banks'
primary regulator categorized First Banks and First Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized, First Banks and First Bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the
table below.
At December 31, 2004 and 2003, First Banks' and First Bank's required
and actual capital ratios were as follows: To be Well Capitalized Under Actual
For Capital Prompt Corrective 2004 2003 Adequacy Purposes Action Provisions
To Be Well
Actual Capitalized Under
------------------ For Capital Prompt Corrective
2004 2003 Adequacy Purpose Action Provisions
---- ---- ---------------- -----------------
Total capital (to risk-weighted assets):
First Banks............................. 10.61% 10.27% 8.0% 10.0%
First Bank.............................. 10.73 10.41 8.0 10.0
Tier 1 capital (to risk-weighted assets):
First Banks............................. 8.43 8.46 4.0 6.0
First Bank.............................. 9.47 9.15 4.0 6.0
Tier 1 capital (to average assets):
First Banks............................. 7.89 7.62 3.0 5.0
First Bank.............................. 8.86 8.22 3.0 5.0
On May 6, 2004, the Board requested public comment on newly proposed
rules that would allow bank holding companies to retain trust preferred
securities in Tier 1 capital, subject to stricter quantitative and qualitative
standards. The proposed rules would implement several significant changes to the
current regulatory capital rules. Under the proposal, the aggregate amount of
trust preferred securities and certain other core capital elements would be
limited to 25% of Tier 1 capital, net of goodwill. Additionally, qualifying
trust preferred securities and Class C minority interests in excess of the 25%
limit would be allowable in Tier 2 capital, but limited, together with
subordinated debt and limited-life preferred stock, to 50% of Tier 1 capital.
The proposed rules also provide that in the last five years before maturity of
the underlying subordinated note, the associated trust preferred securities
would be treated as limited-life preferred stock, at one-fifth amortization per
year, and would be excluded from Tier 1 capital and included in Tier 2 capital,
subject, together with subordinated debt and other limited-life preferred stock,
to a limit of 50% of Tier 1 capital. As further described in Note 25 to the
Consolidated Financial Statements, on March 1, 2005, the Board adopted a final
rule that allows the continued limited inclusion of trust preferred securities
in Tier 1 capital. Under the final rule, trust preferred securities and other
restricted core capital elements will be subject to stricter quantitative
limits. The Board's final rule limits restricted core capital elements to 25% of
all core capital elements, net of goodwill less any associated deferred tax
liability. Amounts of restricted core capital elements in excess of these limits
may generally be included in Tier 2 capital. The final rule provides a five-year
transition period, ending March 31, 2009, for the application of the
quantitative limits. First Banks has evaluated the impact of the final rule on
the Company's financial condition and results of operations, and determined the
implementation of the Board's final rule, as adopted, will reduce First Banks,
Inc.'s regulatory Tier 1 capital ratios, however the overall reduction will not
result in a situation where First Banks, Inc. would fall below the well
capitalized thresholds under the regulatory framework for prompt corrective
action. Under the new rule, First Banks' Tier 1 capital (to risk-weighted
assets) and Tier 1 capital (to average assets) ratios would have been 7.72% and
7.22%, respectively, at December 31, 2004.
(22) DISTRIBUTION OF EARNINGS OF FIRST BANK
First Bank is restricted by various state and federal regulations, as
well as by the terms of the Credit Agreement described in Note 11 to the
Consolidated Financial Statements, as to the amount of dividends that are
available for payment to First Banks, Inc. Under the most restrictive of these
requirements, the future payment of dividends from First Bank is limited to
approximately $69.0 million at December 31, 2004, unless prior permission of the
regulatory authorities and/or the lending banks is obtained.
(23) PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are condensed balance sheets of First Banks, Inc. as of
December 31, 2004 and 2003, and condensed statements of income and cash flows
for the years ended December 31, 2004, 2003 and 2002:
CONDENSED BALANCE SHEETS
December 31,
------------
2004 2003
---- ----
(dollars expressed in thousands)
Assets
------
Cash deposited in subsidiary bank........................................... $ 8,359 15,917
Investment securities....................................................... 9,895 6,905
Investment in subsidiaries.................................................. 879,316 767,311
Other assets................................................................ 2,665 1,563
---------- --------
Total assets.......................................................... $ 900,235 791,696
========== ========
Liabilities and Stockholders' Equity
------------------------------------
Note payable................................................................ $ 15,000 17,000
Subordinated debentures..................................................... 273,300 209,320
Accrued expenses and other liabilities...................................... 11,042 15,561
---------- --------
Total liabilities..................................................... 299,342 241,881
Stockholders' equity........................................................ 600,893 549,815
---------- --------
Total liabilities and stockholders' equity............................ $ 900,235 791,696
========== ========
CONDENSED STATEMENTS OF INCOME
Years Ended December 31,
-----------------------------
2004 2003 2002
---- ---- ----
(dollars expressed in thousands)
Income:
Dividends from subsidiaries........................................ $ 40,000 67,000 28,000
Management fees from subsidiaries.................................. 27,853 23,992 21,754
Gain on sale of available-for-sale investment securities........... -- 8,218 97
Other.............................................................. 710 1,301 3,383
--------- ------- -------
Total income................................................... 68,563 100,511 53,234
--------- ------- -------
Expense:
Interest........................................................... 15,597 18,664 21,855
Salaries and employee benefits..................................... 20,699 19,366 15,726
Legal, examination and professional fees........................... 2,943 3,903 2,824
Charitable contributions........................................... 43 5,134 11
Other.............................................................. 8,114 6,852 7,906
--------- ------- -------
Total expense.................................................. 47,396 53,919 48,322
--------- ------- -------
Income before benefit for income taxes and equity
in undistributed earnings of subsidiaries................... 21,167 46,592 4,912
Benefit for income taxes............................................. (9,344) (8,891) (10,502)
--------- ------- -------
Income before equity in undistributed earnings of subsidiaries. 30,511 55,483 15,414
Equity in undistributed earnings of subsidiaries..................... 52,397 7,328 29,753
--------- ------- -------
Net income..................................................... $ 82,908 62,811 45,167
========= ======= =======
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31,
---------------------------------
2004 2003 2002
---- ---- ----
(dollars expressed in thousands)
Cash flows from operating activities:
Net income...................................................... $ 82,908 62,811 45,167
Adjustments to reconcile net income to net cash provided by
operating activities:
Net income of subsidiaries.................................. (92,397) (74,328) (57,753)
Dividends from subsidiaries................................. 40,000 67,000 28,000
Other, net.................................................. (3,262) 292 3,366
--------- -------- -------
Net cash provided by operating activities................ 27,249 55,775 18,780
--------- -------- -------
Cash flows from investing activities:
(Increase) decrease in investment securities.................... (915) -- 261
Investment in common securities of FBST, FBST II. FBST III,
First Preferred IV and FBCT................................... (1,857) (2,197) (774)
Payments from redemption of investment in common securities
of First Preferred I and FACT................................. -- 4,090 --
Acquisitions of subsidiaries.................................... (76,067) -- (56,334)
Capital (contributions) reductions (to) from subsidiaries....... (15,000) 10,000 (70)
Decrease in advances to subsidiary.............................. -- -- 34,000
Other, net...................................................... (39) -- (9)
--------- -------- -------
Net cash (used in) provided by investing activities...... (93,878) 11,893 (22,926)
--------- -------- -------
Cash flows from financing activities:
Advances drawn on note payable.................................. 15,000 34,500 43,500
Repayments of note payable...................................... (17,000) (24,500) (64,000)
Proceeds from issuance of subordinated debentures............... 61,857 70,907 25,007
Payments for redemption of subordinated debentures.............. -- (136,341) --
Payment of preferred stock dividends............................ (786) (786) (786)
--------- -------- -------
Net cash provided by (used in) financing activities...... 59,071 (56,220) 3,721
--------- -------- -------
Net (decrease) increase in cash deposited in First Bank.. (7,558) 11,448 (425)
Cash deposited in First Bank, beginning of year................... 15,917 4,469 4,894
--------- -------- -------
Cash deposited in First Bank, end of year......................... $ 8,359 15,917 4,469
========= ======== =======
Noncash investing activities:
Cash paid for interest.......................................... $ 13,527 16,489 21,855
========= ======== =======
(24) CONTINGENT LIABILITIES
In October 2000, First Banks entered into two continuing guaranty
contracts. For value received, and for the purpose of inducing a pension fund
and its trustees and a welfare fund and its trustees (the Funds) to conduct
business with Missouri Valley Partners, Inc. (MVP), First Bank's institutional
investment management subsidiary, First Banks irrevocably and unconditionally
guaranteed payment of and promised to pay to each of the Funds any amounts up to
the sum of $5.0 million to the extent MVP is liable to the Funds for a breach of
the Investment Management Agreements (including the Investment Policy Statement
and Investment Guidelines), by and between MVP and the Funds and/or any
violation of the Employee Retirement Income Security Act by MVP resulting in
liability to the Funds. The guaranties are continuing guaranties of all
obligations that may arise for transactions occurring prior to termination of
the Investment Management Agreements and are co-existent with the term of the
Investment Management Agreements. The Investment Management Agreements have no
specified term but may be terminated at any time upon written notice by the
Trustees or, at First Banks' option, upon thirty days written notice to the
Trustees. In the event of termination of the Investment Management Agreements,
such termination shall have no effect on the liability of First Banks with
respect to obligations incurred before such termination. The obligations of
First Banks are joint and several with those of MVP. First Banks does not have
any recourse provisions that would enable it to recover from third parties any
amounts paid under the contracts nor does First Banks hold any assets as
collateral that, upon occurrence of a required payment under the contract, could
be liquidated to recover all or a portion of the amount(s) paid. At December 31,
2004, First Banks had not recorded a liability for the obligations associated
with these guaranty contracts as the likelihood that First Banks will be
required to make payments under the contracts is remote.
On June 30, 2004, as further discussed in Note 2 to the Consolidated
Financial Statements, First Bank recorded a liability of $2.0 million for
recourse obligations related to the completion of the sale of a portion of its
commercial leasing portfolio. For value received, First Bank, as seller,
indemnified the buyer of certain leases from any liability or loss resulting
from defaults subsequent to the sale. First Bank's indemnification for the
recourse obligations is limited to a specified percentage, ranging from 15% to
25%, of the aggregate lease purchase price of specific pools of leases sold. As
of December 31, 2004, this liability was $1.6 million, reflecting reductions in
the related lease balances for the specific pools of leases sold from borrower
repayments.
On August 31, 2004, SBLS LLC acquired substantially all of the assets
and assumed certain liabilities of SBLS, as further discussed in Note 2 to the
Consolidated Financial Statements. The Amended and Restated Asset Purchase
Agreement (Asset Purchase Agreement) governing this transaction provides for
certain payments to the seller contingent on future valuations of specifically
identified assets, including servicing assets and retained interests in
securitizations. As of December 31, 2004, SBLS LLC had not recorded a liability
for the obligations associated with these contingent payments, as the likelihood
that SBLS LLC will be required to make payments under the Asset Purchase
Agreement is not ascertainable at the present time.
In the ordinary course of business, First Banks and its subsidiaries
become involved in legal proceedings. Management, in consultation with legal
counsel, believes the ultimate resolution of these proceedings will not have a
material adverse effect on the financial condition or results of operations of
First Banks and/or its subsidiaries.
(25) SUBSEQUENT EVENTS
On January 10, 2005, First Banks executed an Agreement and Plan of
Reorganization providing for the acquisition of FBA Bancorp, Inc. and its wholly
owned subsidiary, First Bank of the Americas, S.S.B. FBA Bancorp, Inc. is
headquartered in Chicago, Illinois, and through First Bank of the Americas,
operates three banking offices in the southwestern Chicago metropolitan area.
Under the terms of the agreement, First Banks will acquire FBA Bancorp, Inc. for
approximately $10.5 million in cash. The transaction, which is subject to
regulatory approvals, is expected to be completed during the second quarter of
2005. At December 31, 2004, FBA Bancorp, Inc. reported consolidated assets of
$75.0 million, loans, net of unearned discount, of $48.6 million, deposits of
$55.9 million and stockholders' equity of $7.4 million.
Effective February 25, 2005, First Banks terminated $150.0 million
notional amount of its five-year fair value interest rate swap agreements that
hedged a portion of First Banks' other time deposits. The termination of the
swap agreements resulted from an increasing level of ineffectiveness associated
with the highly correlated hedge positions between the swap agreements and the
underlying hedged liabilities that had been anticipated as the swap agreements
neared their originally scheduled maturity dates in January 2006. The related
$3.1 million basis adjustment of the underlying hedged liabilities will be
recorded as interest expense over the remaining weighted average maturity of the
underlying hedged liabilities of approximately ten months.
On March 1, 2005, the Board adopted a final rule, Risk-Based Capital
Standards: Trust Preferred Securities and the Definition of Capital, which
allows for the continued limited inclusion of trust preferred securities in Tier
1 capital, as further discussed in Note 21 to the Consolidated Financial
Statements. The Board's final rule limits restricted core capital elements to
25% of the sum of all core capital elements, including restricted core capital
elements, net of goodwill less any associated deferred tax liability. Amounts of
restricted core capital elements in excess of these limits may generally be
included in Tier 2 capital. Amounts of qualifying trust preferred securities and
cumulative perpetual preferred stock in excess of the 25% limit may be included
in Tier 2 capital, but limited, together with subordinated debt and limited-life
preferred stock, to 50% of Tier 1 capital. In addition, the final rule provides
that in the last five years before the maturity of the underlying subordinated
note, the outstanding amount of the associated trust preferred securities is
excluded from Tier 1 capital and included in Tier 2 capital, subject to
one-fifth amortization per year. The final rule provides for a five-year
transition period, ending March 31, 2009, for the application of the
quantitative limits. Until March 31, 2009, the aggregate amount of qualifying
cumulative perpetual preferred stock and qualifying trust preferred securities
that may be included in Tier 1 capital is limited to 25% of the sum of the
following core capital elements: qualifying common stockholders' equity,
qualifying noncumulative and cumulative perpetual preferred stock, qualifying
minority interest in the equity accounts of consolidated subsidiaries and
qualifying trust preferred securities. First Banks has evaluated the impact of
the final rule on the Company's financial condition and results of operations,
and determined the implementation of the Board's final rule, as adopted, will
reduce First Banks, Inc.'s regulatory capital ratios, however the overall
reduction will not result in a situation where First Banks, Inc. would fall
below the well capitalized thresholds under the regulatory framework for prompt
corrective action.
QUARTERLY CONDENSED FINANCIAL DATA - UNAUDITED
2004 Quarter Ended
----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(dollars expressed in thousands, except per share data)
Interest income.............................................. $ 96,127 96,585 99,461 102,609
Interest expense............................................. 21,474 20,979 23,853 28,461
--------- -------- ------- --------
Net interest income...................................... 74,653 75,606 75,608 74,148
Provision for loan losses.................................... 12,750 3,000 7,500 2,500
--------- -------- ------- --------
Net interest income after provision for loan losses...... 61,903 72,606 68,108 71,648
Noninterest income........................................... 20,559 20,104 21,982 20,841
Noninterest expense.......................................... 52,602 55,405 58,391 63,107
--------- -------- ------- --------
Income before provision for income taxes................. 29,860 37,305 31,699 29,382
Provision for income taxes................................... 11,591 11,302 11,951 10,494
--------- -------- ------- --------
Net income............................................... $ 18,269 26,003 19,748 18,888
========= ======== ======= ========
Earnings per common share:
Basic.................................................... $ 763.81 1,093.42 826.33 787.25
========= ======== ======= ========
Diluted.................................................. $ 753.93 1,074.06 815.20 780.71
========= ======== ======= ========
2003 Quarter Ended
----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(dollars expressed in thousands, except per share data)
Interest income.............................................. $ 99,814 98,481 96,164 96,694
Interest expense............................................. 30,651 27,468 23,084 22,823
--------- -------- ------- --------
Net interest income...................................... 69,163 71,013 73,080 73,871
Provision for loan losses.................................... 11,000 10,000 15,000 13,000
--------- -------- ------- --------
Net interest income after provision for loan losses...... 58,163 61,013 58,080 60,871
Noninterest income........................................... 25,547 18,925 20,242 22,994
Noninterest expense.......................................... 53,587 57,545 54,530 61,407
--------- -------- ------- --------
Income before provision for income taxes................. 30,123 22,393 23,792 22,458
Provision for income taxes................................... 11,092 7,693 10,092 7,078
--------- -------- ------- --------
Net income............................................... $ 19,031 14,700 13,700 15,380
========= ======== ======= ========
Earnings per common share:
Basic.................................................... $ 796.04 615.70 570.75 638.90
========= ======== ======= ========
Diluted.................................................. $ 784.29 606.04 565.09 634.38
========= ======== ======= ========
FIRST BANKS, INC. PREFERRED SECURITIES
The preferred securities of First Preferred Capital Trust II and First
Preferred Capital Trust III are traded on the Nasdaq National Market System with
the ticker symbols "FBNKN" and "FBNKM," respectively. The preferred securities
of First Preferred Capital Trust II and First Preferred Capital Trust III are
represented by a global security that has been deposited with and registered in
the name of The Depository Trust Company, New York, New York (DTC). The
beneficial ownership interests of these preferred securities are recorded
through the DTC book-entry system. The high and low preferred securities prices
and the dividends declared for 2004 and 2003 are summarized as follows:
FIRST PREFERRED CAPITAL TRUST II (ISSUE DATE - OCTOBER 2000) - FBNKN
2004 2003
------------------ ----------------- Dividend
High Low High Low Declared
---- --- ---- --- --------
First quarter............................................ $28.33 26.92 29.00 27.80 $0.640000
Second quarter........................................... 27.23 26.34 29.25 27.90 0.640000
Third quarter............................................ 27.29 26.11 28.70 27.40 0.640000
Fourth quarter........................................... 27.24 26.06 28.14 27.25 0.640000
---------
$2.560000
=========
FIRST PREFERRED CAPITAL TRUST III (ISSUE DATE - NOVEMBER 2001) - FBNKM
2004 2003
------------------ ----------------- Dividend
High Low High Low Declared
---- --- ---- --- --------
First quarter............................................ $27.95 27.00 27.70 26.55 $0.562500
Second quarter........................................... 27.00 25.55 28.50 27.00 0.562500
Third quarter............................................ 29.10 26.04 28.55 26.90 0.562500
Fourth quarter........................................... 27.55 26.55 29.80 27.21 0.562500
---------
$2.250000
=========
The preferred securities of First Preferred Capital Trust IV are traded
on the New York Stock Exchange with the ticker symbol "FBSPrA." The preferred
securities of First Preferred Capital Trust IV are represented by a global
security that has been deposited with and registered in the name of DTC. The
beneficial ownership interests of these preferred securities are recorded
through the DTC book-entry system. The high and low preferred securities prices
and the dividends declared for 2004 and 2003 are summarized as follows:
FIRST PREFERRED CAPITAL TRUST IV (ISSUE DATE - APRIL 2003) - FBSPrA
2004 2003 Dividend Declared
---------------- ---------------- --------------------
High Low High Low 2004 2003
---- --- ---- --- ---- ----
First quarter................................. $28.60 27.35 -- -- $0.509375 --
Second quarter................................ 28.00 25.70 27.80 26.00 0.509375 0.503715
Third quarter................................. 28.00 25.80 28.20 27.35 0.509375 0.509375
Fourth quarter................................ 28.00 26.81 28.20 27.23 0.509375 0.509375
--------- --------
$2.037500 1.522465
========= ========
FOR INFORMATION CONCERNING FIRST BANKS, PLEASE CONTACT:
Allen H. Blake Terrance M. McCarthy
President, Chief Executive Officer Senior Executive Vice President
and Chief Financial Officer and Chief Operating Officer
600 James S. McDonnell Boulevard 600 James S. McDonnell Boulevard
Mail Code - M1-199-014 Mail Code - M1-199-071
Hazelwood, Missouri 63042 Hazelwood, Missouri 63042
Telephone - (314) 592-5000 Telephone - (314) 592-5000
www.firstbanks.com www.firstbanks.com
TRANSFER AGENTS:
FBNKN and FBNKM FBSPrA
--------------- ------
U. S. Bank Corporate Trust Services Computershare Investor Services, LLC
One Federal Street, Third Floor 2 North LaSalle Street
Boston, Massachusetts 02110 Chicago, Illinois 60602
Telephone - (800) 934-6802 Telephone - (312) 588-4990
www.usbank.com www.computershare.com
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST BANKS, INC.
By: /s/ Allen H. Blake
----------------------------------------------
Allen H. Blake
President, Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer and Principal
Financial and Accounting Officer)
Date: March 25, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
Signatures Title Date
- -------------------------------------------------------------------------------------------------------------------
/s/ James F. Dierberg Director March 25, 2005
-------------------------------------
James F. Dierberg
/s/ Allen H. Blake Director March 25, 2005
-------------------------------------
Allen H. Blake
/s/ Terrance M. McCarthy Director March 25, 2005
-------------------------------------
Terrance M. McCarthy
/s/ Steven F. Schepman Director March 25, 2005
-------------------------------------
Steven F. Schepman
/s/ Gordon A. Gundaker Director March 25, 2005
-------------------------------------
Gordon A. Gundaker
/s/ David L. Steward Director March 25, 2005
-------------------------------------
David L. Steward
/s/ Hal J. Upbin Director March 25, 2005
-------------------------------------
Hal J. Upbin
/s/ Douglas H. Yaeger Director March 25, 2005
-------------------------------------
Douglas H. Yaeger
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Stock Purchase Agreement by and among First Banks, Inc., The San
Francisco Company, CIB Marine Bancshares, Inc., Hillside Investors,
Ltd., and CIB Bank, dated August 12, 2004 (incorporated herein by
reference to Exhibit 10.6 to the Company's Current Report on Form 8-K
dated August 12, 2004).
3.1 Restated Articles of Incorporation of the Company, as amended
(incorporated herein by reference to Exhibit 3(i) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
3.2 By-Laws of the Company (incorporated herein by reference to Exhibit 3.2
to Amendment No. 2 to the Company's Registration Statement on Form S-1,
File No. 33-50576, dated September 15, 1992).
4.1 Agreement as to Expenses and Liabilities dated October 19, 2000
(relating to First Preferred Capital Trust II ("First Preferred II"))
(filed as Exhibit 4.8 to the Company's Registration Statement on Form
S-2, File No. 333-46270, dated September 20, 2000).
4.2 Agreement as to Expenses and Liabilities between First Banks, Inc. and
First Preferred Capital Trust III, dated November 15, 2001 (relating to
First Preferred Capital Trust III ("First Preferred III")) (filed as
Exhibit 4.8 to the Company's Registration Statement on Form S-2, File
No. 333-71652, dated October 15, 2001).
4.3 Agreement as to Expenses and Liabilities between First Banks, Inc. and
First Preferred Capital Trust IV, dated April 1, 2003 (relating to
First Preferred Capital Trust IV ("First Preferred IV")) (incorporated
herein by reference to Exhibit 10.20 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2003).
4.4 Preferred Securities Guarantee Agreement by and between First Banks,
Inc. and State Street Bank and Trust Company of Connecticut, National
Association, dated October 19, 2000 (relating to First Preferred II)
(filed as Exhibit 4.7 to the Company's Registration Statement on Form
S-2, File No. 333-46270, dated September 20, 2000).
4.5 Preferred Securities Guarantee Agreement by and between First Banks,
Inc. and State Street Bank and Trust Company of Connecticut, National
Association, dated November 15, 2001 (relating to First Preferred III)
(filed as Exhibit 4.7 to the Company's Registration Statement on Form
S-2, File No. 333-71652, dated October 15, 2001).
4.6 Preferred Securities Guarantee Agreement by and between First Banks,
Inc. and Fifth Third Bank, dated April 1, 2003 (relating to First
Preferred IV) (incorporated herein by reference to Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2003).
4.7 Indenture between First Banks, Inc. and State Street Bank and Trust
Company of Connecticut, National Association, as Trustee, dated October
19, 2000 (relating to First Preferred II) (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-2, File No. 333-46270, dated
September 20, 2000).
4.8 Indenture between First Banks, Inc. and State Street Bank and Trust
Company of Connecticut, National Association, as Trustee, dated
November 15, 2001 (relating to First Preferred III) (filed as Exhibit
4.1 to the Company's Registration Statement on Form S-2, File No.
333-71652, dated October 15, 2001).
4.9 Indenture between First Banks, Inc. and Fifth Third Bank, as Trustee,
dated April 1, 2003 (relating to First Preferred IV) (incorporated
herein by reference to Exhibit 10.22 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2003).
4.10 Amended and Restated Trust Agreement among First Banks, Inc., as
Depositor, State Street Bank and Trust Company of Connecticut, National
Association, as Property Trustee, Wilmington Trust Company, as Delaware
Trustee, and the Administrative Trustees, dated October 19, 2000
(relating to First Preferred II) (filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-2, File No. 333-46270, dated September
20, 2000).
4.11 Amended and Restated Trust Agreement among First Banks, Inc., as
Depositor, State Street Bank and Trust Company of Connecticut, National
Association, as Property Trustee, Wilmington Trust Company, as Delaware
Trustee, and the Administrative Trustees, dated November 15, 2001
(relating to First Preferred III) (filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-2, File No. 333-71652, dated
October 15, 2001).
4.12 Amended and Restated Trust Agreement among First Banks, Inc., as
Depositor, Fifth Third Bank, as Property Trustee, Wilmington Trust
Company, as Delaware Trustee, and the Administrative Trustees, dated
April 1, 2003 (relating to First Preferred IV) (incorporated herein by
reference to Exhibit 10.23 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2003).
4.13 Indenture between First Banks, Inc., as Issuer, and Wilmington Trust
Company, as Trustee, dated as of April 10, 2002 (incorporated herein by
reference to Exhibit 4.15 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2002).
4.14 Guarantee Agreement for First Bank Capital Trust, dated as of April 10,
2002 (incorporated herein by reference to Exhibit 4.16 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
4.15 Amended and Restated Declaration of Trust of First Bank Capital Trust,
dated as of April 10, 2002 (incorporated herein by reference to Exhibit
4.17 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002).
4.16 Floating Rate Junior Subordinated Debt Security Certificate of First
Banks, Inc., dated April 10, 2002 (incorporated herein by reference to
Exhibit 4.18 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002).
4.17 Capital Security Certificate of First Bank Capital Trust, dated as of
April 10, 2002 (incorporated herein by reference to Exhibit 4.19 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2002).
4.18 Indenture between First Banks, Inc., as Issuer, and U.S. Bank National
Association, as Trustee, dated as of March 20, 2003 (incorporated
herein by reference to Exhibit 10.6 to Amendment No. 4 to the Company's
Registration Statement on Form S-2, File No. 333-102549, dated March
24, 2003).
4.19 Amended and Restated Declaration of Trust by and among U.S. Bank
National Association, as Institutional Trustee, First Banks, Inc., as
Sponsor, and Allen H. Blake, Terrance M. McCarthy and Lisa K.
Vansickle, as Administrators, dated as of March 20, 2003 (incorporated
herein by reference to Exhibit 10.7 to Amendment No. 4 to the Company's
Registration Statement on Form S-2, File No. 333-102549, dated March
24, 2003).
4.20 Guarantee Agreement by and between First Banks, Inc. and U.S. Bank
National Association, dated as of March 20, 2003 (incorporated herein
by reference to Exhibit 10.8 to Amendment No. 4 to the Company's
Registration Statement on Form S-2, File No. 333-102549, dated March
24, 2003).
4.21 Placement Agreement by and among First Banks, Inc., First Bank
Statutory Trust and SunTrust Capital Markets, Inc., dated as of March
20, 2003 (incorporated herein by reference to Exhibit 10.9 to Amendment
No. 4 to the Company's Registration Statement on Form S-2, File No.
333-102549, dated March 24, 2003).
4.22 Junior Subordinated Debenture of First Banks, Inc., dated as of March
20, 2003 (incorporated herein by reference to Exhibit 10.10 to
Amendment No. 4 to the Company's Registration Statement on Form S-2,
File No. 333-102549, dated March 24, 2003).
4.23 Capital Securities Subscription Agreement by and among First Bank
Statutory Trust, First Banks, Inc. and STI Investment Management, Inc.,
dated as of March 20, 2003 (incorporated herein by reference to Exhibit
10.11 to Amendment No. 4 to the Company's Registration Statement on
Form S-2, File No. 333-102549, dated March 24, 2003).
4.24 Common Securities Subscription Agreement by and between First Bank
Statutory Trust and First Banks, Inc., dated as of March 20, 2003
(incorporated herein by reference to Exhibit 10.12 to Amendment No. 4
to the Company's Registration Statement on Form S-2, File No.
333-102549, dated March 24, 2003).
4.25 Debenture Subscription Agreement by and between First Banks, Inc. and
First Bank Statutory Trust, dated as of March 20, 2003 (incorporated
herein by reference to Exhibit 10.13 to Amendment No. 4 to the
Company's Registration Statement on Form S-2, File No. 333-102549,
dated March 24, 2003).
4.26 Indenture between First Banks, Inc., as Issuer, and Wilmington Trust
Company, as Trustee, dated as of September 20, 2004 - filed herewith.
4.27 Amended and Restated Declaration of Trust by and among Wilmington Trust
Company, as Delaware Trustee, and the Institutional Trustee, First
Banks, Inc., as Sponsor, and Allen H. Blake, Terrance M. McCarthy and
Lisa K. Vansickle, as Administrators, dated as of September 20, 2004 -
filed herewith.
4.28 Guarantee Agreement by and between First Banks, Inc. and Wilmington
Trust Company, dated as of September 20, 2004 - filed herewith.
4.29 Placement Agreement by and among First Banks, Inc., First Bank
Statutory Trust II and FTN Financial Capital Markets and Keefe,
Bruyette & Woods, as Placement Agents, dated as of September 10, 2004 -
filed herewith.
4.30 Floating Rate Junior Subordinated Deferrable Interest Debenture of
First Banks, Inc., dated as of September 20, 2004 - filed herewith.
4.31 Capital Securities Subscription Agreement by and among First Bank
Statutory Trust II, First Banks, Inc. and First Tennessee Bank National
Association, dated as of September 20, 2004 - filed herewith.
4.32 Capital Securities Subscription Agreement by and between First Bank
Statutory Trust II, First Banks, Inc. and Preferred Term Securities XV,
Ltd., dated as of September 20, 2004 - filed herewith.
4.33 Capital Securities Certificate P-1 of First Bank Statutory Trust II,
dated September 20, 2004 - filed herewith.
4.34 Capital Securities Certificate P-2 of First Bank Statutory Trust II,
dated September 20, 2004 - filed herewith.
4.35 Indenture between First Banks, Inc., as Issuer, and Wilmington Trust
Company, as Trustee, dated as of November 23, 2004 - filed herewith.
4.36 Amended and Restated Declaration of Trust by and among Wilmington Trust
Company, as Delaware Trustee, and the Institutional Trustee, First
Banks, Inc., as Sponsor, and Terrance M. McCarthy, Peter D. Wimmer and
Lisa K. Vansickle, as Administrators, dated as of November 23, 2004 -
filed herewith.
4.37 Guarantee Agreement by and between First Banks, Inc. and Wilmington
Trust Company, dated as of November 23, 2004 - filed herewith.
4.38 Placement Agreement by and among First Banks, Inc., First Bank
Statutory Trust III and FTN Financial Capital Markets and Keefe,
Bruyette & Woods, as Placement Agents, dated as of November 22, 2004 -
filed herewith.
4.39 Floating Rate Junior Subordinated Deferrable Interest Debenture of
First Banks, Inc., dated as of November 23, 2004 - filed herewith.
4.40 Capital Securities Subscription Agreement by and among First Bank
Statutory Trust III, First Banks, Inc. and First Tennessee Bank
National Association, dated as of November 23, 2004 - filed herewith.
4.41 Capital Securities Certificate P-1 of First Bank Statutory Trust III,
dated November 23, 2004 - filed herewith.
10.1 Shareholders' Agreement by and among James F. Dierberg II and Mary W.
Dierberg, Trustees under the Living Trust of James F. Dierberg II,
dated July 24, 1989, Michael James Dierberg and Mary W. Dierberg,
Trustees under the Living Trust of Michael James Dierberg, dated July
24, 1989; Ellen C. Dierberg and Mary W. Dierberg, Trustees under the
Living Trust of Ellen C. Dierberg dated July 17, 1992, and First Banks,
Inc. (incorporated herein by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1, File No 33-50576, dated August 6,
1992).
10.2 Comprehensive Banking System License and Service Agreement dated as of
July 24, 1991, by and between the Company and FiServ CIR, Inc.
(incorporated herein by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1, File No. 33-50576, dated August 6,
1992).
10.3 Secured Credit Agreement ($60,000,000 Revolving Loan Facility and
$20,000,000 Letter of Credit Facility), dated as of August 14, 2003,
among First Banks, Inc. and Wells Fargo Bank, National Association, as
Agent, Bank One, LaSalle Bank National Association, The Northern Trust
Company, Union Bank of California, N.A., Fifth Third Bank (Chicago) and
U.S. Bank National Association (incorporated herein by reference to
Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003).
10.4 AFS Customer Agreement by and between First Banks, Inc. and Advanced
Financial Solutions, Inc., dated January 29, 2004 (incorporated herein
by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2004).
10.5 Management Services Agreement by and between First Banks, Inc. and
First Bank, dated February 28, 2004 (incorporated herein by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004).
10.6 Service Agreement by and between First Services, L.P. and First Banks,
Inc., dated May 1, 2004 (incorporated herein by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004).
10.7 Service Agreement by and between First Services, L.P. and First Bank,
dated May 1, 2004 (incorporated herein by reference to Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2004).
10.8 Service Agreement by and between First Banks, Inc. and First Services,
L.P., dated May 1, 2004 (incorporated herein by reference to Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004).
10.9 First Amendment to Secured Credit Agreement ($75,000,000 Revolving Loan
Facility and $25,000,000 Letter of Credit Facility), dated as of August
12, 2004, by and among First Banks, Inc. and Wells Fargo Bank, National
Association, as Agent, Bank One, N.A., LaSalle Bank National
Association, The Northern Trust Company, Union Bank of California,
N.A., Fifth Third Bank (Chicago) and U.S. Bank National Association
(incorporated herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2004).
10.10* First Banks, Inc. Executive Incentive Compensation Plan - filed
herewith.
10.11* First Banks, Inc. Nonqualified Deferred Compensation Plan - filed
herewith.
10.12* First Amendment to First Banks, Inc. Nonqualified Deferred Compensation
Plan - filed herewith.
14.1 Code of Ethics for Principal Executive Officer and Financial
Professionals (incorporated herein by reference to Exhibit 14 to the
Company's Annual Report on Form 10-K for the year ended December 31,
2003).
21.1 Subsidiaries of the Company - filed herewith.
31 Rule 13a-14(a) / 15d -14(a) Certifications - filed herewith.
32 Section 1350 Certifications - filed herewith.
* Exhibits designated by an asterisk in the Index to Exhibits relate to
management contracts and/or compensatory plans or arrangements.
Exhibit 4.26
----------------------------------------------------------------
FIRST BANKS, INC.,
as Issuer
INDENTURE
Dated as of September 20, 2004
WILMINGTON TRUST COMPANY,
as Trustee
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE 2034
----------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS............................................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II. DEBENTURES............................................................................................8
Section 2.1. Authentication and Dating..............................................................8
Section 2.2. Form of Trustee's Certificate of Authentication........................................8
Section 2.3. Form and Denomination of Debentures....................................................9
Section 2.4. Execution of Debentures................................................................9
Section 2.5. Exchange and Registration of Transfer of Debentures....................................9
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures.......................................11
Section 2.7. Temporary Debentures..................................................................12
Section 2.8. Payment of Interest and Additional Interest...........................................12
Section 2.9. Cancellation of Debentures Paid, etc..................................................13
Section 2.10. Computation of Interest...............................................................14
Section 2.11. Extension of Interest Payment Period..................................................15
Section 2.12. CUSIP Numbers.........................................................................16
ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY.................................................................16
Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures........16
Section 3.2. Offices for Notices and Payments, etc.................................................17
Section 3.3. Appointments to Fill Vacancies in Trustee's Office....................................17
Section 3.4. Provision as to Paying Agent..........................................................17
Section 3.5. Certificate to Trustee................................................................18
Section 3.6. Additional Sums.......................................................................18
Section 3.7. Compliance with Consolidation Provisions..............................................19
Section 3.8. Limitation on Dividends...............................................................19
Section 3.9. Covenants as to the Trust.............................................................19
Section 3.10. Additional Junior Indebtedness........................................................20
ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................................20
Section 4.1. Securityholders' Lists................................................................20
Section 4.2. Preservation and Disclosure of Lists..................................................20
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT..................................21
Section 5.1. Events of Default.....................................................................21
Section 5.2. Payment of Debentures on Default; Suit Therefor.......................................23
Section 5.3. Application of Moneys Collected by Trustee............................................24
Section 5.4. Proceedings by Securityholders........................................................24
Section 5.5. Proceedings by Trustee................................................................25
Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver....................25
Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders........25
Section 5.8. Notice of Defaults....................................................................26
Section 5.9. Undertaking to Pay Costs..............................................................26
ARTICLE VI. CONCERNING THE TRUSTEE...............................................................................26
Section 6.1. Duties and Responsibilities of Trustee................................................26
Section 6.2. Reliance on Documents, Opinions, etc..................................................27
Section 6.3. No Responsibility for Recitals, etc...................................................28
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or
Registrar May Own Debentures........................................................ 28
Section 6.5. Moneys to be Held in Trust............................................................29
Section 6.6. Compensation and Expenses of Trustee..................................................29
Section 6.7. Officers' Certificate as Evidence.....................................................29
Section 6.8. Eligibility of Trustee................................................................30
Section 6.9. Resignation or Removal of Trustee.....................................................30
Section 6.10. Acceptance by Successor Trustee.......................................................31
Section 6.11. Succession by Merger, etc.............................................................32
Section 6.12. Authenticating Agents.................................................................32
ARTICLE VII. CONCERNING THE SECURITYHOLDERS......................................................................33
Section 7.1. Action by Securityholders.............................................................33
Section 7.2. Proof of Execution by Securityholders.................................................33
Section 7.3. Who Are Deemed Absolute Owners........................................................34
Section 7.4. Debentures Owned by Company Deemed Not Outstanding....................................34
Section 7.5. Revocation of Consents; Future Holders Bound..........................................34
ARTICLE VIII. SECURITYHOLDERS' MEETINGS..........................................................................34
Section 8.1. Purposes of Meetings..................................................................34
Section 8.2. Call of Meetings by Trustee...........................................................35
Section 8.3. Call of Meetings by Company or Securityholders........................................35
Section 8.4. Qualifications for Voting.............................................................35
Section 8.5. Regulations...........................................................................35
Section 8.6. Voting................................................................................36
Section 8.7. Quorum; Actions.......................................................................36
ARTICLE IX. SUPPLEMENTAL INDENTURES..............................................................................37
Section 9.1. Supplemental Indentures without Consent of Securityholders............................37
Section 9.2. Supplemental Indentures with Consent of Securityholders...............................38
Section 9.3. Effect of Supplemental Indentures.....................................................39
Section 9.4. Notation on Debentures................................................................39
Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee...........39
ARTICLE X. REDEMPTION OF SECURITIES..............................................................................39
Section 10.1. Optional Redemption...................................................................39
Section 10.2. Special Event Redemption..............................................................39
Section 10.3. Notice of Redemption; Selection of Debentures.........................................40
Section 10.4. Payment of Debentures Called for Redemption...........................................40
ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE....................................................40
Section 11.1. Company May Consolidate, etc., on Certain Terms.......................................41
Section 11.2. Successor Entity to be Substituted....................................................41
Section 11.3. Opinion of Counsel to be Given to Trustee.............................................41
ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.............................................................41
Section 12.1. Discharge of Indenture................................................................41
Section 12.2. Deposited Moneys to be Held in Trust by Trustee.......................................42
Section 12.3. Paying Agent to Repay Moneys Held.....................................................42
Section 12.4. Return of Unclaimed Moneys............................................................42
ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS....................................43
Section 13.1. Indenture and Debentures Solely Corporate Obligations.................................43
ARTICLE XIV. MISCELLANEOUS PROVISIONS............................................................................43
Section 14.1. Successors............................................................................43
Section 14.2. Official Acts by Successor Entity.....................................................43
Section 14.3. Surrender of Company Powers...........................................................43
Section 14.4. Addresses for Notices, etc............................................................43
Section 14.5. Governing Law.........................................................................43
Section 14.6. Evidence of Compliance with Conditions Precedent......................................44
Section 14.7. Table of Contents, Headings, etc......................................................44
Section 14.8. Execution in Counterparts.............................................................44
Section 14.9. Separability..........................................................................44
Section 14.10. Assignment............................................................................44
Section 14.11. Acknowledgment of Rights..............................................................44
ARTICLE XV. SUBORDINATION OF DEBENTURES..........................................................................45
Section 15.1. Agreement to Subordinate..............................................................45
Section 15.2. Default on Senior Indebtedness........................................................45
Section 15.3. Liquidation, Dissolution, Bankruptcy..................................................45
Section 15.4. Subrogation...........................................................................46
Section 15.5. Trustee to Effectuate Subordination...................................................47
Section 15.6. Notice by the Company.................................................................47
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness.................................48
Section 15.8. Subordination May Not Be Impaired.....................................................48
Exhibit A Form of Floating Rate Junior Subordinated Deferrable Interest Debenture
THIS INDENTURE, dated as of September 20, 2004, between First Banks,
Inc., a Missouri corporation (the "Company"), and Wilmington Trust Company, a
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Delaware banking corporation, as debenture trustee (the "Trustee").
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WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its Floating Rate Junior Subordinated Deferrable
Interest Debentures due 2034 (the "Debentures") under this Indenture to provide,
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among other things, for the execution and authentication, delivery and
administration thereof, and the Company has duly authorized the execution of
this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;
NOW, THEREFORE, This Indenture Witnesseth:
In consideration of the premises, and the purchase of the Debentures by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Debentures as follows:
ARTICLE I.
DEFINITIONS
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Section 1.1. Definitions. The terms defined in this Section 1.1
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(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. All
accounting terms used herein and not expressly defined shall have the meanings
assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted in the United States at the time
of any computation. The words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Additional Interest" has the meaning set forth in Section 2.11.
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"Additional Junior Indebtedness" means, without duplication and other
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than the Debentures, any indebtedness, liabilities or obligations of the
Company, or any Subsidiary of the Company, under debt securities (or guarantees
in respect of debt securities) initially issued after the date of this Indenture
to any trust, or a trustee of a trust, partnership or other entity affiliated
with the Company that is, directly or indirectly, a finance subsidiary (as such
term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other
financing vehicle of the Company or any Subsidiary of the Company in connection
with the issuance by that entity of preferred securities or other securities
that are eligible to qualify for Tier 1 capital treatment (or its then
equivalent) for purposes of the capital adequacy guidelines of the Federal
Reserve, as then in effect and applicable to the Company (or, if the Company is
not a bank holding company, such guidelines applied to the Company as if the
Company were subject to such guidelines); provided, however, that the inability
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of the Company to treat all or any portion of the Additional Junior Indebtedness
as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if
such inability results from the Company having cumulative preferred stock,
minority interests in consolidated subsidiaries, or any other class of security
or interest which the Federal Reserve now or may hereafter accord Tier 1 capital
treatment (including the Debentures) in excess of the amount which may qualify
for treatment as Tier 1 capital under applicable capital adequacy guidelines.
"Additional Sums" has the meaning set forth in Section 3.6.
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"Affiliate" has the same meaning as given to that term in Rule 405 of
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the Securities Act or any successor rule thereunder.
"Authenticating Agent" means any agent or agents of the Trustee which
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at the time shall be appointed and acting pursuant to Section 6.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
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state law for the relief of debtors.
"Board of Directors" means the board of directors or the executive
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committee or any other duly authorized designated officers of the Company.
"Board Resolution" means a copy of a resolution certified by the
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Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
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day on which banking institutions in New York City or Wilmington, Delaware are
permitted or required by any applicable law or executive order to close.
"Capital Securities" means undivided beneficial interests in the assets
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of the Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence and continuance of an Event of
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Default (as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of such
Capital Securities.
"Capital Securities Guarantee" means the guarantee agreement that the
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Company enters into with Wilmington Trust Company, as guarantee trustee, or
other Persons that operates directly or indirectly for the benefit of holders of
Capital Securities of the Trust.
"Capital Treatment Event" means the receipt by the Company and the
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Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of any amendment to, or change (including any
announced prospective change) in, the laws, rules or regulations of the United
States or any political subdivision thereof or therein, or as the result of any
official or administrative pronouncement or action or decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or which pronouncement, action or decision is announced on or after the date of
original issuance of the Debentures, there is more than an insubstantial risk
that the Company will not, within 90 days of the date of such opinion, be
entitled to treat an amount equal to the aggregate liquidation amount of the
Capital Securities as "Tier 1 Capital" (or its then equivalent) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Company (or if the Company is not a bank holding company, such
guidelines applied to the Company as if the Company were subject to such
guidelines); provided, however, that the inability of the Company to treat all
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or any portion of the liquidation amount of the Capital Securities as Tier l
Capital shall not constitute the basis for a Capital Treatment Event, if such
inability results from the Company having cumulative preferred stock, minority
interests in consolidated subsidiaries, or any other class of security or
interest which the Federal Reserve or OTS, as applicable, may now or hereafter
accord Tier 1 Capital treatment in excess of the amount which may now or
hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of
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Debentures in connection with the liquidation of the Trust shall not in and of
itself constitute a Capital Treatment Event unless such liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.
"Certificate" means a certificate signed by any one of the principal
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executive officer, the principal financial officer or the principal accounting
officer of the Company.
"Common Securities" means undivided beneficial interests in the assets
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of the Trust which rank pari passu with Capital Securities issued by the Trust;
provided, however, that upon the occurrence and continuance of an Event of
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Default (as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of such
Capital Securities.
"Company" means First Banks, Inc., a Missouri corporation, and, subject
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to the provisions of Article XI, shall include its successors and assigns.
"Coupon Rate" has the meaning set forth in Section 2.8.
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"Debenture" or "Debentures" has the meaning stated in the first recital
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of this Indenture.
"Debenture Register" has the meaning specified in Section 2.5.
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"Declaration" means the Amended and Restated Declaration of Trust of
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the Trust, as amended or supplemented from time to time.
"Default" means any event, act or condition that with notice or lapse
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of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.8.
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"Distribution Period" means (i) with respect to interest paid on the
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first Interest Payment Date, the period beginning on (and including) the date of
original issuance and ending on (but excluding) the Interest Payment Date in
December 2004 and (ii) thereafter, with respect to interest paid on each
successive Interest Payment Date, the period beginning on (and including) the
preceding Interest Payment Date and ending on (but excluding) such current
Interest Payment Date.
"Determination Date" has the meaning set forth in Section 2.10.
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"Event of Default" means any event specified in Section 5.1, continued
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for the period of time, if any, and after the giving of the notice, if any,
therein designated.
"Extension Event of Default" means an Event of Default under Section
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5.1(a), (d) or (e), whatever the reason for such Extension Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
"Extension Period" has the meaning set forth in Section 2.11.
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"Federal Reserve" means the Board of Governors of the Federal Reserve
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System, or its designated district bank, as applicable, and any successor
federal agency that is primarily responsible for regulating the activities of
bank holding companies.
"Indenture" means this instrument as originally executed or, if amended
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or supplemented as herein provided, as so amended or supplemented, or both.
"Institutional Trustee" has the meaning set forth in the Declaration.
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"Interest Payment Date" means March 20, June 20, September 20 and
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December 20 of each year during the term of this Indenture, or if such day is
not a Business Day, then the next succeeding Business Day, commencing in
December 2004.
"Interest Rate" means for the Distribution Period beginning on (and
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including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in December 2004 the rate per annum of 3.92438%, and for
each Distribution Period beginning on or after the Interest Payment Date in
December 2004, the Coupon Rate for such Distribution Period.
"Investment Company Event" means the receipt by the Company and the
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Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Trust is
or, within 90 days of the date of such opinion will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the issuance of
the Debentures.
"Liquidation Amount" means the stated amount of $1,000.00 per Trust
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Security.
"Maturity Date" means September 20, 2034.
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"Officers' Certificate" means a certificate signed by the Chairman of
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the Board, the Chief Executive Officer, the Vice Chairman, the President, any
Managing Director or any Vice President, and by the Treasurer, an Assistant
Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 14.6 if and to
the extent required by the provisions of such Section.
"Opinion of Counsel" means an opinion in writing signed by legal
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counsel, who may be an employee of or counsel to the Company, or may be other
counsel reasonably satisfactory to the Trustee. Each such opinion shall include
the statements provided for in Section 14.6 if and to the extent required by the
provisions of such Section.
"OTS" means the Office of Thrift Supervision and any successor federal
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agency that is primarily responsible for regulating the activities of savings
and loan holding companies.
The term "outstanding," when used with reference to Debentures, means,
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subject to the provisions of Section 7.4, as of any particular time, all
Debentures authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except:
(a) Debentures theretofore canceled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its
own paying agent); provided, however, that, if such Debentures, or portions
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thereof, are to be redeemed prior to maturity thereof, notice of such redemption
shall have been given as provided in Section 10.3 or provision satisfactory to
the Trustee shall have been made for giving such notice; and
(c) Debentures paid pursuant to Section 2.6 or in lieu of or in
substitution for which other Debentures shall have been authenticated and
delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the
Company and the Trustee is presented that any such Debentures are held by bona
fide holders in due course.
"Person" means any individual, corporation, limited liability company,
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partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Debenture means every previous
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Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and, for purposes of this definition, any Debenture
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Debenture.
"Principal Office of the Trustee," or other similar term, means the
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office of the Trustee, at which at any particular time its corporate trust
business shall be principally administered, which at the time of the execution
of this Indenture shall be Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
"Redemption Date" has the meaning set forth in Section 10.1.
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"Redemption Price" means 100% of the principal amount of the Debentures
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being redeemed, plus accrued and unpaid interest (including any Additional
Interest) on such Debentures to the Redemption Date.
"Responsible Officer" means, with respect to the Trustee, any officer
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within the Principal Office of the Trustee, including any vice-president, any
assistant vice-president, any secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or other officer of the Principal
Trust Office of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular 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.
"Securities Act" means the Securities Act of 1933, as amended from time
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to time or any successor legislation.
"Securityholder," "holder of Debentures," or other similar terms, means
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any Person in whose name at the time a particular Debenture is registered on the
register kept by the Company or the Trustee for that purpose in accordance with
the terms hereof.
"Senior Indebtedness" means, with respect to the Company, (i) the
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principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for all borrowed and purchased money and (B) indebtedness evidenced by
securities, debentures, notes, bonds or other similar instruments issued by the
Company; (ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations of
the Company under any title retention agreement; (iv) all obligations of the
Company for the reimbursement of any letter of credit, any banker's acceptance,
any security purchase facility, any repurchase agreement or similar arrangement,
any interest rate swap, any other hedging arrangement, any obligation under
options or any similar credit or other transaction; (v) all obligations of the
Company associated with derivative products such as interest and foreign
exchange rate contracts, commodity contracts, and similar arrangements; (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
Persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise including, without limitation, similar
obligations arising from off-balance sheet guarantees and direct credit
substitutes; and (vii) all obligations of the type referred to in clauses (i)
through (vi) above of other Persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by the Company),
whether incurred on or prior to the date of this Indenture or thereafter
incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this
Indenture and guarantees in respect of such Debentures, (3) trade accounts
payable of the Company arising in the ordinary course of business (such trade
accounts payable being pari passu in right of payment to the Debentures), or (4)
obligations with respect to which (a) in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
obligations are pari passu, junior or otherwise not superior in right of payment
to the Debentures and (b) the Company, prior to the issuance thereof, has
notified (and, if then required under the applicable guidelines of the
regulating entity, has received approval from) the Federal Reserve (if the
Company is a bank holding company) or the OTS (if the Company is a savings and
loan holding company). Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
"Special Event" means any of a Capital Treatment Event, an Investment
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Company Event or a Tax Event.
"Special Redemption Date" has the meaning set forth in Section 10.2.
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"Special Redemption Price" means the price set forth in the following
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table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:
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Month in which Special Special Redemption Price
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Redemption Date Occurs
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December 2004 104.625%
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March 2005 104.300%
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June 2005 104.000%
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September 2005 103.650%
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December 2005 103.350%
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March 2006 103.000%
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June 2006 102.700%
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September 2006 102.350%
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December 2006 102.050%
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March 2007 101.700%
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June 2007 101.400%
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September 2007 101.050%
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December 2007 100.750%
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March 2008 100.450%
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June 2008 100.200%
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September 2008 and thereafter 100.000%
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plus, in each case, accrued and unpaid interest (including any Additional
Interest) on such Debentures to the Special Redemption Date.
"Subsidiary" means with respect to any Person, (i) any corporation at
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least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
"Tax Event" means the receipt by the Company and the Trust of an
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opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations) (an "Administrative Action") or judicial decision
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interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Company or the Trust and whether or not subject to
review or appeal, which amendment, clarification, change, Administrative Action
or decision is enacted, promulgated or announced, in each case on or after the
date of original issuance of the Debentures, 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; (ii) interest payable by the Company on
the Debentures is not, or within 90 days of the date of such opinion, will not
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes; or (iii) 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.
"3-Month LIBOR" has the meaning set forth in Section 2.10.
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"Telerate Page 3750" has the meaning set forth in Section 2.10.
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"Trust" shall mean First Bank Statutory Trust II, a Delaware statutory
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trust, or any other similar trust created for the purpose of issuing Capital
Securities in connection with the issuance of Debentures under this Indenture,
of which the Company is the sponsor.
"Trust Securities" means Common Securities and Capital Securities of
the Trust. ----------------
"Trustee" means Wilmington Trust Company, and, subject to the
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provisions of Article VI hereof, shall also include its successors and assigns
as Trustee hereunder.
ARTICLE II.
DEBENTURES
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Section 2.1. Authentication and Dating. Upon the execution and
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delivery of this Indenture, or from time to time thereafter, Debentures in an
aggregate principal amount not in excess of $20,619,000.00 may be executed and
delivered by the Company to the Trustee for authentication, and the Trustee,
upon receipt of a written authentication order from the Company, shall thereupon
authenticate and make available for delivery said Debentures to or upon the
written order of the Company, signed by its Chairman of the Board of Directors,
Chief Executive Officer, Vice Chairman, the President, one of its Managing
Directors or one of its Vice Presidents without any further action by the
Company hereunder. Notwithstanding anything to the contrary contained herein,
the Trustee shall be fully protected in relying upon the aforementioned
authentication order and written order in authenticating and delivering said
Debentures. In authenticating such Debentures, and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon:
(a) a copy of any Board Resolution or Board Resolutions relating
thereto and, if applicable, an appropriate record of any action taken pursuant
to such resolution, in each case certified by the Secretary or an Assistant
Secretary of the Company, as the case may be; and
(b) an Opinion of Counsel prepared in accordance with Section 14.6
which shall also state:
(1) that such Debentures, when authenticated and delivered by the
Trustee and issued by the Company in each case in the manner and
subject to any conditions specified in such Opinion of Counsel, will
constitute valid and legally binding obligations of the Company,
subject to or limited by applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, moratorium and other
statutory or decisional laws relating to or affecting creditors'
rights or the reorganization of financial institutions (including,
without limitation, preference and fraudulent conveyance or transfer
laws), heretofore or hereafter enacted or in effect, affecting the
rights of creditors generally; and
(2) that all laws and requirements in respect of the execution
and delivery by the Company of the Debentures have been complied with
and that authentication and delivery of the Debentures by the Trustee
will not violate the terms of this Indenture.
The Trustee shall have the right to decline to authenticate and deliver
any Debentures under this Section if the Trustee, being advised in writing by
counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing holders.
The definitive Debentures shall be typed, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Debentures, as evidenced by their
execution of such Debentures.
Section 2.2. Form of Trustee's Certificate of Authentication. The
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Trustee's certificate of authentication on all Debentures shall be in
substantially the following form:
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By
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Authorized Signer
Section 2.3. Form and Denomination of Debentures. The Debentures
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shall be substantially in the form of Exhibit A attached hereto. The Debentures
shall be in registered, certificated form without coupons and in minimum
denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof.
Any attempted transfer of the Debentures in a block having an aggregate
principal amount of less than $100,000.00 shall be deemed to be void and of no
legal effect whatsoever. Any such purported transferee shall be deemed not to be
a holder of such Debentures for any purpose, including, but not limited to the
receipt of payments on such Debentures, and such purported transferee shall be
deemed to have no interest whatsoever in such Debentures. The Debentures shall
be numbered, lettered, or otherwise distinguished in such manner or in
accordance with such plans as the officers executing the same may determine with
the approval of the Trustee as evidenced by the execution and authentication
thereof.
Section 2.4. Execution of Debentures. The Debentures shall be signed
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in the name and on behalf of the Company by the manual or facsimile signature of
its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman,
President, one of its Managing Directors or one of its Executive Vice
Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as
shall bear thereon a certificate of authentication substantially in the form
herein before recited, executed by the Trustee or the Authenticating Agent by
the manual signature of an authorized signer, shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee or the Authenticating Agent upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee or the Authenticating
Agent, or disposed of by the Company, such Debentures nevertheless may be
authenticated and delivered or disposed of as though the Person who signed such
Debentures had not ceased to be such officer of the Company; and any Debenture
may be signed on behalf of the Company by such Persons as, at the actual date of
the execution of such Debenture, shall be the proper officers of the Company,
although at the date of the execution of this Indenture any such person was not
such an officer.
Every Debenture shall be dated the date of its authentication.
Section 2.5. Exchange and Registration of Transfer of Debentures. The
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Company shall cause to be kept, at the office or agency maintained for the
purpose of registration of transfer and for exchange as provided in Section 3.2,
a register (the "Debenture Register") for the Debentures issued hereunder in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration and transfer of all Debentures as in this
Article II provided. The Debenture Register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time.
Debentures to be exchanged may be surrendered at the Principal Office
of the Trustee or at any office or agency to be maintained by the Company for
such purpose as provided in Section 3.2, and the Company shall execute, the
Company or the Trustee shall register and the Trustee or the Authenticating
Agent shall authenticate and make available for delivery in exchange therefor
the Debenture or Debentures which the Securityholder making the exchange shall
be entitled to receive. Upon due presentment for registration of transfer of any
Debenture at the Principal Office of the Trustee or at any office or agency of
the Company maintained for such purpose as provided in Section 3.2, the Company
shall execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in the
name of the transferee or transferees a new Debenture for a like aggregate
principal amount. Registration or registration of transfer of any Debenture by
the Trustee or by any agent of the Company appointed pursuant to Section 3.2,
and delivery of such Debenture, shall be deemed to complete the registration or
registration of transfer of such Debenture.
All Debentures presented for registration of transfer or for exchange
or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by the holder or his
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or
register a transfer of any Debenture for a period of 15 days next preceding the
date of selection of Debentures for redemption.
Notwithstanding anything herein to the contrary, Debentures may not be
transferred except in compliance with the restricted securities legend set forth
below, unless otherwise determined by the Company, upon the advice of counsel
expert in securities law, in accordance with applicable law:
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures. In case
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any Debenture shall become mutilated or be destroyed, lost or stolen, the
Company shall execute, and upon its written request the Trustee shall
authenticate and deliver, a new Debenture bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case the applicant for a substituted Debenture shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and the Trustee evidence to
their satisfaction of the destruction, loss or theft of such Debenture and of
the ownership thereof.
The Trustee may authenticate any such substituted Debenture and deliver
the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Debenture, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature or has
been called for redemption in full shall become mutilated or be destroyed, lost
or stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless and, in case of destruction, loss or theft, evidence
satisfactory to the Company and to the Trustee of the destruction, loss or theft
of such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition that, to the
extent permitted by applicable law, the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
Section 2.7. Temporary Debentures. Pending the preparation of
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definitive Debentures, the Company may execute and the Trustee shall
authenticate and make available for delivery temporary Debentures that are
typed, printed or lithographed. Temporary Debentures shall be issuable in any
authorized denomination, and substantially in the form of the definitive
Debentures in lieu of which they are issued but with such omissions, insertions
and variations as may be appropriate for temporary Debentures, all as may be
determined by the Company. Every such temporary Debenture shall be executed by
the Company and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with the same effect, as the definitive
Debentures. Without unreasonable delay the Company will execute and deliver to
the Trustee or the Authenticating Agent definitive Debentures and thereupon any
or all temporary Debentures may be surrendered in exchange therefor, at the
principal corporate trust office of the Trustee or at any office or agency
maintained by the Company for such purpose as provided in Section 3.2, and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery in exchange for such temporary Debentures a like aggregate principal
amount of such definitive Debentures. Such exchange shall be made by the Company
at its own expense and without any charge therefor except that in case of any
such exchange involving a registration of transfer the Company may require
payment of a sum sufficient to cover any tax, fee or other governmental charge
that may be imposed in relation thereto. Until so exchanged, the temporary
Debentures shall in all respects be entitled to the same benefits under this
Indenture as definitive Debentures authenticated and delivered hereunder.
Section 2.8. Payment of Interest and Additional Interest. Interest at
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the Interest Rate and any Additional Interest on any Debenture that is payable,
and is punctually paid or duly provided for, on any Interest Payment Date for
Debentures shall be paid to the Person in whose name said Debenture (or one or
more Predecessor Securities) is registered at the close of business on the
regular record date for such interest installment except that interest and any
Additional Interest payable on the Maturity Date shall be paid to the Person to
whom principal is paid.
Each Debenture shall bear interest for the period beginning on (and
including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in December 2004 at a rate per annum of 3.92438%, and
shall bear interest for each successive Distribution Period beginning on or
after the Interest Payment Date in December 2004 at a rate per annum equal to
the 3-Month LIBOR, determined as described in Section 2.10, plus 2.05% (the
"Coupon Rate"), applied to the principal amount thereof, until the principal
-----------
thereof becomes due and payable, and on any overdue principal and to the extent
that payment of such interest is enforceable under applicable law (without
duplication) on any overdue installment of interest (including Additional
Interest) at the Interest Rate in effect for each applicable period compounded
quarterly. Interest shall be payable (subject to any relevant Extension Period)
quarterly in arrears on each Interest Payment Date with the first installment of
interest to be paid on the Interest Payment Date in December 2004.
Any interest on any Debenture, including Additional Interest, that is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
-------------------
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debentures (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing at least
25 days prior to the date of the proposed payment of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date for the payment of such Defaulted Interest which shall not
be more than 15 nor less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first class postage prepaid, to each Securityholder
at its address as it appears in the Debenture Register, not less than 10 days
prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
such Debentures (or their respective Predecessor Securities) are registered on
such special record date and shall be no longer payable.
The Company may make payment of any Defaulted Interest on any
Debentures in any other lawful manner after notice given by the Company to the
Trustee of the proposed payment method; provided, however, the Trustee in its
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sole discretion deems such payment method to be practical.
Any interest (including Additional Interest) scheduled to become
payable on an Interest Payment Date occurring during an Extension Period shall
not be Defaulted Interest and shall be payable on such other date as may be
specified in the terms of such Debentures.
The term "regular record date" as used in this Section shall mean the
close of business on the 5th Business Day preceding the applicable Interest
Payment Date.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, that were carried by such other Debenture.
Section 2.9. Cancellation of Debentures Paid, etc. All Debentures
----------------------------------------
surrendered for the purpose of payment, redemption, exchange or registration of
transfer, shall, if surrendered to the Company or any paying agent, be
surrendered to the Trustee and promptly canceled by it, or, if surrendered to
the Trustee or any Authenticating Agent, shall be promptly canceled by it, and
no Debentures shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. All Debentures canceled by any
Authenticating Agent shall be delivered to the Trustee. The Trustee shall
destroy all canceled Debentures unless the Company otherwise directs the Trustee
in writing. If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
surrendered to the Trustee for cancellation.
Section 2.10. Computation of Interest. The amount of interest payable
-----------------------
for each Distribution Period will be calculated by applying the Interest Rate to
the principal amount outstanding at the commencement of the Distribution Period
on the basis of the actual number of days in the Distribution Period concerned
divided by 360. All percentages resulting from any calculations on the
Debentures will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
(a) "3-Month LIBOR" means the London interbank offered interest rate
-------------
for three-month, U.S. dollar deposits determined by the Trustee in the following
order of priority:
(1) the rate (expressed as a percentage per annum) for U.S.
dollar deposits having a three-month maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date (as defined below). "Telerate Page 3750" means the display
designated as "Page 3750" on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other
service or services as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related
Determination Date, the Trustee will request the principal London
offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar
deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested
in clause (2) above, the Trustee will request four major New York City
banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If
at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested
in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined
with respect to the Distribution Period immediately preceding such
current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the
related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.
(b) The Interest Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
(c) "Determination Date" means the date that is two London Banking
------------------
Days (i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.
(d) The Trustee shall notify the Company, the Institutional Trustee
and any securities exchange or interdealer quotation system on which the Capital
Securities are listed, of the Coupon Rate and the Determination Date for each
Distribution Period, in each case as soon as practicable after the determination
thereof but in no event later than the thirtieth (30th) day of the relevant
Distribution Period. Failure to notify the Company, the Institutional Trustee or
any securities exchange or interdealer quotation system, or any defect in said
notice, shall not affect the obligation of the Company to make payment on the
Debentures at the applicable Coupon Rate. Any error in the calculation of the
Coupon Rate by the Trustee may be corrected at any time by notice delivered as
above provided. Upon the request of a holder of a Debenture, the Trustee shall
provide the Coupon Rate then in effect and, if determined, the Coupon Rate for
the next Distribution Period.
(e) Subject to the corrective rights set forth above, all
certificates, communications, opinions, determinations, calculations, quotations
and decisions given, expressed, made or obtained for the purposes of the
provisions relating to the payment and calculation of interest on the Debentures
and distributions on the Capital Securities by the Trustee or the Institutional
Trustee will (in the absence of willful default, bad faith and manifest error)
be final, conclusive and binding on the Trust, the Company and all of the
holders of the Debentures and the Capital Securities, and no liability shall (in
the absence of willful default, bad faith or manifest error) attach to the
Trustee or the Institutional Trustee in connection with the exercise or
non-exercise by either of them or their respective powers, duties and
discretion.
Section 2.11. Extension of Interest Payment Period. So long as no
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Extension Event of Default has occurred and is continuing, the Company shall
have the right, from time to time, and without causing an Event of Default, to
defer payments of interest on the Debentures by extending the interest payment
period on the Debentures at any time and from time to time during the term of
the Debentures, for up to 20 consecutive quarterly periods (each such extended
interest payment period, an "Extension Period"), during which Extension Period
-----------------
no interest (including Additional Interest) shall be due and payable (except any
Additional Sums that may be due and payable). No Extension Period may end on a
date other than an Interest Payment Date. During an Extension Period, interest
will continue to accrue on the Debentures, and interest on such accrued interest
will accrue at an annual rate equal to the Interest Rate in effect for such
Extension Period, compounded quarterly from the date such interest would have
been payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as "Additional Interest"). At the end of
--------------------
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Debentures (together with Additional Interest thereon); provided,
--------
however, that no Extension Period may extend beyond the Maturity Date; provided
- ------- --------
further, however, that during any such Extension Period, the Company shall not
- ------- -------
and shall not permit any Affiliate to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's or such Affiliate's capital stock (other
than payments of dividends or distributions to the Company) or make any
guarantee payments with respect to the foregoing or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company or any Affiliate that rank pari passu in all
respects with or junior in interest to the Debentures (other than, with respect
to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions
of shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholders' rights plan, or the issuance of rights, stock
or other property under any stockholders' rights plan, or the redemption or
repurchase of rights pursuant thereto, (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock and any cash payments in lieu of fractional shares issued in
connection therewith, or (f) payments under the Capital Securities Guarantee).
Prior to the termination of any Extension Period, the Company may further extend
such period, provided that such period together with all such previous and
further consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest to the extent permitted by
applicable law. The Company must give the Trustee notice of its election to
begin or extend an Extension Period by the close of business at least 5 Business
Days prior to the Interest Payment Date with respect to which interest on the
Debentures would have been payable except for the election to begin or extend
such Extension Period. The Trustee shall give notice of the Company's election
to begin a new Extension Period to the Securityholders.
Section 2.12. CUSIP Numbers. The Company in issuing the Debentures may
-------------
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use CUSIP numbers in notices of redemption as a convenience to Securityholders;
provided, however, that any such notice may state that no representation is made
- -------- -------
as to the correctness of such numbers either as printed on the Debentures or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Debentures, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee in writing of any change in the
CUSIP numbers.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
-----------------------------------
Section 3.1. Payment of Principal, Premium and Interest; Agreed
--------------------------------------------------------
Treatment of the Debentures.
- ---------------------------
(a) The Company covenants and agrees that it will duly and punctually
pay or cause to be paid the principal of and premium, if any, and interest and
any Additional Interest and other payments on the Debentures at the place, at
the respective times and in the manner provided in this Indenture and the
Debentures. Each installment of interest on the Debentures may be paid (i) by
mailing checks for such interest payable to the order of the holders of
Debentures entitled thereto as they appear on the registry books of the Company
if a request for a wire transfer has not been received by the Company or (ii) by
wire transfer to any account with a banking institution located in the United
States designated in writing by such Person to the paying agent no later than
the related record date. Notwithstanding the foregoing, so long as the holder of
this Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Institutional Trustee.
(b) The Company will treat the Debentures as indebtedness, and the
amounts payable in respect of the principal amount of such Debentures as
interest, for all United States federal income tax purposes. All payments in
respect of such Debentures will be made free and clear of United States
withholding tax to any beneficial owner thereof that has provided an Internal
Revenue Service Form W8 BEN (or any substitute or successor form) establishing
its non-United States status for United States federal income tax purposes.
(c) As of the date of this Indenture, the Company has no present
intention to exercise its right under Section 2.11 to defer payments of interest
on the Debentures by commencing an Extension Period.
(d) As of the date of this Indenture, the Company believes that the
likelihood that it would exercise its right under Section 2.11 to defer payments
of interest on the Debentures by commencing an Extension Period at any time
during which the Debentures are outstanding is remote because of the
restrictions that would be imposed on the Company's ability to declare or pay
dividends or distributions on, or to redeem, purchase or make a liquidation
payment with respect to, any of its outstanding equity and on the Company's
ability to make any payments of principal of or interest on, or repurchase or
redeem, any of its debt securities that rank pari passu in all respects with (or
junior in interest to) the Debentures.
Section 3.2. Offices for Notices and Payments, etc. So long as any of
--------------------------------------
the Debentures remain outstanding, the Company will maintain in Wilmington,
Delaware, an office or agency where the Debentures may be presented for payment,
an office or agency where the Debentures may be presented for registration of
transfer and for exchange as in this Indenture provided and an office or agency
where notices and demands to or upon the Company in respect of the Debentures or
of this Indenture may be served. The Company will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. Until otherwise designated from time to time by the Company in
a notice to the Trustee, or specified as contemplated by Section 2.5, such
office or agency for all of the above purposes shall be the office or agency of
the Trustee. In case the Company shall fail to maintain any such office or
agency in Wilmington, Delaware, or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside Wilmington, Delaware,
where the Debentures may be presented for registration of transfer and for
exchange in the manner provided in this Indenture, and the Company may from time
to time rescind such designation, as the Company may deem desirable or
expedient; provided, however, that no such designation or rescission shall in
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any manner relieve the Company of its obligation to maintain any such office or
agency in Wilmington, Delaware, for the purposes above mentioned. The Company
will give to the Trustee prompt written notice of any such designation or
rescission thereof.
Section 3.3. Appointments to Fill Vacancies in Trustee's Office. The
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Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 6.9, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 3.4. Provision as to Paying Agent.
----------------------------
(a) If the Company shall appoint a paying agent other than the Trustee,
it will cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.4,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest, if any,
on the Debentures (whether such sums have been paid to it by the
Company or by any other obligor on the Debentures) in trust for the
benefit of the holders of the Debentures;
(2) that it will give the Trustee prompt written notice of any
failure by the Company (or by any other obligor on the Debentures) to
make any payment of the principal of and premium, if any, or interest,
if any, on the Debentures when the same shall be due and payable; and
(3) that it will, at any time during the continuance of any Event
of Default, upon the written request of the Trustee, forthwith pay to
the Trustee all sums so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest or
other payments, if any, on the Debentures, set aside, segregate and hold in
trust for the benefit of the holders of the Debentures a sum sufficient to pay
such principal, premium, interest or other payments so becoming due and will
notify the Trustee in writing of any failure to take such action and of any
failure by the Company (or by any other obligor under the Debentures) to make
any payment of the principal of and premium, if any, or interest or other
payments, if any, on the Debentures when the same shall become due and payable.
Whenever the Company shall have one or more paying agents for the
Debentures, it will, on or prior to each due date of the principal of and
premium, if any, or interest, if any, on the Debentures, deposit with a paying
agent a sum sufficient to pay the principal, premium, interest or other payments
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.
(c) Anything in this Section 3.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debentures, or for any other reason, pay, or
direct any paying agent to pay to the Trustee all sums held in trust by the
Company or any such paying agent, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.4 is subject to
Sections 12.3 and 12.4.
Section 3.5. Certificate to Trustee. The Company will deliver to the
-----------------------
Trustee on or before 120 days after the end of each fiscal year, so long as
Debentures are outstanding hereunder, a Certificate stating that in the course
of the performance by the signers of their duties as officers of the Company
they would normally have knowledge of any default during such fiscal year by the
Company in the performance of any covenants contained herein, stating whether or
not they have knowledge of any such default and, if so, specifying each such
default of which the signers have knowledge and the nature and status thereof.
Section 3.6. Additional Sums. If and for so long as the Trust is the
----------------
holder of all Debentures and the Trust is required to pay any additional taxes
(including withholding taxes), duties, assessments or other governmental charges
as a result of a Tax Event, the Company will pay such additional amounts
("Additional Sums") on the Debentures as shall be required so that the net
----------------
amounts received and retained by the Trust after paying taxes (including
withholding taxes), duties, assessments or other governmental charges will be
equal to the amounts the Trust would have received if no such taxes, duties,
assessments or other governmental charges had been imposed. Whenever in this
Indenture or the Debentures there is a reference in any context to the payment
of principal of or interest on the Debentures, such mention shall be deemed to
include mention of payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made; provided, however,
-------- -------
that the deferral of the payment of interest during an Extension Period pursuant
to Section 2.11 shall not defer the payment of any Additional Sums that may be
due and payable.
Section 3.7. Compliance with Consolidation Provisions. The Company
-----------------------------------------
will not, while any of the Debentures remain outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other Person unless the provisions of Article XI hereof are
complied with.
Section 3.8. Limitation on Dividends. If Debentures are initially
-------------------------
issued to the Trust or a trustee of such Trust in connection with the issuance
of Trust Securities by the Trust (regardless of whether Debentures continue to
be held by such Trust) and (i) there shall have occurred and be continuing an
Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest on
the Debentures by extending the interest payment period as provided herein and
such period, or any extension thereof, shall be continuing, then the Company
shall not, and shall not allow any Affiliate of the Company to, (x) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Company) or make any guarantee payments with respect to the foregoing or (y)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company or any Affiliate that
rank pari passu in all respects with or junior in interest to the Debentures
(other than, with respect to clauses (x) and (y) above, (1) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
Section 3.9. Covenants as to the Trust. For so long as the Trust
---------------------------
Securities remain outstanding, the Company shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
-------- -------
Company under this Indenture may succeed to the Company's ownership of such
Common Securities. The Company, as owner of the Common Securities, shall, except
in connection with a distribution of Debentures 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 the Declaration, cause the Trust (a) to remain a statutory trust,
(b) to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes, and (c) to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.
Section 3.10. Additional Junior Indebtedness. The Company shall not,
-------------------------------
and it shall not cause or permit any Subsidiary of the Company to, incur, issue
or be obligated on any Additional Junior Indebtedness, either directly or
indirectly, by way of guarantee, suretyship or otherwise, other than Additional
Junior Indebtedness (i) that, by its terms, is expressly stated to be either
junior and subordinate or pari passu in all respects to the Debentures, and (ii)
of which the Company has notified (and, if then required under the applicable
guidelines of the regulating entity, has received approval from) the Federal
Reserve, if the Company is a bank holding company, or the OTS, if the Company is
a savings and loan holding company.
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS
----------------------------------
BY THE COMPANY AND THE TRUSTEE
------------------------------
Section 4.1. Securityholders' Lists. The Company covenants and agrees
----------------------
that it will furnish or caused to be furnished to the Trustee:
(a) on each regular record date for the Debentures, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Securityholders of the Debentures as of such record date; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
except that no such lists need be furnished under this Section 4.1 so long as
the Trustee is in possession thereof by reason of its acting as Debenture
registrar.
Section 4.2. Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures (1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so
acting) hereunder. The Trustee may destroy any list furnished to it as provided
in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter referred
to as "applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Debenture for a period of
at least 6 months preceding the date of such application, and such application
states that the applicants desire to communicate with other holders of
Debentures with respect to their rights under this Indenture or under such
Debentures and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within 5 Business Days after the receipt of such application, at its election,
either:
(1) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.2, or
(2) inform such applicants as to the approximate number of
holders of Debentures whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with
the provisions of subsection (a) of this Section 4.2, and as to the
approximate cost of mailing to such Securityholders the form of proxy
or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder whose name and address appear in the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.2 a copy of the form of proxy or other
communication which is specified in such request with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender, the Trustee shall mail to such applicants and file
with the Securities and Exchange Commission, if permitted or required by
applicable law, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the holders of all Debentures, as the case
may be, or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If said Commission, as permitted or required
by applicable law, after opportunity for a hearing upon the objections specified
in the written statement so filed, shall enter an order refusing to sustain any
of such objections or if, after the entry of an order sustaining one or more of
such objections, said Commission shall find, after notice and opportunity for
hearing, that all the objections so sustained have been met and shall enter an
order so declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every holder of Debentures, by receiving and holding the
same, agrees with Company and the Trustee that neither the Company nor the
Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debentures in accordance with the provisions of subsection (b) of this
Section 4.2, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
-------------------------------------------
UPON AN EVENT OF DEFAULT
------------------------
Section 5.1. Events of Default. "Event of Default," wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) the Company defaults in the payment of any interest upon any
Debenture, including any Additional Interest in respect thereof, following the
nonpayment of any such interest for twenty or more consecutive Distribution
Periods; or
(b) the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debentures as and when the same shall
become due and payable either at maturity, upon redemption, by declaration of
acceleration or otherwise; or
(c) the Company defaults in the performance of, or breaches, any of its
covenants or agreements in this Indenture or in the terms of the Debentures
established as contemplated in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach for
a period of 60 days after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the outstanding Debentures, a
written notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(d) a court of competent jurisdiction shall enter a decree or order for
relief in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or
(e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(f) the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (i) the distribution of the Debentures to holders of such Trust
Securities in liquidation of their interests in the Trust, (ii) the redemption
of all of the outstanding Trust Securities or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
If an Event of Default under Section 5.1(a), (d) or (e) occurs and is
continuing with respect to the Debentures, then, and in each and every such
case, unless the principal of the Debentures shall have already become due and
payable, either the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding hereunder, by notice in
writing to the Company (and to the Trustee if given by Securityholders), may
declare the entire principal of the Debentures and the interest accrued thereon,
if any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. If an Event of Default under
Section 5.1(b), (c) or (f) occurs and is continuing with respect to the
Debentures, then, and in each and every such case, unless the principal of the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by Securityholders), may proceed to remedy the default or
breach thereunder by such appropriate judicial proceedings as the Trustee or
such holders shall deem most effectual to remedy the defaulted covenant or
enforce the provisions of this Indenture so breached, either by suit in equity
or by action at law, for damages or otherwise.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Debentures shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Debentures and the principal
of and premium, if any, on the Debentures which shall have become due otherwise
than by acceleration (with interest upon such principal and premium, if any, and
Additional Interest) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other amounts due to the Trustee pursuant
to Section 6.6, if any, and (ii) all Events of Default under this Indenture,
other than the non-payment of the principal of or premium, if any, on Debentures
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein -- then and in every such case the holders
of a majority in aggregate principal amount of the Debentures then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Debentures shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Debentures shall continue as though no such proceeding had been taken.
Section 5.2. Payment of Debentures on Default; Suit Therefor. The
---------------------------------------------------
Company covenants that upon the occurrence of an Event of Default pursuant to
Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to
the Trustee, for the benefit of the holders of the Debentures the whole amount
that then shall have become due and payable on all Debentures for principal and
premium, if any, or interest, or both, as the case may be, with Additional
Interest accrued on the Debentures (to the extent that payment of such interest
is enforceable under applicable law and, if the Debentures are held by the Trust
or a trustee of such Trust, without duplication of any other amounts paid by the
Trust or a trustee in respect thereof); and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including a reasonable compensation to the Trustee, its agents, attorneys and
counsel, and any other amounts due to the Trustee under Section 6.6. In case the
Company shall fail forthwith to pay such amounts upon such demand, the Trustee,
in its own name and as trustee of an express trust, shall be entitled and
empowered to institute any actions or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company or any other obligor on such Debentures and
collect in the manner provided by law out of the property of the Company or any
other obligor on such Debentures wherever situated the moneys adjudged or
decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Bankruptcy Law, or in case a receiver or trustee shall have been appointed for
the property of the Company or such other obligor, or in the case of any other
similar judicial proceedings relative to the Company or other obligor upon the
Debentures, or to the creditors or property of the Company or such other
obligor, the Trustee, irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration of
acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.2, shall be
entitled and empowered, by intervention in such proceedings or otherwise,
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the
Debentures,
(ii) in case of any judicial proceedings, to file such proofs of claim
and other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all other amounts due to the Trustee under
Section 6.6), and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the
Debentures, or to the creditors or property of the Company or
such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Debentures
in any election of a trustee or a standby trustee in arrangement,
reorganization, liquidation or other bankruptcy or insolvency
proceedings or Person performing similar functions in comparable
proceedings,
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims, and
(iv) to distribute the same after the deduction of its charges and
expenses.
Any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Securityholders to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
amounts due to the Trustee under Section 6.6.
Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Debentures.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
holders of the Debentures, and it shall not be necessary to make any holders of
the Debentures parties to any such proceedings.
Section 5.3. Application of Moneys Collected by Trustee. Any moneys
--------------------------------------------
collected by the Trustee pursuant to this Article V shall be applied in the
following order, at the date or dates fixed by the Trustee for the distribution
of such moneys, upon presentation of the several Debentures in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses incurred by, and reasonable
fees of, the Trustee, its agents, attorneys and counsel, and of all other
amounts due to the Trustee under Section 6.6;
Second: To the payment of all Senior Indebtedness of the Company if and
to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon
Debentures for principal (and premium, if any), and interest on the Debentures,
in respect of which or for the benefit of which money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due on such Debentures (including Additional Interest); and
Fourth: The balance, if any, to the Company.
Section 5.4. Proceedings by Securityholders. No holder of any
----------------------------------
Debenture shall have any right to institute any suit, action or proceeding for
any remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default with respect to the Debentures and
unless the holders of not less than 25% in aggregate principal amount of the
Debentures then outstanding shall have given the Trustee a written request to
institute such action, suit or proceeding and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred thereby, and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity shall have failed to
institute any such action, suit or proceeding.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Debenture to receive payment of the principal of,
premium, if any, and interest, on such Debenture when due, or to institute suit
for the enforcement of any such payment, shall not be impaired or affected
without the consent of such holder and by accepting a Debenture hereunder it is
expressly understood, intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the Trustee, that no one or
more holders of Debentures shall have any right in any manner whatsoever by
virtue or by availing itself of any provision of this Indenture to affect,
disturb or prejudice the rights of the holders of any other Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
Section 5.5. Proceedings by Trustee. In case of an Event of Default
-----------------------
hereunder the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 5.6. Remedies Cumulative and Continuing; Delay or Omission
--------------------------------------------------------
Not a Waiver. Except as otherwise provided in Section 2.6, all powers and
- ------------
remedies given by this Article V to the Trustee or to the Securityholders shall,
to the extent permitted by law, be deemed cumulative and not exclusive of any
other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to the Debentures, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right,
remedy or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right, remedy or power, or shall be construed to
be a waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.4, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee (in accordance with
its duties under Section 6.1) or by the Securityholders.
Section 5.7. Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------------
Majority of Securityholders. The holders of a majority in aggregate principal
- ----------------------------
amount of the Debentures affected (voting as one class) at the time outstanding
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee with respect to such Debentures; provided,
--------
however, that (subject to the provisions of Section 6.1) the Trustee shall have
- -------
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if a Responsible Officer of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability.
The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive (or modify any previously granted waiver of) any past default
or Event of Default, and its consequences, except a default (a) in the payment
of principal of, premium, if any, or interest on any of the Debentures, (b) in
respect of covenants or provisions hereof which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9; provided, however, that if the
-------- -------
Debentures are held by the Trust or a trustee of such trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
-------- -------
if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section, said default or Event of
Default shall for all purposes of the Debentures and this Indenture be deemed to
have been cured and to be not continuing.
Section 5.8. Notice of Defaults. The Trustee shall, within 90 days
-------------------
after the actual knowledge by a Responsible Officer of the Trustee of the
occurrence of a default with respect to the Debentures, mail to all
Securityholders, as the names and addresses of such holders appear upon the
Debenture Register, notice of all defaults with respect to the Debentures known
to the Trustee, unless such defaults shall have been cured before the giving of
such notice (the term "defaults" for the purpose of this Section 5.8 being
hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and
(f) of Section 5.1, not including periods of grace, if any, provided for
therein); provided, however, that, except in the case of default in the payment
-------- -------
of the principal of, premium, if any, or interest on any of the Debentures, the
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the withholding
of such notice is in the interests of the Securityholders.
Section 5.9. Undertaking to Pay Costs. All parties to this Indenture
-------------------------
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, that the provisions of
-------- -------
this Section 5.9 shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Securityholder, or group of Securityholders, holding in
the aggregate more than 10% in principal amount of the Debentures outstanding,
or to any suit instituted by any Securityholder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Debenture
against the Company on or after the same shall have become due and payable.
ARTICLE VI.
CONCERNING THE TRUSTEE
----------------------
Section 6.1. Duties and Responsibilities of Trustee. With respect to
----------------------------------------
the holders of Debentures issued hereunder, the Trustee, prior to the occurrence
of an Event of Default with respect to the Debentures and after the curing or
waiving of all Events of Default which may have occurred, with respect to the
Debentures, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants shall be read
into this Indenture against the Trustee. In case an Event of Default with
respect to the Debentures has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to
Debentures and after the curing or waiving of all Events of Default which may
have occurred
(1) the duties and obligations of the Trustee with respect
to Debentures shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations with
respect to the Debentures as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee, and
(2) in the absence of bad faith on the part of the Trustee,
the Trustee 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 Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent facts;
and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.7, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is ground for believing that the repayment of
such funds or liability is not assured to it under the terms of this Indenture
or indemnity satisfactory to the Trustee against such risk is not reasonably
assured to it.
Section 6.2. Reliance on Documents, Opinions, etc. Except as
-------------------------------------------
otherwise provided in Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, note,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default with respect to the Debentures (that has not
been cured or waived) to exercise with respect to Debentures such of the rights
and powers vested in it by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
holders of not less than a majority in aggregate principal amount of the
outstanding Debentures affected thereby; provided, however, that if the payment
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within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care; and
(h) with the exceptions of defaults under Sections 5.1(a) or (b), the
Trustee shall not be charged with knowledge of any Default or Event of Default
with respect to the Debentures unless a written notice of such Default or Event
of Default shall have been given to the Trustee by the Company or any other
obligor on the Debentures or by any holder of the Debentures.
Section 6.3. No Responsibility for Recitals, etc. The recitals
----------------------------------------
contained herein and in the Debentures (except in the certificate of
authentication of the Trustee or the Authenticating Agent) shall be taken as the
statements of the Company, and the Trustee and the Authenticating Agent assume
no responsibility for the correctness of the same. The Trustee and the
Authenticating Agent make no representations as to the validity or sufficiency
of this Indenture or of the Debentures. The Trustee and the Authenticating Agent
shall not be accountable for the use or application by the Company of any
Debentures or the proceeds of any Debentures authenticated and delivered by the
Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer
--------------------------------------------------------
Agents or Registrar May Own Debentures. The Trustee or any Authenticating Agent
- --------------------------------------
or any paying agent or any transfer agent or any Debenture registrar, in its
individual or any other capacity, may become the owner or pledgee of Debentures
with the same rights it would have if it were not Trustee, Authenticating Agent,
paying agent, transfer agent or Debenture registrar.
Section 6.5. Moneys to be Held in Trust. Subject to the provisions of
--------------------------
Section 12.4, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purpose for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company. So long as no Event of Default shall have
occurred and be continuing, all interest allowed on any such moneys shall be
paid from time to time upon the written order of the Company, signed by the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer
of the Company.
Section 6.6. Compensation and Expenses of Trustee. The Company
----------------------------------------
covenants and agrees to pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. For purposes
of clarification, this Section 6.6 does not contemplate the payment by the
Company of acceptance or annual administration fees owing to the Trustee
pursuant to the services to be provided by the Trustee under this Indenture or
the fees and expenses of the Trustee's counsel in connection with the closing of
the transactions contemplated by this Indenture. The Company also covenants to
indemnify each of the Trustee or any predecessor Trustee (and its officers,
agents, directors and employees) for, and to hold it harmless against, any and
all loss, damage, claim, liability or expense including taxes (other than taxes
based on the income of the Trustee) incurred without negligence or willful
misconduct on the part of the Trustee and arising out of or in connection with
the acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim of liability. The obligations of the
Company under this Section 6.6 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Debentures upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the holders of particular Debentures.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(d), (e) or (f), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the resignation or removal
of the Trustee and the defeasance or other termination of this Indenture.
Notwithstanding anything in this Indenture or any Debenture to the
contrary, the Trustee shall have no obligation whatsoever to advance funds to
pay any principal of or interest on or other amounts with respect to the
Debentures or otherwise advance funds to or on behalf of the Company.
Section 6.7. Officers' Certificate as Evidence. Except as otherwise
----------------------------------
provided in Sections 6.1 and 6.2, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee, and such certificate, in
the absence of negligence or willful misconduct on the part of the Trustee,
shall be full warrant to the Trustee for any action taken or omitted by it under
the provisions of this Indenture upon the faith thereof.
Section 6.8. Eligibility of Trustee. The Trustee hereunder shall at
----------------------
all times 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 other Person authorized under such laws to exercise
corporate trust powers, having (or whose obligations under this Indenture are
guaranteed by an affiliate having) a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000.00) 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 aforesaid supervising or examining authority, then
for the purposes of this Section 6.8 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 records of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.8, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.9.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of ss. 310(b) of the Trust Indenture Act of 1939, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
described by this Indenture.
Section 6.9. Resignation or Removal of Trustee
---------------------------------
(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation to the Company
and by mailing notice thereof, at the Company's expense, to the holders of the
Debentures at their addresses as they shall appear on the Debenture Register.
Upon receiving such notice of resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument, in duplicate, executed by
order of its Board of Directors, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor Trustee. If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee, or any Securityholder
who has been a bona fide holder of a Debenture or Debentures for at least six
months may, subject to the provisions of Section 5.9, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor Trustee.
(b) In case at any time any of the following shall occur --
(1) the Trustee shall fail to comply with the provisions of
Section 6.8 after written request therefor by the Company or by
any Securityholder who has been a bona fide holder of a Debenture
or Debentures for at least 6 months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.8 and shall fail to resign after written
request therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged as bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 5.9, any Securityholder who has been a bona fide holder of
a Debenture or Debentures for at least 6 months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within 10
Business Days after such nomination the Company objects thereto, in which case,
or in the case of a failure by such holders to nominate a successor Trustee, the
Trustee so removed or any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.9 provided, may petition any
court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor Trustee as provided in
Section 6.10.
Section 6.10. Acceptance by Successor Trustee. Any successor Trustee
--------------------------------
appointed as provided in Section 6.9 shall execute, acknowledge and deliver to
the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties
and obligations with respect to the Debentures of its predecessor hereunder,
with like effect as if originally named as Trustee herein; but, nevertheless, on
the written request of the Company or of the successor Trustee, the Trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 6.6, execute and deliver an instrument transferring to
such successor Trustee all the rights and powers of the Trustee so ceasing to
act and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee thereunder. Upon request of any
such successor Trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
Trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the provisions of Section
6.6.
If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Debentures as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 6.8.
In no event shall a retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall mail notice of the succession of such
Trustee hereunder to the holders of Debentures at their addresses as they shall
appear on the Debenture Register. If the Company fails to mail such notice
within 10 Business Days after the acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Company.
Section 6.11. Succession by Merger, etc. Any corporation into which
-------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided such
corporation shall be otherwise eligible and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such
Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
-------- -------
right to adopt the certificate of authentication of any predecessor Trustee or
authenticate Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 6.12. Authenticating Agents. There may be one or more
----------------------
Authenticating Agents appointed by the Trustee upon the request of the Company
with power to act on its behalf and subject to its direction in the
authentication and delivery of Debentures issued upon exchange or registration
of transfer thereof as fully to all intents and purposes as though any such
Authenticating Agent had been expressly authorized to authenticate and deliver
Debentures; provided, however, that the Trustee shall have no liability to the
-------- -------
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Debentures. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $50,000,000.00 and being 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 the requirements of such authority, then for the
purposes of this Section 6.12 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.12 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the
Debentures by giving written notice of termination to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Debentures as the
names and addresses of such holders appear on the Debenture Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities with
respect to the Debentures of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services. Any Authenticating Agent shall have no
responsibility or liability for any action taken by it as such in accordance
with the directions of the Trustee.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
------------------------------
Section 7.1. Action by Securityholders. Whenever in this Indenture it
-------------------------
is provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action) the fact that at the time of taking any such action the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by such
Securityholders in person or by agent or proxy appointed in writing, or (b) by
the record of such holders of Debentures voting in favor thereof at any meeting
of such Securityholders duly called and held in accordance with the provisions
of Article VIII, or (c) by a combination of such instrument or instruments and
any such record of such a meeting of such Securityholders or (d) by any other
method the Trustee deems satisfactory.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debentures for the
determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action or revocation of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record date shall be deemed to be Securityholders for the purposes of
determining whether Securityholders of the requisite proportion of outstanding
Debentures have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding Debentures shall be computed
as of the record date; provided, however, that no such authorization, agreement
-------- -------
or consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than 6 months after the record date.
Section 7.2. Proof of Execution by Securityholders. Subject to the
---------------------------------------
provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument
by a Securityholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
ownership of Debentures shall be proved by the Debenture Register or by a
certificate of the Debenture registrar. The Trustee may require such additional
proof of any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.6.
Section 7.3. Who Are Deemed Absolute Owners. Prior to due presentment
-------------------------------
for registration of transfer of any Debenture, the Company, the Trustee, any
Authenticating Agent, any paying agent, any transfer agent and any Debenture
registrar may deem the Person in whose name such Debenture shall be registered
upon the Debenture Register to be, and may treat him as, the absolute owner of
such Debenture (whether or not such Debenture shall be overdue) for the purpose
of receiving payment of or on account of the principal of, premium, if any, and
interest on such Debenture and for all other purposes; and neither the Company
nor the Trustee nor any Authenticating Agent nor any paying agent nor any
transfer agent nor any Debenture registrar shall be affected by any notice to
the contrary. All such payments so made to any holder for the time being or upon
his order shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Debenture.
Section 7.4. Debentures Owned by Company Deemed Not Outstanding. In
---------------------------------------------------
determining whether the holders of the requisite aggregate principal amount of
Debentures have concurred in any direction, consent or waiver under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided, however, that for the purposes of
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determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Debentures which a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded. Debentures so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 7.4 if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Debentures and that the pledgee
is not the Company or any such other obligor or Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any such other obligor. In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
Section 7.5. Revocation of Consents; Future Holders Bound. At any
-----------------------------------------------
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 7.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action, any holder (in cases where no record date has been
set pursuant to Section 7.1) or any holder as of an applicable record date (in
cases where a record date has been set pursuant to Section 7.1) of a Debenture
(or any Debenture issued in whole or in part in exchange or substitution
therefor) the serial number of which is shown by the evidence to be included in
the Debentures the holders of which have consented to such action may, by filing
written notice with the Trustee at the Principal Office of the Trustee and upon
proof of holding as provided in Section 7.2, revoke such action so far as
concerns such Debenture (or so far as concerns the principal amount represented
by any exchanged or substituted Debenture). Except as aforesaid any such action
taken by the holder of any Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of such Debenture, and of any
Debenture issued in exchange or substitution therefor or on registration of
transfer thereof, irrespective of whether or not any notation in regard thereto
is made upon such Debenture or any Debenture issued in exchange or substitution
therefor.
ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
-------------------------
Section 8.1. Purposes of Meetings. A meeting of Securityholders may
--------------------
be called at any time and from time to time pursuant to the provisions of this
Article VIII for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of such Debentures
under any other provision of this Indenture or under applicable law.
Section 8.2. Call of Meetings by Trustee. The Trustee may at any time
---------------------------
call a meeting of Securityholders to take any action specified in Section 8.1,
to be held at such time and at such place as the Trustee shall determine. Notice
of every meeting of the Securityholders, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed to holders of Debentures affected at their addresses as
they shall appear on the Debentures Register and, if the Company is not a holder
of Debentures, to the Company. Such notice shall be mailed not less than 20 nor
more than 180 days prior to the date fixed for the meeting.
Section 8.3. Call of Meetings by Company or Securityholders. In case
----------------------------------------------
at any time the Company pursuant to a Board Resolution, or the holders of at
least 10% in aggregate principal amount of the Debentures, as the case may be,
then outstanding, shall have requested the Trustee to call a meeting of
Securityholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such request,
then the Company or such Securityholders may determine the time and the place
for such meeting and may call such meeting to take any action authorized in
Section 8.1, by mailing notice thereof as provided in Section 8.2.
Section 8.4. Qualifications for Voting. To be entitled to vote at any
-------------------------
meeting of Securityholders a Person shall (a) be a holder of one or more
Debentures with respect to which the meeting is being held or (b) a Person
appointed by an instrument in writing as proxy by a holder of one or more such
Debentures. The only Persons who shall be entitled to be present or to speak at
any meeting of Securityholders shall be the Persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.
Section 8.5. Regulations. Notwithstanding any other provisions of
-----------
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.4, at any meeting each holder of
Debentures with respect to which such meeting is being held or proxy therefor
shall be entitled to one vote for each $1,000.00 principal amount of Debentures
held or represented by him; provided, however, that no vote shall be cast or
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counted at any meeting in respect of any Debenture challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Debentures held
by him or instruments in writing as aforesaid duly designating him as the Person
to vote on behalf of other Securityholders. Any meeting of Securityholders duly
called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from
time to time by a majority of those present, whether or not constituting a
quorum, and the meeting may be held as so adjourned without further notice.
Section 8.6. Voting. The vote upon any resolution submitted to any
------
meeting of holders of Debentures with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders or of their representatives by proxy and the serial number or
numbers of the Debentures held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more Persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 8.2. The record
shall show the serial numbers of the Debentures voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 8.7. Quorum; Actions. The Persons entitled to vote a majority
---------------
in principal amount of the Debentures then outstanding shall constitute a quorum
for a meeting of Securityholders; provided, however, that if any action is to be
-------- -------
taken at such meeting with respect to a consent, waiver, request, demand,
notice, authorization, direction or other action which may be given by the
holders of not less than a specified percentage in principal amount of the
Debentures then outstanding, the Persons holding or representing such specified
percentage in principal amount of the Debentures then outstanding will
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Securityholders, be dissolved. In any other case the meeting may be adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section 8.2,
except that such notice need be given only once not less than 5 days prior to
the date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Debentures then outstanding which
shall constitute a quorum.
Except as limited by the provisos in the first paragraph of Section
9.2, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Debentures then
outstanding; provided, however, that, except as limited by the provisos in the
-------- -------
first paragraph of Section 9.2, any resolution with respect to any consent,
waiver, request, demand, notice, authorization, direction or other action which
this Indenture expressly provides may be given by the holders of not less than a
specified percentage in principal amount of the Debentures then outstanding may
be adopted at a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid only by the affirmative vote of the holders of a
not less than such specified percentage in principal amount of the Debentures
then outstanding.
Any resolution passed or decision taken at any meeting of holders of
Debentures duly held in accordance with this Section shall be binding on all the
Securityholders, whether or not present or represented at the meeting.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
-----------------------
Section 9.1. Supplemental Indentures without Consent of
--------------------------------------------------------
Securityholders. The Company, when authorized by a Board Resolution, and the
- ---------------
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto, without the consent of the Securityholders, for
one or more of the following purposes:
(a) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of Debentures as
the Board of Directors shall consider to be for the protection of the holders of
such Debentures, and to make the occurrence, or the occurrence and continuance,
of a default in any of such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth; provided,
--------
however, that in respect of any such additional covenant restriction or
- -------
condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided that any such action shall not materially
--------
adversely affect the interests of the holders of the Debentures;
(d) to add to, delete from, or revise the terms of Debentures,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debentures, including to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.5 (for purposes of assuring that no
registration of Debentures is required under the Securities Act); provided,
--------
however, that any such action shall not adversely affect the interests of the
- -------
holders of the Debentures then outstanding (it being understood, for purposes of
this proviso, that transfer restrictions on Debentures substantially similar to
those that were applicable to Capital Securities shall not be deemed to
materially adversely affect the holders of the Debentures);
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee;
(f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or
(g) to provide for the issuance of and establish the form and terms
and conditions of the Debentures, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or the
Debentures, or to add to the rights of the holders of Debentures.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
9.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 9.2.
Section 9.2. Supplemental Indentures with Consent of Securityholders.
-------------------------------------------------------
With the consent (evidenced as provided in Section 7.1) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the time
outstanding affected by such supplemental indenture (voting as a class), the
Company, when authorized by a Board Resolution, and the Trustee may from time to
time and at any time enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the
Debentures; provided, however, that no such supplemental indenture shall without
-------- -------
the consent of the holders of each Debenture then outstanding and affected
thereby (i) change the fixed maturity of any Debenture, or reduce the principal
amount thereof or any premium thereon, or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on redemption thereof
or make the principal thereof or any interest or premium thereon payable in any
coin or currency other than that provided in the Debentures, or impair or affect
the right of any Securityholder to institute suit for payment thereof or impair
the right of repayment, if any, at the option of the holder, or (ii) reduce the
aforesaid percentage of Debentures the holders of which are required to consent
to any such supplemental indenture; provided further, however, that if the
-------- ------- -------
Debentures are held by a trust or a trustee of such trust, such supplemental
indenture shall not be effective until the holders of a majority in Liquidation
Amount of Trust Securities shall have consented to such supplemental indenture;
provided further, however, that if the consent of the Securityholder of each
- -------- ------- -------
outstanding Debenture is required, such supplemental indenture shall not be
effective until each holder of the Trust Securities shall have consented to such
supplemental indenture.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 9.3. Effect of Supplemental Indentures. Upon the execution of
----------------------------------
any supplemental indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 9.4. Notation on Debentures. Debentures authenticated and
-----------------------
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article IX may bear a notation as to any matter provided for
in such supplemental indenture. If the Company or the Trustee shall so
determine, new Debentures so modified as to conform, in the opinion of the Board
of Directors of the Company, to any modification of this Indenture contained in
any such supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee or the Authenticating Agent and delivered in
exchange for the Debentures then outstanding.
Section 9.5. Evidence of Compliance of Supplemental Indenture to be
--------------------------------------------------------
Furnished to Trustee. The Trustee, subject to the provisions of Sections 6.1 and
- --------------------
6.2, shall, in addition to the documents required by Section 14.6, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article IX is authorized or permitted by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee under the provisions of this
Article IX to join in the execution thereof.
ARTICLE X.
REDEMPTION OF SECURITIES
------------------------
Section 10.1. Optional Redemption. The Company shall have the right
--------------------
(subject to the receipt by the Company of prior approval (i) if the Company is a
bank holding company, from the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve or (ii) if the
Company is a savings and loan holding company, from the OTS, if then required
under applicable capital guidelines or policies of the OTS) to redeem the
Debentures, in whole or in part, but in all cases in a principal amount with
integral multiples of $1,000.00, on any Interest Payment Date on or after the
Interest Payment Date in September 2009 (the "Redemption Date"), at the
----------------
Redemption Price.
Section 10.2. Special Event Redemption. If a Special Event shall occur
------------------------
and be continuing, the Company shall have the right (subject to the receipt by
the Company of prior approval (i) if the Company is a bank holding company, from
the Federal Reserve, if then required under applicable capital guidelines or
policies of the Federal Reserve or (ii) if the Company is a savings and loan
holding company, from the OTS, if then required under applicable capital
guidelines or policies of the OTS) to redeem the Debentures in whole, but not in
part, at any Interest Payment Date, within 120 days following the occurrence of
such Special Event (the "Special Redemption Date") at the Special Redemption
-------------------------
Price.
Section 10.3. Notice of Redemption; Selection of Debentures. In case
----------------------------------------------
the Company shall desire to exercise the right to redeem all, or, as the case
may be, any part of the Debentures, it shall cause to be mailed a notice of such
redemption at least 30 and not more than 60 days prior to the Redemption Date or
the Special Redemption Date to the holders of Debentures so to be redeemed as a
whole or in part at their last addresses as the same appear on the Debenture
Register. Such mailing shall be by first class mail. The notice if mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice. In any case, failure to give
such notice by mail or any defect in the notice to the holder of any Debenture
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the CUSIP number, if any,
of the Debentures to be redeemed, the Redemption Date or the Special Redemption
Date, as applicable, the Redemption Price or the Special Redemption Price, as
applicable, at which Debentures are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Debentures, that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portions thereof to be redeemed will cease to accrue. If less than all
the Debentures are to be redeemed the notice of redemption shall specify the
numbers of the Debentures to be redeemed. In case the Debentures are to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion thereof will be
issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Section 10.4. Payment of Debentures Called for Redemption. If notice
-------------------------------------------
of redemption has been given as provided in Section 10.3, the Debentures or
portions of Debentures with respect to which such notice has been given shall
become due and payable on the Redemption Date or Special Redemption Date, as
applicable, and at the place or places stated in such notice at the applicable
Redemption Price or Special Redemption Price and on and after said date (unless
the Company shall default in the payment of such Debentures at the Redemption
Price or Special Redemption Price, as applicable) interest on the Debentures or
portions of Debentures so called for redemption shall cease to accrue. On
presentation and surrender of such Debentures at a place of payment specified in
said notice, such Debentures or the specified portions thereof shall be paid and
redeemed by the Company at the applicable Redemption Price or Special Redemption
Price.
Upon presentation of any Debenture redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Debenture or
Debentures of authorized denominations, in principal amount equal to the
unredeemed portion of the Debenture so presented.
ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
-------------------------------------------------
Section 11.1. Company May Consolidate, etc., on Certain Terms. Nothing
-----------------------------------------------
contained in this Indenture or in the Debentures shall prevent any consolidation
or merger of the Company with or into any other Person (whether or not
affiliated with the Company) or successive consolidations or mergers in which
the Company or its successor or successors shall be a party or parties, or shall
prevent any sale, conveyance, transfer or other disposition of the property or
capital stock of the Company or its successor or successors as an entirety, or
substantially as an entirety, to any other Person (whether or not affiliated
with the Company, or its successor or successors) authorized to acquire and
operate the same; provided, however, that the Company hereby covenants and
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agrees that, upon any such consolidation, merger (where the Company is not the
surviving corporation), sale, conveyance, transfer or other disposition, the due
and punctual payment of the principal of (and premium, if any) and interest on
all of the Debentures in accordance with their terms, according to their tenor,
and the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept or performed by the Company, shall be
expressly assumed by supplemental indenture satisfactory in form to the Trustee
executed and delivered to the Trustee by the entity formed by such
consolidation, or into which the Company shall have been merged, or by the
entity which shall have acquired such property or capital stock.
Section 11.2. Successor Entity to be Substituted. In case of any such
----------------------------------
consolidation, merger, sale, conveyance, transfer or other disposition and upon
the assumption by the successor entity, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Debentures and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the Company, and
thereupon the predecessor entity shall be relieved of any further liability or
obligation hereunder or upon the Debentures. Such successor entity thereupon may
cause to be signed, and may issue in its own name, any or all of the Debentures
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee or the Authenticating Agent; and, upon the order of
such successor entity instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee or the
Authenticating Agent shall authenticate and deliver any Debentures which
previously shall have been signed and delivered by the officers of the Company,
to the Trustee or the Authenticating Agent for authentication, and any
Debentures which such successor entity thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating Agent for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof.
Section 11.3. Opinion of Counsel to be Given to Trustee. The Trustee,
-----------------------------------------
subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to
the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as
conclusive evidence that any consolidation, merger, sale, conveyance, transfer
or other disposition, and any assumption, permitted or required by the terms of
this Article XI complies with the provisions of this Article XI.
ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
Section 12.1. Discharge of Indenture. When
----------------------
(a) the Company shall deliver to the Trustee for cancellation all
Debentures theretofore authenticated (other than any Debentures
which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.6) and not
theretofore canceled, or
(b) all the Debentures not theretofore canceled or delivered to the
Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within 1 year or are
to be called for redemption within 1 year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in
trust, funds, which shall be immediately due and payable,
sufficient to pay at maturity or upon redemption all of the
Debentures (other than any Debentures which shall have been
destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.6) not theretofore canceled or
delivered to the Trustee for cancellation, including principal
and premium, if any, and interest due or to become due to such
date of maturity or redemption date, as the case may be, but
excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debentures
(1) theretofore repaid to the Company in accordance with the
provisions of Section 12.4, or (2) paid to any state or to the
District of Columbia pursuant to its unclaimed property or
similar laws,
and if in the case of either clause (a) or clause (b) the Company shall also pay
or cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect except for the provisions of
Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall
survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6
and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with, and at the cost and expense
of the Company, shall execute proper instruments acknowledging satisfaction of
and discharging this Indenture. The Company agrees to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
in connection with this Indenture or the Debentures.
Section 12.2. Deposited Moneys to be Held in Trust by Trustee.
-------------------------------------------------------
Subject to the provisions of Section 12.4, all moneys deposited with the Trustee
pursuant to Section 12.1 shall be held in trust in a non-interest bearing
account and applied by it to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the holders
of the particular Debentures for the payment of which such moneys have been
deposited with the Trustee, of all sums due and to become due thereon for
principal, and premium, if any, and interest.
Section 12.3. Paying Agent to Repay Moneys Held. Upon the satisfaction
---------------------------------
and discharge of this Indenture all moneys then held by any paying agent of the
Debentures (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such moneys.
Section 12.4. Return of Unclaimed Moneys. Any moneys deposited with or
--------------------------
paid to the Trustee or any paying agent for payment of the principal of, and
premium, if any, or interest on Debentures and not applied but remaining
unclaimed by the holders of Debentures for 2 years after the date upon which the
principal of, and premium, if any, or interest on such Debentures, as the case
may be, shall have become due and payable, shall, subject to applicable
escheatment laws, be repaid to the Company by the Trustee or such paying agent
on written demand; and the holder of any of the Debentures shall thereafter look
only to the Company for any payment which such holder may be entitled to
collect, and all liability of the Trustee or such paying agent with respect to
such moneys shall thereupon cease.
ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
----------------------------------------
OFFICERS AND DIRECTORS
----------------------
Section 13.1. Indenture and Debentures Solely Corporate Obligations.
-------------------------------------------------------
No recourse for the payment of the principal of or premium, if any, or interest
on any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any such
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, officer or
director, as such, past, present or future, of the Company or of any successor
Person of the Company, either directly or through the Company or any successor
Person of the Company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Debentures.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
------------------------
Section 14.1. Successors. All the covenants, stipulations, promises
----------
and agreements of the Company in this Indenture shall bind its successors and
assigns whether so expressed or not.
Section 14.2. Official Acts by Successor Entity. Any act or proceeding
---------------------------------
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee,
officer or other authorized Person of any entity that shall at the time be the
lawful successor of the Company.
Section 14.3. Surrender of Company Powers. The Company by instrument
---------------------------
in writing executed by authority of at least 2/3 (two-thirds) of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company and thereupon such power so surrendered shall terminate both as
to the Company, and as to any permitted successor.
Section 14.4. Addresses for Notices, etc. Any notice, consent,
-----------------------------
direction, request, authorization, waiver or demand which by any provision of
this Indenture is required or permitted to be given, made, furnished or served
by the Trustee or by the Securityholders on or to the Company may be given or
served in writing by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company, with the Trustee for the purpose) to the Company, 600 James S.
McDonnell Boulevard, Hazelwood, Missouri 63042, Attention: Lisa K. Vansickle.
Any notice, consent, direction, request, authorization, waiver or demand by any
Securityholder or the Company to or upon the Trustee shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the office of the Trustee, addressed to the Trustee, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate
Trust Administration. Any notice, consent, direction, request, authorization,
waiver or demand on or to any Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
address set forth in the Debenture Register.
Section 14.5. Governing Law. This Indenture and each Debenture shall
-------------
be deemed to be a contract made under the law of the State of New York, and for
all purposes shall be governed by and construed in accordance with the law of
said State, without regard to conflict of laws principles thereof.
Section 14.6. Evidence of Compliance with Conditions Precedent. Upon
-------------------------------------------------
any application or demand by the Company to the Trustee to take any action under
any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that in the opinion of the signers all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not in the opinion of such
person, such condition or covenant has been complied with.
Section 14.7. Table of Contents, Headings, etc. The table of contents
---------------------------------
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 14.8. Execution in Counterparts. This Indenture may be
-------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
Section 14.9. Separability. In case any one or more of the provisions
------------
contained in this Indenture or in the Debentures shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Indenture or
of such Debentures, but this Indenture and such Debentures shall be construed as
if such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 14.10. Assignment. The Company will have the right at all times
----------
to assign any of its rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company will remain liable for all such obligations.
Subject to the foregoing, this Indenture is binding upon and inures to the
benefit of the parties hereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties hereto.
Section 14.11. Acknowledgment of Rights. The Company agrees that, with
------------------------
respect to any Debentures held by the Trust or the Institutional Trustee of the
Trust, if the Institutional Trustee of the Trust fails to enforce its rights
under this Indenture as the holder of Debentures held as the assets of such
Trust after the holders of a majority in Liquidation Amount of the Capital
Securities of such Trust have so directed such Institutional Trustee, a holder
of record of such Capital Securities may, to the fullest extent permitted by
law, institute legal proceedings directly against the Company to enforce such
Institutional Trustee's rights under this Indenture without first instituting
any legal proceedings against such trustee or any other Person. Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest (or premium,
if any) or principal on the Debentures on the date such interest (or premium, if
any) or principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company agrees that a holder of record of Capital
Securities of the Trust may directly institute a proceeding against the Company
for enforcement of payment to such holder directly of the principal of (or
premium, if any) or interest on the Debentures having an aggregate principal
amount equal to the aggregate Liquidation Amount of the Capital Securities of
such holder on or after the respective due date specified in the Debentures.
ARTICLE XV.
SUBORDINATION OF DEBENTURES
---------------------------
Section 15.1. Agreement to Subordinate. The Company covenants and
-------------------------
agrees, and each holder of Debentures by such Securityholder's acceptance
thereof likewise covenants and agrees, that all Debentures shall be issued
subject to the provisions of this Article XV; and each holder of a Debenture,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Company of the principal of, and premium, if any,
and interest on all Debentures shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred; provided,
--------
however, that the Debentures shall rank pari passu in right of payment with the
- -------
Company's Floating Rate Junior Subordinated Deferrable Interest Debentures due
September 26, 2032 issued pursuant to an Indenture dated as of September 26,
2002 by and between the Company and State Street Bank and Trust of Connecticut
N.A.
No provision of this Article XV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 15.2. Default on Senior Indebtedness. In the event and during
-------------------------------
the continuation of any default by the Company in the payment of principal,
premium, interest or any other payment due on any Senior Indebtedness of the
Company following any grace period, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default and
such acceleration has not been rescinded or canceled and such Senior
Indebtedness has not been paid in full, then, in either case, no payment shall
be made by the Company with respect to the principal (including redemption) of,
or premium, if any, or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing
within 90 days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.
Section 15.3. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company, on account
of the principal (and premium, if any) or interest on the Debentures. Upon any
such dissolution or winding-up or liquidation or reorganization, any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Securityholders or the
Trustee would be entitled to receive from the Company, except for the provisions
of this Article XV, shall be paid by the Company, or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Securityholders or by the Trustee under this Indenture
if received by them or it, directly to the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness, remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debentures to the payment of all Senior Indebtedness, that may at the
time be outstanding, provided that (i) such Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XI of this Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article XI
of this Indenture. Nothing in Section 15.2 or in this Section shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this
Indenture.
Section 15.4. Subrogation. Subject to the payment in full of all
-----------
Senior Indebtedness, the Securityholders shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, applicable to such Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Debentures shall be paid in full. For the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Trustee would
be entitled except for the provisions of this Article XV, and no payment over
pursuant to the provisions of this Article XV to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Debentures be deemed to be a payment or
distribution by the Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article XV are and are intended solely
for the purposes of defining the relative rights of the holders of the
Securities, on the one hand, and the holders of such Senior Indebtedness, on the
other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or
in the Debentures is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Debentures and creditors of the Company, other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article XV of the holders of such Senior
Indebtedness in respect of cash, property or securities of the Company, received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
Section 15.5. Trustee to Effectuate Subordination. Each Securityholder
-----------------------------------
by such Securityholder's acceptance thereof authorizes and directs the Trustee
on such Securityholder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XV and
appoints the Trustee such Securityholder's attorney-in-fact for any and all such
purposes.
Section 15.6. Notice by the Company. The Company shall give prompt
----------------------
written notice to a Responsible Officer of the Trustee at the Principal Office
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Debentures
pursuant to the provisions of this Article XV. Notwithstanding the provisions of
this Article XV or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee at the Principal Office of the Trustee shall
have received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
-------- -------
provided for in this Section at least 2 Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Debenture), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within 2 Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness (or a
trustee or representative on behalf of such holder), to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee or
representative on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness.
-------------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article XV in respect of any Senior Indebtedness at any time held
by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XV, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior Indebtedness and, subject
to the provisions of Article VI of this Indenture, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Securityholders, the Company or any other Person money or assets to which any
holder of such Senior Indebtedness shall be entitled by virtue of this Article
XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.6.
Section 15.8. Subordination May Not Be Impaired. No right of any
-----------------------------------
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company, or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company,
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Securityholders, without
incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debentures to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company, and any other Person.
Signatures appear on the following page
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
FIRST BANKS, INC.
By /s/ Allen H. Blake
------------------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
WILMINGTON TRUST COMPANY, as Trustee
By /s/ Christopher J. Monigle
------------------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
EXHIBIT A
FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
First Banks, Inc.
September 20, 2004
First Banks, Inc., a Missouri corporation (the "Company" which term
includes any successor Person under the Indenture hereinafter referred to), for
value received promises to pay to Wilmington Trust Company, not in its
individual capacity but solely as Institutional Trustee for First Bank Statutory
Trust II (the "Holder") or registered assigns, the principal sum of twenty
million six hundred nineteen thousand dollars ($20,619,000.00) on September 20,
2034, and to pay interest on said principal sum from September 20, 2004, or from
the most recent Interest Payment Date (as defined below) to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 20, June 20, September 20 and December 20 of each
year or if such day is not a Business Day, then the next succeeding Business Day
(each such date, an "Interest Payment Date") (it being understood that interest
accrues for any such non-Business Day), commencing on the Interest Payment Date
in December 2004, at an annual rate equal to 3.92438% beginning on (and
including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in December 2004 and at an annual rate for each successive
period beginning on (and including) the Interest Payment Date in December 2004,
and each succeeding Interest Payment Date, and ending on (but excluding) the
next succeeding Interest Payment Date (each a "Distribution Period"), equal to
3-Month LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"),
applied to the principal amount hereof, until the principal hereof is paid or
duly provided for or made available for payment, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest
(including Additional Interest) at the Interest Rate in effect for each
applicable period, compounded quarterly, from the dates such amounts are due
until they are paid or made available for payment. The amount of interest
payable for any period will be computed on the basis of the actual number of
days in the Distribution Period concerned divided by 360. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on the regular record date for such interest
installment, which shall be five days prior to the day on which the relevant
Interest Payment Date occurs. Any such interest installment not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such regular record date and may be paid to the Person in whose name this
Debenture (or one or more Predecessor Securities) is registered at the close of
business on a special record date.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Trustee will request
the principal London offices of four leading banks in the London interbank
market to provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar deposits
having a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Trustee will
request four major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Debentures will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
-------- -------
mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire transfer by such holder has not been received
by the Company or by wire transfer to an account appropriately designated by the
holder hereof. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Trustee.
So long as no Extension Event of Default has occurred and is
continuing, the Company shall have the right, from time to time, and without
causing an Event of Default, to defer payments of interest on the Debentures by
extending the interest payment period on the Debentures at any time and from
time to time during the term of the Debentures, for up to 20 consecutive
quarterly periods (each such extended interest payment period, an "Extension
Period"), during which Extension Period no interest (including Additional
Interest) shall be due and payable (except any Additional Sums that may be due
and payable). No Extension Period may end on a date other than an Interest
Payment Date. During an Extension Period, interest will continue to accrue on
the Debentures, and interest on such accrued interest will accrue at an annual
rate equal to the Interest Rate in effect for such Extension Period, compounded
quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to
herein as "Additional Interest"). At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however, that no
-------- -------
Extension Period may extend beyond the Maturity Date; provided further, however,
-------- ------- -------
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to engage in any of the activities or transactions
described on the reverse side hereof and in the Indenture. Prior to the
termination of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The Company must give the
Trustee notice of its election to begin or extend an Extension Period by the
close of business at least 5 Business Days prior to the Interest Payment Date
with respect to which interest on the Debentures would have been payable except
for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has duly executed this certificate.
FIRST BANKS, INC.
By
----------------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By:
----------------------------------
Authorized Officer
[FORM OF REVERSE OF DEBENTURE]
This Debenture is one of the floating rate junior subordinated
deferrable interest debentures of the Company, all issued or to be issued under
and pursuant to the Indenture dated as of September 20, 2004 (the "Indenture"),
duly executed and delivered between the Company and the Trustee, to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the
Interest Payment Date in September 2009, the Company shall have the right to
redeem the Debentures in whole, but not in part, at any Interest Payment Date,
within 120 days following the occurrence of such Special Event, at the Special
Redemption Price.
In addition, the Company shall have the right to redeem the Debentures,
in whole or in part, but in all cases in a principal amount with integral
multiples of $1,000.00, on any Interest Payment Date on or after the Interest
Payment Date in September 2009, at the Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Notwithstanding the foregoing, any redemption of Debentures by the
Company shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default described in Section 5.1(a), (d) or (e) of
the Indenture shall have occurred and be continuing, upon demand of the Trustee,
the principal of all of the Debentures shall become due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
-------- ------
without the consent of the holders of each Debenture then outstanding and
affected thereby (i) change the fixed maturity of any Debenture, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Debentures at the time outstanding
on behalf of the holders of all of the Debentures to waive (or modify any
previously granted waiver of) any past default or Event of Default, and its
consequences, except a default (a) in the payment of principal of, premium, if
any, or interest on any of the Debentures, (b) in respect of covenants or
provisions hereof or of the Indenture which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9 of the Indenture; provided, however,
-------- -------
that if the Debentures are held by the Trust or a trustee of such trust, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
-------- -------
if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of the Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by the Indenture, said default or Event of
Default shall for all purposes of the Debentures and the Indenture be deemed to
have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest, including Additional Interest, on this Debenture at the time and place
and at the rate and in the money herein prescribed.
The Company has agreed that if Debentures are initially issued to the
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such Trust) and (i) there shall have occurred and be continuing an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee, or (iii) the Company shall
have given notice of its election to defer payments of interest on the
Debentures by extending the interest payment period as provided herein and such
Extension Period, or any extension thereof, shall be continuing, then the
Company shall not, and shall not allow any Affiliate of the Company to, (x)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or its Affiliates' capital stock (other than payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (x) and (y) above, (1)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form
without coupons and in minimum denominations of $100,000.00 and any multiple of
$1,000.00 in excess thereof. As provided in the Indenture and subject to the
transfer restrictions and limitations as may be contained herein and therein
from time to time, this Debenture is transferable by the holder hereof on the
Debenture Register of the Company. Upon due presentment for registration of
transfer of any Debenture at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in
Section 3.2 of the Indenture, the Company shall execute, the Company or the
Trustee shall register and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in the name of the transferee or
transferees a new Debenture for a like aggregate principal amount. All
Debentures presented for registration of transfer or for exchange or payment
shall (if so required by the Company or the Trustee or the Authenticating Agent)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to, the Company and the Trustee or the
Authenticating Agent duly executed by the holder or his attorney duly authorized
in writing. No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
Prior to due presentment for registration of transfer of any Debenture,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Debenture registrar may deem the Person in whose name
such Debenture shall be registered upon the Debenture Register to be, and may
treat him as, the absolute owner of such Debenture (whether or not such
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the principal of, premium, if any, and interest on such Debenture and
for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Debenture registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or
interest on any Debenture, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any supplemental indenture, or
in any such Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, officer or director, as such, past, present or future, of the Company
or of any successor Person of the Company, either directly or through the
Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the
meanings assigned in the Indenture dated as of the date of original issuance of
this Debenture between the Trustee and the Company.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
Exhibit 4.27
-----------------------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
by and among
WILMINGTON TRUST COMPANY,
as Delaware Trustee,
WILMINGTON TRUST COMPANY,
as Institutional Trustee,
FIRST BANKS, INC.,
as Sponsor,
and
ALLEN H. BLAKE, TERRANCE M. McCARTHY and
LISA K. VANSICKLE,
as Administrators,
Dated as of September 20, 2004
-----------------------------------------
TABLE OF CONTENTS
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Page
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ARTICLE I INTERPRETATION AND DEFINITIONS..........................................................................1
Section 1.1. Definitions............................................................................1
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ARTICLE II ORGANIZATION...........................................................................................7
Section 2.1. Name...................................................................................7
----
Section 2.2. Office.................................................................................7
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Section 2.3. Purpose................................................................................7
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Section 2.4. Authority..............................................................................8
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Section 2.5. Title to Property of the Trust.........................................................8
------------------------------
Section 2.6. Powers and Duties of the Trustees and the Administrators...............................8
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Section 2.7. Prohibition of Actions by the Trust and the Institutional Trustee.....................11
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Section 2.8. Powers and Duties of the Institutional Trustee........................................12
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Section 2.9. Certain Duties and Responsibilities of the Trustees and Administrators................13
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Section 2.10. Certain Rights of Institutional Trustee...............................................14
---------------------------------------
Section 2.11. Delaware Trustee......................................................................16
----------------
Section 2.12. Execution of Documents................................................................16
----------------------
Section 2.13. Not Responsible for Recitals or Issuance of Securities................................16
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Section 2.14. Duration of Trust.....................................................................17
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Section 2.15. Mergers...............................................................................17
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ARTICLE III SPONSOR..............................................................................................18
Section 3.1. Sponsor's Purchase of Common Securities...............................................18
---------------------------------------
Section 3.2. Responsibilities of the Sponsor.......................................................18
-------------------------------
Section 3.3. Expenses..............................................................................18
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Section 3.4. Right to Proceed......................................................................19
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ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS..............................................................19
Section 4.1. Number of Trustees....................................................................19
------------------
Section 4.2. Delaware Trustee......................................................................20
----------------
Section 4.3. Institutional Trustee; Eligibility....................................................20
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Section 4.4. Certain Qualifications of the Delaware Trustee Generally..............................20
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Section 4.5. Administrators........................................................................20
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Section 4.6. Initial Delaware Trustee..............................................................21
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Section 4.7. Appointment, Removal and Resignation of Trustees and Administrators...................21
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Section 4.8. Vacancies Among Trustees..............................................................22
------------------------
Section 4.9. Effect of Vacancies...................................................................22
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Section 4.10. Meetings of the Trustees and the Administrators.......................................22
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Section 4.11. Delegation of Power...................................................................23
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Section 4.12. Conversion, Consolidation or Succession to Business...................................23
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ARTICLE V DISTRIBUTIONS..........................................................................................23
Section 5.1. Distributions.........................................................................23
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ARTICLE VI ISSUANCE OF SECURITIES................................................................................24
Section 6.1. General Provisions Regarding Securities...............................................24
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Section 6.2. Paying Agent, Transfer Agent and Registrar............................................24
------------------------------------------
Section 6.3. Form and Dating.......................................................................25
---------------
Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates.....................................25
-------------------------------------------------
Section 6.5. Temporary Securities..................................................................25
--------------------
Section 6.6. Cancellation..........................................................................26
------------
Section 6.7. Rights of Holders; Waivers of Past Defaults...........................................26
-------------------------------------------
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST.................................................................27
Section 7.1. Dissolution and Termination of Trust..................................................27
------------------------------------
ARTICLE VIII TRANSFER OF INTERESTS...............................................................................28
Section 8.1. General...............................................................................28
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Section 8.2. Transfer Procedures and Restrictions..................................................29
------------------------------------
Section 8.3. Deemed Security Holders...............................................................31
-----------------------
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS.....................31
Section 9.1. Liability.............................................................................31
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Section 9.2. Exculpation...........................................................................32
-----------
Section 9.3. Fiduciary Duty........................................................................32
--------------
Section 9.4. Indemnification.......................................................................32
---------------
Section 9.5. Outside Businesses....................................................................34
------------------
Section 9.6. Compensation; Fee.....................................................................35
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ARTICLE X ACCOUNTING.............................................................................................35
Section 10.1. Fiscal Year...........................................................................35
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Section 10.2. Certain Accounting Matters............................................................35
--------------------------
Section 10.3. Banking...............................................................................36
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Section 10.4. Withholding...........................................................................36
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ARTICLE XI AMENDMENTS AND MEETINGS...............................................................................36
Section 11.1. Amendments............................................................................36
----------
Section 11.2. Meetings of the Holders of Securities; Action by Written Consent......................37
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ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE....................................39
Section 12.1. Representations and Warranties of Institutional Trustee...............................39
-------------------------------------------------------
Section 12.2. Representations of the Delaware Trustee...............................................39
---------------------------------------
ARTICLE XIII MISCELLANEOUS.......................................................................................40
Section 13.1. Notices...............................................................................40
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Section 13.2. Governing Law.........................................................................41
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Section 13.3. Intention of the Parties..............................................................41
------------------------
Section 13.4. Headings..............................................................................41
--------
Section 13.5. Successors and Assigns................................................................41
----------------------
Section 13.6. Partial Enforceability................................................................41
----------------------
Section 13.7. Counterparts..........................................................................42
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Annex I....................Terms of Securities
Exhibit A-1................Form of Capital Security Certificate
Exhibit A-2................Form of Capital Security Certificate
Exhibit A-3................Form of Common Security Certificate
Exhibit B..................Specimen of Initial Debenture
Exhibit C..................Placement Agreement
AMENDED AND RESTATED
DECLARATION OF TRUST
FIRST BANK STATUTORY TRUST II
September 20, 2004
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
-----------
effective as of September 20, 2004, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and by the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;
WHEREAS, the Trustees, the Administrators and the Sponsor established
First Bank Statutory Trust II (the "Trust"), a statutory trust under the
-----
Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated
as of September 9, 2004 (the "Original Declaration"), and a Certificate of Trust
--------------------
filed with the Secretary of State of the State of Delaware on September 9, 2004,
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 (as defined
herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, the Trustees, the Administrators and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
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 Declaration constitutes 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 Declaration. The parties hereto
hereby agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.1 Definitions. Unless the context otherwise requires:
-----------
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural and vice versa.
"Additional Interest" has the meaning set forth in the Indenture.
-------------------
"Administrative Action" has the meaning set forth in paragraph 4(a) of
----------------------
Annex I.
"Administrators" means each of Allen H. Blake, Terrance M. McCarthy and
--------------
Lisa K. Vansickle, solely in such Person's capacity as Administrator of the
Trust created and continued hereunder and not in such Person's individual
capacity, or such Administrator's successor in interest in such capacity, or any
successor appointed as herein provided.
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized to
------------------
bind such Person.
"Bankruptcy Event" means, with respect to any Person:
----------------
(a) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or
(b) such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of such Person of any substantial part of its
property, or shall make any general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due.
"Business Day" means any day other than Saturday, Sunday or any other
------------
day on which banking institutions in New York City or Wilmington, Delaware are
permitted or required by any applicable law or executive order to close.
"Capital Securities" has the meaning set forth in paragraph 1(a) of
-------------------
Annex I.
"Capital Security Certificate" means a definitive Certificate in fully
----------------------------
registered form representing a Capital Security substantially in the form of
Exhibits A-1 and A-2.
"Capital Treatment Event" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Certificate" means any certificate evidencing Securities.
-----------
"Closing Date" has the meaning set forth in the Placement Agreement.
-------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor legislation.
"Common Securities" has the meaning set forth in paragraph 1(b) of
-----------------
Annex I.
"Common Security Certificate" means a definitive Certificate in fully
----------------------------
registered form representing a Common Security substantially in the form of
Exhibit A-3.
"Company Indemnified Person" means (a) any Administrator; (b) any
----------------------------
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Institutional Trustee
---------------------- at which the corporate trust business of the
Institutional Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Declaration is
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-1600, Attn: Corporate Trust Administration.
"Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.
------------
"Covered Person" means: (a) any Administrator, officer, director,
---------------
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.
"Creditor" has the meaning set forth in Section 3.3.
--------
"Debenture Issuer" means First Banks, Inc., a Missouri corporation, in
----------------
its capacity as issuer of the Debentures under the Indenture.
"Debenture Trustee" means Wilmington Trust Company, as trustee under
------------------
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"Debentures" means the Floating Rate Junior Subordinated Deferrable
----------
Interest Debentures due 2034 to be issued by the Debenture Issuer under the
Indenture.
"Defaulted Interest" has the meaning set forth in the Indenture.
------------------
"Delaware Trustee" has the meaning set forth in Section 4.2.
------------------
"Determination Date" has the meaning set forth in paragraph 4(a) of
-------------------
Annex I.
"Direct Action" has the meaning set forth in Section 2.8(d).
---------------
"Distribution" means a distribution payable to Holders of Securities in
------------
accordance with Section 5.1.
"Distribution Payment Date" has the meaning set forth in paragraph 2(b)
-------------------------
of Annex I.
"Distribution Period" means (i) with respect to the Distribution paid
-------------------
on the first Distribution Payment Date, the period beginning on (and including)
the date of original issuance and ending on (but excluding) the Distribution
Payment Date in December 2004 and (ii) thereafter, with respect to a
Distribution paid on each successive Distribution Payment Date, the period
beginning on (and including) the preceding Distribution Payment Date and ending
on (but excluding) such current Distribution Payment Date.
"Distribution Rate" means, for the Distribution Period beginning on
-----------------
(and including) the date of original issuance and ending on (but excluding) the
Distribution Payment Date in December 2004, the rate per annum of 3.92438%, and
for each Distribution Period beginning on or after the Distribution Payment Date
in December 2004, the Coupon Rate for such Distribution Period.
"Event of Default" means any one of the following events (whatever the
----------------
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of an Indenture Event of Default; or
(b) default by the Trust in the payment of any Redemption Price or
Special Redemption Price of any Security when it becomes due and payable; or
(c) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Institutional Trustee in this Declaration
(other than those specified in clause (a) or (b) above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail to the Institutional Trustee and to the Sponsor by
the Holders of at least 25% in aggregate liquidation amount of the outstanding
Capital Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(d) the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.
"Extension Event of Default" has the meaning set forth in the
-----------------------------
Indenture.
"Extension Period" has the meaning set forth in paragraph 2(b) of Annex
----------------
I.
"Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.
----------------
"Fiduciary Indemnified Person" shall mean each of the Institutional
------------------------------
Trustee (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or
Delaware Trustee and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or Delaware Trustee.
"Fiscal Year" has the meaning set forth in Section 10.1.
-----------
"Guarantee" means the guarantee agreement to be dated as of the Closing
---------
Date, of the Sponsor in respect of the Capital Securities.
"Holder" means a Person in whose name a Certificate representing 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" means the Indenture dated as of the Closing Date, between
---------
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental indenture may be amended, supplemented or otherwise modified
from time to time.
"Indenture Event of Default" means an "Event of Default" as defined in
---------------------------
the Indenture.
"Institutional Trustee" means the Trustee meeting the eligibility
----------------------
requirements set forth in Section 4.3.
"Interest" means any interest due on the Debentures including any
--------
Additional Interest and Defaulted Interest.
"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 paragraph 4(a)
-------------------------
of Annex I.
"Liquidation" has the meaning set forth in paragraph 3 of Annex I.
-----------
"Liquidation Distribution" has the meaning set forth in paragraph 3 of
-------------------------
Annex I.
"Majority in liquidation amount of the Securities" means Holder(s) of
-------------------------------------------------
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities 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 (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Officers' Certificates" means, with respect to any Person, a
-----------------------
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
providing for it in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read
the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"OTS" has the meaning set forth in paragraph 3 of Annex I.
---
"Paying Agent" has the meaning specified in Section 6.2.
------------
"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.
"Placement Agreement" means the Placement Agreement relating to the
--------------------
offering and sale of Capital Securities in the form of Exhibit C.
"Property Account" has the meaning set forth in Section 2.8(c).
-----------------
"Pro Rata" has the meaning set forth in paragraph 8 of Annex I.
---------
"Quorum" means a majority of the Administrators or, if there are only
------
two Administrators, both of them.
"Redemption Date" has the meaning set forth in paragraph 4(a) of Annex
----------------
I.
"Redemption/Distribution Notice" has the meaning set forth in paragraph
------------------------------
4(e) of Annex I.
"Redemption Price" has the meaning set forth in paragraph 4(a) of Annex
----------------
I.
"Registrar" has the meaning set forth in Section 6.2.
---------
"Relevant Trustee" has the meaning set forth in Section 4.7(a).
-----------------
"Responsible Officer" means, with respect to the Institutional Trustee,
-------------------
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Corporate Trust Office of the Institutional 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.
"Restricted Securities Legend" has the meaning set forth in Section
------------------------------
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
---------
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act.
---------
"Securities" means the Common Securities and the Capital Securities.
----------
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time, or any successor legislation.
"Special Event" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Special Redemption Date" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Special Redemption Price" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Sponsor" means First Banks, Inc., a Missouri corporation, or any
-------
successor entity in a merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
"Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware
-------------------
Code, 12 Del. C. ss.ss. 3801, et seq. as may be amended from time to time.
"Successor Entity" has the meaning set forth in Section 2.15(b).
-----------------
"Successor Delaware Trustee" has the meaning set forth in Section
----------------------------
4.7(e).
"Successor Institutional Trustee" has the meaning set forth in Section
-------------------------------
4.7(b).
"Successor Securities" has the meaning set forth in Section 2.15(b).
--------------------
"Super Majority" has the meaning set forth in paragraph 5(b) of
--------------
Annex I.
"Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.
----------
"10% in liquidation amount of the Securities" means Holder(s)
--------------------------------------------------
of outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Capital Securities 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 (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Transfer Agent" has the meaning set forth in Section 6.2.
----------------
"Treasury Regulations" means the income tax regulations, including
---------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
--------------
or owing to, the Property Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Institutional Trustee pursuant to the trusts of this
Declaration.
"Trustee" or "Trustees" means each Person who has signed this
-----------------------
Declaration 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.
"U.S. Person" means a United States Person as defined in Section
------------
7701(a) (30) of the Code.
ARTICLE II
ORGANIZATION
Section 2.1 Name. The Trust is named "First Bank Statutory Trust II,"
----
as such name may be modified from time to time by the Administrators following
written notice to the Holders of the Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Administrators.
Section 2.2. Office. The address of the principal office of the Trust
------
is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600. On at least 10 Business Days written notice to
the Holders of the Securities, the Administrators may designate another
principal office, which shall be in a state of the United States or in the
District of Columbia.
Section 2.3. Purpose. The exclusive purposes and functions of the Trust
-------
are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures, (c) to facilitate direct investment in the
assets of the Trust through issuance of the Common Securities and the Capital
Securities and (d) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, 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 2.4 Authority. Except as specifically provided in this
---------
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
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 Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.
Section 2.5 Title to Property of the Trust. Except as provided in
------------------------------
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, 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.
Section 2.6 Powers and Duties of the Trustees and the Administrators.
--------------------------------------------------------
(a) The Trustees and the Administrators shall conduct the affairs of
the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the Trustees and the Administrators shall
have the authority to enter into all transactions and agreements determined by
the Institutional Trustee to be appropriate in exercising the authority, express
or implied, otherwise granted to the Trustees or the Administrators, as the case
may be, under this Declaration, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) Each Administrator shall have the power and authority to act
on behalf of the Trust with respect to the following matters:
(A) the issuance and sale of the Securities;
(B) to cause the Trust to enter into, and to execute and
deliver on behalf of the Trust, such agreements as may be
necessary or desirable in connection with the purposes and
function of the Trust, including agreements with the Paying
Agent;
(C) ensuring compliance with the Securities Act, applicable
state securities or blue sky laws;
(D) the sending of notices (other than notices of default),
and other information regarding the Securities and the Debentures
to the Holders in accordance with this Declaration;
(E) the consent to the appointment of a Paying Agent,
Transfer Agent and Registrar in accordance with this Declaration,
which consent shall not be unreasonably withheld or delayed;
(F) execution and delivery of the Securities in accordance
with this Declaration;
(G) execution and delivery of closing certificates pursuant
to the Placement Agreement and the application for a taxpayer
identification number;
(H) unless otherwise determined by the Holders of a Majority
in liquidation amount of the Securities or as otherwise required
by the Statutory Trust Act, to execute on behalf of the Trust
(either acting alone or together with any or all of the
Administrators) any documents that the Administrators have the
power to execute pursuant to this Declaration;
(I) the taking of any action incidental to the foregoing as
the Institutional Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this
Declaration for the benefit of the Holders (without consideration
of the effect of any such action on any particular Holder);
(J) to establish a record date with respect to all actions
to be taken hereunder that require a record date be established,
including Distributions, voting rights, redemptions and
exchanges, and to issue relevant notices to the Holders of
Capital Securities and Holders of Common Securities as to such
actions and applicable record dates; and
(K) to duly prepare and file all applicable tax returns and
tax information reports that are required to be filed with
respect to the Trust on behalf of the Trust.
(ii) As among the Trustees and the Administrators, the
Institutional Trustee shall have the power, duty and authority to act on
behalf of the Trust with respect to the following matters:
(A) the establishment of the Property Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the Property
Account;
(D) the distribution through the Paying Agent of amounts
owed to the Holders in respect of the Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Securities and the Debentures to the Holders in
accordance with this Declaration;
(G) the distribution of the Trust Property in accordance
with the terms of this Declaration;
(H) to the extent provided in this Declaration, the winding
up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
(I) after any Event of Default (provided that such Event of
--------
Default is not by or with respect to the Institutional Trustee)
the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this
Declaration and protect and conserve the Trust Property for the
benefit of the Holders (without consideration of the effect of
any such action on any particular Holder); and
(J) to take all action that may be necessary 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.
(iii) The Institutional Trustee shall have the power and
authority to act on behalf of the Trust with respect to any of the duties,
liabilities, powers or the authority of the Administrators set forth in
Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do
any such act unless specifically requested to do so in writing by the
Sponsor, and shall then be fully protected in acting pursuant to such
written request; and in the event of a conflict between the action of the
Administrators and the action of the Institutional Trustee, the action of
the Institutional Trustee shall prevail.
(b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration, (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein,
(iii) take any action that would reasonably be expected (x) to cause the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes or (y) to require the trust to register as an Investment
Company under the Investment Company Act, (iv) incur any indebtedness for
borrowed money or issue any other debt or (v) take or consent to any action that
would result in the placement of a lien on any of the Trust Property. The
Institutional Trustee shall, at the sole cost and expense of the Trust, defend
all claims and demands of all Persons at any time claiming any lien on any of
the Trust Property adverse to the interest of the Trust or the Holders in their
capacity as Holders.
(c) In connection with the issuance and sale of the Capital
Securities, the Sponsor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an exemption from
the Securities Act;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Capital
Securities and the determination of any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and the advice to
the Administrators of actions they must take on behalf of the Trust, and
the preparation for execution and filing of any documents to be executed
and filed by the Trust or on behalf of the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any
such States in connection with the sale of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and delivery
of, the Placement Agreement providing for the sale of the Capital
Securities; and
(iv) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Holders of a Majority in liquidation amount of the Common
Securities are authorized and directed to conduct the affairs of the Trust and
to operate the Trus t so that the Trust will not (i) be deemed to be an
Investment Company required to be registered under the Investment Company Act,
and (ii) fail to be classified as a "grantor trust" for United States federal
income tax purposes. The Administrators and the Holders of a Majority in
liquidation amount of the Common Securities shall not take any action
inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Administrators and the Holders of a Majority in liquidation
amount of the Common Securities are authorized to take any action, not
inconsistent with applicable laws, the Certificate of Trust or this Declaration,
as amended from time to time, that each of the Administrators and the Holders of
a Majority in liquidation amount of the Common Securities determines in their
discretion to be necessary or desirable for such purposes.
(e) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees and the Administrators shall have no obligations with respect to such
expenses.
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times
in the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.
(h) If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.
Section 2.7 Prohibition of Actions by the Trust and the Institutional
----------------------------------------------------------
Trustee.
- -------
(a) The Trust shall not, and the Institutional Trustee shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the
Securities pursuant to the terms of this Declaration 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 other than as expressly provided herein;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) carry on any "trade or business" as that phrase is used in
the Code; or
(viii) other than as provided in this Declaration (including
Annex I), (A) direct the time, method and place of 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, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required
unless the Trust shall have received a written opinion of counsel to
the effect that such modification will not cause the Trust to cease to
be classified as a "grantor trust" for United States federal income
tax purposes.
Section 2.8 Powers and Duties of the Institutional Trustee.
----------------------------------------------
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 4.7. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right, title
and interest in the Debentures to the Administrators or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Account") in the name of and under the
----------------
exclusive control of the Institutional Trustee, and maintained in the
Institutional Trustee's trust department, on behalf of the Holders of
the Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Institutional Trustee, deposit
such funds into the Property Account and make payments, or cause the
Paying Agent to make payments, to the Holders of the Capital
Securities and Holders of the Common Securities from the Property
Account in accordance with Section 5.1. Funds in the Property Account
shall be held uninvested until disbursed in accordance with this
Declaration;
(ii) engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption of the Capital Securities and
the Common Securities to the extent the Debentures are redeemed or
mature; and
(iii) upon written notice of distribution issued by the
Administrators 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 of Securities
upon the occurrence of certain circumstances pursuant to the terms of
the Securities.
(d) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust which arises out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee's duties and obligations under this Declaration; 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 interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of the
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities 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 the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that no Holder of the Common Securities may
-------- -------
exercise such right of subrogation so long as an Event of Default with respect
to the Capital Securities has occurred and is continuing.
(e) The Institutional Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of the Securities pursuant
to the terms of the Securities and this Declaration; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 4.7.
(f) The Institutional Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a Holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.
The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.
Section 2.9 Certain Duties and Responsibilities of the Trustees and
---------------------------------------------------------
Administrators.
- --------------
(a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all such Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 6.7), the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, 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) The duties and responsibilities of the Trustees and the
Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require any Trustee or
Administrators to expend or risk their own funds or otherwise incur any
financial liability in the performance of any of their duties hereunder, or in
the exercise of any of their rights or powers if it shall have reasonable
grounds to believe that repayment of such funds or adequate protection against
such risk of liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Declaration relating to the
conduct or affecting the liability of or affording protection to the Trustees or
Administrators shall be subject to the provisions of this Article. Nothing in
this Declaration shall be construed to relieve an Administrator or a Trustee
from liability for its own negligent act, its own negligent failure to act, or
its own willful misconduct. To the extent that, at law or in equity, a Trustee
or an Administrator has duties and liabilities relating to the Trust or to the
Holders, such Trustee or such Administrator shall not be liable to the Trust or
to any Holder for such Trustee's or such Administrator's good faith reliance on
the provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Administrators or
the Trustee otherwise existing at law or in equity, are agreed by the Sponsor
and the Holders to replace such other duties and liabilities of the
Administrators or the Trustees.
(c) All payments made by the Institutional Trustee or a Paying Agent
in respect of the Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Institutional Trustee
or a Paying Agent to make payments in accordance with the terms hereof. Each
Holder, by its acceptance of a Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally vailable for
distribution to it as herein provided and that the Trustees and the
Administrators are not personally liable to it for any amount distributable in
respect of any Security or for any other liability in respect of any Security.
This Section 2.9(c) does not limit the liability of the Trustees expressly set
forth elsewhere in this Declaration.
(d) The Institutional Trustee shall not be liable for its own acts
or omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any error
of judgment made in good faith by an Authorized Officer of the
Institutional Trustee, unless it shall be proved that the
Institutional Trustee was negligent in ascertaining the pertinent
facts;
(ii) the Institutional Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Capital Securities or the Common
Securities, as applicable, relating to the time, method and place of
conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under this Declaration;
(iii) the Institutional Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and
the Property Account shall be to deal with such property in a similar
manner as the Institutional Trustee deals with similar property for
its fiduciary accounts generally, subject to the protections and
limitations on liability afforded to the Institutional Trustee under
this Declaration;
(iv) the Institutional 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; and money held by the Institutional
Trustee need not be segregated from other funds held by it except in
relation to the Property Account maintained by the Institutional
Trustee pursuant to Section 2.8(c)(i) and except to the extent
otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Administrators or the Sponsor.
Section 2.10 Certain Rights of Institutional Trustee. Subject to the
----------------------------------------
provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall fully
be protected in acting or refraining from acting in good faith upon any
resolution, opinion of counsel, certificate, written representation of a
Holder or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, appraisal, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's written instructions as to the course of action
to be taken and the Institutional Trustee shall take such action, or refrain
from taking such action, as the Institutional Trustee shall be instructed in
writing, in which event the Institutional Trustee shall have no liability except
for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;
(d) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers' Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;
(e) the Institutional 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;
(f) the Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;
(g) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction; provided, that nothing contained in this Section 2.10(g) shall be
--------
taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the
occurrence of an Event of Default (that has not been cured or waived pursuant to
Section 6.7), to exercise such of the rights and powers vested in it by this
Declaration, 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;
(h) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys and the Institutional Trustee shall not be
responsible for any misconduct or negligence on the part of or for the
supervision of, any such agent or attorney appointed with due care by it
hereunder;
(j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;
(k) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;
(l) when the Institutional Trustee incurs expenses or renders
services in connection with a Bankruptcy Event, such expenses (including the
fees and expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law or
law relating to creditors rights generally;
(m) the Institutional Trustee shall not be charged with knowledge of
an Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;
(n) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional 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 Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and
(o) no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional 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 Institutional 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 Institutional
Trustee shall be construed to be a duty.
Section 2.11 Delaware Trustee. Notwithstanding any other provision of
-----------------
this Declaration other than Section 4.1, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration (except as may be required under the Statutory
Trust Act). Except as set forth in Section 4.1, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807 of the Statutory Trust Act.
Section 2.12 Execution of Documents. Unless otherwise determined in
-----------------------
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute on behalf of the
Trust any documents that the Trustees or the Administrators, as the case may be,
have the power and authority to execute pursuant to Section 2.6.
Section 2.13 Not Responsible for Recitals or Issuance of Securities.
---------------------------------------------------------
The recitals contained in this Declaration 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 Declaration, the
Debentures or the Securities.
Section 2.14 Duration of Trust. The Trust, unless earlier dissolved
-------------------
pursuant to the provisions of Article VII hereof, shall be in existence for 35
years from the Closing Date.
Section 2.15 Mergers.
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(a) The Trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 2.15(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.
(b) The Trust may, with the consent of the Institutional Trustee and
without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:
(i) if the Trust is not the surviving 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 that the Successor Securities rank the same as the
----------
Securities rank with respect to Distributions and payments upon
Liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity
that possesses substantially the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material
respect;
(iv) the Institutional Trustee receives written confirmation from
Moody's Investor Services, Inc. and any other nationally recognized
statistical rating organization that rates securities issued by the initial
purchaser of the Capital Securities that it will not reduce or withdraw the
rating of any such securities because of such merger, conversion,
consolidation, amalgamation or replacement;
(v) such Successor Entity has a purpose substantially identical to
that of the Trust;
(vi) prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect
that:
(A) such merger, consolidation, amalgamation or replacement
does not adversely affectthe rights, preferences and privileges of the
Holders of the Securities (including any Successor Securities) in any
material respect;
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be
required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will continue to be
classified as a "grantor trust" for United States federal income tax
purposes;
(vii) the Sponsor guarantees the obligations of such Successor Entity
under the Successor Securities at least to the extent provided by the
Guarantee;
(viii) the Sponsor owns 100% of the common securities of any Successor
Entity; and
(ix) prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers'
Certificate of the Administrators and an opinion of counsel, each to the
effect that all conditions precedent under this Section 2.15(b) to such
transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall not, except with the
consent of Holders of 100% in aggregate liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge withor into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.
ARTICLE III
SPONSOR
Section 3.1 Sponsor's Purchase of Common Securities. On the Closing
-------------------------------------------
Date, the Sponsor will purchase all of the Common Securities issued by the Trust
in an amount at least equal to 3% of the capital of the Trust, at the same time
as the Capital Securities are sold.
Section 3.2 Responsibilities of the Sponsor. In connection with the
----------------------------------
issue and sale of the Capital Securities, the Sponsor shall have the exclusive
right and responsibility to engage in, or direct the Administrators to engage
in, the following activities:
(a) to determine the States in which to take appropriate action to
qualify the Trust or to qualify or register for sale all or part of the Capital
Securities 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, to protect the limited liability of the Holders of the
Capital Securities or to enable the Trust to effect the purposes for which it
was created; and
(b) to negotiate the terms of and/or execute on behalf of the Trust,
the Placement Agreement and other related agreements providing for the sale of
the Capital Securities.
Section 3.3 Expenses. In connection with the offering, sale and
--------
issuance of the Debentures to the Trust and in connection with the sale of the
Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer,
shall:
(a) pay al reasonable costs and expenses owing to the Debenture
Trustee pursuant to Section 6.6 of the Indenture;
(b) be responsible for and shall pay all debts and obligations (other
than with respect to the Securities) and all costs and expenses of the Trust,
the offering, sale and issuance of the Securities (including fees to the
placement agents in connection therewith), the costs and expenses (including
reasonable counsel fees and expenses) of the Institutional Trustee and the
Administrators, the costs and expenses relating to the operation of the Trust,
including, without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, Paying Agents, Registrars, Transfer Agents,
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets and the enforcement by the Institutional Trustee of
the rights of the Holders (for purposes of clarification, this Section 3.3(b)
does not contemplate the payment by the Sponsor of acceptance or annual
administration fees owing to the Institutional Trustee pursuant to the services
to be provided by the Institutional Trustee under this Declaration or the fees
and expenses of the Institutional Trustee's counsel in connection with the
closing of the transactions contemplated by this Declaration); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
The Sponsor's obligations under this Section 3.3 shall be for the
benefit of, and shall be enforceable by, any Person to whom such debts,
obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
--------
has received notice hereof. Any such Creditor may enforce the Sponsor's
obligations under this Section 3.3 directly against the Sponsor and the Sponsor
irrevocably waives any right or remedy to require that any such Creditor take
any action against the Trust or any other Person before proceeding against the
Sponsor. The Sponsor agrees to execute such additional agreements as may be
necessary or desirable in order to give full effect to the provisions of this
Section 3.3.
Section 3.4 Right to Proceed. The Sponsor acknowledges the rights of
-----------------
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.
ARTICLE IV
INSTITUTIONAL TRUSTEE AND ADMINISTRATORS
Section 4.1 Number of Trustees. The number of Trustees shall
------------------
initially be two, 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
increased or decreased by vote of the Holder of a Majority in liquidation amount
be of the Common Securities voting as a class at a meeting of the Holder of the
Common Securities; provided, however, that there shall be a Delaware Trustee if
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required by Section 4.2; and there shall always be one Trustee who shall be the
Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements, in which case Section 2.11 shall have no
application to such entity in its capacity as Institutional Trustee.
Section 4.2 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 is organized under the
laws of the United States or any state thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including ss. 3807 of the Statutory Trust
Act.
Section 4.3 Institutional Trustee; Eligibility.
----------------------------------
(a) There shall at all times be one Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the
Trust; and
(iii) be a banking corporation or trust company organized and
doing business under the laws of the United States of America or any
state thereof or the District of Columbia, authorized under such laws
to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000.00), and
subject to supervision or examination by Federal, state, or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then for the
purposes of this Section 4.3(a)(iii), 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 Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section 4.7.
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act of 1939, as amended, the Institutional Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to this Declaration.
(d) The initial Institutional Trustee shall be Wilmington Trust
Company.
Section 4.4 Certain Qualifications of the Delaware Trustee Generally.
----------------------------------------------------------
The Delaware Trustee shall be a U.S. Person and 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.
Section 4.5 Administrators. Each Administrator shall be a U.S.
--------------
Person, 21 years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be Allen H. Blake, Terrance M. McCarthy and Lisa K.
Vansickle. There shall at all times be at least one Administrator. Except where
a requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken by, and any power of
the Administrators may be exercised by, or with the consent of, any one such
Administrator.
Section 4.6 Initial Delaware Trustee. The initial Delaware Trustee
------------------------
shall be Wilmington Trust Company.
Section 4.7 Appointment, Removal and Resignation of Trustees and
----------------------------------------------------------
Administrators.
- --------------
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of this Section 4.7.
(b) Subject to Section 4.7(a), a Relevant Trustee may resign at any
time by giving written notice thereof to the Holders of the Securities and by
appointing a successor Relevant Trustee. Upon the resignation of the
Institutional Trustee, the Institutional Trustee shall appoint a successor by
requesting from at least three Persons meeting the eligibility requirements
their expenses and charges to serve as the successor Institutional Trustee on a
form provided by the Administrators, and selecting the Person who agrees to the
lowest expense and charges (the "Successor Institutional Trustee"). If the
instrument of acceptance by the successor Relevant Trustee required by this
Section 4.7 shall not have been delivered to the Relevant Trustee within 60 days
after the giving of such notice of resignation or delivery of the instrument of
removal, the Relevant Trustee may petition, at the expense of the Trust, any
federal, state or District of Columbia court of competent jurisdiction for the
appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Relevant
Trustee. The Institutional Trustee shall have no liability for the selection of
such successor pursuant to this Section 4.7.
(c) Unless an Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by an act of the Holders of a
Majority in liquidation amount of the Common Securities. If any Trustee shall be
so removed, the Holders of the Common Securities, by act of the Holders of a
Majority in liquidation amount of the Common Securities delivered to the
Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such
successor Trustee shall comply with the applicable requirements of this Section
4.7. If an Event of Default shall have occurred and be continuing, the
Institutional Trustee or the Delaware Trustee, or both of them, may be removed
by the act of the Holders of a Majority in liquidation amount of the Capital
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). If any Trustee shall be so removed, the Holders of Capital
Securities, by act of the Holders of a Majority in liquidation amount of the
Capital Securities then outstanding delivered to the Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of this Section 4.7. If no
successor Relevant Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.7 within 30 days after
delivery of an instrument of removal, the Relevant Trustee or any Holder who has
been a Holder of the Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any federal, state or
District of Columbia court of competent jurisdiction for the appointment of a
successor Relevant Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a successor Relevant Trustee or
Trustees.
(d) The Institutional Trustee shall give notice of each resignation
and each remova of a Trustee and each appointment of a successor Trustee to all
Holders and to the Sponsor. Each notice shall include the name of the successor
Relevant Trustee and the address of its Corporate Trust Office if it is the
Institutional Trustee.
(e) Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee following the procedures in this Section 4.7 (with the
successor being a Person who satisfies the eligibility requirement for a
Delaware Trustee set forth in this Declaration) (the "Successor Delaware
-------------------
Trustee").
- -------
(f) In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Securities and the Trust and (b) shall add to or change any of the provisions of
this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Relevant Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee, such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Securities and the Trust
subject to the payment of all unpaid fees, expenses and indemnities of such
retiring Relevant Trustee.
(g) No Institutional Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Institutional Trustee or
Successor Delaware Trustee, as the case may be.
(h) The Holders of the Capital Securities will have no right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Holders of the Common Securities.
(i) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.
Section 4.8 Vacancies Among Trustees. If a Trustee ceases to hold
------------------------
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, a vacancy shall occur. A resolution certifying the existence of
such vacancy by the Trustees or, if there are more than two, a majority of the
Trustees, shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section 4.7.
Section 4.9 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 or terminate this Declaration. Whenever a vacancy in the number
of Trustees shall occur, until such vacancy is filled by the appointment of a
Trustee in accordance with Section 4.7, the Institutional Trustee shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration.
Section 4.10 Meetings of the Trustees and the Administrators. Meetings
-----------------------------------------------
of the Administrators shall be held from time to time upon the call of an
Administrator. Regular meetings of the Administrators may be held in person in
the United States or by telephone, at a place (if applicable) and time fixed by
resolution of the Administrators. Notice of any in-person meetings of the
Trustees with the Administrators or meetings of the Administrators shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic meetings of the Trustees with the Administrators or meetings of
the Administrators 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 a Trustee or an Administrator,
as the case may be, at a meeting shall constitute a waiver of notice of such
meeting except where the Trustee or an Administrator, as the case may be,
attends a meeting for the express purpose of objecting to the transaction of any
activity on the grounds that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Trustees or the Administrators, as the case may be, may be taken at a meeting by
vote of a majority of the Trustees or the Administrators 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 Trustees or the Administrators. Meetings of the Trustees and the
Administrators together shall be held from time to time upon the call of any
Trustee or an Administrator.
Section 4.11 Delegation of Power.
-------------------
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and
(b) the Administrators shall have power to delegate from time to
time to such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
Section 4.12 Conversion, Consolidation or Succession to Business. Any
----------------------------------------------------
Person into which the Institutional Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Institutional Trustee or the Delaware Trustee shall be the successor of the
Institutional Trustee or the Delaware Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article and, provided,
--------
further, that such Person shall file an amendment to the Certificate of Trust
- -------
with the Secretary of State of the State of Delaware as contemplated in Section
4.7(i).
ARTICLE V
DISTRIBUTIONS
Section 5.1 Distributions. Holders shall receive Distributions in
-------------
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of such amounts to Holders.
------------
ARTICLE VI
ISSUANCE OF SECURITIES
Section 6.1 General Provisions Regarding Securities.
---------------------------------------
(a) The Administrators shall, on behalf of the Trust, issue one
series of capital securities substantially in the form of Exhibits A-1 and A-2
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I and one series of common securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Capital Securities and
the Common Securities. The Capital Securities rank pari passu to, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities as set forth in Annex I.
(b) The Certificates shall be signed on behalf of the Trust by one
or more Administrators. Such signature shall be the facsimile or manual
signature of any Administrator. In case any Administrator of the Trust who shall
have signed any of the Securities shall cease to be such Administrator before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated.
(c) 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.
(d) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and, except as provided in Section 9.1(b) with respect to the Common
Securities, non-assessable.
(e) Every Person, by virtue of having become a Holder in accordance
with the terms of this Declaration, shall be deemed to have expressly assented
and agreed to the terms of, and shall be bound by, this Declaration and the
Guarantee.
Section 6.2 Paying Agent, Transfer Agent and Registrar. The Trust
--------------------------------------------
shall maintain in Wilmington, Delaware, an office or agency where the Capital
Securities may be presented for payment ("Paying Agent"), and an office or
------------
agency where Securities may be presented for registration of transfer or
exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at
---------------
such office or agency a register for the purpose of registering Securities,
transfers and exchanges of Securities, such register to be held by a registrar
(the "Registrar"). The Administrators may appoint the Paying Agent, the
---------
Registrar and the Transfer Agent and may appoint one or more additional Paying
Agents or one or more co-Registrars, or one or more co Transfer Agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent, the term "Registrar" includes any additional registrar
or co Registrar and the term "Transfer Agent" includes any additional transfer
agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.
Section 6.3 Form and Dating. The Capital Securities and the
----------------
Institutional Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibits A-1 and A-2, and the Common Securities
shall be substantially in the form of Exhibit A-3, each of which is hereby
incorporated in and expressly made a part of this Declaration. Certificates may
be typed, printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Administrators, as conclusively
evidenced by their execution thereof. The Securities may have letters, 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 Sponsor). The Trust at the direction
of the Sponsor shall furnish any such legend not contained in Exhibits A-1 and
A-2 to the Institutional Trustee in writing. Each Capital Security shall be
dated on or before 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, A-2 and A-3 are part of the terms of this Declaration and to the
extent applicable, the Institutional Trustee, the Delaware Trustee, the
Administrators and the Sponsor, by their execution and delivery of this
Declaration, expressly agree to such terms and provisions and to be bound
thereby. Capital Securities will be issued only in blocks having a stated
liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in
excess thereof.
The Capital Securities are being offered and sold by the Trust pursuant
to the Placement Agreement in definitive, registered form without coupons and
with the Restricted Securities Legend.
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If:
(a) any mutilated Certificates should be surrendered to the
Registrar, or if the Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators
and the Institutional Trustee such security or indemnity as may be required by
them to keep each of them harmless;
then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.4, the Registrar or the Administrators may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 6.5 Temporary Securities. Until definitive Securities are
---------------------
ready for delivery, the Administrators may prepare and, in the case of the
Capital Securities, the Institutional Trustee shall authenticate, temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Administrators consider
appropriate for temporary Securities. Without unreasonable delay, the
Administrators shall prepare and, in the case of the Capital Securities, the
Institutional Trustee shall authenticate, definitive Securities in exchange for
temporary Securities.
Section 6.6 Cancellation. The Administrators at any time may deliver
------------
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.
Section 6.7 Rights of Holders; Waivers of Past Defaults.
-------------------------------------------
(a) The legal title to the Trust Property is vested exclusively in
the Institutional Trustee (in its capacity as such) in accordance with Section
2.5, and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.
(b) For so long as any Capital Securities remain outstanding, if
upon an Indenture Event of Default, the Debenture Trustee fails or the holders
of not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of a Majority in liquidation amount of the Capital
Securities then outstanding shall have the right to make such declaration by a
notice in writing to the Institutional Trustee, the Sponsor and the Debenture
Trustee.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of a Majority
in liquidation amount of the Capital Securities, by written notice to the
Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Debenture Issuer has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
(B) any accrued Additional Interest on all of the Debentures,
(C) the principal of (and premium, if any, on) any Debentures
that have become due otherwise than by such declaration of
acceleration and interest and Additional Interest thereon at the rate
borne by the Debentures, and
(D) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Institutional Trustee, their
agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other than
the non-payment of the principal of the Debentures that has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.7 of the Indenture.
The Holders of at least a Majority in liquidation amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default under the Indenture or any Indenture Event of Default, except a
default or Indenture Event of Default in the payment of principal or interest on
the Debentures (unless such default or Indenture Event of Default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Debenture
Trustee) or a default under the Indenture or an Indenture Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.7.
(c) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
Section 7.1 Dissolution and Termination of Trust.
------------------------------------
(a) The Trust shall dissolve on the first to occur of:
(i) unless earlier dissolved, on September 20, 2039, the
expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the
Trust or the Debenture Issuer;
(iii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor (other than in connection with
a merger, consolidation or similar transaction not prohibited by the
Indenture, this Declaration or the Guarantee, as the case may be) or
upon the revocation of the charter of the Sponsor and the expiration
of 90 days after the date of revocation without a reinstatement
thereof;
(iv) upon the distribution of the Debentures to the Holders of
the Securities, upon exercise of the right of the Holder of all of the
outstanding Common Securities to dissolve the Trust as provided in
Annex I hereto;
(v) upon the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
(vi) 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; or
(vii) before the issuance of any Securities, with the consent of
all of the Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including of the Statutory
Trust Act, and subject to the terms set forth in Annex I, the Institutional
Trustee shall terminate the Trust by filing a certificate of cancellation with
the Secretary of State of the State of Delaware.
(c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
Section 8.1 General.
-------
(a) Subject to Section 8.1(c), where Capital Securities are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal number of Capital Securities
represented by different certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met. To
permit registrations of transfer and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar's
request.
(b) Upon issuance of the Common Securities, the Sponsor shall
acquire and retain beneficial and record ownership of the Common Securities and
for so long as the Securities remain outstanding, and to the fullest extent
permitted by applicable law, the Sponsor shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
-------- -------
Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a
U.S. Person may succeed to the Sponsor's ownership of the Common Securities.
(c) Capital Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by applicable law,
any transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void and will be deemed to be of no legal
effect whatsoever and any such transferee shall be deemed not to be the holder
of such Capital Securities for any purpose, including but not limited to the
receipt of Distributions on such Capital Securities, and such transferee shall
be deemed to have no interest whatsoever in such Capital Securities.
(d) The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar 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 Registrar
shall cause one or more new Securities of the same tenor 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 Registrar 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 Institutional Trustee pursuant
to Section 6.6. 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 Declaration.
(e) The Trust shall not be required (i) to issue, register the
transfer of, or exchange any Securities during a period beginning at the opening
of business five days before the day of any selection of Securities for
redemption and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Section 8.2 Transfer Procedures and Restrictions.
------------------------------------
(a) The Capital Securities shall bear the Restricted Securities
Legend, which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Institutional Trustee, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act. Upon provision of such satisfactory evidence, the Institutional
Trustee, at the written direction of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.
(b) Except as permitted by Section 8.2(a), each Capital Security
shall bear a legend (the "Restricted Securities Legend") in substantially
-----------------------------------
the following form and a Capital Security shall not be transferred except in
compliance with such legend, unless otherwise determined by the Sponsor, upon
the advice of counsel expert in securities law, in accordance with applicable
law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY
OR INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS
SECURITY
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE
144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER
OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE
OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING
THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF
AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS
EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED
BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN
EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR
A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR
OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR
ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT
PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100
SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
(c) To permit registrations of transfers and exchanges, the Trust
shall execute and the Institutional Trustee shall authenticate Capital
Securities at the Registrar's request.
(d) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Registrar or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.
(e) All Capital Securities issued upon any registration of transfer
or exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration as
the Capital Securities surrendered upon such registration of transfer or
exchange.
Section 8.3 Deemed Security Holders. The Trust, the Administrators,
-----------------------
the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat
the Person in whose name any Certificate shall be registered on the books
and records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
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
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS
Section 9.1 Liability.
---------
(a) Except as expressly set forth in this Declaration, the Guarantee
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 of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of the
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to the Statutory Trust Act, the Holders of the Capital
Securities 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 9.2 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 Declaration 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 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, if selected by such Indemnified Person,
has been selected by such Indemnified Person 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 of Securities might properly be paid.
Section 9.3 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
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.
(b) Whenever in this Declaration 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
Declaration or by applicable law.
Section 9.4 Indemnification.
---------------
(a) The Sponsor shall indemnify, to the full extent permitted by
law, any 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) arising out of or in connection with the
acceptance or administration of this Declaration by reason of the fact that he
is or was an Indemnified Person against expenses (including reasonable
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 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.
(b) The Sponsor shall indemnify, to the full extent permitted by
law, any 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 arising out of or in connection
with the acceptance or administration of this Declaration by reason of the fact
that he is or was an Indemnified Person against expenses (including reasonable
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; provided, however, that no such indemnification
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shall be made in respect of any claim, issue or matter as to which such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that 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 shall deem proper.
(c) To the extent that an 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 (a) and (b) of this Section
9.4, 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 and expenses) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification of an Administrator under paragraphs (a) and
(b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.
(e) To the fullest extent permitted by law, expenses (including
reasonable attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such 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 Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
(f) The Trustees, at the sole cost and expense of the Sponsor,
retain the right to representation by counsel of its own choosing in any action,
suit or any other proceeding for which it is indemnified under paragraphs (a)
and (b) of this Section 9.4, without affecting their right to indemnification
hereunder or waiving any rights afforded to it under this Declaration or
applicable law.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 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 Sponsor or Capital Security
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 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.
(h) The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an 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 Sponsor would have the power to indemnify
him against such liability under the provisions of this Section 9.4.
(i) For purposes of this Section 9.4, 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
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, (i) continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person; and (ii) survive the termination or expiration
of this Declaration or the earlier removal or resignation of an Indemnified
Person.
Section 9.5 Outside Businesses. Any Covered Person, the Sponsor, the
-------------------
Delaware Trustee and the Institutional 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 of Securities shall have no rights by virtue of this
Declaration 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. None of any
Covered Person, the Sponsor, the Delaware Trustee or the Institutional 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 Institutional 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 Institutional 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.
Section 9.6 Compensation; Fee. The Sponsor agrees:
-----------------
(a) to pay to the Trustees from time to time such compensation for all
services rendered by them hereunder as the parties shall agree from time to time
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this
Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, bad faith or
willful misconduct.
The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this Declaration and the removal or resignation of
any Trustee.
No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 9.6.
ARTICLE X
ACCOUNTING
Section 10.1 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.
Section 10.2 Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the
Administrators shall keep, or cause to be kept at the principal office of the
Trust in the United States, as defined for purposes of Treasury Regulations
section 301.7701-7, 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, at the Sponsor's expense, in accordance
with generally accepted accounting principles, consistently applied. The books
of account and the records of the Trust shall be examined by and reported
upon (either separately or as part of the Sponsor's regularly prepared
consolidated financial report) as of the end of each Fiscal Year of the Trust by
a firm of independent certified public accountants selected by the
Administrators.
(b) The Administrators shall cause to be duly prepared and delivered
to each of the Holders of Securities Form 1099 or such other 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 Administrators
shall endeavor to deliver all such statements within 30 days after the end of
each Fiscal Year of the Trust.
(c) The Administrators, at the Sponsor's expense, shall cause to be
duly prepared at the principal office of the Sponsor in the United States, as
`United States' is defined in Section 7701(a)(9) of the Code (or at the
principal office of the Trust if the Sponsor has no such principal office in the
United States), and filed 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 tax returns required to be filed by the
Administrators on behalf of the Trust with any state or local taxing authority.
Section 10.3 Banking. The Trust shall maintain in the United States,
-------
as defined for purposes of Treasury Regulations section 301.7701-7, 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
- -------
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.
Section 10.4 Withholding. The Institutional Trustee or any Paying
-----------
Agent and the Administrators shall comply with all withholding requirements
under United States federal, state and local law. The Institutional Trustee or
any Paying Agent shall request, and each Holder shall provide to the
Institutional Trustee or any Paying Agent, such forms or certificates as are
necessary to establish an exemption from withholding with respect to the Holder,
and any representations and forms as shall reasonably be requested by the
Institutional Trustee or any Paying Agent to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Administrators 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
Institutional Trustee or any Paying Agent is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, 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 overwithholding,
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 Institutional Trustee or any Paying Agent may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
Section 11.1 Amendments.
----------
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed (i) by the Institutional Trustee, or
(ii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Delaware Trustee, by the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XI, an
amendment may be made, and any such purported amendment shall be valid and
effective only if:
(i) the Institutional Trustee shall have first received
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (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 Declaration (including the terms of the
Securities); and
(ii) the result of such amendment would not be to
(A) cause the Trust to cease to be classified for purposes
of United States federal income taxation as a grantor trust; or
(B) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.
(c) Except as provided in Section 11.1(d), (e) or (h), no amendment
shall be made, and any such purported amendment shall be void and ineffective,
unless the Holders of a Majority in liquidation amount of the Capital Securities
shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or change any
conversion or exchange provisions or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities.
(g) The rights of the Holders of the Capital Securities under
Article IV to appoint and remove Trustees shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Capital
Securities.
(h) This Declaration may be amended by the Institutional Trustee and
the Holders of a Majority in liquidation amount of the Common Securities without
the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; or
(iv) modify, eliminate or add to any provision of this
Declaration to such extent as may be necessary to ensure that the
Trust will be classified for United States federal income tax purposes
at all times as a grantor trust and will not be required to register
as an Investment Company (including without limitation to conform to
any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under
the Investment Company Act or written change in interpretation or
application thereof by any legislative body, court, government agency
or regulatory authority) which amendment does not have a material
adverse effect on the rights, preferences or privileges of the Holders
of Securities;
provided, however, that no such modification, elimination or addition
-------- -------
referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any
material respect the powers, preferences or special rights of Holders of Capital
Securities.
Section 11.2. Meetings of the Holders of Securities; Action by Written
--------------------------------------------------------
Consent.
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(a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrators (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 Declaration or the terms of the
Securities. The Administrators 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 of
such class of Securities. Such direction shall be given by delivering to the
Administrators one or more calls in a writing stating that the signing Holders
of the Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of the Securities
calling a meeting shall specify in writing the Certificates held by the Holders
of the Securities exercising the right to call a meeting and only those
Securities represented by such Certificates 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 of the
Securities:
(i) notice of any such meeting shall be given to all the Holders
of the Securities having a right to vote thereat at least 7 days and
not more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders of the Securities is
permitted or required under this Declaration, such vote, consent or
approval may be given at a meeting of the Holders of the Securities.
Any action that may be taken at a meeting of the Holders of the
Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of the
Securities 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 of the Securities 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 of
the Securities entitled to vote who have not consented in writing. The
Administrators may specify that any written ballot submitted to the
Holders of the Securities for the purpose of taking any action without
a meeting shall be returned to the Trust within the time specified by
the Administrators;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities 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 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder of the Securities 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 of the Securities were stockholders of a
Delaware corporation; each meeting of the Holders of the Securities
shall be conducted by the Administrators or by such other Person that
the Administrators may designate; and
(iii) unless the Statutory Trust Act, this Declaration, or the
terms of the Securities otherwise provides, the Administrators, in
their sole discretion, shall establish all other provisions relating
to meetings of Holders of Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on
by any Holders of the Securities, 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; provided, however,
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that each meeting shall be conducted in the United States (as that term
is defined in Treasury Regulations section 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE
Section 12.1. Representations and Warranties of Institutional Trustee.
-------------------------------------------------------
The initial Institutional Trustee represents and warrants to the Trust and to
the Sponsor at the date of this Declaration, and each Successor Institutional
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee's acceptance of its appointment as Institutional
Trustee, that:
(a) the Institutional Trustee is a Delaware banking corporation with
trust powers, duly organized and validly existing under the laws of the State of
Delaware with trust power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional 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 (regardless of
whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by
the Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and
(d) no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Institutional Trustee of this
Declaration.
Section 12.2 Representations of the 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 Declaration, 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) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) 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 considered in a proceeding in equity or at law);
(c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(e) no consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority governing the trust
powers of the Delaware Trustee is required for the execution, delivery or
performance by the Delaware Trustee of this Declaration; and
(f) the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, it is an entity which has
its principal place of business in the State of Delaware and, in either case,
a Person that satisfies for the Trust the requirements of Section 3807 of the
Statutory Trust Act.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. All notices provided for in this Declaration
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shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):
First Bank Statutory Trust II
c/o First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(b) if given to the Delaware Trustee, at the Delaware Trustee's
mailing address set forth below (or such other address as the Delaware Trustee
may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(c) if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(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 of to the Trust):
First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(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 13.2 Governing Law. This Declaration and the rights of the
-------------
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
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that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.
Section 13.3 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 Declaration shall be
interpreted to further this intention of the parties.
Section 13.4 Headings. Headings contained in this Declaration are
--------
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
Section 13.5 Successors and Assigns. Whenever in this Declaration 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 Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so expressed.
Section 13.6 Partial Enforceability. If any provision of this
-----------------------
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, 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 13.7 Counterparts. This Declaration may contain more than one
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counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and Administrators to any 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.
Signatures appear on the following page
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By./s/ Christopher J. Monigle
--------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
WILMINGTON TRUST COMPANY,
as Institutional Trustee
By./s/ Christopher J. Monigle
--------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
FIRST BANKS, INC. as Sponsor
By./s/ Allen H. Blake
--------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
By./s/ Allen H. Blake
--------------------------------
Administrator
By./s/ Lisa K. Vansickle
--------------------------------
Administrator
By./s/ Terrance M. McCarthy
--------------------------------
Administrator
ANNEX I
TERMS OF SECURITIES
Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of September 20, 2004 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):
1. Designation and Number.
----------------------
(a) 20,000 Floating Rate Capital Securities of First Bank Statutory
Trust II (the "Trust"), with an aggregate stated liquidation amount with respect
to the assets of the Trust of twenty million dollars ($20,000,000.00) and a
stated liquidation amount with respect to the assets of the Trust of $1,000.00
per Capital Security, are hereby designated for the purposes of identification
only as the "Capital Securities". The Capital Security Certificates evidencing
------------------
the Capital Securities shall be substantially in the form of Exhibits A-1 and
A-2 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice.
(b) 619 Floating Rate Common Securities of the Trust (the "Common
------
Securities") will be evidenced by Common Security Certificates substantially in
- ----------
the form of Exhibit A-3 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.
2. Distributions.
-------------
(a) Distributions will be payable on each Security for the Distribution
Period beginning on (and including) the date of original issuance and ending on
(but excluding) the Distribution Payment Date in December 2004 at a rate per
annum of 3.92438% and shall bear interest for each successive Distribution
Period beginning on (and including) the Distribution Payment Date in December
2004, and each succeeding Distribution Payment Date, and ending on (but
excluding) the next succeeding Distribution Payment Date at a rate per annum
equal to the 3-Month LIBOR, determined as described below, plus 2.05% (the
"Coupon Rate"), applied to the stated liquidation amount thereof, such rate
-----------
being the rate of interest payable on the Debentures to be held by the
Institutional Trustee. Distributions in arrears will bear interest thereon
compounded quarterly at the applicable Distribution Rate (to the extent
permitted by law). Distributions, as used herein, include cash distributions and
any such compounded distributions unless otherwise noted. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of the Distribution payable for any
Distribution Period will be calculated by applying the Distribution Rate to the
stated liquidation amount outstanding at the commencement of the Distribution
Period on the basis of the actual number of days in the Distribution Period
concerned divided by 360. All percentages resulting from any calculations on the
Capital Securities will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to
9.87655% (or .0987655), and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent (with one-half cent being
rounded upward)).
(b) Distributions on the Securities will be cumulative, will accrue
from the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein, quarterly in arrears on March
20, June 20, September 20 and December 20 of each year, or if such day is not a
Business Day, then the next succeeding Business Day (each a "Distribution
------------
Payment Date"), commencing on the Distribution Payment Date in December 2004
- -------------
when, as and if available for payment. The Debenture Issuer has the right under
the Indenture to defer payments of interest on the Debentures, so long as no
Extension Event of Default has occurred and is continuing, by deferring the
payment of interest on the Debentures for up to 20 consecutive quarterly periods
(each an "Extension Period") at any time and from time to time, subject to the
----------------
conditions described below, during which Extension Period no interest shall be
due and payable. During any Extension Period, interest will continue to accrue
on the Debentures, and interest on such accrued interest will accrue at an
annual rate equal to the Distribution Rate in effect for each such Extension
Period, compounded quarterly from the date such interest would have been
payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as "Additional Interest"). No Extension
--------------------
Period may end on a date other than a Distribution Payment Date. At the end of
any such Extension Period, the Debenture Issuer shall pay all interest then
accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend beyond the
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Maturity Date and provided further, however, that during any such Extension
-------- ------- -------
Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Debenture Issuer's or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Debenture Issuer) or make any guarantee payments with respect to the
foregoing, or (ii) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Debenture
Issuer or any Affiliate that rank pari passu in all respects with or junior in
interest to the Debentures (other than, with respect to clauses (i) and (ii)
above, (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Additional Interest shall
be due and payable during an Extension Period, except at the end thereof, but
each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest. During any
Extension Period, Distributions on the Securities shall be deferred for a period
equal to the Extension Period. If Distributions are deferred, the Distributions
due shall be paid on the date that the related Extension Period terminates to
Holders of the Securities as they appear on the books and records of the Trust
on the record date immediately preceding such date. Distributions on the
Securities must be paid on the dates payable (after giving effect to any
Extension Period) to the extent that the Trust has funds available for the
payment of such distributions in the Property Account of the Trust. The Trust's
funds available for Distribution to the Holders of the Securities will be
limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be five days before the relevant
Distribution Payment Date. Distributions payable on any Securities that are not
punctually paid on any Distribution Payment Date, as a result of the Debenture
Issuer having failed to make a payment under the Debentures, as the case may be,
when due (taking into account any Extension Period), will cease to be payable to
the Person in whose name such Securities are registered 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.
(d) 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 of the Securities.
3. Liquidation Distribution Upon Dissolution. In the event of the
--------------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation") other than in connection with a redemption of
-----------
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000.00 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
-----------
Distribution"), unless in connection with such Liquidation, the Debentures in an
- ------------
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Distribution Rate
of, and bearing accrued and unpaid interest in an amount equal to the accrued
and unpaid Distributions on, and having the same record date as, such
Securities, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with the Statutory Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the
right at any time to dissolve the Trust (including, without limitation, upon the
occurrence of a Special Event), subject to the receipt by the Debenture Issuer
of prior approval from the Board of Governors of the Federal Reserve System, or
its designated district bank, as applicable, and any successor federal agency
that is primarily responsible for regulating the activities of the Sponsor (the
"Federal Reserve"), if the Sponsor is a bank holding company, or from the Office
---------------
of Thrift Supervision and any successor federal agency that is primarily
responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor
---
is a savings and loan holding company, in either case if then required under
applicable capital guidelines or policies of the Federal Reserve or OTS, as
applicable, and, after satisfaction of liabilities to creditors of the Trust,
cause the Debentures to be distributed to the Holders of the Securities on a Pro
Rata basis in accordance with the aggregate stated liquidation amount thereof.
If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders, after satisfaction of liabilities of creditors of the Trust to
the extent not satisfied by the Debenture Issuer, an amount equal to the
Liquidation Distribution. An early Liquidation of the Trust pursuant to clause
(iv) of Section 7.1(a) of the Declaration shall occur if the Institutional
Trustee determines that such Liquidation is possible by distributing, after
satisfaction of liabilities to creditors of the Trust, to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.
If, upon any such Liquidation the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such Capital Securities shall be paid to the Holders of the Trust
Securities on a Pro Rata basis, except that if an Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.
After the date for any distribution of the Debentures upon dissolution
of the Trust (i) the Securities of the Trust will be deemed to be no longer
outstanding, (ii) upon surrender of a Holder's Securities certificate, such
Holder of the Securities will receive a certificate representing the Debentures
to be delivered upon such distribution, (iii) any certificates representing the
Securities still outstanding will be deemed to represent undivided beneficial
interests in such of the Debentures as have an aggregate principal amount equal
to the aggregate stated liquidation amount with an interest rate identical to
the Distribution Rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance (and
until such certificates are so surrendered, no payments of interest or principal
shall be made to Holders of Securities in respect of any payments due and
payable under the Debentures; provided, however that such failure to pay shall
-------- -------
not be deemed to be an Event of Default and shall not entitle the Holder to the
benefits of the Guarantee), and (iv) all rights of Holders of Securities under
the Declaration shall cease, except the right of such Holders to receive
Debentures upon surrender of certificates representing such Securities.
4. Redemption and Distribution.
---------------------------
(a) The Debentures will mature on September 20, 2034. The Debentures
may be redeemed by the Debenture Issuer, in whole or in part, at any
Distribution Payment Date on or after the Distribution Payment Date in September
2009, at the Redemption Price. In addition, the Debentures may be redeemed by
the Debenture Issuer at the Special Redemption Price, in whole but not in part,
at any Distribution Payment Date, upon the occurrence and continuation of a
Special Event within 120 days following the occurrence of such Special Event at
the Special Redemption Price, upon not less than 30 nor more than 60 days'
notice to holders of such Debentures so long as such Special Event is
continuing. In each case, the right of the Debenture Issuer to redeem the
Debentures is subject to the Debenture Issuer having received prior approval
from the Federal Reserve (if the Debenture Issuer is a bank holding company) or
prior approval from the OTS (if the Debenture Issuer is a savings and loan
holding company), in each case if then required under applicable capital
guidelines or policies of the applicable federal agency.
"3-Month LIBOR" means the London interbank offered interest rate for
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three-month, U.S. dollar deposits determined by the Debenture Trustee in the
following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S.
dollar deposits having a three-month maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date (as defined below). "Telerate Page 3750" means the display
designated as "Page 3750" on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other
service or services as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related
Determination Date, the Debenture Trustee will request the principal
London offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar
deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested
in clause (2) above, the Debenture Trustee will request four major New
York City banks to provide such banks' offered quotations (expressed
as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If
at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested
in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined
with respect to the Distribution Period immediately preceding such
current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the
related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
"Capital Treatment Event" means the receipt by the Debenture Issuer and
-----------------------
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws, rules or regulations of the
United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of original issuance of the Debentures, there is more than an
insubstantial risk that the Sponsor will not, within 90 days of the date of such
opinion, be entitled to treat an amount equal to the aggregate liquidation
amount of the Capital Securities as "Tier 1 Capital" (or its then equivalent)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding
company, such guidelines applied to the Sponsor as if the Sponsor were subject
to such guidelines); provided, however, that the inability of the Sponsor to
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treat all or any portion of the liquidation amount of the Capital Securities as
Tier l Capital shall not constitute the basis for a Capital Treatment Event, if
such inability results from the Sponsor having cumulative preferred stock,
minority interests in consolidated subsidiaries, or any other class of security
or interest which the Federal Reserve or OTS, as applicable, may now or
hereafter accord Tier 1 Capital treatment in excess of the amount which may now
or hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of
-------- ------- -------
Debentures in connection with the Liquidation of the Trust shall not in and of
itself constitute a Capital Treatment Event unless such Liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.
"Determination Date" means the date that is two London Banking Days
-------------------
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.
"Investment Company Event" means the receipt by the Debenture Issuer
--------------------------
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion, will be considered
an Investment Company that is required to be registered under the Investment
Company Act which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Debentures.
"Maturity Date" means September 20, 2034.
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"Redemption Date" shall mean the date fixed for the redemption of
----------------
Capital Securities, which shall be any Distribution Payment Date on or after the
Distribution Payment Date in September 2009.
"Redemption Price" means 100% of the principal amount of the Debentures
----------------
being redeemed, plus accrued and unpaid Interest on such Debentures to the
Redemption Date.
"Special Event" means a Tax Event, an Investment Company Event or a
--------------
Capital Treatment Event.
"Special Redemption Date" means a date on which a Special Event
-------------------------
redemption occurs, which shall be a Distribution Payment Date.
"Special Redemption Price" means the price set forth in the following
--------------------------
table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:
- ----------------------------------------- --------------------------------------
Month in which Special Special Redemption Price
---------------------- ------------------------
Redemption Date Occurs
----------------------
- ----------------------------------------- --------------------------------------
December 2004 104.625%
- ----------------------------------------- --------------------------------------
March 2005 104.300%
- ----------------------------------------- --------------------------------------
June 2005 104.000%
- ----------------------------------------- --------------------------------------
September 2005 103.650%
- ----------------------------------------- --------------------------------------
December 2005 103.350%
- ----------------------------------------- --------------------------------------
March 2006 103.000%
- ----------------------------------------- --------------------------------------
June 2006 102.700%
- ----------------------------------------- --------------------------------------
September 2006 102.350%
- ----------------------------------------- --------------------------------------
December 2006 102.050%
- ----------------------------------------- --------------------------------------
March 2007 101.700%
- ----------------------------------------- --------------------------------------
June 2007 101.400%
- --------------------------------------------------------------------------------
- ----------------------------------------- --------------------------------------
September 2007 101.050%
- ----------------------------------------- --------------------------------------
December 2007 100.750%
- ----------------------------------------- --------------------------------------
March 2008 100.450%
- ----------------------------------------- --------------------------------------
June 2008 100.200%
- ----------------------------------------- --------------------------------------
September 2008 and thereafter 100.000%
- ----------------------------------------- --------------------------------------
plus, in each case, accrued and unpaid Interest on such Debentures to
the Special Redemption Date.
"Tax Event" means the receipt by the Debenture Issuer and the Trust of
---------
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement including any notice or announcement of intent to adopt such
procedures or regulations) (an "Administrative Action") or judicial decision
----------------------
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, 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; (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes; or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
(b) Upon the repayment in full at maturity or redemption in
whole or in part of the Debentures (other than following the distribution of the
Debentures to the Holders of the Securities), the proceeds from such repayment
or payment shall concurrently be applied to redeem Pro Rata at the applicable
Redemption Price or Special Redemption Price, as applicable, Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed; provided, however, that holders of such
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Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).
(c) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from
each Holder of Capital Securities.
(d) The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) Redemption or Distribution Procedures.
-------------------------------------
(i) Notice of any redemption of, or notice of distribution
of the Debentures in exchange for, the Securities (a "Redemption/Distribution
-----------------------
Notice") will be given by the Trust by mail to each Holder of Securities to be
- ------
redeemed or exchanged not fewer than 30 nor more than 60 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 paragraph 4(e)(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 of such Securities. Each
Redemption/Distribution Notice shall be addressed to the Holders of such
Securities at the address of each such Holder appearing on the books and records
of the Trust. No defect in the Redemption/Distribution Notice or in the mailing
thereof with respect to any Holder shall affect the validity of the redemption
or exchange proceedings with respect to any other Holder.
(ii) If the Securities are to be redeemed and the \ Trust
gives a Redemption/ Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this paragraph 4 (which notice will be
irrevocable), then, provided that the Institutional Trustee has a sufficient
--------
amount of cash in connection with the related redemption or maturity of the
Debentures, the Institutional Trustee will pay the relevant Redemption Price or
Special Redemption Price, as applicable, to the Holders of such Securities by
check mailed to the address of each such 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 then immediately prior to
the close of business on the date of such deposit Distributions will cease to
accrue on the Securities so called for redemption and all rights of Holders of
such Securities so called for redemption will cease, except the right of the
Holders of such Securities to receive the applicable Redemption Price or Special
Redemption Price specified in paragraph 4(a), but without interest on such
Redemption Price or Special Redemption Price. If payment of the Redemption Price
or Special Redemption Price in respect of any Securities is improperly withheld
or refused and not paid either by the Trust or by the Debenture Issuer as
guarantor pursuant to the Guarantee, Distributions on such Securities will
continue to accrue at the Distribution Rate 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 or Special Redemption Price. In the event of any redemption of
the Capital Securities issued by the Trust in part, the Trust shall not be
required to (i) issue, register the transfer of or exchange any Security during
a period beginning at the opening of business five days before any selection for
redemption of the Capital Securities and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have been
given to all Holders of the Capital Securities to be so redeemed or (ii)
register the transfer of or exchange any Capital Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Capital Securities being redeemed in part.
(iii) Redemption/Distribution Notices shall be sent by the
Administrators on behalf of the Trust to (A) in respect of the Capital
Securities, the Holders thereof and (B) in respect of the Common Securities, the
Holder thereof.
(iv) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), and provided that
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 Capital Securities by tender, in the open market or
by private agreement.
5. Voting Rights - Capital Securities.
----------------------------------
(a) Except as provided under paragraphs 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights. The Administrators are required to call
a meeting of the Holders of the Capital Securities if directed to do so by
Holders of at least 10% in liquidation amount of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion by
the Institutional Trustee in certain circumstances set forth in the last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Capital Securities, voting separately as a class, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to (i)
exercise the remedies available under the Indenture as the holder of the
Debentures, (ii) waive any past default that is waivable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent on behalf of all
the Holders of the Capital Securities to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required; provided, however, that, where a consent or action under the Indenture
-------- -------
would require the consent or act of the holders of greater than a simple
majority in aggregate principal amount of Debentures (a "Super Majority")
--------------
affected thereby, the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Capital Securities outstanding which the relevant
Super Majority represents of the aggregate principal amount of the Debentures
outstanding. If the Institutional Trustee fails to enforce its rights under the
Debentures after the Holders of a Majority in liquidation amount of such Capital
Securities have so directed the Institutional Trustee, to the fullest extent
permitted by law, a Holder of the Capital Securities may institute a legal
proceeding directly against the Debenture Issuer to enforce the Institutional
Trustee's rights under the Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture
Issuer to pay interest or principal on the Debentures on the date the interest
or principal is payable (or in the case of redemption, the Redemption Date or
the Special Redemption Date, as applicable), then a Holder of record of the
Capital Securities may directly institute a proceeding for enforcement of
payment, on or after the respective due dates specified in the Debentures, to
such Holder directly of the principal of or interest on the Debentures having
an aggregate principal amount equal to the aggregate liquidation amount of the
Capital Securities of such Holder. The Institutional Trustee shall notify all
Holders of the Capital Securities of any default actually known to the
Institutional Trustee with respect to the Debentures unless (x) such default
has been cured prior to the giving of such notice or (y) the Institutional
Trustee determines in good faith that the withholding of such notice is in
the interest of the Holders of such Capital Securities, except where the default
relates to the payment of principal of or interest on any of the Debentures.
Such notice shall state that such Indenture Event of Default also constitutes an
Event of Default hereunder. Except with respect to directing the time, method
and place of conducting a proceeding for a remedy, the Institutional Trustee
shall not take any of the actions described in clauses (i), (ii) or (iii) above
unless the Institutional Trustee has obtained an opinion of tax counsel to the
effect that, as a result of such action, the Trust will not be classified as
other than a grant or trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of
the Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the Holders of the Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
-------- -------
that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of Holders of the Capital Securities may be given at a separate meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the Securities in the Trust or pursuant to written consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (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 Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.
In no event will Holders of the Capital Securities have the right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Sponsor as the Holder of all of the Common Securities
of the Trust. Under certain circumstances as more fully described in the
Declaration, Holders of Capital Securities have the right to vote to appoint,
remove or replace the Institutional Trustee and the Delaware Trustee.
6. Voting Rights - Common Securities.
---------------------------------
(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as
otherwise required by law and the Declaration, the Common Securities will have
no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article IV of the Declaration, to vote to appoint, remove or
replace any Administrators.
(c) Subject to Section 6.7 of the Declaration and only after
each Event of Default (if any) with respect to the Capital Securities has been
cured, waived, or otherwise eliminated and subject to the requirements of the
second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waiving any past
default and its consequences that is waivable under the Indenture, or (iii)
exercising any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable; provided, however, that, where a
-------- -------
consent or action under the Indenture would require a Super Majority, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities which the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. Notwithstanding
this paragraph 6(c), the Institutional Trustee shall not revoke any action
previously authorized or approved by a vote or consent of the Holders of the
Capital Securities. Other than with respect to directing the time, method and
place of conducting any proceeding for any remedy available to the Institutional
Trustee or the Debenture Trustee as set forth above, the Institutional Trustee
shall not take any action described in (i), (ii) or (iii) above, unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights, to the fullest extent
permitted by law, under the Declaration, any Holder of the Common Securities may
institute a legal proceeding directly against any Person to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person.
Any approval or direction of Holders of the Common Securities may be
given at a separate meeting of Holders of the Common Securities convened for
such purpose, at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the 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 the 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 Declaration and the terms of the
Securities.
7. Amendments to Declaration and Indenture.
---------------------------------------
(a) In addition to any requirements under Section 11.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Trustees, Sponsor or Administrators otherwise propose to effect, (i) any action
that would adversely affect the powers, preferences or special rights of the
Securities, whether by way of amendment to the Declaration or otherwise, or (ii)
the Liquidation of the Trust, other than as described in Section 7.1 of the
Declaration, then the Holders of outstanding Securities, voting together as a
single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; provided, however, if any amendment or proposal referred to in clause
-------- -------
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee as
the holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
-------- -------
a Super Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or modification
may be made to the Declaration if such amendment or modification would (i) cause
the Trust to be classified for purposes of United States federal income taxation
as other than a grant or trust, (ii) reduce or otherwise adversely affect the
powers of the Institutional Trustee or (iii) cause the Trust to be deemed an
Investment Company which is required to be registered under the Investment
Company Act.
(d) Notwithstanding any provision of the Declaration, the right
of any Holder of the Capital Securities to receive payment of distributions and
other payments upon redemption or otherwise, on or after their respective due
dates, or to institute a suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder. For the protection and enforcement of the foregoing
provision, each and every Holder of the Capital Securities shall be entitled to
such relief as can be given either at law or equity.
8. 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 of the Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities then outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking. The Capital Securities rank pari passu with and payment
-------
thereon shall be made Pro Rata with the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price (or Special Redemption Price) of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price (or Special Redemption Price) the
full amount of such Redemption Price (or Special Redemption Price) on all
outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the Redemption Price (or Special Redemption Price) of, the
Capital Securities then due and payable.
10. Acceptance of Guarantee and Indenture. Each Holder of the Capital
-------------------------------------
Securities and the Common Securities, by the acceptance of such Securities,
agrees to the provisions of the Guarantee, including the subordination
provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights. The Holders of the Securities shall have no
---------------------
preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous. These terms constitute a part of the Declaration.
-------------
The Sponsor will provide a copy of the Declaration, the Guarantee, and the
Indenture to a Holder without charge on written request to the Sponsor at its
principal place of business.
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Certificate Number P-1 17,850 Capital Securities
[CUSIP NO. [_______] **To be inserted at the request of the Holder]
September 20, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust II
(liquidation amount $1,000.00 per Capital Security)
First Bank Statutory Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that Hare & Co. (the
"Holder"), as the nominee of The Bank of New York, indenture trustee under the
Indenture dated as of September 20, 2004 among Preferred Term Securities XV,
Ltd., Preferred Term Securities XV, Inc. and The Bank of New York, is the
registered owner of capital securities of the Trust representing undivided
beneficial interests in the assets of the Trust, (liquidation amount $1,000.00
per capital security) (the "Capital Securities"). Subject to the Declaration (as
defined below), the Capital 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 Capital
Securities represented hereby are issued pursuant to, and the designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities shall in all respects be subject to, the provisions of
the Amended and Restated Declaration of Trust of the Trust dated as of September
20, 2004, among Allen H. Blake, Terrance M. McCarthy and Lisa K. Vansickle, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, First Banks, Inc., as Sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Trust, including the designation of the terms of the Capital Securities as set
forth in Annex I to such amended and restated declaration as the same may be
amended from time to time (the "Declaration"). Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture
to the Holder without charge upon written request to the Sponsor at its
principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signatures appear on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST II
By:
---------------------------------
Name:
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By:
---------------------------------
Authorized Officer
[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate equal to 3.92438% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 20, June 20, September 20 and
December 20 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in December 2004. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
-------- -------
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security 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 Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this
Capital Security Certificate)
Signature Guarantee:1
- ----------------------
1 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
EXHIBIT A-2
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Certificate Number P-2 2,150 Capital Securities
[CUSIP NO. [____] **To be inserted at the request of the Holder]
September 20, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust II
(liquidation amount $1,000.00 per Capital Security)
First Bank Statutory Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that First Tennessee
Bank National Association is the registered owner of capital securities of the
Trust representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").
Subject to the Declaration (as defined below), the Capital 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 Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of September 20, 2004, among Allen H. Blake, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Trust, including the designation of
the terms of the Capital Securities as set forth in Annex I to such amended and
restated declaration as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signatures appear on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST II
By:
----------------------------------
Name:
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By:
----------------------------------
Authorized Officer
[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate equal to 3.92438% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 20, June 20, September 20 and
December 20 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in December 2004. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
-------- -------
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security 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 Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side
of this Capital Security Certificate)
Signature Guarantee:2
- -------------------------
2 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended
EXHIBIT A-3
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION
8.1 OF THE DECLARATION.
September 20, 2004
Certificate Evidencing Floating Rate Common Securities
of
First Bank Statutory Trust II
First Bank Statutory Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that First Banks, Inc.
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities"). The Common Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities shall in all respects be
subject to, the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of September 20, 2004, among Allen H. Blake, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interest in the assets of the Trust including the designation of the
terms of the Common Securities as set forth in Annex I to such amended and
restated declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
As set forth in the Declaration, when an Event of Default has occurred
and is continuing, the rights of Holders of Common Securities to payment in
respect of Distributions and payments upon Liquidation, redemption or otherwise
are subordinated to the rights of payment of Holders of the Capital Securities.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of undivided beneficial ownership in the
Debentures.
This Common Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST II
By:
------------------------------
Name:
Title: Administrator
[FORM OF REVERSE OF COMMON SECURITY]
Distributions payable on each Common Security will be payable at an
annual rate equal to 3.92438% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Common Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Common
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 20, June 20, September 20 and
December 20 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in December 2004. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
-------- -------
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Common
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer.
The Common Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security 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 Common Security Certificate on the books
of the Trust. The agent may substitute another to act for
him or her.
Date:
-----------------------------
Signature:
------------------------
(Sign exactly as your name appears on the other side of this Common
Security Certificate)
Signature:
-------------------------------------------
(Sign exactly as your name appears on the other side of this Common
Security Certificate)
Signature Guarantee3
- -------------------------
3 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
EXHIBIT B
SPECIMEN OF INITIAL DEBENTURE
(See Document No. 16)
EXHIBIT C
PLACEMENT AGREEMENT
(See Document No. 1)
Exhibit 4.28
-------------------------------------------------
GUARANTEE AGREEMENT
by and between
FIRST BANKS, INC.
and
WILMINGTON TRUST COMPANY
Dated as of September 20, 2004
-------------------------------------------------
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of September 20,
2004, is executed and delivered by First Banks, Inc., a Missouri corporation
(the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation,
as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of First
Bank Statutory Trust II, a Delaware statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of the date hereof among Wilmington Trust Company, not
in its individual capacity but solely as institutional trustee, the
administrators of the Issuer named therein, the Guarantor, as sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof those undivided beneficial
interests, having an aggregate liquidation amount of $20,000,000.00 (the
"Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Guarantee, to pay to the Holders of Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation. In this Guarantee, unless the
------------------------------
context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to "Articles" or "Sections" are to
Articles or Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of this
Guarantee have the same meanings when used in this Guarantee, unless otherwise
defined in this Guarantee or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
---------
Securities Act of 1933, as amended, or any successor rule thereunder.
"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes
-------------
indebted or liable.
"Capital Securities" has the meaning set forth in the recitals to this
-------------------
Guarantee.
"Common Securities" means the common securities issued by the Issuer to the
-----------------
Guarantor pursuant to the Declaration.
"Corporate Trust Office" means the office of the Guarantee Trustee at which
----------------------
the corporate trust business of the Guarantee Trustee shall, at any particular
time, be principally administered, which office at the date of execution of this
Guarantee is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
"Covered Person" means any Holder of Capital Securities.
--------------
"Debentures" means the debt securities of the Guarantor designated the
----------
Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 held
by the Institutional Trustee (as defined in the Declaration) of the Issuer.
"Declaration Event of Default" means an "Event of Default" as defined in
------------------------------
the Declaration.
"Event of Default" has the meaning set forth in Section 2.4(a).
----------------
"Guarantee Payments" means the following payments or distributions, without
------------------
duplication, with respect to the Capital Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital Securities to the
extent the Issuer shall have funds available therefor, (ii) the Redemption Price
to the extent the Issuer has funds available therefor, with respect to any
Capital Securities called for redemption by the Issuer, (iii) the Special
Redemption Price to the extent the Issuer has funds available therefor, with
respect to Capital Securities redeemed upon the occurrence of a Special Event,
and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer shall have funds available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
------------------
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Guarantor" means First Banks, Inc. and each of its successors and assigns.
---------
"Holder" means any holder, as registered on the books and records of the
------
Issuer, of any Capital Securities; provided, however, that, in determining
-------- -------
whether the Holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
-------------------
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of the date hereof between the
---------
Guarantor and Wilmington Trust Company, not in its individual capacity but
solely as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the institutional trustee of the Issuer.
"Issuer" has the meaning set forth in the opening paragraph to this
------
Guarantee.
"Liquidation Distribution" has the meaning set forth in the definition of
-------------------------
"Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means Holder(s)
---------------------------------------------------------
of outstanding Capital Securities, voting together as a class, but separately
from the holders of Common Securities, of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital
Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not including
-----------
liabilities related to taxes) of the Issuer other than obligations of the Issuer
to pay to holders of any Trust Securities the amounts due such holders pursuant
to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a certificate
----------------------
signed by one Authorized Officer of such Person. Any Officer's Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee shall include:
(a) a statement that the officer signing the Officer's Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by the officer in rendering the Officer's
Certificate;
(c) a statement that the officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of the officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Redemption Price" has the meaning set forth in the Indenture.
----------------
"Responsible Officer" means, with respect to the Guarantee Trustee, any
--------------------
officer within the Corporate Trust Office of the Guarantee Trustee including any
Vice President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also, 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.
"Special Event" has the meaning set forth in the Indenture.
-------------
"Special Redemption Price" has the meaning set forth in the Indenture.
------------------------
"Successor Guarantee Trustee" means a successor Guarantee Trustee
-------------------------------
possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital Securities.
----------------
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 2.1. Powers and Duties of the Guarantee Trustee.
------------------------------------------
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit
of the Holders of the Capital Securities, and the Guarantee Trustee shall not
transfer this Guarantee to any Person except a Holder of Capital Securities
exercising his or her rights pursuant to Section 4.4(b) or to a Successor
Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and interest
of the Guarantee Trustee shall automatically vest in any Successor Guarantee
Trustee, and such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall
enforce this Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after curing all Events of Default that may have occurred, shall undertake
to perform only such duties as are specifically set forth in this Guarantee, and
no implied covenants shall be read into this Guarantee against the Guarantee
Trustee. In case an Event of Default has occurred (that has not been waived
pursuant to Section 2.4) and is actually known to a Responsible Officer of the
Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee, and use the same degree of care and skill
in its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee, and the
Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Guarantee, and no implied covenants or obligations shall be read into
this Guarantee against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this Guarantee; but in
the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of
this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that such Responsible Officer of the
Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining
the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the written direction of the Holders of not less than a Majority in
liquidation amount of the Capital Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee, or relating to the exercise of any trust or power
conferred upon the Guarantee Trustee under this Guarantee; and
(iv) no provision of this Guarantee shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds is
not reasonably assured to it under the terms of this Guarantee or security
and indemnity, reasonably satisfactory to the Guarantee Trustee, against
such risk or liability is not reasonably assured to it.
Section 2.2. Certain Rights of Guarantee Trustee.
-----------------------------------
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully
protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee shall be sufficiently evidenced by an Officer's Certificate.
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Guarantee Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely
upon an Officer's Certificate of the Guarantor which, upon receipt of such
request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any re-recording,
refiling or re-registration thereof).
(v) The Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to legal
matters 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 Guarantor or any of its Affiliates and may include any of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee from any court
of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee at the request
or direction of any Holder, unless such Holder shall have provided to the
Guarantee Trustee such security and indemnity, reasonably satisfactory to
the Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Guarantee 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 Guarantee Trustee; provided, however,
that nothing contained in this Section 2.2(a)(vi) shall relieve the
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Guarantee.
(vii) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, nominees, custodians or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
ix) Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of the Capital Securities, and the
signature of the Guarantee Trustee or its agents alone shall be sufficient
and effective to perform any such action. No third party shall be required
to inquire as to the authority of the Guarantee Trustee to so act or as to
its compliance with any of the terms and provisions of this Guarantee, both
of which shall be conclusively evidenced by the Guarantee Trustee's or its
agent's taking such action.
(x) Whenever in the administration of this Guarantee the Guarantee
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Capital Securities, (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 accordance with such instructions.
(xi) The Guarantee 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 Guarantee.
(b) No provision of this Guarantee shall be deemed to impose any duty or
obligation on the Guarantee Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal or in which the Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law to perform any such
act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.
Section 2.3. Not Responsible for Recitals or Issuance of Guarantee. The
--------------------------------------------------------
recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.
Section 2.4. Events of Default; Waiver.
-------------------------
(a) An Event of Default under this Guarantee will occur upon the failure of
the Guarantor to perform any of its payment or other obligations hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital
Securities may, voting or consenting as a class, on behalf of the Holders of all
of the Capital Securities, waive any past Event of Default and its consequences.
Upon such waiver, any such Event of Default shall cease to exist, and shall be
deemed to have been cured, for every purpose of this Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.5. Events of Default; Notice.
-------------------------
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders
of the Capital Securities and the Guarantor, notices of all Events of Default
actually known to a Responsible Officer of the Guarantee Trustee, unless such
defaults have been cured before the giving of such notice, provided, however,
-------- -------
that the Guarantee Trustee shall be protected in withholding such notice if and
so long as a Responsible Officer of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Capital Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written notice
from the Guarantor or a Holder of the Capital Securities (except in the case of
a payment default), or a Responsible Officer of the Guarantee Trustee charged
with the administration of this Guarantee shall have obtained actual knowledge
thereof.
ARTICLE III
GUARANTEE TRUSTEE
Section 3.1. Guarantee Trustee; Eligibility.
------------------------------
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor, and
(ii) be a 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 Person 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 3.1(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 Guarantee Trustee shall cease to be eligible to so
act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 3.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee shall either eliminate such interest or resign to the extent
and in the manner provided by, and subject to this Guarantee.
Section 3.2. Appointment, Removal and Resignation of Guarantee Trustee.
---------------------------------------------------------
(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor except during an Event of
Default.
(b) The Guarantee Trustee shall not be removed in accordance with Section
3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted
such appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by an instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 3.2 within 60 days after
delivery of an instrument of removal or resignation, the Guarantee Trustee
resigning or being removed may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act
of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the
Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the
Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2
and 7.3 accrued to the date of such termination, removal or resignation.
ARTICLE IV
GUARANTEE
Section 4.1. Guarantee.
---------
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense (except the
defense of payment by the Issuer), right of set-off or counterclaim that the
Issuer may have or assert. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.
(b) The Guarantor hereby also agrees to assume any and all Obligations of
the Issuer and in the event any such Obligation is not so assumed, subject to
the terms and conditions hereof, the Guarantor hereby irrevocably and
unconditionally guarantees to each Beneficiary the full payment, when and as
due, of any and all Obligations to such Beneficiaries. This Guarantee is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 4.2. Waiver of Notice and Demand. The Guarantor hereby waives
---------------------------
notice of acceptance of this Guarantee and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 4.3. Obligations Not Affected. The obligations, covenants,
--------------------------
agreements and duties of the Guarantor under this Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Capital Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Special Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any other
obligation under, arising out of or in connection with, the Capital Securities
(other than an extension of time for payment of Distributions, Redemption Price,
Special Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures or
any extension of the maturity date of the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Capital Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 4.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances. There shall be no
obligation of the Holders to give notice to, or obtain consent of, the Guarantor
with respect to the happening of any of the foregoing.
Section 4.4. Rights of Holders.
-----------------
(a) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee; provided, however, that (subject to
-------- -------
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any
such direction if the Guarantee Trustee being advised by counsel determines that
the action or proceeding so directed may not lawfully be taken or if the
Guarantee Trustee in good faith by its board of directors or trustees, executive
committees or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal proceeding
directly against the Guarantor to enforce the Guarantee Trustee's rights under
this Guarantee, without first instituting a legal proceeding against the Issuer,
the Guarantee Trustee or any other Person. The Guarantor waives any right or
remedy to require that any such action be brought first against the Issuer, the
Guarantee Trustee or any other Person before so proceeding directly against the
Guarantor.
Section 4.5. Guarantee of Payment. This Guarantee creates a guarantee of
--------------------
payment and not of collection.
Section 4.6. Subrogation. The Guarantor shall be subrogated to all (if any)
-----------
rights of the Holders of Capital Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Guarantee; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if, after
giving effect to any such payment, any amounts are due and unpaid under this
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
Section 4.7. Independent Obligations. The Guarantor acknowledges that its
------------------------
obligations hereunder are independent of the obligations of the Issuer with
respect to the Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 4.3 hereof.
Section 4.8. Enforcement by a Beneficiary. A Beneficiary may enforce the
----------------------------
obligations of the Guarantor contained in Section 4.1(b) directly against the
Guarantor and the Guarantor waives any right or remedy to require that any
action be brought against the Issuer or any other person or entity before
proceeding against the Guarantor. The Guarantor shall be subrogated to all
rights (if any) of any Beneficiary against the Issuer in respect of any amounts
paid to the Beneficiaries by the Guarantor under this Guarantee; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if at the
time of any such payment, and after giving effect to such payment, any amounts
are due and unpaid under this Guarantee.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 5.1. Limitation of Transactions. So long as any Capital Securities
--------------------------
remain outstanding, if (a) there shall have occurred and be continuing an Event
of Default or a Declaration Event of Default or (b) the Guarantor shall have
selected an Extension Period as provided in the Declaration and such period, or
any extension thereof, shall have commenced and be continuing, then the
Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Guarantor's or such Affiliate's
capital stock (other than payments of dividends or distributions to the
Guarantor) or make any guarantee payments with respect to the foregoing or (y)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Guarantor or any Affiliate that
rank pari passu in all respects with or junior in interest to the Debentures
(other than, with respect to clauses (x) and (y) above, (i) repurchases,
redemptions or other acquisitions of shares of capital stock of the Guarantor in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Guarantor (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of the Event of Default, Declaration Event of Default or
Extension Period, as applicable, (ii) as a result of any exchange or conversion
of any class or series of the Guarantor's capital stock (or any capital stock of
a subsidiary of the Guarantor) for any class or series of the Guarantor's
capital stock or of any class or series of the Guarantor's indebtedness for any
class or series of the Guarantor's capital stock, (iii) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) any declaration of a dividend in connection with
any stockholders' rights plan, or the issuance of rights, stock or other
property under any stockholders' rights plan, or the redemption or repurchase of
rights pursuant thereto, (v) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari passu with or junior to such
stock and any cash payments in lieu of fractional shares issued in connection
therewith, or (vi) payments under this Guarantee).
Section 5.2. Ranking. This Guarantee will constitute an unsecured
-------
obligation of the Guarantor and will rank subordinate and junior in right of
payment to all present and future Senior Indebtedness (as defined in the
Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital
Securities agrees to the foregoing provisions of this Guarantee and the other
terms set forth herein.
The right of the Guarantor to participate in any distribution of assets of
any of its subsidiaries upon any such subsidiary's liquidation or reorganization
or otherwise is subject to the prior claims of creditors of that subsidiary,
except to the extent the Guarantor may itself be recognized as a creditor of
that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee
will be effectively subordinated to all existing and future liabilities of the
Guarantor's subsidiaries, and claimants should look only to the assets of the
Guarantor for payments hereunder. This Guarantee does not limit the incurrence
or issuance of other secured or unsecured debt of the Guarantor, including
Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may
enter into in the future or otherwise.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Guarantee shall terminate as to the Capital
-----------
Securities (i) upon full payment of the Redemption Price or Special Redemption
Price of all Capital Securities then outstanding, (ii) upon the distribution of
all of the Debentures to the Holders of all of the Capital Securities or (iii)
upon full payment of the amounts payable in accordance with the Declaration upon
dissolution of the Issuer. This Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any Holder of Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Guarantee.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Exculpation.
-----------
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor 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 in accordance with this Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee 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 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 Issuer or the Guarantor and upon such information,
opinions, reports or statements presented to the Issuer or the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who, if selected by such
Indemnified Person, has been selected with reasonable care by such Indemnified
Person, 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 of Capital Securities might properly be paid.
Section 7.2. Indemnification.
---------------
(a) The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or willful misconduct on
the part of the Indemnified Person, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including, but
not limited to, the costs and expenses (including reasonable legal fees and
expenses) of the Indemnified Person defending itself against, or investigating,
any claim or liability in connection with the exercise or performance of any of
the Indemnified Person's powers or duties hereunder. The obligation to indemnify
as set forth in this Section 7.2 shall survive the resignation or removal of the
Guarantee Trustee and the termination of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this Section 7.2
of notice of the commencement of any action, such Indemnified Person will, if a
claim in respect thereof is to be made against the Guarantor under this Section
7.2, notify the Guarantor in writing of the commencement thereof; but the
failure so to notify the Guarantor (i) will not relieve the Guarantor from
liability under paragraph (a) above unless and to the extent that the Guarantor
did not otherwise learn of such action and such failure results in the
forfeiture by the Guarantor of substantial rights and defenses and (ii) will
not, in any event, relieve the Guarantor from any obligations to any Indemnified
Person other than the indemnification obligation provided in paragraph (a)
above. The Guarantor shall be entitled to appoint counsel of the Guarantor's
choice at the Guarantor's expense to represent the Indemnified Person in any
action for which indemnification is sought (in which case the Guarantor shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person or Persons except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
- -------- -------
Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel
to represent the Guarantor in an action, the Indemnified Person shall have the
right to employ separate counsel (including local counsel), and the Guarantor
shall bear the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the Guarantor to represent the Indemnified
Person would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both the
Indemnified Person and the Guarantor and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it and/or
other Indemnified Person(s) which are different from or additional to those
available to the Guarantor, (iii) the Guarantor shall not have employed counsel
satisfactory to the Indemnified Person to represent the Indemnified Person
within a reasonable time after notice of the institution of such action or (iv)
the Guarantor shall authorize the Indemnified Person to employ separate counsel
at the expense of the Guarantor. The Guarantor will not, without the prior
written consent of the Indemnified Persons, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnified Persons are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Person from all
liability arising out of such claim, action, suit or proceeding.
Section 7.3. Compensation; Reimbursement of Expenses. The Guarantor agrees:
---------------------------------------
(a) to pay to the Guarantee Trustee from time to time such compensation for
all services rendered by it hereunder as the parties shall agree to from time to
time (which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by it in accordance with any provision of this
Guarantee (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or willful misconduct.
For purposes of clarification, this Section 7.3 does not contemplate the
payment by the Guarantor of acceptance or annual administration fees owing to
the Guarantee Trustee for services to be provided by the Guarantee Trustee under
this Guarantee or the fees and expenses of the Guarantee Trustee's counsel in
connection with the closing of the transactions contemplated by this Guarantee.
The provisions of this Section 7.3 shall survive the resignation or removal of
the Guarantee Trustee and the termination of this Guarantee.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Successors and Assigns. All guarantees and agreements
------------------------
contained in this Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Capital Securities then outstanding. Except in connection
with any merger or consolidation of the Guarantor with or into another entity or
any sale, transfer or lease of the Guarantor's assets to another entity, in each
case, to the extent permitted under the Indenture, the Guarantor may not assign
its rights or delegate its obligations under this Guarantee without the prior
approval of the Holders of at least a Majority in liquidation amount of the
Capital Securities.
Section 8.2. Amendments. Except with respect to any changes that do not
----------
adversely affect the rights of Holders of the Capital Securities in any material
respect (in which case no consent of Holders will be required), this Guarantee
may be amended only with the prior approval of the Holders of not less than a
Majority in liquidation amount of the Capital Securities. The provisions of the
Declaration with respect to amendments thereof apply to the giving of such
approval.
Section 8.3. Notices. All notices provided for in this Guarantee 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 Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may give
notice of to the Holders of the Capital Securities and the Guarantor):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Capital Securities and to the Guarantee Trustee):
First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(c) If given to any Holder of the Capital Securities, at the address set
forth on the books and records of the Issuer.
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 8.4. Benefit. This Guarantee is solely for the benefit of the
-------
Beneficiaries and, subject to Section 2.1(a), is not separately transferable
from the Capital Securities.
Section 8.5. Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND
--------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).
Section 8.6. Counterparts. This Guarantee may be executed in one or more
------------
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.7 Separability. In case one or more of the provisions contained
------------
in this Guarantee shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Guarantee, but this Guarantee
shall be construed as if such invalid or illegal or unenforceable provision had
never been contained herein.
Signatures appear on the following page
THIS GUARANTEE is executed as of the day and year first above written.
FIRST BANK, INC., Guarantor
By: /s/ Allen H. Blake
-------------------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
WILMINGTON TRUST COMPANY, as Guarantee Trustee
By: /s/ Christopher J. Monigle
-------------------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
Exhibit 4.29
FIRST BANK, INC.
20,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
--------------------
September 10, 2004
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Ladies and Gentlemen:
First Banks, Inc., a Missouri corporation (the "Company"), and its
financing subsidiary, First Bank Statutory Trust II, a Delaware statutory trust
(the "Trust," and hereinafter together with the Company, the "Offerors"), hereby
confirm their agreement (this "Agreement") with you as placement agents (the
"Placement Agents"), as follows:
Section 1. Issuance and Sale of Securities.
-------------------------------
1.1. Introduction. The Offerors propose to issue and sell at the
------------
Closing (as defined in Section 2.3.1 hereof) 20,000 of the Trust's Floating Rate
Capital Securities, with a liquidation amount of $1,000.00 per capital security
(the "Capital Securities"), to First Tennessee Bank National Association, a
national banking association organized under the laws of the United States of
America and Preferred Term Securities XV, Ltd., a company with limited liability
established under the laws of the Cayman Islands (the "Purchasers") pursuant to
the terms of Subscription Agreements entered into, or to be entered into on or
prior to the Closing Date (as defined in Section 2.3.1 hereof), between the
Offerors and the Purchasers (the "Subscription Agreements"), the forms of which
are attached hereto as Exhibit A-1 and Exhibit A-2 and incorporated herein by
----------- -----------
this reference.
1.2. Operative Agreements. The Capital Securities shall be fully and
---------------------
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and Wilmington Trust Company ("WTC"), as trustee (the
"Guarantee Trustee"), for the benefit from time to time of the holders of the
Capital Securities. The entire proceeds from the sale by the Trust to the
holders of the Capital Securities shall be combined with the entire proceeds
from the sale by the Trust to the Company of its common securities (the "Common
Securities"), and shall be used by the Trust to purchase $20,619,000.00 in
principal amount of the Floating Rate Junior Subordinated Deferrable Interest
Debentures (the "Debentures") of the Company. The Capital Securities and the
Common Securities for the Trust shall be issued pursuant to an Amended and
Restated Declaration of Trust among WTC, as Delaware trustee (the "Delaware
Trustee"), WTC, as institutional trustee (the "Institutional Trustee"), the
Administrators named therein, and the Company, to be dated as of the Closing
Date and in substantially the form heretofore delivered to the Placement Agents
(the "Trust Agreement"). The Debentures shall be issued pursuant to an Indenture
(the "Indenture"), to be dated as of the Closing Date, between the Company and
WTC, as indenture trustee (the "Indenture Trustee"). The documents identified in
this Section 1.2 and in Section 1.1 are referred to herein as the "Operative
Documents."
1.3. Rights of Purchasers. The Capital Securities shall be offered and
--------------------
sold by the Trust directly to the Purchasers without registration of any of the
Capital Securities, the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreements and the
Purchasers shall be entitled to each of the benefits of the Placement Agents and
the Purchasers under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchasers were parties
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.
1.4. Legends. Upon original issuance thereof, and until such time as
-------
the same is no longer required under the applicable requirements of the
Securities Act, the Capital Securities and Debentures certificates shall each
contain a legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
------------------------------
2.1. Exclusive Rights; Purchase Price. From the date hereof until the
---------------------------------
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchasers at a purchase price of $1,000.00 per Capital Security.
2.2. Subscription Agreements. The Offerors hereby agree to evidence
------------------------
their acceptance of the subscription by countersigning a copy of each of the
Subscription Agreements and returning the same to the Placement Agents.
2.3. Closing and Delivery of Payment.
-------------------------------
2.3.1. Closing; Closing Date. The sale and purchase of the
---------------------
Capital Securities by the Offerors to the Purchasers shall take place at a
closing (the "Closing") at the offices of Lewis, Rice & Fingersh, L.C., at 10:00
a.m. (St. Louis time) on September 20, 2004, or such other business day as may
be agreed upon by the Offerors and the Placement Agents (the "Closing Date");
provided, however, that in no event shall the Closing Date occur later than
- -------- -------
September 30, 2004 unless consented to by the Purchasers. Payment by the
Purchasers shall be payable in the manner set forth in the Subscription
Agreements and shall be made prior to or on the Closing Date.
2.3.2. Delivery. The certificates for the Capital Securities
--------
shall be in definitive form, each registered in the name of the applicable
Purchaser, or Purchaser designee, and in the aggregate amount of the Capital
Securities purchased by the Purchaser.
2.3.3. Transfer Agent. The Offerors shall deposit the
--------------
certificates representing the Capital Securities with the Institutional Trustee
or other appropriate party prior to the Closing Date.
2.4. Costs and Expenses. Whether or not this Agreement is terminated
------------------
or the sale of the Capital Securities is consummated, the Company hereby
covenants and agrees that it shall pay or cause to be paid (directly or by
reimbursement) all reasonable costs and expenses incident to the performance of
the obligations of the Offerors under this Agreement, including all fees,
expenses and disbursements of counsel and accountants for the Offerors; all
reasonable expenses incurred by the Offerors incident to the preparation,
execution and delivery of the Trust Agreement, the Indenture, and the Guarantee;
and all other reasonable costs and expenses incident to the performance of the
obligations of the Company hereunder and under the Trust Agreement.
2.5. Failure to Close. If any of the conditions to the Closing
------------------
specified in this Agreement shall not have been fulfilled to the satisfaction of
the Placement Agents or if the Closing shall not have occurred on or before
10:00 a.m. (St. Louis time) on September 30, 2004, then each party hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
-------- -------
the obligations of the parties under Sections 2.4, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.
Section 3. Closing Conditions. The obligations of the Purchasers and the
-------------------
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1. Opinions of Counsel. On the Closing Date, the Placement Agents
-------------------
shall have received the following favorable opinions, each dated as of the
Closing Date: (a) from Stinson Morrison Hecker LLP, counsel for the Offerors and
addressed to the Purchasers and the Placement Agents in substantially the form
set forth on Exhibit B-1 attached hereto and incorporated herein by this
------------
reference, (b) from Richards, Layton & Finger, P.A., special Delaware counsel to
the Offerors and addressed to the Purchasers, the Placement Agents and the
Offerors, in substantially the form set forth on Exhibit B-2 attached hereto and
-----------
incorporated herein by this reference and (c) from Lewis, Rice & Fingersh, L.C.,
special tax counsel to the Offerors, and addressed to the Placement Agents and
the Offerors, in substantially the form set forth on Exhibit B-3 attached hereto
-----------
and incorporated herein by this reference, subject to the receipt by Lewis, Rice
& Fingersh, L.C. of a representation letter from the Company in the form set
forth in Exhibit B-3 completed in a manner reasonably satisfactory to Lewis,
-----------
Rice & Fingersh, L.C. (collectively, the "Offerors' Counsel Opinions"). In
rendering the Offerors' Counsel Opinions, counsel to the Offerors may rely as to
factual matters upon certificates or other documents furnished by officers,
directors and trustees of the Offerors (copies of which shall be delivered to
the Placement Agents and the Purchasers) and by government officials, and upon
such other documents as counsel to the Offerors may, in their reasonable
opinion, deem appropriate as a basis for the Offerors' Counsel Opinions. Counsel
to the Offerors may specify the jurisdictions in which they are admitted to
practice and that they are not admitted to practice in any other jurisdiction
and are not experts in the law of any other jurisdiction. If the Offerors'
counsel is not admitted to practice in the State of New York, the opinion of
Offerors' counsel may assume, for purposes of the opinion, that the laws of the
State of New York are substantively identical, in all respects material to the
opinion, to the internal laws of the state in which such counsel is admitted to
practice. Such Offerors' Counsel Opinions shall not state that they are to be
governed or qualified by, or that they are otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
3.2. Officer's Certificate. At the Closing Date, the Purchasers and
---------------------
the Placement Agents shall have received certificates from an authorized officer
of the Company, dated as of the Closing Date, stating that (i) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and (iii)
covering such other matters as the Placement Agents may reasonably request.
3.3. Administrator's Certificate. At the Closing Date, the Purchasers
----------------------------
and the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment. The
-----------------------------------------------------------
purchase of and payment for the Capital Securities as described in this
Agreement and pursuant to the Subscription Agreements shall (a) not be
prohibited by any applicable law or governmental regulation, (b) not subject the
Purchasers or the Placement Agents to any penalty or, in the reasonable judgment
of the Purchasers and the Placement Agents, other onerous conditions under or
pursuant to any applicable law or governmental regulation, and (c) be permitted
by the laws and regulations of the jurisdictions to which the Purchasers and the
Placement Agents are subject.
3.5. Consents and Permits. The Company and the Trust shall have
----------------------
received all consents, permits and other authorizations, and made all such
filings and declarations, as may be required from any person or entity pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree to which the Company or the Trust is
a party or to which either is subject, in connection with the transactions
contemplated by this Agreement.
3.6. Sale of Purchaser Securities. Preferred Term Securities XV, Ltd.
----------------------------
shall have sold securities issued by it in an amount such that the net proceeds
of such sale shall be (i) available on the Closing Date and (ii) in an amount
sufficient to purchase that portion of the Capital Securities Preferred Term
Securities XV, Ltd. agrees to purchase pursuant to the Subscription Agreement to
be entered into by it and all other capital or similar securities contemplated
to be purchased by Preferred Term Securities XV, Ltd. in agreements similar to
this Agreement and the Subscription Agreement to be entered into by it.
3.7. Information. Prior to or on the Closing Date, the Offerors shall
-----------
have furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchasers and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates required by this Section 3; and all proceedings taken by the
Offerors in connection with the issuance, offer and sale of the Capital
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
Section 4. Conditions to the Offerors' Obligations. The obligations of the
---------------------------------------
Offerors to sell the Capital Securities to the Purchasers and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1. Executed Agreement. The Offerors shall have received from the
-------------------
Placement Agents an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations. The Placement Agents shall have
--------------------------------
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. Except as set
----------------------------------------------
forth on the Disclosure Schedule (as defined in Section 11.1) attached hereto,
if any, the Offerors jointly and severally represent and warrant to the
Placement Agents and the Purchasers as of the date hereof and as of the Closing
Date as follows:
5.1. Securities Law Matters.
----------------------
(a) Neither the Company nor the Trust, nor any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on any of their behalf has, directly or
indirectly, made offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration under the
Securities Act of any of the Capital Securities, the Guarantee or the Debentures
(collectively, the "Securities") or any other securities to be issued, or which
may be issued, by Preferred Term Securities XV, Ltd.
(b) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf has (i) other than the
Placement Agents, offered for sale or solicited offers to purchase the
Securities, (ii) engaged in any form of offering, general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities, or (iii) engaged or will engage in any
"directed selling efforts" within the meaning of Regulation S of the Securities
Act ("Regulation S") with respect to the Securities.
(c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving effect
to the offering and sale of the Capital Securities and the consummation of the
transactions described in this Agreement, will be an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.
(e) Neither the Company nor the Trust has paid or agreed to pay
to any person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.
5.2. Organization, Standing and Qualification of the Trust. The Trust
------------------------------------------------------
has been duly created and is validly existing in good standing as a statutory
trust under the Delaware Statutory Trust Act (the "Statutory Trust Act") with
the power and authority to own property and to conduct the business it transacts
and proposes to transact and to enter into and perform its obligations under the
Operative Documents. The Trust is duly qualified to transact business as a
foreign entity and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party to or otherwise bound by any agreement other than the Operative
Documents. The Trust is and will, under current law, be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
5.3. Trust Agreement. The Trust Agreement has been duly authorized by
---------------
the Company and, on the Closing Date, will have been duly executed and delivered
by the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Delaware Trustee and the
Institutional Trustee, will be a valid and binding obligation of the Company and
such Administrators, enforceable against them in accordance with its terms,
subject to (a) applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation and other laws relating to or affecting creditors'
rights generally, and (b) general principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law) ("Bankruptcy and
Equity"). Each of the Administrators of the Trust is an employee or a director
of the Company or of a financial institution subsidiary of the Company and has
been duly authorized by the Company to execute and deliver the Trust Agreement.
5.4. Guarantee Agreement and the Indenture. Each of the Guarantee and
-------------------------------------
the Indenture has been duly authorized by the Company and, on the Closing Date,
will have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities. The Capital Securities
----------------------------------------
and the Common Securities have been duly authorized by the Trust Agreement and,
when issued and delivered against payment therefor on the Closing Date to the
Purchasers, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.
5.6. Debentures. The Debentures have been duly authorized by the
----------
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture, and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture enforceable
against the Company in accordance with their terms, subject to Bankruptcy and
Equity.
5.7. Power and Authority. This Agreement has been duly authorized,
--------------------
executed and delivered by the Company and the Trust and constitutes the valid
and binding obligation of the Company and the Trust, enforceable against the
Company and the Trust in accordance with its terms, subject to Bankruptcy and
Equity.
5.8. No Defaults. The Trust is not in violation of the Trust Agreement
-----------
or, to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement or the Operative Documents to which it is a party, and the
consummation of the transactions contemplated herein or therein and the use of
the proceeds therefrom, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any property or assets of the Trust, the Company or any
of the Company's Subsidiaries (as defined in Section 5.11 hereof) pursuant to
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Trust, the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound, or to which any of the property or
assets of any of them is subject, except for a conflict, breach, default, lien,
charge or encumbrance which could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect nor will such action result in any
violation of the Trust Agreement or the Statutory Trust Act or require the
consent, approval, authorization or order of any court or governmental agency or
body. As used herein, the term "Material Adverse Effect" means any one or more
effects that individually or in the aggregate are material and adverse to the
Offerors' ability to consummate the transactions contemplated herein or in the
Operative Documents or any one or more effects that individually or in the
aggregate are material and adverse to the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Company
and its Subsidiaries taken as whole, whether or not occurring in the ordinary
course of business.
5.9. Organization, Standing and Qualification of the Company. The
-----------------------------------------------------------
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of Missouri, with all requisite corporate power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of the Company
to be so qualified would not, singly or in the aggregate, have a Material
Adverse Effect.
5.10. Subsidiaries of the Company. Each of the Company's significant
---------------------------
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
---------
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiary to be so qualified would not, singly or in the aggregate,
have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of the Significant Subsidiaries (a) have been duly authorized and
are validly issued, (b) are fully paid and nonassessable, and (c) are wholly
owned, directly or indirectly, by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, restriction upon voting or
transfer, preemptive rights, claim, equity or other defect.
5.11. Permits. The Company and each of its subsidiaries (as defined in
-------
Section 1-02(x) of Regulation S-X to the Securities Act) (the "Subsidiaries")
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not, singly or in the
aggregate, have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorizations, approvals, orders,
licenses, certificates or permits which, singly or in the aggregate, if the
failure to be so licensed or approved is the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate, have a Material Adverse
Effect; and the Company and its Subsidiaries are in compliance with all
applicable laws, rules, regulations and orders and consents, the violation of
which would, singly or in the aggregate, have a Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals. Neither the Company nor
----------------------------------------
any of its Subsidiaries is in violation of its respective articles or
certificate of incorporation, charter or by-laws or similar organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which either the
Company or any of its Subsidiaries is a party, or by which it or any of them may
be bound or to which any of the property or assets of the Company or any of its
Subsidiaries is subject, the effect of which violation or default in performance
or observance would have, singly or in the aggregate, a Material Adverse Effect.
5.13. Holding Company Registration and Deposit Insurance. The Company
---------------------------------------------------
is duly registered (i) as a bank holding company or financial holding company
under the Bank Holding Company Act of 1956, as amended, and the regulations of
the Board of Governors of the Federal Reserve System (the "Federal Reserve") or
(ii) as a savings and loan holding company under the Home Owners' Loan Act of
1933, as amended, and the regulations of the Office of Thrift Supervision (the
"OTS"), and the deposit accounts of the Company's Subsidiary depository
institutions are insured by the Federal Deposit Insurance Corporation ("FDIC")
to the fullest extent permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are pending or
threatened.
5.14. Financial Statements.
--------------------
(a) The consolidated balance sheets of the Company and all of its
Subsidiaries as of December 31, 2003 and December 31, 2002 and related
consolidated income statements and statements of changes in shareholders' equity
for the 3 years ended December 31, 2003 together with the notes thereto, and the
consolidated balance sheets of the Company and all of its Subsidiaries as of
June 30, 2004 and the related consolidated income statements and statements of
changes in shareholders' equity for the 6 months then ended, copies of each of
which have been provided to the Placement Agents (together, the "Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein) and fairly present in all material respects the financial position and
the results of operations and changes in shareholders' equity of the Company and
all of its Subsidiaries as of the dates and for the periods indicated (subject,
in the case of interim financial statements, to normal recurring year-end
adjustments, none of which shall be material). The books and records of the
Company and all of its Subsidiaries have been, and are being, maintained in all
material respects in accordance with generally accepted accounting principles
and any other applicable legal and accounting requirements and reflect only
actual transactions.
(b) The information in the Company's most recently filed (i) FR
Y-9C filed with the Federal Reserve if the Company is a bank holding company,
(ii) FR Y-9SP filed with the Federal Reserve if the Company is a small bank
holding company or (iii) H-(b)11 filed with the OTS if the Company is a savings
and loan holding company (the "Regulatory Report"), previously provided to the
Placement Agents fairly presents in all material respects the financial position
of the Company and, where applicable, all of its Subsidiaries as of the end of
the period represented by such Regulatory Report.
(c) Since the respective dates of the Financial Statements and
the Regulatory Report, there has been no material adverse change or development
with respect to the financial condition or earnings of the Company and all of
its Subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.15. Exchange Act Reporting. The reports filed with the Securities and
----------------------
Exchange Commission (the "Commission") by the Company under the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the regulations thereunder
at the time they were filed with the Commission complied as to form in all
material respects with the requirements of the 1934 Act and such reports did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, except to
the extent superseded by a subsequent report filed by the Company with the
Commission.
5.16. Regulatory Enforcement Matters. Neither the Company nor any of
-------------------------------
its Subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to, any investigation with respect
to, any cease-and-desist order, agreement, consent agreement, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been since January 1, 2001, a recipient of
any supervisory letter from, or since January 1, 2001, has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their ability or authority to pay dividends or make distributions to
their shareholders or make payments of principal or interest on their debt
obligations, their management or their business (each, a "Regulatory
Agreement"), nor has the Company or any of its Subsidiaries been advised since
January 1, 2001, by any Regulatory Agency that it is considering issuing or
requesting any such Regulatory Agreement. There is no material unresolved
violation, criticism or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Company or any of its
Subsidiaries. As used herein, the term "Regulatory Agency" means any federal or
state agency charged with the supervision or regulation of depository
institutions, bank, financial or savings and loan holding companies, or engaged
in the insurance of depository institution deposits, or any court,
administrative agency or commission or other governmental agency, authority or
instrumentality having supervisory or regulatory authority with respect to the
Company or any of its Subsidiaries. Neither the Company nor any of the
Subsidiaries is currently unable to pay dividends or make distributions to its
shareholders with respect to any class of its equity securities, or prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise, and, in the reasonable
judgment of the Company's management, neither the Company nor any of the
Subsidiaries will be unable in the foreseeable future to pay dividends or make
distributions with respect to any class of equity securities, or be prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise.
5.17. No Material Change. Since December 31, 2003, there has been no
-------------------
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business, prospects or results of operations
of the Company or its Subsidiaries on a consolidated basis, whether or not
arising in the ordinary course of business.
5.18. No Undisclosed Liabilities. Neither the Company nor any of its
----------------------------
Subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the Financial Statements and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of the Company and all of its
Subsidiaries since the date of the most recent balance sheet included in the
Financial Statements.
5.19. Litigation. No charge, investigation, action, suit or proceeding
----------
is pending or, to the knowledge of the Offerors, threatened, against or
affecting the Company or its Subsidiaries or any of their respective properties
before or by any courts or any regulatory, administrative or governmental
official, commission, board, agency or other authority or body, or any
arbitrator, wherein an unfavorable decision, ruling or finding could have,
singly or in the aggregate, a Material Adverse Effect.
5.20. Deferral of Interest Payments on Debentures. The Company has no
-------------------------------------------
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents. Each
----------------------------------------------------------
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
6.1. Organization, Standing and Qualification.
----------------------------------------
(a) FTN Financial Capital Markets is a division of First
Tennessee Bank National Association, a national banking association duly
organized, validly existing and in good standing under the laws of the United
States, with full power and authority to own, lease and operate its properties
and conduct its business as currently being conducted. FTN Financial Capital
Markets is duly qualified to transact business as a foreign corporation and is
in good standing in each other jurisdiction in which it owns or leases property
or conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of FTN Financial Capital Markets.
(b) Keefe, Bruyette & Woods, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own, lease and operate its properties
and conduct its business as currently being conducted. Keefe, Bruyette & Woods,
Inc. is duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of Keefe, Bruyette & Woods, Inc.
6.2. Power and Authority. The Placement Agent has all requisite power
-------------------
and authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3. General Solicitation. In the case of the offer and sale of the
---------------------
Capital Securities, no form of general solicitation or general advertising was
used by the Placement Agent or its representatives including, but not limited
to, advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
6.4. Purchasers. The Placement Agent has made such reasonable inquiry
----------
as is necessary to determine that each Purchaser is acquiring the Capital
Securities for its own account, except as contemplated in Section 7.8 hereto,
and that the Purchasers do not intend to distribute the Capital Securities in
contravention of the Securities Act or any other applicable securities laws.
6.5. Qualified Purchasers. The Placement Agent has not offered or sold
--------------------
and will not arrange for the offer or sale of the Capital Securities except (i)
to those the Placement Agent reasonably believes are "accredited investors" (as
defined in Rule 501 of Regulation D), (ii) in an offshore transaction complying
with Rule 903 of Regulation S, or (iii) in any other manner that does not
require registration of the Capital Securities under the Securities Act. In
connection with each such sale, the Placement Agent has taken or will take
reasonable steps to ensure that the purchasers is aware that (a) such sale is
being made in reliance on an exemption under the Securities Act and (b) future
transfers of the Capital Securities will not be made except in compliance with
applicable securities laws.
6.6. Offering Circulars. Neither the Placement Agent nor its
--------------------
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
Section 7. Covenants of the Offerors. The Offerors covenant and agree with
-------------------------
the Placement Agents and the Purchasers as follows:
7.1. Compliance with Representations and Warranties. During the period
----------------------------------------------
from the date of this Agreement to the Closing Date, the Offerors shall use
their best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.
7.2. Sale and Registration of Securities. The Offerors and their
--------------------------------------
Affiliates shall not nor shall any of them permit any person acting on their
behalf (other than the Placement Agents), to directly or indirectly (i) sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that would or could be integrated
with the sale of the Capital Securities in a manner that would require the
registration under the Securities Act of the Securities or (ii) make offers or
sales of any such Security, or solicit offers to buy any such Security, under
circumstances that would require the registration of any of such Securities
under the Securities Act.
7.3. Use of Proceeds. The Trust shall use the proceeds from the sale
---------------
of the Capital Securities and the Common Securities to purchase the Debentures
from the Company.
7.4. Investment Company. The Offerors shall not engage, or permit any
-------------------
Subsidiary to engage, in any activity which would cause it or any Subsidiary to
be an "investment company" under the provisions of the Investment Company Act.
7.5. Reimbursement of Expenses. If the sale of the Capital Securities
-------------------------
provided for herein is not consummated (i) because any condition set forth in
Section 3 hereof is not satisfied, or (ii) because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a breach by the
Placement Agents, the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket expenses (including reasonable
fees and disbursements of counsel) in an amount not to exceed $50,000.00 that
shall have been incurred by them in connection with the proposed purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse the Placement Agents for their out-of-pocket
expenses if the sale of the Capital Securities fails to occur because the
Placement Agents fail to fulfill a condition set forth in Section 4.
7.6. Directed Selling Efforts, Solicitation and Advertising. In
------------------------------------------------------------
connection with any offer or sale of any of the Securities, the Offerors shall
not, nor shall either of them permit any of their Affiliates or any person
acting on their behalf, other than the Placement Agents, to (i) engage in any
"directed selling efforts" within the meaning of Regulation S, or (ii) engage in
any form of general solicitation or general advertising (as defined in
Regulation D).
7.7. Compliance with Rule 144A(d)(4) under the Securities Act. So long
--------------------------------------------------------
as any of the Securities are outstanding and are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Offerors will,
during any period in which they are not subject to and in compliance with
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the Offerors are not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser in connection with any proposed
transfer, any information required to be provided by Rule 144A(d)(4) under the
Securities Act, if applicable. This covenant is intended to be for the benefit
of the holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities. The information provided by the
Offerors pursuant to this Section 7.7 will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
7.8. Transfer Notice. The Offerors acknowledge that First Tennessee
----------------
Bank National Association ("First Tennessee") may transfer the Capital
Securities that it is purchasing, in whole or in part, at any time and from time
to time following the Closing Date by delivering the notice (the "Transfer
Notice") attached as Exhibit B to the Master Custodian Agreement, dated May 27,
---------
2004 and attached as Exhibit A to the Subscription Agreement to which First
---------
Tennessee is a party. In order to facilitate such transfer, the Company shall
execute in blank five additional Capital Securities certificates, to be
delivered at Closing, such certificates to be completed with the name of the
transferee(s) to which the Capital Securities, in whole or in part, will be
transferred upon the receipt of a Transfer Notice and authenticated by the
Institutional Trustee at the time of each such transfer.
7.9. Quarterly Reports. Within 50 days of the end of each calendar
-----------------
year quarter and within 100 days of the end of each calendar year during which
the Debentures are issued and outstanding, the Offerors shall submit to The Bank
of New York a completed quarterly report in the form attached hereto as
Exhibit D, with a copy provided to First Tennessee during the period when it
- ---------
holds any of the Capital Securities. If First Tennessee transfers the Capital
Securities as contemplated by Section 7.8, in addition to the reporting
obligations of the Offerors to The Bank of New York and First Tennessee provided
for in this Section 7.9, the Offerors shall submit to the trustee designated in
the Transfer Notice such periodic reports as may be required by such trustee in
the form and at such times as such trustee may require. The Offerors acknowledge
and agree that The Bank of New York and such designated trustee and its
successors and assigns are third party beneficiaries of this Section 7.9.
Section 8. Covenants of the Placement Agents. The Placement Agents covenant
---------------------------------
and agree with the Offerors that, during the period from the date of this
Agreement to the Closing Date, the Placement Agents shall use their best efforts
and take all action necessary or appropriate to cause their representations and
warranties contained in Section 6 to be true as of Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of the Closing Date. The Placement Agents further covenant and agree not to
engage in hedging transactions with respect to the Capital Securities unless
such transactions are conducted in compliance with the Securities Act.
Section 9. Indemnification.
---------------
9.1. Indemnification Obligation. The Offerors shall jointly and
----------------------------
severally indemnify and hold harmless the Placement Agents and the Purchasers
and each of their respective agents, employees, officers and directors and each
person that controls either of the Placement Agents or the Purchasers within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and agents, employees, officers and directors or any such controlling person of
either of the Placement Agents or the Purchasers (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchasers by the Offerors, or (b) any
omission or alleged omission to state in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Placement Agents or the Purchasers by the Offerors a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Indemnified Party for any legal and other expenses as
such expenses are reasonably incurred by such Indemnified Party in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, judgments, liability, expense or action described in this Section
9.1. In addition to their other obligations under this Section 9, the Offerors
hereby agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of, or based
upon, or related to the matters described above in this Section 9.1, they shall
reimburse each Indemnified Party on a quarterly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Indemnified Party
shall promptly return such amounts to the Offerors together with interest,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by First
Tennessee Bank National Association (the "Prime Rate"). Any such interim
reimbursement payments which are not made to an Indemnified Party within 30 days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
9.2. Conduct of Indemnification Proceedings. Promptly after receipt by
--------------------------------------
an Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
-------- -------
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (ii) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.
9.3. Contribution. If the indemnification provided for in this Section
------------
9 is required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, liabilities or expenses referred to
herein or therein, then the Offerors shall contribute to the amount paid or
payable by such Indemnified Party as a result of any losses, claims, damages,
judgments, liabilities or expenses referred to herein (i) in such proportion as
is appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the Indemnified Party, on the other hand, from the offering of
such Capital Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Offerors, on the one hand, and the Placement Agents,
on the other hand, in connection with the statements or omissions or
inaccuracies in the representations and warranties herein or other breaches
which resulted in such losses, claims, damages, judgments, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Offerors, on the one hand, and the Placement
Agents, on the other hand, shall be deemed to be in the same proportion, in the
case of the Offerors, as the total price paid to the Offerors for the Capital
Securities sold by the Offerors to the Purchasers (net of the compensation paid
to the Placement Agents hereunder, but before deducting expenses), and in the
case of the Placement Agents, as the compensation received by them, bears to the
total of such amounts paid to the Offerors and received by the Placement Agents
as compensation. The relative fault of the Offerors and the Placement Agents
shall be determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission of a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Offerors
or the Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The provisions set forth in Section 9.2 with respect to notice of commencement
of any action shall apply if a claim for contribution is made under this Section
9.3; provided, however, that no additional notice shall be required with respect
-------- -------
to any action for which notice has been given under Section 9.2 for purposes of
indemnification. The Offerors and the Placement Agents agree that it would not
be just and equitable if contribution pursuant to this Section 9.3 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in this Section
9.3. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, judgments, liabilities or expenses referred to in this
Section 9.3 shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim. In no
event shall the liability of the Placement Agents hereunder be greater in amount
than the dollar amount of the compensation (net of payment of all expenses)
received by the Placement Agents upon the sale of the Capital Securities giving
rise to such obligation. No person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
9.4. Additional Remedies. The indemnity and contribution agreements
--------------------
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5. Additional Indemnification. The Company shall indemnify and hold
---------------------------
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents.
-----------------------------------------------
10.1. Reliance. In performing their duties under this Agreement, the
--------
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchasers.
10.2. Rights of Placement Agents. In connection with the performance of
--------------------------
their duties under this Agreement, the Placement Agents shall not be liable for
any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchasers in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.
Section 11. Miscellaneous.
-------------
11.1. Disclosure Schedule. The term "Disclosure Schedule," as used
--------------------
herein, means the schedule, if any, attached to this Agreement that sets forth
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in Section 5 hereof; provided,
that any item set forth in the Disclosure Schedule as an exception to a
representation or warranty shall be deemed an admission by the Offerors that
such item represents an exception, fact, event or circumstance that is
reasonably likely to result in a Material Adverse Effect. The Disclosure
Schedule shall be arranged in paragraphs corresponding to the section numbers
contained in Section 5. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the immediately preceding sentence, the mere listing
(or inclusion of a copy) of a document or other item in the Disclosure Schedule
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein unless the representation or warranty has to do with the
existence of the document or other item itself. Information provided by the
Company in response to any due diligence questionnaire shall not be deemed part
of the Disclosure Schedule and shall not be deemed to be an exception to one or
more representations or warranties contained in Section 5 hereof unless such
information is specifically included on the Disclosure Schedule in accordance
with the provisions of this Section 11.1.
11.2. Legal Expenses. At Closing, the Placement Agents shall provide a
--------------
credit for the Offerors' transaction-related legal expenses in the amount of
$10,000.00.
11.3. Non-Disclosure. Except as required by applicable law, including
--------------
without limitation securities laws and regulations promulgated thereunder, (i)
the Offerors shall not, and will cause their advisors and representatives not
to, issue any press release or other public statement regarding the transactions
contemplated by this Agreement or the Operative Documents prior to or on the
Closing Date and (ii) following the Closing Date, the Offerors shall not include
in any press release, other public statement or other communication regarding
the transactions contemplated by this Agreement or the Operative Documents, any
reference to the Placement Agents, WTC, the Purchaser, the term "PreTS" or any
derivations thereof. Notwithstanding anything to the contrary, the Offerors may
(1) consult any tax advisor regarding U.S. federal income tax treatment or tax
structure of the transaction contemplated under this Agreement and the Operative
Documents and (2) disclose to any and all persons, without limitation of any
kind, the U.S. Federal income tax structure (in each case, within the meaning of
Treasury Regulation ss. 1.6011-4) of the transaction contemplated under this
Agreement and the Operative Documents and all materials of any kind (including
opinions or other tax analyses) that are provided to you relating to such tax
treatment and tax structure. For this purpose, "tax structure" is limited to any
facts relevant to the U.S. federal income tax treatment of the transaction and
does not include information relating to identity of the parties.
11.4. Notices. Prior to the Closing, and thereafter with respect to
-------
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Telecopier: 901-435-4706
Telephone: 800-456-5460
Attention: James D. Wingett
and
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Telecopier: 212-403-2000
Telephone: 212-403-1004
Attention: Mitchell Kleinman, General Counsel
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Telecopier: 314-241-6056
Telephone: 314-444-7600
Attention: Thomas C. Erb, Esq.
and
Sidley Austin Brown & Wood LLP
787 7th Avenue
New York, New York 10019
Telecopier: 212-839-5599
Telephone: 212-839-5300
Attention: Renwick Martin, Esq.
if to the Offerors, to:
First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
Telecopier: 314-592-6621
Telephone: 314-592-6603
Attention: Lisa K. Vansickle
with a copy to:
Stinson Morrison Hecker LLP
1201 Walnut Street
Kansas City, Missouri 64106
Telecopier: 816-474-4208
Telephone: 816-691-3351
Attention: C. Robert Monroe, Esq.
All such notices and communications shall be deemed to have been duly
given (i) at the time delivered by hand, if personally delivered, (ii) five
business days after being deposited in the mail, postage prepaid, if mailed,
(iii) when answered back, if telexed, (iv) the next business day after being
telecopied, or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Offerors, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.5. Parties in Interest, Successors and Assigns. Except as expressly
--------------------------------------------
set forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchasers and the Offerors and any person controlling the Placement
Agents, the Purchasers or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
11.6. Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
11.7. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
11.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS
OF LAWS) OF THE STATE OF NEW YORK.
11.9. Entire Agreement. This Agreement, together with the Operative
-----------------
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the Operative Documents and the other
documents delivered in connection with the transaction contemplated by this
Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.10. Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected, it being intended that all of the Placement Agents' and the
Purchasers' rights and privileges shall be enforceable to the fullest extent
permitted by law.
11.11. Survival. The Placement Agents and the Offerors, respectively,
--------
agree that the representations, warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument delivered pursuant
hereto shall remain in full force and effect and shall survive the delivery of,
and payment for, the Capital Securities.
Signatures appear on the following page
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
FIRST BANK, INC.
By: /s/ Allen H. Blake
-------------------------------
Name: Allen H. Blake
-----------------------------
Title: President and
Chief Executive Officer
----------------------------
FIRST BANK STATUTORY TRUST II
By: /s/ Allen H. Blake
-------------------------------
Name: Allen H. Blake
-----------------------------
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank National Association,
as a Placement Agent
By: /s/ James D. Wingett
----------------------------------------------------
Name: James D. Wingett
--------------------------------------------------
Title: Senior Vice President
-------------------------------------------------
KEEFE, BRUYETTE & WOODS, INC.,
a New York corporation, as a Placement Agent
By: /s/ Peter J. Wirth
---------------------------------------------------
Name: Peter J. Wirth
--------------------------------------------------
Title: Managing Director
-------------------------------------------------
EXHIBIT A-1
-----------
FORM OF SUBSCRIPTION AGREEMENT
------------------------------
FIRST BANK STATUTORY TRUST II
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
September 20, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust II (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 135 North Meramec Avenue, Clayton, Missouri 63105
(the "Company" and, collectively with the Trust, the "Offerors"), and First
Tennessee Bank National Association (the "Purchaser").
RECITALS:
A. The Trust desires to issue 20,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and WTC, as trustee (the "Indenture");
and
C. In consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees
to purchase from the Trust 2,150 Capital Securities at a price equal to
$1,000.00 per Capital Security (the "Purchase Price") and the Trust agrees to
sell such Capital Securities to the Purchaser for said Purchase Price. The
rights and preferences of the Capital Securities are set forth in the
Declaration. The Purchase Price is payable in immediately available funds on
September 20, 2004, or such other business day as may be designated by the
Purchaser, but in no event later than September 30, 2004 (the "Closing Date").
The Offerors shall provide the Purchaser wire transfer instructions no later
than 1 day following the date hereof.
1.2. As a condition to its purchase of the Capital Securities,
Purchaser shall enter into the Joinder Agreement to the Master Custodian
Agreement, the form of which is attached hereto as Exhibit A (the "Custodian
Agreement") and, in accordance therewith, the certificate for the Capital
Securities shall be delivered by the Trust on the Closing Date to the custodian
in accordance with the Custodian Agreement. Purchaser shall not transfer the
Capital Securities to any person or entity except in accordance with the terms
of the Custodian Agreement.
1.3. The Placement Agreement, dated September 10, 2004 (the "Placement
Agreement"), among the Offerors and the placement agents identified therein (the
"Placement Agents") includes certain representations and warranties, covenants
and conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.
1.4. Anything herein or in the Placement Agreement notwithstanding,
the Offerors acknowledge and agree that, so long as Purchaser holds some or all
of the Capital Securities, the Purchaser may in its discretion from time to time
transfer or sell, or sell or grant participation interests in, some or all of
such Capital Securities to one or more parties, provided that any such
transaction complies, as applicable, with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and any other
applicable securities laws, is pursuant to an exemption therefrom, or is
otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the
Capital Securities, the Debentures nor the Guarantee have been registered under
the Securities Act or any other applicable securities law, are being offered for
sale by the Trust in transactions not requiring registration under the
Securities Act, and may not be offered, sold, pledged or otherwise transferred
by the Purchaser except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as
contemplated under Section 1.4 hereof, it is purchasing the Capital Securities
for its own account, for investment, and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of the Securities
Act or other applicable securities laws, subject to any requirement of law that
the disposition of its property be at all times within its control and subject
to its ability to resell such Capital Securities pursuant to an effective
registration statement under the Securities Act or under Rule 144A or any other
exemption from registration available under the Securities Act or any other
applicable securities law.
2.3. The Purchaser represents and warrants that neither the Offerors
nor the Placement Agents are acting as a fiduciary or financial or investment
adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying (for
purposes of making any investment decision or otherwise) upon any advice,
counsel or representations (whether written or oral) of the Offerors or of the
Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has consulted
with its own legal, regulatory, tax, business, investment, financial and
accounting advisers in connection herewith to the extent it has deemed
necessary, (b) it has had a reasonable opportunity to ask questions of and
receive answers from officers and representatives of the Offerors concerning
their respective financial condition and results of operations and the purchase
of the Capital Securities, and any such questions have been answered to its
satisfaction, (c) it has had the opportunity to review all publicly available
records and filings concerning the Offerors and it has carefully reviewed such
records and filings that it considers relevant to making an investment decision,
and (d) it has made its own investment decisions based upon its own judgment,
due diligence and advice from such advisers as it has deemed necessary and not
upon any view expressed by the Offerors or the Placement Agents.
2.6. The Purchaser represents and warrants that it is a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act. If the
Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A
under the Securities Act, it owns and invests on a discretionary basis not less
than U.S. $25,000,000.00 in securities of issuers that are not affiliated with
it. The Purchaser is not a participant-directed employee plan, such as a 401(k)
plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F)
of Rule 144A that holds the assets of such a plan, unless investment decisions
with respect to the plan are made solely by the fiduciary, trustee or sponsor of
such plan.
2.7. The Purchaser represents and warrants that on each day from the
date on which it acquires the Capital Securities through and including the date
on which it disposes of its interests in the Capital Securities, either (i) it
is not (a) an "employee benefit plan" (as defined in Section 3(3) of the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
-----
which is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA,
or any entity whose underlying assets include the assets of any such plan (an
"ERISA Plan"), (b) any other "plan" (as defined in Section 4975(e)(1) of the
-----------
United States Internal Revenue Code of 1986, as amended (the "Code")) which is
----
subject to the provisions of Section 4975 of the Code or any entity whose
underlying assets include the assets of any such plan (a "Plan"), (c) an entity
----
whose underlying assets include the assets of any such ERISA Plan or other Plan
by reason of Department of Labor regulation section 2510.3-101 or otherwise, or
(d) a governmental or church plan that is subject to any federal, state or local
law which is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (a "Similar Law"); or (ii) the purchase, holding and
------------
disposition of the Capital Securities by it will satisfy the requirements for
exemptive relief under Prohibited Transaction Class Exemption ("PTCE") 84-14,
----
PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the
case of a plan subject to a Similar Law, will not result in a non-exempt
violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the
Capital Securities as principal for its own account for investment and, except
as contemplated under Section 1.4 hereof, not for sale in connection with any
distribution thereof. It was not formed solely for the purpose of investing in
the Capital Securities, and additional capital or similar contributions were not
specifically solicited from any person owning a beneficial interest in it for
the purpose of enabling it to purchase any Capital Securities. The Purchaser is
not a (i) partnership, (ii) common trust fund or (iii) special trust, pension,
profit sharing or other retirement trust fund or plan in which the partners,
beneficiaries or participants, as applicable, may designate the particular
investments to be made or the allocation of any investment among such partners,
beneficiaries or participants, and except as contemplated under Section 1.4
hereof, it agrees that it shall not hold the Capital Securities for the benefit
of any other person and shall be the sole beneficial owner thereof for all
purposes and that it shall not sell participation interests in the Capital
Securities or enter into any other arrangement pursuant to which any other
person shall be entitled to a beneficial interest in the distribution on the
Capital Securities. The Capital Securities purchased directly or indirectly by
the Purchaser constitute an investment of no more than 40% of its assets. The
Purchaser understands and agrees that any purported transfer of the Capital
Securities to a purchaser which would cause the representations and warranties
of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab
initio and the Offerors retain the right to resell any Capital Securities sold
to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.10. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.11. The Purchaser represents and warrants that this Agreement has
been duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
2.13. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
Fax: 901-435-7983
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except
by a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
3.6. This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Offerors' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
FIRST BANK, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
FIRST BANK STATUTORY TRUST II
By:
------------------------------------
Name:
----------------------------------
Title: Administrator
EXHIBIT A TO SUBSCRIPTION AGREEMENT
-----------------------------------
FORM OF MASTER CUSTODIAN AGREEMENT
This Master Custodian Agreement (this "Agreement") is made and entered
into as of May 27, 2004 by and among each purchaser (each a "Purchaser" and
collectively the "Purchasers") that enters into a Joinder Agreement attached
hereto as Exhibit A (the "Joinder Agreement"), Wilmington Trust Company, a
Delaware banking corporation (the "Custodian") and each financial institution
(each an "Issuer" and collectively the "Issuers") that enters into a Joinder
Agreement. The Purchasers and the Issuers are sometimes referred to herein as
the "Interested Parties".
RECITALS
A. The Purchasers intend to purchase from the Issuers or their
respective statutory business trust subsidiaries Securities issued by such
Issuers (the "Securities").
B. In order to facilitate any future transfer of all or any portion
of the Securities by the Purchasers, the Interested Parties intend to provide
for the custody of the Securities and certain other securities on the terms set
forth herein.
C. The Custodian is willing to hold and administer such securities
and to distribute the securities held by it in accordance with the agreement of
the Interested Parties and/or arbitral or judicial orders and decrees as set
forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants herein contained and other good and valuable consideration (the
receipt, adequacy and sufficiency of which are hereby acknowledged by the
parties by their execution hereof), the parties agree as follows:
1. Joinder Agreement. On or before the delivery to the Custodian of any
------------------
Securities issued by an Issuer, such Issuer and the applicable Purchaser or
Purchasers shall enter into a Joinder Agreement substantially in the form of
Exhibit A attached hereto, with such additional provisions as the Interested
Parties may wish to add from time to time. An executed copy of each such Joinder
Agreement shall be delivered to the Custodian on or before the date on which
such Issuer's Securities are issued. This Agreement and each Joinder Agreement
constitute the entire agreement among the Purchasers, Issuers and the Custodian
pertaining to the subject matter hereof.
2. Delivery of Securities. On or before each date on which an Issuer enters
----------------------
into a Joinder Agreement:
(a) The applicable Issuer shall deliver to the Custodian a signed,
authenticated certificate representing a beneficial interest in such
Issuer's Securities, with the Purchaser designated as owner thereof
(the "Original Securities"). The Custodian shall have no
responsibility for the genuineness, validity, market value, title or
sufficiency for any intended purpose of the Original Securities.
(b) The applicable Issuer shall deliver to the Custodian five signed,
unauthenticated and undated certificates with no holder designated,
each of which when completed representing a beneficial interest in
such Issuer's Securities (the "Replacement Securities"). The Custodian
shall have no responsibility for the genuineness, validity, market
value, title or sufficiency for any intended purpose of the
Replacement Securities.
3. Timing of Release from Custody. Upon receipt of a signed transfer notice in
------------------------------
the form of Exhibit B to be delivered in connection with the Purchaser's
transfer of all or any portion of an Issuer's Securities, on the effective date
set forth in such transfer notice, the Custodian shall:
(a) Deliver the Original Securities certificate corresponding to the
Issuer identified in the transfer notice to Wilmington Trust Company,
as Institutional Trustee under the Amended and Restated Declaration of
Trust, dated as of the date of the applicable Joinder Agreement, among
the Institutional Trustee, the Company and the administrators named
therein (the "Declaration") or as Trustee under the Indenture, dated
as of the date of the applicable Joinder Agreement, between the
Company and the Trustee (the "Indenture"), as applicable, for the
purpose of canceling the applicable Original Securities certificate in
accordance with the terms of the Issuer's Amended and Restated
Declaration of Trust or Indenture, as applicable; and
(b) Deliver the Replacement Securities certificate(s) corresponding to
the Issuer identified in the transfer notice in the amount designated
in and in accordance with the transfer notice for the purpose of
completing and authenticating the applicable Replacement Securities
certificate(s) in accordance with the terms of the Issuer's
Declaration or Indenture, as applicable.
The initial term of this Agreement shall be one year (the "Initial
Term"). Unless FTN Financial Capital Markets or Keefe, Bruyette &
Woods, Inc. shall otherwise notify the Custodian in writing, upon
expiration of the Initial Term, this Agreement shall automatically
renew for an additional one-year term and shall continue to
automatically renew for succeeding one-year terms until terminated.
Upon termination of this Agreement, the Custodian and the Interested
Parties shall be released from all obligations hereunder, except for
the indemnification obligations set forth in paragraphs 5(b) and 5(c)
hereof.
4. Concerning the Custodian.
------------------------
(a) Each Interested Party acknowledges and agrees that the Custodian
(i) shall not be responsible for any of the agreements referred to or
described herein (including without limitation any Issuer's
Declaration or Indenture relating to such Issuer's Securities), or for
determining or compelling compliance therewith, and shall not
otherwise be bound thereby, (ii) shall be obligated only for the
performance of such duties as are expressly and specifically set forth
in this Agreement on its part to be performed, each of which are
ministerial (and shall not be construed to be fiduciary) in nature,
and no implied duties or obligations of any kind shall be read into
this Agreement against or on the part of the Custodian, (iii) shall
not be obligated to take any legal or other action hereunder which
might in its judgment involve or cause it to incur any expense or
liability unless it shall have been furnished with acceptable
indemnification, (iv) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction,
instrument, statement, certificate, request or other document
furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof, and (v) may
consult counsel satisfactory to it, including in-house counsel, and
the opinion or advice of such counsel in any instance 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 the opinion or advice of such counsel.
(b) The Custodian shall not be liable to anyone for any action taken
or omitted to be taken by it hereunder except in the case of the
Custodian's negligence or willful misconduct in breach of the terms of
this Agreement. In no event shall the Custodian be liable for
indirect, punitive, special or consequential damage or loss (including
but not limited to lost profits) whatsoever, even if the Custodian has
been informed of the likelihood of such loss or damage and regardless
of the form of action.
(c) The Custodian shall have no more or less responsibility or
liability on account of any action or omission of any book-entry
depository, securities intermediary or other subcustodian employed by
the Custodian than any such book-entry depository, securities
intermediary or other subcustodian has to the Custodian, except to the
extent that such action or omission of any book-entry depository,
securities intermediary or other subcustodian was caused by the
Custodian's own negligence, bad faith or willful misconduct in breach
of this Agreement.
(d) The recitals contained herein shall be taken as the statements of
each of the Issuers and the Purchaser, and the Custodian assumes no
responsibility for the correctness of the same. The Custodian makes no
representations as to the validity or sufficiency of this Agreement or
the Securities. The Custodian shall not be accountable for the use or
application by any of the Issuers or the Purchaser of any Securities
or the proceeds of any Securities.
5. Compensation, Expense Reimbursement and Indemnification.
-------------------------------------------------------
(a) The Custodian shall be compensated pursuant to a separate fee
agreement.
(b) Each of the Interested Parties agrees, jointly and severally, to
reimburse the Custodian on demand for all costs and expenses incurred
in connection with the administration of this Agreement or the
performance or observance of its duties hereunder which are in excess
of its customary compensation for normal services hereunder, including
without limitation, payment of any legal fees and expenses incurred by
the Custodian in connection with resolution of any claim by any party
hereunder.
(c) Each of the Interested Parties covenants and agrees, jointly and
severally, to indemnify the Custodian (and its directors, officers and
employees) and hold it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and
expense of any nature incurred by the Custodian arising out of or in
connection with this Agreement or with the administration of its
duties hereunder, including but not limited to attorney's fees and
other costs and expenses of defending or preparing to defend against
any claim of liability unless and except to the extent such loss,
liability, damage, cost and expense shall be caused by the Custodian's
negligence, bad faith, or willful misconduct. The provisions in this
paragraph 5 shall survive the expiration of this Agreement and the
resignation or removal of the Custodian.
6. Voting Rights. The Custodian shall be under no obligation to preserve,
--------------
protect or exercise rights in the Original Securities, and shall be responsible
only for reasonable measures to maintain the physical safekeeping thereof, and
otherwise to perform and observe such duties on its part as are expressly set
forth in this Agreement. The Custodian shall not be responsible for forwarding
to any Interested Party, notifying any Interested Party with respect to, or
taking any action with respect to, any notice, solicitation or other document or
information, written or otherwise, received from an issuer or other person with
respect to the Original Securities, including but not limited to, proxy
material, tenders, options, the pendency of calls and maturities and expiration
of rights.
7. Resignation. The Custodian may at any time resign as Custodian hereunder by
-----------
giving thirty (30) days' prior written notice of resignation to each of the
Interested Parties. Prior to the effective date of the resignation as specified
in such notice, the Interested Parties will issue to the Custodian a written
instruction authorizing redelivery of the Original Securities and the
Replacement Securities to a bank or trust company that they select as successor
to the Custodian hereunder. If, however, the Interested Parties shall fail to
name such a successor custodian within twenty days after the notice of
resignation from the Custodian, the Purchasers shall be entitled to name such
successor custodian. If no successor custodian is named by the Interested
Parties or the Purchasers, the Custodian may apply to a court of competent
jurisdiction for appointment of a successor custodian.
8. Dispute Resolution. It is understood and agreed that should any dispute arise
------------------
with respect to the delivery, ownership, right of possession, and/or disposition
of the Original Securities or the Replacement Securities, or should any claim be
made upon the Custodian, the Original Securities or the Replacement Securities
by a third party, the Custodian upon receipt of notice of such dispute or claim
is authorized and shall be entitled (at its sole option and election) to retain
in its possession without liability to anyone, all or any of said Original
Securities and Replacement Securities until such dispute shall have been settled
either by the mutual written agreement of the parties involved or by a final
order, decree or judgment of a court in the United States of America, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Custodian may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Original Securities and Replacement
Securities.
9. Consent to Jurisdiction and Service. Each of the Interested Parties hereby
------------------------------------
absolutely and irrevocably consents and submits to the jurisdiction of the
courts in the State of Delaware and of any Federal court located in said State
in connection with any actions or proceedings brought against any of the
Interested Parties (or each of them) by the Custodian arising out of or relating
to this Agreement. In any such action or proceeding, the Interested Parties each
hereby absolutely and irrevocably (i) waives any objection to jurisdiction or
venue, (ii) waives personal service of any summons, complaint, declaration or
other process, and (iii) agrees that the service thereof may be made by
certified or registered first-class mail directed to such party, as the case may
be, at their respective addresses in accordance with paragraph 10 hereof.
10. Force Majeure. The Custodian shall not be responsible for delays or failures
-------------
in performance resulting from acts beyond its control. Such acts shall include
but not be limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
11. Notices.
-------
(a) Any notice permitted or required hereunder shall be in writing,
and shall be sent by personal delivery, overnight delivery by a
recognized courier or delivery service, mailed by registered or
certified mail, return receipt requested, postage prepaid, or by
confirmed facsimile accompanied by mailing of the original on the same
day by first class mail, postage prepaid, in each case the parties at
their address set forth below (or to such other address as any such
party may hereafter designate by written notice to the other parties).
If to an Issuer, to the address appearing on such Issuer's Joinder
Agreement
If to the Purchaser, to the address appearing on such Purchaser's
Joinder Agreement
If to the Custodian:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Chris Slaybaugh - Corporate Trust Administration
Fax: 302-636-4140
12. Miscellaneous.
-------------
(a) Binding Effect. This Agreement shall be binding upon the
---------------
respective parties hereto and their heirs, executors, successors and
assigns.
(b) Modifications. This Agreement may not be altered or modified
-------------
without the express written consent of the parties hereto. No course
of conduct shall constitute a waiver of any of the terms and
conditions of this Agreement, unless such waiver is specified in
writing, and then only to the extent so specified. A waiver of any of
the terms and conditions of this Agreement on one occasion shall not
constitute a waiver of the other terms of this Agreement, or of such
terms and conditions on any other occasion.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of Delaware.
(d) Reproduction of Documents. This Agreement and all documents
---------------------------
relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b)
certificates and other information previously or hereafter furnished,
may be reproduced by any photographic, photostatic, microfilm, optical
disk, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or
not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
(e) Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
signatures appear on the following page
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first above written.
WILMINGTON TRUST COMPANY
By:
----------------------------
Print Name:
------------------------
Title:
--------------------------
EXHIBIT A TO MASTER CUSTODIAN AGREEMENT
---------------------------------------
FORM OF JOINDER AGREEMENT
-------------------------
September 20, 2004
This Joinder Agreement (this "Agreement") is entered into as of
September 20, 2004 by First Tennessee Bank National Association (the
"Purchaser") and First Banks, Inc. (the "Issuer").
RECITALS
A. Wilmington Trust Company (the "Custodian") is party to that
certain Master Custodian Agreement dated as of May 27, 2004 (the "Custodian
Agreement").
B. The Custodian Agreement provides that certain financial
institutions that have issued securities (or whose statutory trust subsidiaries
have issued securities) and the Purchaser of such securities will join into the
Custodian Agreement pursuant to the terms of a joinder agreement.
C. On the date hereof, Issuer is issuing securities to the Purchaser
and the Issuer and the Purchaser desire to enter into this Agreement to
facilitate the subsequent transfer of the Issuer's securities by the Custodian.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein contained and other good and valuable consideration (the receipt,
adequacy and sufficiency of which are hereby acknowledged by the Issuer by its
execution hereof), the Issuer agrees as follows:
1. Joinder. The Issuer and Purchaser hereby join in the Custodian
-------
Agreement and agree to be subject to, and bound by, the terms and provisions of
the Custodian Agreement that are ascribed to "Issuers" and "Purchasers"
respectively therein to the same extent as if the Issuer and Purchaser had
signed the Custodian Agreement as an original party thereto.
2. Notice. Any notice permitted or required to be sent to an Issuer
------
under the Custodian Agreement shall be sent to the following address:
First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
Attention: Lisa K. Vansickle
Any notice permitted or required to be sent to a Purchaser under the
Custodian Agreement shall be sent to the following address:
First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
3. Termination. This Agreement and the Purchaser's and Issuer's
-----------
respective rights and obligations under the Custodian Agreement shall terminate
upon the transfer of all of Issuer's securities pursuant to the Custodian
Agreement.
4. Entire Agreement. This Agreement and the Custodian Agreement
-----------------
constitute the entire agreement among the Purchaser, Issuer and the Custodian
pertaining to the subject matter hereof.
IN WITNESS WHEREOF, the Issuer and Purchaser have executed this
Agreement as of the day first above written.
FIRST BANK, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
EXHIBIT B TO MASTER CUSTODIAN AGREEMENT
---------------------------------------
FORM OF TRANSFER NOTICE
[DATE]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Dear Sir or Madam:
The undersigned hereby notifies you of the transfer of [________] of
the Capital Securities of First Bank Statutory Trust II, such transfer to be
effective on [DATE OF TRANSFER]. In accordance with Section 7.9 of the Placement
Agreement dated September 10, 2004 between the Offerors and the placement agents
named therein (the "Placement Agreement"), periodic reports shall be delivered
to [_______________] on each March 20, June 20, September 20 and December 20
during the term of the Capital Securities, commencing [___________], in the form
attached thereto. Capitalized terms used in this notice and not otherwise
defined shall have the meanings ascribed to such terms in the Placement
Agreement.
The undersigned hereby instructs you as Custodian to deliver the
Original Securities certificate to Wilmington Trust Company, as Institutional
Trustee (the "Trustee") under the Amended and Restated Trust Agreement dated
September 20, 2004 among the Trustee, First Banks, Inc. and the administrative
trustees named therein (the "Trust Agreement") for cancellation in accordance
with the terms of the Trust Agreement and to deliver the Replacement Securities
certificate to the Trustee for authentication in accordance with the terms of
the Trust Agreement.
By copy of this notice, the Institutional Trustee is hereby instructed
to make the Replacement Securities certificate registered to [NAME, ADDRESS AND
IDENTITY OF TRANSFEREE] in the liquidation amount of [_________] and bearing the
identification number "CUSIP NO. [__________]" and to authenticate and deliver
the Replacement Securities certificate to [_____________].
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
cc: First Banks, Inc.
Wilmington Trust Company, as Trustee
EXHIBIT A-2
-----------
FORM OF SUBSCRIPTION AGREEMENT
------------------------------
FIRST BANK STATUTORY TRUST II
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
September 20, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust II (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 135 North Meramec Avenue, Clayton, Missouri 63105
(the "Company" and, collectively with the Trust, the "Offerors"), and Preferred
Term Securities XV, Ltd. (the "Purchaser").
RECITALS:
A. The Trust desires to issue 20,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and WTC, as trustee (the "Indenture");
and
C. In consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees
to purchase from the Trust 17,850 Capital Securities at a price equal to
$1,000.00 per Capital Security (the "Purchase Price") and the Trust agrees to
sell such Capital Securities to the Purchaser for said Purchase Price. The
rights and preferences of the Capital Securities are set forth in the
Declaration. The Purchase Price is payable in immediately available funds on
September 20, 2004, or such other business day as may be designated by the
Purchaser, but in no event later than September 30, 2004 (the "Closing Date").
The Offerors shall provide the Purchaser wire transfer instructions no later
than 3 days prior to the Closing Date.
1.2. The certificate for the Capital Securities shall be delivered by
the Trust on the Closing Date to the Purchaser or its designee.
1.3. The Placement Agreement, dated September 10, 2004 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the
Capital Securities, the Debentures nor the Guarantee have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is
not a "U.S. person" as such term is defined in Rule 902 under the Securities
Act, (ii) it is not acquiring the Capital Securities for the account or benefit
of any such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Agreement has
been duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is
not in violation or default of any term of its Memorandum of Association or
Articles of Association, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
2.11. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: Preferred Term Securities XV, Ltd.
c/o Maples Finance Limited
P.O. Box 1093 GT
Queensgate House
South Church Street
George Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: 345-945-7100
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except
by a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
3.6. This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Offerors' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, I have set my hand the day and year first written
above.
PREFERRED TERM SECURITIES XV, LTD.
By:
--------------------------------------------------
Print Name:
------------------------------------------
Title:
-----------------------------------------------
IN WITNESS WHEREOF, this Subscription Agreement is agreed to and
accepted as of the day and year first written above.
FIRST BANK, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
FIRST BANK STATUTORY TRUST II
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title: Administrator
EXHIBIT B-1
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FORM OF COMPANY COUNSEL OPINION
-------------------------------
September 20, 2004
First Tennessee Bank National Association FTN Financial Capital Markets
845 Crossover Lane, Suite 150 845 Crossover Lane, Suite 150
Memphis, Tennessee 38117 Memphis, Tennessee 38117
Preferred Term Securities XV, Ltd. Keefe, Bruyette & Woods, Inc.
c/o Maples Finance Limited 787 7th Avenue, 4th Floor
P. O. Box 1093 GT New York, New York 10019
Queensgate House
South Church Street Wilmington Trust Company
George Town, Grand Cayman Rodney Square North
Cayman Islands 1100 North Market Street
Wilmington, Delaware 19890-1600
Ladies and Gentlemen:
We have acted as counsel to First Banks, Inc. (the "Company"), a
Missouri corporation in connection with a certain Placement Agreement, dated
September 10, 2004, (the "Placement Agreement"), between the Company and First
Bank Statutory Trust II (the "Trust"), on one hand, and FTN Financial Capital
Markets and Keefe, Bruyette & Woods, Inc. (the "Placement Agents"), on the other
hand. Pursuant to the Placement Agreement, and subject to the terms and
conditions stated therein, the Trust will issue and sell to First Tennessee Bank
National Association and Preferred Term Securities XV, Ltd. (the "Purchasers"),
$20,000,000.00 aggregate principal amount of Floating Rate Capital Securities
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").
Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State of Missouri.
We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended;
and (b) such corporate documents, records, information and certificates of the
Company and the Subsidiaries, certificates of public officials or government
authorities and other documents as we have deemed necessary or appropriate as a
basis for the opinions hereinafter expressed. As to certain facts material to
our opinions, we have relied, with your permission, upon statements,
certificates or representations, including those delivered or made in connection
with the above-referenced transaction, of officers and other representatives of
the Company and the Subsidiaries and the Trust.
As used herein, the phrases "to the best of our knowledge" or "known to
us" or other similar phrases mean the actual knowledge of the attorneys who have
had active involvement in the transactions described above or who have prepared
or signed this opinion letter, or who otherwise have devoted substantial
attention to legal matters for the Company.
Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:
1. The Company is validly existing and in good standing under the
laws of the State of Missouri and is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended. Each of the Significant
Subsidiaries is validly existing and in good standing under the laws of its
jurisdiction of organization. Each of the Company and the Significant
Subsidiaries has full corporate power and authority to own or lease its
properties and to conduct its business as such business is currently conducted
in all material respects. To the best of our knowledge, all outstanding shares
of capital stock of the Significant Subsidiaries have been duly authorized and
validly issued, and are fully paid and nonassessable except to the extent such
shares may be deemed assessable under 12 U.S.C. Section 1831o or 12 U.S.C.
Section 55, and are owned of record and beneficially, directly or indirectly, by
the Company.
2. The issuance, sale and delivery of the Debentures in accordance
with the terms and conditions of the Placement Agreement and the Operative
Documents have been duly authorized by all necessary actions of the Company. The
issuance, sale and delivery of the Debentures by the Company and the issuance,
sale and delivery of the Capital Securities and the Common Securities by the
Trust do not give rise to any preemptive or other rights to subscribe for or to
purchase any shares of capital stock or equity securities of the Company or the
Significant Subsidiaries pursuant to the corporate Articles of Incorporation or
Charter, By-Laws or other governing documents of the Company or the Significant
Subsidiaries, or, to the best of our knowledge, any agreement or other
instrument to which either the Company or the Subsidiaries is a party or by
which the Company or the Significant Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into and
perform its obligations under the Placement Agreement and the Subscription
Agreements, and the Placement Agreement and the Subscription Agreements have
been duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their terms, except as the enforcement thereof may be limited
by general principles of equity and by bankruptcy or other laws affecting
creditors' rights generally, and except as the indemnification and contribution
provisions thereof may be limited under applicable laws and certain remedies may
not be available in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered
by the Company, are entitled to the benefits of the Indenture and are legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor
any of the Subsidiaries is in breach or violation of, or default under, with or
without notice or lapse of time or both, its Articles of Incorporation or
Charter, By-Laws or other governing documents (including without limitation, the
Trust Agreement). The execution, delivery and performance of the Placement
Agreement and the Operative Documents and the consummation of the transactions
contemplated by the Placement Agreement and the Operative Documents do not and
will not (i) result in the creation or imposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the Company or
the Subsidiaries, or (ii) conflict with, constitute a material breach or
violation of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of (A) the
Articles of Incorporation or Charter, By-Laws or other governing documents of
the Company or the Subsidiaries, or (B) to the best of our knowledge, any
material contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease, franchise, license or any other agreement or instrument to which
the Company or the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or the Subsidiaries or any of
their respective properties which, in the case of each of (i) or (ii) above, is
material to the Company and the Subsidiaries on a consolidated basis.
7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of Missouri in connection with the transactions
contemplated by the Placement Agreement and the Operative Documents in
connection with the offer and sale of the Capital Securities as contemplated by
the Placement Agreement and the Operative Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at
law or in equity is pending or threatened to which the Company, the Trust or the
Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is
pending or threatened against or affecting the Company, the Trust or the
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Company, the Trust and the Subsidiaries on a
consolidated basis.
9. Assuming the truth and accuracy of the representations and
warranties of the Placement Agents in the Placement Agreement and the Purchasers
in the Subscription Agreements, it is not necessary in connection with the
offering, sale and delivery of the Capital Securities, the Debentures and the
Guarantee Agreement (or the Guarantee) to register the same under the Securities
Act of 1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreements.
10. Neither the Company nor the Trust is or after giving effect to
the offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of numbered paragraph
1 of this opinion is based solely upon certain certificates and confirmations
issued by the applicable governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.
With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Delaware or New York,
we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Richards, Layton & Finger, P.A.
with respect to matters of Delaware law and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of Missouri, without regard to conflict of law provisions.
The opinions expressed herein are rendered to you solely pursuant to
Section 3.1(a) of the Placement Agreement. As such, they may be relied upon by
you only and may not be used or relied upon by any other person for any purpose
whatsoever without our prior written consent.
Very truly yours,
EXHIBIT B-2
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FORM OF DELAWARE COUNSEL OPINION
--------------------------------
To Each of the Persons
Listed on Schedule A Hereto
Re: First Bank Statutory Trust II
-----------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Bank
Statutory Trust II, a Delaware statutory trust (the "Trust"), in connection with
the matters set forth herein. At your request, this opinion is being furnished
to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust (the "Certificate of
Trust"), as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on September 9, 2004;
(b) The Declaration of Trust, dated as of September 9, 2004,
among First Banks, Inc., a Missouri corporation (the "Company"), Wilmington
Trust Company, a Delaware banking corporation ("WTC"), as trustee and the
administrators named therein (the "Administrators");
(c) The Amended and Restated Declaration of Trust of the Trust,
dated as of September 20, 2004 (including the form of Capital Securities
Certificate attached thereto as Exhibits A-1 and A-2 and the terms of the
Capital Securities attached as Annex I) (the "Declaration of Trust"), among the
Company, as sponsor, WTC, as Delaware trustee (the "Delaware Trustee") and
institutional trustee (the "Institutional Trustee"), the Administrators and the
holders, from time to time, of undivided beneficial interests in the assets of
the Trust;
(d) The Placement Agreement, dated September 10, 2004 (the
"Placement Agreement"), among the Company, the Trust, and FTN Financial Capital
Markets and Keefe, Bruyette & Woods, Inc., as placement agents;
(e) The Subscription Agreements, dated September 20, 2004 (the
"Subscription Agreements"), among (i) the Trust, the Company and Preferred Term
Securities XV, Ltd. and (ii) the Trust, the Company and First Tennessee Bank
National Association (the documents identified in items (c) through (e) being
collectively referred to as the "Operative Documents");
(f) The Capital Securities being issued on the date hereof (the
"Capital Securities");
(g) The Common Securities being issued on the date hereof (the
"Common Securities") (the documents identified in items (f) and (g) being
collectively referred to as the "Trust Securities"); and
(h) A Certificate of Good Standing for the Trust, dated September
17, 2004, obtained from the Secretary of State.
Capitalized terms used herein and not otherwise defined are used
as defined in the Declaration of Trust, except that reference herein to any
document shall mean such document as in effect on the date hereof. This opinion
is being delivered pursuant to Section 3.1 of the Placement Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (h) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (h) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Declaration of Trust constitutes the entire agreement among the parties thereto
with respect to the subject matter thereof, including with respect to the
creation, operation, and termination of the Trust, and that the Declaration of
Trust and the Certificate of Trust are in full force and effect and have not
been amended further, (ii) that there are no proceedings pending or
contemplated, for the merger, consolidation, liquidation, dissolution or
termination of the Trust, (iii) except to the extent provided in paragraph 1
below, the due creation, due formation or due organization, as the case may be,
and valid existence in good standing of each party to the documents examined by
us under the laws of the jurisdiction governing its creation, formation or
organization, (iv) that each party to the documents examined by us is qualified
to do business in each jurisdiction where such qualification is required
generally or necessary in order for such party to enforce its rights under the
documents examined by us, (v) the legal capacity of each natural person who is a
party to the documents examined by us, (vi) except to the extent set forth in
paragraph 2 below, that each of the parties to the documents examined by us has
the power and authority to execute and deliver, and to perform its obligations
under, such documents, (vii) except to the extent provided in paragraph 3 below,
that each of the parties to the documents examined by us has duly authorized,
executed and delivered such documents, (viii) the receipt by each Person to whom
a Capital Security is to be issued by the Trust (the "Capital Security Holders")
of a Capital Security Certificate for the Capital Security and the payment for
the Capital Securities acquired by it, in accordance with the Declaration of
Trust and the Subscription Agreements, (ix) that the Capital Securities are
issued and sold to the Holders of the Capital Securities in accordance with the
Declaration of Trust and the Subscription Agreements, (x) the receipt by the
Person (the "Common Securityholder") to whom the common securities of the Trust
representing common undivided beneficial interests in the assets of the Trust
(the "Common Securities" and, together with the Capital Securities, the "Trust
Securities") are to be issued by the Trust of a Common Security Certificate for
the Common Securities and the payment for the Common Securities acquired by it,
in accordance with the Declaration of Trust, (xi) that the Common Securities are
issued and sold to the Common Securityholder in accordance with the Declaration
of Trust, (xii) that each of the parties to the documents reviewed by us has
agreed to and received the stated consideration for the incurrence of its
obligations under such documents and (xiii) that each of the documents reviewed
by us (other than the Declaration of Trust) is a legal, valid, binding and
enforceable obligation of the parties thereto in accordance with the terms
thereof. We have not participated in the preparation of any offering materials
with respect to the Trust Securities and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
We express no opinion as to (i) the effect of suretyship
defenses, or defenses in the nature thereof, with respect to the obligations of
any applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents.
We express no opinion as to the enforceability of any particular
provision of the Trust Agreement or the other Operative Documents relating to
remedies after default.
We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of rights to
object to jurisdiction or venue, or consents to jurisdiction or venue, (ii)
waivers of rights to (or methods of) service of process, or rights to trial by
jury, or other rights or benefits bestowed by operation of law, (iii) waivers of
any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
variations of provisions which are not capable of waiver or variation under the
Uniform Commercial Code ("UCC") of the State, (v) the grant of powers of
attorney to any person or entity, or (vi) exculpation or exoneration clauses,
indemnity clauses, and clauses relating to releases or waivers of unmatured
claims or rights.
We have made no examination of, and no opinion is given herein as
to the Trustee's or the Trust's title to or other ownership rights in, or the
existence of any liens, charges or encumbrances on, or adverse claims against,
any asset or property held by the Institutional Trustee or the Trust. We express
no opinion as to the creation, validity, attachment, perfection or priority of
any mortgage, security interest or lien in any asset or property held by the
Institutional Trustee or the Trust.
We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring, after
the date hereof on the matters addressed in this opinion letter, and we assume
no responsibility to inform you of additional or changed facts, or changes in
law, of which we may become aware.
We express no opinion as to any requirement that any party to the
Operative Documents (or any other persons or entities purportedly entitled to
the benefits thereof) qualify or register to do business in any jurisdiction in
order to be able to enforce its rights thereunder or obtain the benefits
thereof.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a statutory trust under the Delaware Statutory Trust Act
(12 Del. C. ss. 3801, et seq.) (the "Act"). All filings required under the laws
------ ------
of the State of Delaware with respect to the creation and valid existence of the
Trust as a statutory trust have been made.
2. Under the Declaration of Trust and the Act, the Trust has the
trust power and authority to (A) execute and deliver the Operative Documents,
(B) perform its obligations under such Operative Documents and (C) issue the
Trust Securities.
3. The execution and delivery by the Trust of the Operative
Documents, and the performance by the Trust of its obligations thereunder, have
been duly authorized by all necessary trust action on the part of the Trust.
4. The Declaration of Trust constitutes a legal, valid and
binding obligation of the Company, the Trustees and the Administrators, and is
enforceable against the Company, the Trustees and the Administrators, in
accordance with its terms.
5. Each of the Operative Documents constitutes a legal, valid and
binding obligation of the Trust, enforceable against the Trust, in accordance
with its terms.
6. The Capital Securities have been duly authorized for issuance
by the Declaration of Trust, and, when duly executed and delivered to and paid
for by the purchasers thereof in accordance with the Declaration of Trust, the
Subscription Agreements and the Placement Agreement, the Capital Securities will
be validly issued, fully paid and, subject to the qualifications set forth in
paragraph 8 below, nonassessable undivided beneficial interests in the assets of
the Trust and will entitle the Capital Securities Holders to the benefits of the
Declaration of Trust. The issuance of the Capital Securities is not subject to
preemptive or other similar rights under the Act or the Declaration of Trust.
7. The Common Securities have been duly authorized for issuance
by the Declaration of Trust and, when duly executed and delivered to the Company
as Common Security Holder in accordance with the Declaration of Trust, will be
validly issued, fully paid and, subject to paragraph 8 below and Section 9.1(b)
of the Declaration of Trust (which provides that the Holder of the Common
Securities are liable for debts and obligations of Trust), nonassessable
undivided beneficial interests in the assets of the Trust and will entitle the
Common Security Holder to the benefits of the Declaration of Trust. The issuance
of the Common Securities is not subject to preemptive or other similar rights
under the Act or the Declaration of Trust.
8. Under the Declaration of Trust and the Act, the Holders of the
Capital Securities, as beneficial owners of the Trust, will 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. We note that the Holders of the Capital Securities and the Holder
of the Common Securities may be obligated, pursuant to the Declaration of Trust,
(A) to provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers or exchanges of Capital Security
Certificates and the issuance of replacement Capital Security Certificates, and
(B) to provide security or indemnity in connection with requests of or
directions to the Institutional Trustee to exercise its rights and powers under
the Declaration of Trust.
9. Neither the execution, delivery and performance by the Trust
of the Operative Documents, nor the consummation by the Trust of any of the
transactions contemplated thereby, requires the consent or approval of, the
authorization of, the withholding of objection on the part of, the giving of
notice to, the filing, registration or qualification with, or the taking of any
other action in respect of, any governmental authority or agency of the State of
Delaware, other than the filing of the Certificate of Trust with the Secretary
of State (which Certificate of Trust has been duly filed).
10. Neither the execution, delivery and performance by the Trust
of the Trust Documents, nor the consummation by the Trust of the transactions
contemplated thereby, (i) is in violation of the Trust Agreement or of any law,
rule or regulation of the State of Delaware applicable to the Trust or (ii) to
the best of our knowledge, without independent investigation, violates,
contravenes or constitutes a default under, or results in a breach of or in the
creation of any lien (other than as permitted by the Operative Documents) upon
any property of the Trust under any indenture, mortgage, chattel mortgage, deed
of trust, conditional sales contract, bank loan or credit agreement, license or
other agreement or instrument to which the Trust is a party or by which it is
bound.
11. Assuming that the Trust will not be taxable as a corporation
for federal income tax purposes, but rather will be classified for such purposes
as a grantor trust under Subpart E, Part I of Subchapter J of the Internal
Revenue Code of 1986, as amended, the Trust will not be subject to any tax, fee
or governmental charge under the laws of the State of Delaware.
The opinions expressed in paragraph 4, 5, 6, 7 and 8 above are
subject, as to enforcement, to the effect upon the Declaration of Trust of (i)
bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation,
fraudulent conveyance and transfer, and other similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) principles of
equity, including applicable law relating to fiduciary duties (regardless of
whether considered and applied in a proceeding in equity or at law), and (iii)
the effect of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
We consent to your relying as to matters of Delaware law upon
this opinion in connection with the Placement Agreement. We also consent to
Lewis, Rice & Fingersh, L.C.'s and Stinson Morrison Hecker LLP's relying as to
matters of Delaware law upon this opinion in connection with opinions to be
rendered by them on the date hereof pursuant to the Placement Agreement.
Except as stated above, without our prior written consent, this
opinion may not be furnished or quoted to, or relied upon by, any other Person
for any purpose.
Very truly yours,
SCHEDULE A
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Wilmington Trust Company
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
First Tennessee Bank National Association
Preferred Term Securities XV, Ltd.
Preferred Term Securities XV, Inc.
First Banks, Inc.
EXHIBIT B-3
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FORM OF TAX COUNSEL OPINION
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First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
First Bank Statutory Trust II
c/o First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Ladies and Gentlemen:
We have acted as special tax counsel to First Banks, Inc. and to First
Bank Statutory Trust II in connection with the proposed issuance of (i) Floating
Rate Capital Securities, liquidation amount $1,000.00 per Capital Security (the
"Capital Securities") of First Bank Statutory Trust II, a statutory business
trust created under the laws of Delaware (the "Trust"), pursuant to the terms of
the Amended and Restated Declaration of Trust dated as of the date hereof by
First Banks, Inc., a Missouri corporation (the "Company"), Wilmington Trust
Company, as Delaware trustee, Wilmington Trust Company, as institutional
trustee, and Allen H. Blake, Terrance M. McCarthy and Lisa K. Vansickle, as
Administrators (the "Trust Agreement"), (ii) Junior Subordinated Deferrable
Interest Debentures (the "Corresponding Debentures") of the Company issued
pursuant to the terms of an Indenture dated as of the date hereof from the
Company to Wilmington Trust Company, as trustee (the "Indenture"), which
Debentures are to be sold by the Company to the Trust, and (iii) the Guarantee
Agreement of the Company with respect to the Capital Securities dated as of the
date hereof (the "Guarantee") between the Company and Wilmington Trust Company,
as guarantee trustee. The portion of the Capital Securities and the
Corresponding Debentures to be purchased by Preferred Term Securities XV, Ltd.
are to be issued as contemplated by the Offering Circular (the "Offering
Circular") dated September 10, 2004 prepared by Preferred Term Securities XV,
Ltd., an entity formed under the Companies Law of the Cayman Islands, and
Preferred Term Securities XV, Inc., a Delaware corporation.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion including (i)
the Offering Circular, (ii) the Indenture, (iii) the form of the Corresponding
Debentures attached as an exhibit to the Indenture, (iv) the Trust Agreement,
(v) the Guarantee, and (vi) the form of Capital Securities Certificate attached
as an exhibit to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of Richards, Layton & Finger, P.A. as to certain matters of
Delaware law. In such examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, the
authenticity of the originals of such latter documents, the genuineness of all
signatures and the correctness of all representations made therein. We have
further assumed that there are no agreements or understandings contemplated
therein other than those contained in the Documents.
Based upon the foregoing, and assuming (i) that the final Documents
will be substantially identical to the forms examined, (ii) full compliance with
all the terms of the final Documents, and (iii) the accuracy of representations
made by the Company and delivered to us, we are of the opinion that:
(a) The Corresponding Debentures will be classified as indebtedness
of the Company for U.S. federal income tax purposes.
(b) The Trust will be characterized as a grantor trust and not as an
association taxable as a corporation for U.S. federal income tax
purposes.
The opinions expressed above are based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, published interpretations by the Internal Revenue Service of the
Code and such Treasury regulations, and existing court decisions, any of which
could be changed at any time. Any such changes may or may not be retroactively
applied, and may result in federal income tax consequences that differ from
those reflected in the opinions set forth above. We note that there is no
authority directly on point dealing with securities such as the Capital
Securities or with transactions of the type described herein, and that the
authorities on which this opinion is based are subject to various
interpretations. Further, you should be aware that opinions of counsel have no
official status and are not binding on the Internal Revenue Service or the
courts. Accordingly, we can provide no assurance that the interpretation of the
federal income tax laws set forth in our opinions will prevail if challenged by
the IRS in an administrative or judicial proceeding.
We have also assumed that each transaction contemplated herein will be
carried out strictly in accordance with the Documents. Any variance in the facts
may result in Federal income tax consequences that differ from those reflected
in the opinions set forth above.
Additionally, we undertake no obligation to update this opinion in the
event there is either a change in the legal authorities, in the facts (including
the taking of any action by any party to any of the transactions described in
the Documents relating to such transactions) or in the Documents on which this
opinion is based, or an inaccuracy in any of the representations upon which we
have relied in rendering this opinion.
We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.
This letter is delivered for the benefit of the specified addressees
and may not be relied upon by any other person. No portion of this letter may be
quoted or otherwise referred to in any document or delivered to any other person
or entity without the express written consent of Lewis, Rice & Fingersh, L.C.
This opinion letter is rendered as of the date set forth above.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
Lewis, Rice & Fingersh, L.C.
500 N. Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Lawrence H. Weltman, Esq.
Re: Representations Concerning the Issuance of Junior Subordinated
Deferrable Interest Debentures (the "Debentures") to First Bank
Statutory Trust II (the "Trust") and Sale of Trust Securities
(the "Trust Securities") of the Trust
Ladies and Gentlemen:
In accordance with your request, First Banks, Inc. (the "Company")
hereby makes the following representations in connection with the preparation of
your opinion letter as to the United States federal income tax consequences of
the issuance by the Company of the Debentures to the Trust and the sale of the
Trust Securities.
Company hereby represents that:
1. The sole assets of the Trust will be the Debentures, any interest
paid on the Debentures to the extent not distributed, proceeds of the
Debentures, or any of the foregoing.
2. The Company intends to use the net proceeds from the sale of the
Debentures for general corporate purposes.
3. The Trust was not formed to conduct any trade or business and is not
authorized to conduct any trade or business. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of Trust Securities to acquire the Debentures, and (iii)
engaging only in activities necessary or incidental thereto.
4. The Trust was formed to facilitate direct investment in the assets
of the Trust, and the existence of multiple classes of ownership is incidental
to that purpose. There is no intent to provide holders of such interests in the
Trust with diverse interests in the assets of the Trust.
5. The Company intends to create a debtor-creditor relationship between
the Company, as debtor, and the Trust, as a creditor, upon the issuance and sale
of the Debentures to the Trust by the Company. The Company will (i) record and
at all times continue to reflect the Debentures as indebtedness on its separate
books and records for financial accounting purposes, and (ii) treat the
Debentures as indebtedness for all United States tax purposes.
6. During each year, the Trust's income will consist solely of payments
made by the Company with respect to the Debentures. Such payments will not be
derived from the active conduct of a financial business by the Trust. Both the
Company's obligation to make such payments and the measurement of the amounts
payable by the Company are defined by the terms of the Debentures. Neither the
Company's obligation to make such payments nor the measurement of the amounts
payable by the Company is dependent on income or profits of Company or any
affiliate of the Company.
7. The Company expects that it will be able to make, and will make,
timely payment of amounts identified by the Debentures as principal and interest
in accordance with the terms of the Debentures with available capital or
accumulated earnings.
8. The Company presently has no intention to defer interest payments on
the Debentures, and it considers the likelihood of such a deferral to be remote
because, if it were to exercise its right to defer payments of interest with
respect to the Debentures, it would not be permitted to declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company or any
affiliate of the Company (other than payments of dividends or distributions to
the Company) or make any payment of principal of or interest or premium, if any,
on or repay, repurchase, or redeem any debt securities of the Company or any
affiliate of the Company that rank pari passu in all respects with or junior in
interest to the Debentures, in each case subject to limited exceptions stated in
Section 2.11 of the Indenture to be entered into in connection with the issuance
of the Debentures.
9. Immediately after the issuance of the Debentures, the debt-to-equity
ratio of the Company (as determined for financial accounting purposes, but
excluding deposit liabilities from the Company's debt) will be within standard
depository institution industry norms and, in any event, will be no higher than
four to one (4 : 1).
10. To the best of our knowledge, the Company is currently in
compliance with all federal, state, and local capital requirements, except to
the extent that failure to comply with any such requirements would not have a
material adverse effect on the Company and its affiliates.
11. The Company will not issue any class of common stock or preferred
stock senior to the Debentures during their term.
12. The Internal Revenue Service has not challenged the interest
deduction on any class of the Company's subordinated debt in the last ten (10)
years on the basis that such debt constitutes equity for federal income tax
purposes.
The above representations are accurate as of the date below and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
FIRST BANK, INC.
Date: September 13, 2004 By:____________________________
Title:_________________________
EXHIBIT C
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SIGNIFICANT SUBSIDIARIES
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The San Francisco Company
First Bank
EXHIBIT D
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FORM OF QUARTERLY REPORT
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The Bank of New York
Collateralized Debt Obligation Group
101 Barclay Street, 8E
New York, New York 10286
Attention: Franco B. Talavera
CDO Relationship Manager
BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20__
Tier 1 to Risk Weighted Assets _________%
Ratio of Double Leverage _________%
Non-Performing Assets to Loans and OREO _________%
Ratio of Reserves to Non-Performing Loans _________%
Ratio of Net Charge-Offs to Loans _________%
Return on Average Assets (annualized)** _________%
Net Interest Margin (annualized)** _________%
Efficiency Ratio _________%
Ratio of Loans to Assets _________%
Ratio of Loans to Deposits _________%
Total Assets $__________
Year to Date Income $__________
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*A table describing the quarterly report calculation procedures is provided on page D-2
** To annualize Return on Average Assets and Net Interest Margin do the following:
1st Quarter-multiply income statement item by 4, then divide by balance sheet item(s)
2nd Quarter-multiply income statement item by 2, then divide by balance sheet item(s)
3rd Quarter-divide income statement item by 3, then multiply by 4, then divide by balance sheet item(s)
4th Quarter-should already be an annual number
NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS
Financial Definitions
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Report Item Corresponding FRY-9C or LP Line Items with Line
Item corresponding Schedules Description of Calculation
- ----------------------- -------------------------------------------------- ---------------------------------------------------
"Tier 1 Capital" to BHCK7206 Tier 1 Risk Ratio: Core Capital (Tier 1)/
Risk Weighted Assets Schedule HC-R Risk-Adjusted Assets
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Ratio of Double (BHCP0365)/(BHCP3210) Total equity investments in subsidiaries divided
Leverage Schedule PC in the LP by the total equity capital. This field is
calculated at the parent company level.
"Subsidiaries" include bank, bank holding
company, and nonbank subsidiaries.
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Non-Performing Assets (BHCK5525-BHCK3506+BHCK5526-BHCK3507+BHCK2744)/ Total+Nonperforming Assets (NPLs+Foreclosed Real
to Loans and OREO (BHCK2122+BHCK2774)Schedules HC-C, HC-M & HC-N Estate+Other Nonaccrual & Repossessed Assets)/
Total Loans + Foreclosed Real Estate
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Ratio of Reserves to (BHCK3123+BHCK3128)/(BHCK5525-BHCK3506+BHCK5526- Total Loan Loss and Allocated Transfer Risk
Non-Performing Loans BHCK3507) Schedules HC & HC-N Reserves/ Total Nonperforming Loans (Nonaccrual +
Restructured)
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Ratio of Net (BHCK4635-BHCK4605)/(BHCK3516) Net charge offs for the period as a percentage of
Charge-Offs to Loans Schedules HI-B & HC-K average loans.
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Return on Assets (BHCK4340/BHCK3368) Net Income as a percentage of Assets.
Schedules HI & HC-K
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Net Interest Margin (BHCK4519)/(BHCK3515+BHCK3365+BHCK3516+BHCK3401 (Net Interest Income Fully Taxable Equivalent, if
+BHCK985) Schedules HI Memorandum and HC-K available / Average Earning Assets)
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Efficiency Ratio (BHCK4093)/(BHCK4519+BHCK4079) (Noninterest Expense)/ (Net Interest Income
Schedule HI Fully Taxable Equivalent, if available, plus
Noninterest Income)
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Ratio of Loans to (BHCKB528+BHCK5369)/BHCK2170) Total Loans & Leases (Net of Unearned Income &
Assets Schedule HC Gross of Reserve)/ Total Assets
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Ratio of Loans to (BHCKB528+BHCK5369)/(BHDM6631+BHD Total Loans & Leases (Net of Unearned Income &
M6636+BHFN6631+BHFN6636) Gross of Reserve)/ Total Deposits (Includes
Deposits Schedule HC Domestic and Foreign Deposits)
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Total Assets (BHCK2170) The sum of total assets. Includes cash and
Schedule HC balances due from depository institutions;
securities; federal funds sold and securities
purchased under agreements to resell; loans and
lease financing receivables; trading assets;
premises and fixed assets; other real estate owned;
investments in unconsolidated subsidiaries and
associated companies; customer's liability on
acceptances outstanding; intangible assets; and
other assets.
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Net Income (BHCK4300) The sum of income (loss) before extraordinary
Schedule HI items and other adjustments and extraordinary
items; and other adjustments, net of income
taxes.
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First Banks, Inc.
Disclosure Schedule
to the
Placement Agreement
Section 5.10 Subsidiaries of the Company - All issued and outstanding common
----------------------------
stock of The San Francisco Company, a wholly owned subsidiary of the Company,
and First Bank, a wholly owned subsidiary of The San Francisco Company, has been
pledged to Wells Fargo Bank, National Association as the Agent for the ratable
benefit of certain lenders pursuant to the terms of that certain Secured Credit
Agreement dated as of August 14, 2003 among the Company, the Lenders signatory
thereto and the Agent, as amended by that certain First Amendment to Secured
Credit Agreement dated as of August 12, 2004 (the "Credit Agreement").
Section 5.16 Regulatory Enforcement Matters - Pursuant to the terms of the
--------------------------------
Credit Agreement, the Company has agreed not to pay any dividends on its common
stock and is limited as to the amount of any dividend paid on its preferred
stock during any 12 month period.
Exhibit 4.30
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
First Banks, Inc.
September 20, 2004
First Banks, Inc., a Missouri corporation (the "Company" which term
includes any successor Person under the Indenture hereinafter referred to), for
value received promises to pay to Wilmington Trust Company, not in its
individual capacity but solely as Institutional Trustee for First Bank Statutory
Trust II (the "Holder") or registered assigns, the principal sum of twenty
million six hundred nineteen thousand dollars ($20,619,000.00) on September 20,
2034, and to pay interest on said principal sum from September 20, 2004, or from
the most recent Interest Payment Date (as defined below) to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 20, June 20, September 20 and December 20 of each
year or if such day is not a Business Day, then the next succeeding Business Day
(each such date, an "Interest Payment Date") (it being understood that interest
accrues for any such non-Business Day), commencing on the Interest Payment Date
in December 2004, at an annual rate equal to 3.92438% beginning on (and
including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in December 2004 and at an annual rate for each successive
period beginning on (and including) the Interest Payment Date in December 2004,
and each succeeding Interest Payment Date, and ending on (but excluding) the
next succeeding Interest Payment Date (each a "Distribution Period"), equal to
3-Month LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"),
applied to the principal amount hereof, until the principal hereof is paid or
duly provided for or made available for payment, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest
(including Additional Interest) at the Interest Rate in effect for each
applicable period, compounded quarterly, from the dates such amounts are due
until they are paid or made available for payment. The amount of interest
payable for any period will be computed on the basis of the actual number of
days in the Distribution Period concerned divided by 360. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on the regular record date for such interest
installment, which shall be five days prior to the day on which the relevant
Interest Payment Date occurs. Any such interest installment not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such regular record date and may be paid to the Person in whose name this
Debenture (or one or more Predecessor Securities) is registered at the close of
business on a special record date.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Trustee will request
the principal London offices of four leading banks in the London interbank
market to provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar deposits
having a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Trustee will
request four major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Debentures will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
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mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire transfer by such holder has not been received
by the Company or by wire transfer to an account appropriately designated by the
holder hereof. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Trustee.
So long as no Extension Event of Default has occurred and is
continuing, the Company shall have the right, from time to time, and without
causing an Event of Default, to defer payments of interest on the Debentures by
extending the interest payment period on the Debentures at any time and from
time to time during the term of the Debentures, for up to 20 consecutive
quarterly periods (each such extended interest payment period, an "Extension
Period"), during which Extension Period no interest (including Additional
Interest) shall be due and payable (except any Additional Sums that may be due
and payable). No Extension Period may end on a date other than an Interest
Payment Date. During an Extension Period, interest will continue to accrue on
the Debentures, and interest on such accrued interest will accrue at an annual
rate equal to the Interest Rate in effect for such Extension Period, compounded
quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to
herein as "Additional Interest"). At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however, that no
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Extension Period may extend beyond the Maturity Date; provided further, however,
-------- ------- -------
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to engage in any of the activities or transactions
described on the reverse side hereof and in the Indenture. Prior to the
termination of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The Company must give the
Trustee notice of its election to begin or extend an Extension Period by the
close of business at least 5 Business Days prior to the Interest Payment Date
with respect to which interest on the Debentures would have been payable except
for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
Signatures appear on the following page
IN WITNESS WHEREOF, the Company has duly executed this certificate.
FIRST BANKS, INC.
By: /s/ Allen H. Blake
---------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ Christopher J. Monigle
---------------------------------
Authorized Officer
REVERSE OF DEBENTURE
This Debenture is one of the floating rate junior subordinated
deferrable interest debentures of the Company, all issued or to be issued under
and pursuant to the Indenture dated as of September 20, 2004 (the "Indenture"),
duly executed and delivered between the Company and the Trustee, to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the
Interest Payment Date in September 2009, the Company shall have the right to
redeem the Debentures in whole, but not in part, at any Interest Payment Date,
within 120 days following the occurrence of such Special Event, at the Special
Redemption Price.
In addition, the Company shall have the right to redeem the Debentures,
in whole or in part, but in all cases in a principal amount with integral
multiples of $1,000.00, on any Interest Payment Date on or after the Interest
Payment Date in September 2009, at the Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Notwithstanding the foregoing, any redemption of Debentures by the
Company shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default described in Section 5.1(a), (d) or (e) of
the Indenture shall have occurred and be continuing, upon demand of the Trustee,
the principal of all of the Debentures shall become due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
-------- -------
without the consent of the holders of each Debenture then outstanding and
affected thereby (i) change the fixed maturity of any Debenture, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Debentures at the time outstanding
on behalf of the holders of all of the Debentures to waive (or modify any
previously granted waiver of) any past default or Event of Default, and its
consequences, except a default (a) in the payment of principal of, premium, if
any, or interest on any of the Debentures, (b) in respect of covenants or
provisions hereof or of the Indenture which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9 of the Indenture; provided, however,
-------- -------
that if the Debentures are held by the Trust or a trustee of such trust, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
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if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of the Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by the Indenture, said default or Event of
Default shall for all purposes of the Debentures and the Indenture be deemed to
have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest, including Additional Interest, on this Debenture at the time and place
and at the rate and in the money herein prescribed.
The Company has agreed that if Debentures are initially issued to the
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such Trust) and (i) there shall have occurred and be continuing an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee, or (iii) the Company shall
have given notice of its election to defer payments of interest on the
Debentures by extending the interest payment period as provided herein and such
Extension Period, or any extension thereof, shall be continuing, then the
Company shall not, and shall not allow any Affiliate of the Company to, (x)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or its Affiliates' capital stock (other than payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (x) and (y) above, (1)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form
without coupons and in minimum denominations of $100,000.00 and any multiple of
$1,000.00 in excess thereof. As provided in the Indenture and subject to the
transfer restrictions and limitations as may be contained herein and therein
from time to time, this Debenture is transferable by the holder hereof on the
Debenture Register of the Company. Upon due presentment for registration of
transfer of any Debenture at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in
Section 3.2 of the Indenture, the Company shall execute, the Company or the
Trustee shall register and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in the name of the transferee or
transferees a new Debenture for a like aggregate principal amount. All
Debentures presented for registration of transfer or for exchange or payment
shall (if so required by the Company or the Trustee or the Authenticating Agent)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to, the Company and the Trustee or the
Authenticating Agent duly executed by the holder or his attorney duly authorized
in writing. No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
Prior to due presentment for registration of transfer of any Debenture,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Debenture registrar may deem the Person in whose name
such Debenture shall be registered upon the Debenture Register to be, and may
treat him as, the absolute owner of such Debenture (whether or not such
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the principal of, premium, if any, and interest on such Debenture and
for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Debenture registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or
interest on any Debenture, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any supplemental indenture, or
in any such Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, officer or director, as such, past, present or future, of the Company
or of any successor Person of the Company, either directly or through the
Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the
meanings assigned in the Indenture dated as of the date of original issuance of
this Debenture between the Trustee and the Company.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
Exhibit 4.31
FIRST BANK STATUTORY TRUST II
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
September 20, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust II (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 600 James S. McDonnell Boulevard, Hazelwood,
Missouri 63042 (the "Company" and, collectively with the Trust, the "Offerors"),
and First Tennessee Bank National Association (the "Purchaser").
RECITALS:
A. The Trust desires to issue 20,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and WTC, as trustee (the "Indenture");
and
C. In consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees
to purchase from the Trust 2,150 Capital Securities at a price equal to
$1,000.00 per Capital Security (the "Purchase Price") and the Trust agrees to
sell such Capital Securities to the Purchaser for said Purchase Price. The
rights and preferences of the Capital Securities are set forth in the
Declaration. The Purchase Price is payable in immediately available funds on
September 20, 2004, or such other business day as may be designated by the
Purchaser, but in no event later than September 30, 2004 (the "Closing Date").
The Offerors shall provide the Purchaser wire transfer instructions no later
than 1 day following the date hereof.
1.2. As a condition to its purchase of the Capital Securities,
Purchaser shall enter into the Joinder Agreement to the Master Custodian
Agreement, the form of which is attached hereto as Exhibit A (the "Custodian
Agreement") and, in accordance therewith, the certificate for the Capital
Securities shall be delivered by the Trust on the Closing Date to the custodian
in accordance with the Custodian Agreement. Purchaser shall not transfer the
Capital Securities to any person or entity except in accordance with the terms
of the Custodian Agreement.
1.3. The Placement Agreement, dated September 10, 2004 (the "Placement
Agreement"), among the Offerors and the placement agents identified therein (the
"Placement Agents") includes certain representations and warranties, covenants
and conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.
1.4. Anything herein or in the Placement Agreement notwithstanding, the
Offerors acknowledge and agree that, so long as Purchaser holds some or all of
the Capital Securities, the Purchaser may in its discretion from time to time
transfer or sell, or sell or grant participation interests in, some or all of
such Capital Securities to one or more parties, provided that any such
transaction complies, as applicable, with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and any other
applicable securities laws, is pursuant to an exemption therefrom, or is
otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the
Capital Securities, the Debentures or the Guarantee have been registered under
the Securities Act or any other applicable securities law, are being offered for
sale by the Trust in transactions not requiring registration under the
Securities Act, and may not be offered, sold, pledged or otherwise transferred
by the Purchaser except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as contemplated
under Section 1.4 hereof, it is purchasing the Capital Securities for its own
account, for investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the Securities Act or
other applicable securities laws, subject to any requirement of law that the
disposition of its property be at all times within its control and subject to
its ability to resell such Capital Securities pursuant to an effective
registration statement under the Securities Act or under Rule 144A or any other
exemption from registration available under the Securities Act or any other
applicable securities law.
2.3. The Purchaser represents and warrants that neither the Offerors
nor the Placement Agents are acting as a fiduciary or financial or investment
adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying (for
purposes of making any investment decision or otherwise) upon any advice,
counsel or representations (whether written or oral) of the Offerors or of the
Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has consulted
with its own legal, regulatory, tax, business, investment, financial and
accounting advisers in connection herewith to the extent it has deemed
necessary, (b) it has had a reasonable opportunity to ask questions of and
receive answers from officers and representatives of the Offerors concerning
their respective financial condition and results of operations and the purchase
of the Capital Securities, and any such questions have been answered to its
satisfaction, (c) it has had the opportunity to review all publicly available
records and filings concerning the Offerors and it has carefully reviewed such
records and filings that it considers relevant to making an investment decision,
and (d) it has made its own investment decisions based upon its own judgment,
due diligence and advice from such advisers as it has deemed necessary and not
upon any view expressed by the Offerors or the Placement Agents.
2.6. The Purchaser represents and warrants that it is a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act. If the
Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A
under the Securities Act, it owns and invests on a discretionary basis not less
than U.S. $25,000,000.00 in securities of issuers that are not affiliated with
it. The Purchaser is not a participant-directed employee plan, such as a 401(k)
plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F)
of Rule 144A that holds the assets of such a plan, unless investment decisions
with respect to the plan are made solely by the fiduciary, trustee or sponsor of
such plan.
2.7. The Purchaser represents and warrants that on each day from the
date on which it acquires the Capita Securities through and including the date
on which it disposes of its interests in the Capital Securities, either (i) it
is not (a) an "employee benefit plan" (as defined in Section 3(3) of the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
-----
which is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA,
or any entity whose underlying assets include the assets of any such plan (an
"ERISA Plan"), (b) any other "plan" (as defined in Section 4975(e)(1) of the
-----------
United States Internal Revenue Code of 1986, as amended (the "Code")) which is
----
underlying assets include the assets of any such plan (a "Plan"), (c) an entity
----
whose underlying assets include the assets of any such ERISA Plan or other Plan
by reason of Department of Labor regulation section 2510.3-101 or otherwise, or
(d) a governmental or church plan that is subject to any federal, state or local
law which is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (a "Similar Law"); or (ii) the purchase, holding and
------------
disposition of the Capital Securities by it will satisfy the requirements for
exemptive relief under Prohibited Transaction Class Exemption ("PTCE") 84-14,
----
PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the
case of a plan subject to a Similar Law, will not result in a non-exempt
violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the
Capital Securities as principal for its own account for investment and, except
as contemplated under Section 1.4 hereof, not for sale in connection with any
distribution thereof. It was not formed solely for the purpose of investing in
the Capital Securities, and additional capital or similar contributions were not
specifically solicited from any person owning a beneficial interest in it for
the purpose of enabling it to purchase any Capital Securities. The Purchaser is
not a (i) partnership, (ii) common trust fund or (iii) special trust, pension,
profit sharing or other retirement trust fund or plan in which the partners,
beneficiaries or participants, as applicable, may designate the particular
investments to be made or the allocation of any investment among such partners,
beneficiaries or participants, and except as contemplated under Section 1.4
hereof, it agrees that it shall not hold the Capital Securities for the benefit
of any other person and shall be the sole beneficial owner thereof for all
purposes and that it shall not sell participation interests in the Capital
Securities or enter into any other arrangement pursuant to which any other
person shall be entitled to a beneficial interest in the distribution on the
Capital Securities. The Capital Securities purchased directly or indirectly by
the Purchaser constitute an investment of no more than 40% of its assets. The
Purchaser understands and agrees that any purported transfer of the Capital
Securities to a purchaser which would cause the representations and warranties
of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab
initio and the Offerors retain the right to resell any Capital Securities sold
to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.10. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.11. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
2.13. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
Fax: 901-435-7983
Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by
a writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Offerors' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:/s/ David S. Work
----------------------------------------
Print Name: David S. Work
--------------------------------
Title: Executive Vice President
-------------------------------------
FIRST BANKS, INC.
By:/s/ Allen H. Blake
----------------------------------
Name: Allen H. Blake
--------------------------------
Title: President and
Chief Executive Officer
-------------------------------
FIRST BANK STATUTORY TRUST II
By:/s/ Allen H. Blake
----------------------------------
Name: Allen H. Blake
--------------------------------
Title: Administrator
EXHIBIT A TO SUBSCRIPTION AGREEMENT
-----------------------------------
FORM OF MASTER CUSTODIAN AGREEMENT
This Master Custodian Agreement (this "Agreement") is made and entered
into as of May 27, 2004 by and among each purchaser (each a "Purchaser" and
collectively the "Purchasers") that enters into a Joinder Agreement attached
hereto as Exhibit A (the "Joinder Agreement"), Wilmington Trust Company, a
Delaware banking corporation (the "Custodian") and each financial institution
(each an "Issuer" and collectively the "Issuers") that enters into a Joinder
Agreement. The Purchasers and the Issuers are sometimes referred to herein as
the "Interested Parties".
RECITALS
A. The Purchasers intend to purchase from the Issuers or their
respective statutory business trust subsidiaries Securities issued by such
Issuers (the "Securities").
B. In order to facilitate any future transfer of all or any portion of
the Securities by the Purchasers, the Interested Parties intend to provide for
the custody of the Securities and certain other securities on the terms set
forth herein.
C. The Custodian is willing to hold and administer such securities and
to distribute the securities held by it in accordance with the agreement of the
Interested Parties and/or arbitral or judicial orders and decrees as set forth
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein contained and other good and valuable consideration (the receipt,
adequacy and sufficiency of which are hereby acknowledged by the parties by
their execution hereof), the parties agree as follows:
1. Joinder Agreement. On or before the delivery to the Custodian of any
------------------
Securities issued by an Issuer, such Issuer and the applicable Purchaser or
Purchasers shall enter into a Joinder Agreement substantially in the form of
Exhibit A attached hereto, with such additional provisions as the Interested
Parties may wish to add from time to time. An executed copy of each such Joinder
Agreement shall be delivered to the Custodian on or before the date on which
such Issuer's Securities are issued. This Agreement and each Joinder Agreement
constitute the entire agreement among the Purchasers, Issuers and the Custodian
pertaining to the subject matter hereof.
2. Delivery of Securities. On or before each date on which an Issuer enters
-----------------------
into a Joinder Agreement:
(a) The applicable Issuer shall deliver to the Custodian a signed,
authenticated certificate representing a beneficial interest in such
Issuer's Securities, with the Purchaser designated as owner thereof
(the "Original Securities"). The Custodian shall have no
responsibility for the genuineness, validity, market value, title or
sufficiency for any intended purpose of the Original Securities.
(b) The applicable Issuer shall deliver to the Custodian five signed,
unauthenticated and undated certificates with no holder designated,
each of which when completed representing a beneficial interest in
such Issuer's Securities (the "Replacement Securities"). The Custodian
shall have no responsibility for the genuineness, validity, market
value, title or sufficiency for any intended purpose of the
Replacement Securities.
3. Timing of Release from Custody. Upon receipt of a signed transfer notice in
------------------------------
the form of Exhibit B to be delivered in connection with the Purchaser's
transfer of all or any portion of an Issuer's Securities, on the effective date
set forth in such transfer notice, the Custodian shall:
(a) Deliver the Original Securities certificate corresponding to the
Issuer identified in the transfer notice to Wilmington Trust Company,
as Institutional Trustee under the Amended and Restated Declaration of
Trust, dated as of the date of the applicable Joinder Agreement, among
the Institutional Trustee, the Company and the administrators named
therein (the "Declaration") or as Trustee under the Indenture, dated
as of the date of the applicable Joinder Agreement, between the
Company and the Trustee (the "Indenture"), as applicable, for the
purpose of canceling the applicable Original Securities certificate in
accordance with the terms of the Issuer's Amended and Restated
Declaration of Trust or Indenture, as applicable; and
(b) Deliver the Replacement Securities certificate(s) corresponding to
the Issuer identified in the transfer notice in the amount designated
in and in accordance with the transfer notice for the purpose of
completing and authenticating the applicable Replacement Securities
certificate(s) in accordance with the terms of the Issuer's
Declaration or Indenture, as applicable.
The initial term of this Agreement shall be one year (the "Initial
Term"). Unless FTN Financial Capital Markets or Keefe, Bruyette &
Woods, Inc. shall otherwise notify the Custodian in writing, upon
expiration of the Initial Term, this Agreement shall automatically
renew for an additional one-year term and shall continue to
automatically renew for succeeding one-year terms until terminated.
Upon termination of this Agreement, the Custodian and the Interested
Parties shall be released from all obligations hereunder, except for
the indemnification obligations set forth in paragraphs 5(b) and 5(c)
hereof.
4. Concerning the Custodian.
------------------------
(a) Each Interested Party acknowledges and agrees that the Custodian
(i) shall not be responsible for any of the agreements referred to or
described herein (including without limitation any Issuer's
Declaration or Indenture relating to such Issuer's Securities), or for
determining or compelling compliance therewith, and shall not
otherwise be bound thereby, (ii) shall be obligated only for the
performance of such duties as are expressly and specifically set forth
in this Agreement on its part to be performed, each of which are
ministerial (and shall not be construed to be fiduciary) in nature,
and no implied duties or obligations of any kind shall be read into
this Agreement against or on the part of the Custodian, (iii) shall
not be obligated to take any legal or other action hereunder which
might in its judgment involve or cause it to incur any expense or
liability unless it shall have been furnished with acceptable
indemnification, (iv) may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction,
instrument, statement, certificate, request or other document
furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof, and (v) may
consult counsel satisfactory to it, including in-house counsel, and
the opinion or advice of such counsel in any instance 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 the opinion or advice of such counsel.
(b) The Custodian shall not be liable to anyone for any action taken
or omitted to be taken by it hereunder except in the case of the
Custodian's negligence or willful misconduct in breach of the terms of
this Agreement. In no event shall the Custodian be liable for
indirect, punitive, special or consequential damage or loss (including
but not limited to lost profits) whatsoever, even if the Custodian has
been informed of the likelihood of such loss or damage and regardless
of the form of action.
(c) The Custodian shall have no more or less responsibility or
liability on account of any action or omission of any book-entry
depository, securities intermediary or other subcustodian employed by
the Custodian than any such book-entry depository, securities
intermediary or other subcustodian has to the Custodian, except to the
extent that such action or omission of any book-entry depository,
securities intermediary or other subcustodian was caused by the
Custodian's own negligence, bad faith or willful misconduct in breach
of this Agreement.
(d) The recitals contained herein shall be taken as the statements of
each of the Issuers and the Purchaser, and the Custodian assumes no
responsibility for the correctness of the same. The Custodian makes no
representations as to the validity or sufficiency of this Agreement or
the Securities. The Custodian shall not be accountable for the use or
application by any of the Issuers or the Purchaser of any Securities
or the proceeds of any Securities.
5. Compensation, Expense Reimbursement and Indemnification.
-------------------------------------------------------
(a) The Custodian shall be compensated pursuant to a separate fee
agreement.
(b) Each of the Interested Parties agrees, jointly and severally, to
reimburse the Custodian on demand for all costs and expenses incurred
in connection with the administration of this Agreement or the
performance or observance of its duties hereunder which are in excess
of its customary compensation for normal services hereunder, including
without limitation, payment of any legal fees and expenses incurred by
the Custodian in connection with resolution of any claim by any party
hereunder.
(c) Each of the Interested Parties covenants and agrees, jointly and
severally, to indemnify the Custodian (and its directors, officers and
employees) and hold it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and
expense of any nature incurred by the Custodian arising out of or in
connection with this Agreement or with the administration of its
duties hereunder, including but not limited to attorney's fees and
other costs and expenses of defending or preparing to defend against
any claim of liability unless and except to the extent such loss,
liability, damage, cost and expense shall be caused by the Custodian's
negligence, bad faith, or willful misconduct. The provisions in this
paragraph 5 shall survive the expiration of this Agreement and the
resignation or removal of the Custodian.
6. Voting Rights. The Custodian shall be under no obligation to preserve,
--------------
protect or exercise rights in the Original Securities, and shall be responsible
only for reasonable measures to maintain the physical safekeeping thereof, and
otherwise to perform and observe such duties on its part as are expressly set
forth in this Agreement. The Custodian shall not be responsible for forwarding
to any Interested Party, notifying any Interested Party with respect to, or
taking any action with respect to, any notice, solicitation or other document or
information, written or otherwise, received from an issuer or other person with
respect to the Original Securities, including but not limited to, proxy
material, tenders, options, the pendency of calls and maturities and expiration
of rights.
7. Resignation. The Custodian may at any time resign as Custodian hereunder by
-----------
giving thirty (30) days' prior written notice of resignation to each of the
Interested Parties. Prior to the effective date of the resignation as specified
in such notice, the Interested Parties will issue to the Custodian a written
instruction authorizing redelivery of the Original Securities and the
Replacement Securities to a bank or trust company that they select as successor
to the Custodian hereunder. If, however, the Interested Parties shall fail to
name such a successor custodian within twenty days after the notice of
resignation from the Custodian, the Purchasers shall be entitled to name such
successor custodian. If no successor custodian is named by the Interested
Parties or the Purchasers, the Custodian may apply to a court of competent
jurisdiction for appointment of a successor custodian.
8. Dispute Resolution. It is understood and agreed that should any dispute arise
------------------
with respect to the delivery, ownership, right of possession, and/or disposition
of the Original Securities or the Replacement Securities, or should any claim be
made upon the Custodian, the Original Securities or the Replacement Securities
by a third party, the Custodian upon receipt of notice of such dispute or claim
is authorized and shall be entitled (at its sole option and election) to retain
in its possession without liability to anyone, all or any of said Original
Securities and Replacement Securities until such dispute shall have been settled
either by the mutual written agreement of the parties involved or by a final
order, decree or judgment of a court in the United States of America, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Custodian may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Original Securities and Replacement
Securities.
9. Consent to Jurisdiction and Service. Each of the Interested Parties hereby
------------------------------------
absolutely and irrevocably consents and submits to the jurisdiction of the
courts in the State of Delaware and of any Federal court located in said State
in connection with any actions or proceedings brought against any of the
Interested Parties (or each of them) by the Custodian arising out of or relating
to this Agreement. In any such action or proceeding, the Interested Parties each
hereby absolutely and irrevocably (i) waives any objection to jurisdiction or
venue, (ii) waives personal service of any summons, complaint, declaration or
other process, and (iii) agrees that the service thereof may be made by
certified or registered first-class mail directed to such party, as the case may
be, at their respective addresses in accordance with paragraph 10 hereof.
10. Force Majeure. The Custodian shall not be responsible for delays or failures
-------------
in performance resulting from acts beyond its control. Such acts shall include
but not be limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
11. Notices.
-------
(a) Any notice permitted or required hereunder shall be in writing,
and shall be sent by personal delivery, overnight delivery by a
recognized courier or delivery service, mailed by registered or
certified mail, return receipt requested, postage prepaid, or by
confirmed facsimile accompanied by mailing of the original on the same
day by first class mail, postage prepaid, in each case the parties at
their address set forth below (or to such other address as any such
party may hereafter designate by written notice to the other parties).
If to an Issuer, to the address appearing on such Issuer's Joinder
Agreement
If to the Purchaser, to the address appearing on such Purchaser's
Joinder Agreement
If to the Custodian:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Chris Slaybaugh - Corporate Trust Administration
Fax: 302-636-4140
12. Miscellaneous.
-------------
(a) Binding Effect. This Agreement shall be binding upon the
---------------
respective parties hereto and their heirs, executors, successors and
assigns.
(b) Modifications. This Agreement may not be altered or modified
-------------
without the express written consent of the parties hereto. No course
of conduct shall constitute a waiver of any of the terms and
conditions of this Agreement, unless such waiver is specified in
writing, and then only to the extent so specified. A waiver of any of
the terms and conditions of this Agreement on one occasion shall not
constitute a waiver of the other terms of this Agreement, or of such
terms and conditions on any other occasion.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of Delaware.
(d) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b)
certificates and other information previously or hereafter furnished,
may be reproduced by any photographic, photostatic, microfilm, optical
disk, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or
not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
(e) Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
signatures appear on the following page
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first above written.
WILMINGTON TRUST COMPANY
By:
----------------------------------------
Print Name:
--------------------------------
Title:
-------------------------------------
EXHIBIT A TO MASTER CUSTODIAN AGREEMENT
---------------------------------------
FORM OF JOINDER AGREEMENT
-------------------------
September 20, 2004
This Joinder Agreement (this "Agreement") is entered into as of
September 20, 2004 by First Tennessee Bank National Association (the
"Purchaser") and First Banks, Inc. (the "Issuer").
RECITALS
A. Wilmington Trust Company (the "Custodian") is party to that certain
Master Custodian Agreement dated as of May 27, 2004 (the "Custodian Agreement").
B. The Custodian Agreement provides that certain financial institutions
that have issued securities (or whose statutory trust subsidiaries have issued
securities) and the Purchaser of such securities will join into the Custodian
Agreement pursuant to the terms of a joinder agreement.
C. On the date hereof, Issuer is issuing securities to the Purchaser
and the Issuer and the Purchaser desire to enter into this Agreement to
facilitate the subsequent transfer of the Issuer's securities by the Custodian.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein contained and other good and valuable consideration (the receipt,
adequacy and sufficiency of which are hereby acknowledged by the Issuer by its
execution hereof), the Issuer agrees as follows:
1. Joinder. The Issuer and Purchaser hereby join in the Custodian
-------
Agreement and agree to be subject to, and bound by, the terms and provisions of
the Custodian Agreement that are ascribed to "Issuers" and "Purchasers"
respectively therein to the same extent as if the Issuer and Purchaser had
signed the Custodian Agreement as an original party thereto.
2. Notice. Any notice permitted or required to be sent to an Issuer
------
under the Custodian Agreement shall be sent to the following address:
First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Any notice permitted or required to be sent to a Purchaser under the
Custodian Agreement shall be sent to the following address:
First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
3. Termination. This Agreement and the Purchaser's and Issuer's
-----------
respective rights and obligations under the Custodian Agreement shall terminate
upon the transfer of all of Issuer's securities pursuant to the Custodian
Agreement.
4. Entire Agreement. This Agreement and the Custodian Agreement
-----------------
constitute the entire agreement among the Purchaser, Issuer and the Custodian
pertaining to the subject matter hereof.
IN WITNESS WHEREOF, the Issuer and Purchaser have executed this
Agreement as of the day first above written.
FIRST BANKS, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
EXHIBIT B TO MASTER CUSTODIAN AGREEMENT
---------------------------------------
FORM OF TRANSFER NOTICE
[DATE]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Dear Sir or Madam:
The undersigned hereby notifies you of the transfer of [________] of
the Capital Securities of First Bank Statutory Trust II, such transfer to be
effective on [DATE OF TRANSFER]. In accordance with Section 7.9 of the Placement
Agreement dated September 10, 2004 between the Offerors and the placement agents
named therein (the "Placement Agreement"), periodic reports shall be delivered
to [_______________] on each March 17, June 17, September 17 and December 17
during the term of the Capital Securities, commencing [___________], in the form
attached thereto. Capitalized terms used in this notice and not otherwise
defined shall have the meanings ascribed to such terms in the Placement
Agreement.
The undersigned hereby instructs you as Custodian to deliver the
Original Securities certificate to Wilmington Trust Company, as Institutional
Trustee (the "Trustee") under the Amended and Restated Trust Agreement dated
September 20, 2004 among the Trustee, First Banks, Inc. and the administrative
trustees named therein (the "Trust Agreement") for cancellation in accordance
with the terms of the Trust Agreement and to deliver the Replacement Securities
certificate to the Trustee for authentication in accordance with the terms of
the Trust Agreement.
By copy of this notice, the Institutional Trustee is hereby instructed
to make the Replacement Securities certificate registered to [NAME, ADDRESS AND
IDENTITY OF TRANSFEREE] in the liquidation amount of [_________] and bearing the
identification number "CUSIP NO. [__________]" and to authenticate and deliver
the Replacement Securities certificate to [_____________].
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
cc: First Banks, Inc.
Wilmington Trust Company, as Trustee
Exhibit 4.32
FIRST BANKS STATUTORY TRUST II
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
September 20, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust II (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 600 James S. McDonnell Boulevard, Hazelwood,
Missouri 63042 (the "Company" and, collectively with the Trust, the "Offerors"),
and Preferred Term Securities XV, Ltd. (the "Purchaser").
RECITALS:
A. The Trust desires to issue 20,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and WTC, as trustee (the "Indenture"); and
C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust 17,850 Capital Securities at a price equal to $1,000.00
per Capital Security (the "Purchase Price") and the Trust agrees to sell such
Capital Securities to the Purchaser for said Purchase Price. The rights and
preferences of the Capital Securities are set forth in the Declaration. The
Purchase Price is payable in immediately available funds on September 20, 2004,
or such other business day as may be designated by the Purchaser, but in no
event later than September 30, 2004 (the "Closing Date"). The Offerors shall
provide the Purchaser wire transfer instructions no later than 1 day following
the date hereof.
1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.
1.3. The Placement Agreement, dated September 10, 2004 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not in
violation or default of any term of its Memorandum of Association or Articles of
Association, of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is a party or by which it is bound or of any
judgment, decree, order, writ or, to its knowledge, any statute, rule or
regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.
2.11. The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: Preferred Term Securities XV, Ltd.
c/o Maples Finance Limited
P.O. Box 1093 GT
Queensgate House
South Church Street
George Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: 345-945-7100
Unless otherwise expressly provided herein, notices shall be deemed
to have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, I have set my hand the day and year first written
above.
PREFERRED TERM SECURITIES XV, LTD.
By: /s/ Carrie Bunton
--------------------------------------------------
Print Name: Carrie Bunton
------------------------------------------
Title: Director
-----------------------------------------------
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day
and year first written above.
FIRST BANKS, INC.
By: /s/ Allen H. Blake
--------------------------------------------------
Name: Allen H. Blake
------------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------------
FIRST BANK STATUTORY TRUST II
By: /s/ Allen H. Blake
--------------------------------------------------
Name: Allen H. Blake
------------------------------------------------
Title: Administrator
Exhibit 4.33
Certificate Number P-1 17,850 Capital Securities
CUSIP NO. 31928B9Z4
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND
WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR
OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR
HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO
SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY
INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (II) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK
HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE
DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
September 20, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust II
(liquidation amount $1,000 per Capital Security)
First Bank Statutory Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that Hare & Co. (the
"Holder"), as the nominee of The Bank of New York, indenture trustee under the
Indenture dated as of September 20, 2004 among Preferred Term Securities XV,
Ltd., Preferred Term Securities XV, Inc. and The Bank of New York, is the
registered owner of capital securities of the Trust representing undivided
beneficial interests in the assets of the Trust, (liquidation amount $1,000 per
capital security) (the "Capital Securities"). Subject to the Declaration (as
defined below), the Capital 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 Capital
Securities represented hereby are issued pursuant to, and the designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities shall in all respects be subject to, the provisions of
the Amended and Restated Declaration of Trust of the Trust dated as of September
20, 2004, among Allen H. Blake, Terrance M. McCarthy and Lisa K. Vansickle, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, First Banks, Inc., as Sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Trust, including the designation of the terms of the Capital Securities as set
forth in Annex I to such amended and restated declaration as the same may be
amended from time to time (the "Declaration"). Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture
to the Holder without charge upon written request to the Sponsor at its
principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signature appears on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
First Bank Statutory Trust II
By: /s/ Allen H. Blake
------------------------------------
Name: Allen H. Blake
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By: /s/ Christopher J. Monigle
-----------------------------------
Authorized Officer
REVERSE OF CAPITAL SECURITY
Distributions payable on each Capital Security will be payable at an
annual rate equal to 3.92438% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 20, June 20, September 20 and
December 20 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in December 2004. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
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 Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this Capital
Security Certificate)
Signature Guarantee:1
- -----------------------
1 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
Exhibit 4.34
Certificate Number P-2 2,150 Capital Securities
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND
WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR
OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR
HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO
SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY
INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (II) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK
HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE
DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
September 20, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust II
(liquidation amount $1,000 per Capital Security)
First Bank Statutory Trust II, a statutory trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that First Tennessee
Bank National Association is the registered owner of capital securities of the
Trust representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000 per capital security) (the "Capital Securities").
Subject to the Declaration (as defined below), the Capital 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 Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of September 20, 2004, among Allen H. Blake, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Trust, including the designation of
the terms of the Capital Securities as set forth in Annex I to such amended and
restated declaration as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signature appears on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
First Bank Statutory Trust II
By: /s/ Allen H. Blake
------------------------------------
Name: Allen H. Blake
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By: /s/ Christopher J. Monigle
------------------------------------
Authorized Officer
REVERSE OF CAPITAL SECURITY
Distributions payable on each Capital Security will be payable at an
annual rate equal to 3.92438% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.05% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in December 2004. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
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 Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this
Capital Security Certificate)
Signature Guarantee:1
- ------------------------------------
1 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
Exhibit 4.35
==================================================
FIRST BANKS, INC.,
as Issuer
INDENTURE
Dated as of November 23, 2004
WILMINGTON TRUST COMPANY,
as Trustee
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE 2034
==================================================
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS............................................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II. DEBENTURES............................................................................................8
Section 2.1. Authentication and Dating..............................................................8
Section 2.2. Form of Trustee's Certificate of Authentication........................................9
Section 2.3. Form and Denomination of Debentures....................................................9
Section 2.4. Execution of Debentures................................................................9
Section 2.5. Exchange and Registration of Transfer of Debentures...................................10
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures.......................................12
Section 2.7. Temporary Debentures..................................................................12
Section 2.8. Payment of Interest and Additional Interest...........................................13
Section 2.9. Cancellation of Debentures Paid, etc..................................................14
Section 2.10. Computation of Interest...............................................................14
Section 2.11. Extension of Interest Payment Period..................................................15
Section 2.12. CUSIP Numbers.........................................................................16
Section 2.13. Global Debentures.....................................................................17
ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY.................................................................18
Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures........18
Section 3.2. Offices for Notices and Payments, etc.................................................19
Section 3.3. Appointments to Fill Vacancies in Trustee's Office....................................19
Section 3.4. Provision as to Paying Agent..........................................................19
Section 3.5. Certificate to Trustee................................................................20
Section 3.6. Additional Sums.......................................................................20
Section 3.7. Compliance with Consolidation Provisions..............................................21
Section 3.8. Limitation on Dividends...............................................................21
Section 3.9. Covenants as to the Trust.............................................................21
Section 3.10. Additional Junior Indebtedness........................................................22
ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................................22
Section 4.1. Securityholders' Lists................................................................22
Section 4.2. Preservation and Disclosure of Lists..................................................22
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT..................................23
Section 5.1. Events of Default.....................................................................23
Section 5.2. Payment of Debentures on Default; Suit Therefor.......................................25
Section 5.3. Application of Moneys Collected by Trustee............................................26
Section 5.4. Proceedings by Securityholders........................................................26
Section 5.5. Proceedings by Trustee................................................................27
Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver....................27
Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders........27
Section 5.8. Notice of Defaults....................................................................28
Section 5.9. Undertaking to Pay Costs..............................................................28
ARTICLE VI. CONCERNING THE TRUSTEE...............................................................................28
Section 6.1. Duties and Responsibilities of Trustee................................................28
Section 6.2. Reliance on Documents, Opinions, etc..................................................29
Section 6.3. No Responsibility for Recitals, etc...................................................30
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar
May Own Debentures....................................................................30
Section 6.5. Moneys to be Held in Trust............................................................31
Section 6.6. Compensation and Expenses of Trustee..................................................31
Section 6.7. Officers' Certificate as Evidence.....................................................31
Section 6.8. Eligibility of Trustee................................................................32
Section 6.9. Resignation or Removal of Trustee.....................................................32
Section 6.10. Acceptance by Successor Trustee.......................................................33
Section 6.11. Succession by Merger, etc.............................................................34
Section 6.12. Authenticating Agents.................................................................34
ARTICLE VII. CONCERNING THE SECURITYHOLDERS......................................................................35
Section 7.1. Action by Securityholders.............................................................35
Section 7.2. Proof of Execution by Securityholders.................................................35
Section 7.3. Who Are Deemed Absolute Owners........................................................36
Section 7.4. Debentures Owned by Company Deemed Not Outstanding....................................36
Section 7.5. Revocation of Consents; Future Holders Bound..........................................36
ARTICLE VIII. SECURITYHOLDERS' MEETINGS..........................................................................37
Section 8.1. Purposes of Meetings..................................................................37
Section 8.2. Call of Meetings by Trustee...........................................................37
Section 8.3. Call of Meetings by Company or Securityholders........................................37
Section 8.4. Qualifications for Voting.............................................................37
Section 8.5. Regulations...........................................................................37
Section 8.6. Voting................................................................................38
Section 8.7. Quorum; Actions.......................................................................38
ARTICLE IX. SUPPLEMENTAL INDENTURES..............................................................................39
Section 9.1. Supplemental Indentures without Consent of Securityholders............................39
Section 9.2. Supplemental Indentures with Consent of Securityholders...............................40
Section 9.3. Effect of Supplemental Indentures.....................................................41
Section 9.4. Notation on Debentures................................................................41
Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee...........41
ARTICLE X. REDEMPTION OF SECURITIES..............................................................................41
Section 10.1. Optional Redemption...................................................................41
Section 10.2. Special Event Redemption..............................................................41
Section 10.3. Notice of Redemption; Selection of Debentures.........................................42
Section 10.4. Payment of Debentures Called for Redemption...........................................42
ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE....................................................43
Section 11.1. Company May Consolidate, etc., on Certain Terms.......................................43
Section 11.2. Successor Entity to be Substituted....................................................43
Section 11.3. Opinion of Counsel to be Given to Trustee.............................................43
ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.............................................................44
Section 12.1. Discharge of Indenture................................................................44
Section 12.2. Deposited Moneys to be Held in Trust by Trustee.......................................44
Section 12.3. Paying Agent to Repay Moneys Held.....................................................44
Section 12.4. Return of Unclaimed Moneys............................................................44
ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS....................................45
Section 13.1. Indenture and Debentures Solely Corporate Obligations.................................45
ARTICLE XIV. MISCELLANEOUS PROVISIONS............................................................................45
Section 14.1. Successors............................................................................45
Section 14.2. Official Acts by Successor Entity.....................................................45
Section 14.3. Surrender of Company Powers...........................................................45
Section 14.4. Addresses for Notices, etc............................................................45
Section 14.5. Governing Law.........................................................................46
Section 14.6. Evidence of Compliance with Conditions Precedent......................................46
Section 14.7. Table of Contents, Headings, etc......................................................46
Section 14.8. Execution in Counterparts.............................................................46
Section 14.9. Separability..........................................................................46
Section 14.10. Assignment............................................................................46
Section 14.11. Acknowledgment of Rights..............................................................46
ARTICLE XV. SUBORDINATION OF DEBENTURES..........................................................................47
Section 15.1. Agreement to Subordinate..............................................................47
Section 15.2. Default on Senior Indebtedness........................................................47
Section 15.3. Liquidation, Dissolution, Bankruptcy..................................................47
Section 15.4. Subrogation...........................................................................48
Section 15.5. Trustee to Effectuate Subordination...................................................49
Section 15.6. Notice by the Company.................................................................49
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness.................................50
Section 15.8. Subordination May Not Be Impaired.....................................................50
Exhibit A Form of Floating Rate Junior Subordinated Deferrable Interest Debenture
THIS INDENTURE, dated as of November 23, 2004, between First Banks,
Inc., a Missouri corporation (the "Company"), and Wilmington Trust Company, a
-------
Delaware banking corporation, as debenture trustee (the "Trustee").
-------
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its Floating Rate Junior Subordinated Deferrable
Interest Debentures due 2034 (the "Debentures") under this Indenture to provide,
----------
among other things, for the execution and authentication, delivery and
administration thereof, and the Company has duly authorized the execution of
this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;
NOW, THEREFORE, This Indenture Witnesseth:
In consideration of the premises, and the purchase of the Debentures by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Debentures as follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.1. Definitions. The terms defined in this Section 1.1
-----------
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. All
accounting terms used herein and not expressly defined shall have the meanings
assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted in the United States at the time
of any computation. The words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Additional Interest" has the meaning set forth in Section 2.11.
-------------------
"Additional Junior Indebtedness" means, without duplication and other
-------------------------------
than the Debentures, any indebtedness, liabilities or obligations of the
Company, or any Subsidiary of the Company, under debt securities (or guarantees
in respect of debt securities) initially issued after the date of this Indenture
to any trust, or a trustee of a trust, partnership or other entity affiliated
with the Company that is, directly or indirectly, a finance subsidiary (as such
term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other
financing vehicle of the Company or any Subsidiary of the Company in connection
with the issuance by that entity of preferred securities or other securities
that are eligible to qualify for Tier 1 capital treatment (or its then
equivalent) for purposes of the capital adequacy guidelines of the Federal
Reserve, as then in effect and applicable to the Company (or, if the Company is
not a bank holding company, such guidelines applied to the Company as if the
Company were subject to such guidelines); provided, however, that the inability
-------- -------
of the Company to treat all or any portion of the Additional Junior Indebtedness
as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if
such inability results from the Company having cumulative preferred stock,
minority interests in consolidated subsidiaries, or any other class of security
or interest which the Federal Reserve now or may hereafter accord Tier 1 capital
treatment (including the Debentures) in excess of the amount which may qualify
for treatment as Tier 1 capital under applicable capital adequacy guidelines.
"Additional Sums" has the meaning set forth in Section 3.6.
---------------
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act or any successor rule thereunder.
"Applicable Depositary Procedures" means, with respect to any transfer
---------------------------------
or transaction involving a Global Debenture or beneficial interest therein, the
rules and procedures of the Depositary for such Debenture, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means any agent or agents of the Trustee which
---------------------
at the time shall be appointed and acting pursuant to Section 6.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
--------------
state law for the relief of debtors.
"Board of Directors" means the board of directors or the executive
-------------------
committee or any other duly authorized designated officers of the Company.
"Board Resolution" means a copy of a resolution certified by the
-----------------
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
------------
day on which banking institutions in New York City or Wilmington, Delaware are
permitted or required by any applicable law or executive order to close.
"Capital Securities" means undivided beneficial interests in the assets
------------------
of the Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence and continuance of an Event of
- -------- -------
Default (as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of such
Capital Securities.
"Capital Securities Guarantee" means the guarantee agreement that the
------------------------------
Company enters into with Wilmington Trust Company, as guarantee trustee, or
other Persons that operates directly or indirectly for the benefit of holders of
Capital Securities of the Trust.
"Capital Treatment Event" means the receipt by the Company and the
-------------------------
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of any amendment to, or change (including any
announced prospective change) in, the laws, rules or regulations of the United
States or any political subdivision thereof or therein, or as the result of any
official or administrative pronouncement or action or decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or which pronouncement, action or decision is announced on or after the date of
original issuance of the Debentures, there is more than an insubstantial risk
that the Company will not, within 90 days of the date of such opinion, be
entitled to treat an amount equal to the aggregate liquidation amount of the
Capital Securities as "Tier 1 Capital" (or its then equivalent) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Company (or if the Company is not a bank holding company, such
guidelines applied to the Company as if the Company were subject to such
guidelines); provided, however, that the inability of the Company to treat all
-------- -------
or any portion of the liquidation amount of the Capital Securities as Tier l
Capital shall not constitute the basis for a Capital Treatment Event, if such
inability results from the Company having cumulative preferred stock, minority
interests in consolidated subsidiaries, or any other class of security or
interest which the Federal Reserve or OTS, as applicable, may now or hereafter
accord Tier 1 Capital treatment in excess of the amount which may now or
hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of
-------- ------- -------
Debentures in connection with the liquidation of the Trust shall not in and of
itself constitute a Capital Treatment Event unless such liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.
"Certificate" means a certificate signed by any one of the principal
-----------
executive officer, the principal financial officer or the principal accounting
officer of the Company.
"Common Securities" means undivided beneficial interests in the assets
-----------------
of the Trust which rank pari passu with Capital Securities issued by the Trust;
provided, however, that upon the occurrence and continuance of an Event of
- -------- -------
Default (as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of such
Capital Securities.
"Company" means First Banks, Inc., a Missouri corporation, and, subject
-------
to the provisions of Article XI, shall include its successors and assigns.
"Coupon Rate" has the meaning set forth in Section 2.8.
-----------
"Debenture" or "Debentures" has the meaning stated in the first recital
--------- ----------
of this Indenture.
"Debenture Register" has the meaning specified in Section 2.5.
------------------
"Declaration" means the Amended and Restated Declaration of Trust of
-----------
the Trust, as amended or supplemented from time to time.
"Default" means any event, act or condition that with notice or lapse
-------
of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.8.
------------------
"Depositary" means an organization registered as a clearing agency
----------
under the Exchange Act that is designated as Depositary by the Company or any
successor thereto. The initial Depositary will be DTC.
"Depositary Participant" means a broker, dealer, bank, other financial
-----------------------
institution or other Person for whom from time to time a Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.
"Distribution Period" means (i) with respect to interest paid on the
--------------------
first Interest Payment Date, the period beginning on (and including) the date of
original issuance and ending on (but excluding) the Interest Payment Date in
March 2005 and (ii) thereafter, with respect to interest paid on each successive
Interest Payment Date, the period beginning on (and including) the preceding
Interest Payment Date and ending on (but excluding) such current Interest
Payment Date.
"Determination Date" has the meaning set forth in Section 2.10.
------------------
"DTC" means the Depository Trust Company, a New York corporation.
---
"Event of Default" means any event specified in Section 5.1, continued
----------------
for the period of time, if any, and after the giving of the notice, if any,
therein designated.
"Extension Event of Default" means an Event of Default under Section
---------------------------
5.1(a), (d) or (e), whatever the reason for such Extension Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
"Extension Period" has the meaning set forth in Section 2.11.
----------------
"Federal Reserve" means the Board of Governors of the Federal Reserve
----------------
System, or its designated district bank, as applicable, and any successor
federal agency that is primarily responsible for regulating the activities of
bank holding companies.
"Global Debenture" means a security that evidences all or part of the
-----------------
Debentures, the ownership and transfers of which shall be made through book
entries by a Depositary.
"Indenture" means this instrument as originally executed or, if amended
---------
or supplemented as herein provided, as so amended or supplemented, or both.
"Institutional Trustee" has the meaning set forth in the Declaration.
---------------------
"Interest Payment Date" means March 15, June 15, September 15 and
-----------------------
December 15 of each year during the term of this Indenture, or if such day is
not a Business Day, then the next succeeding Business Day, commencing in March
2005.
"Interest Rate" means for the Distribution Period beginning on (and
--------------
including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in March 2005 the rate per annum of 4.54%, and for each
Distribution Period beginning on or after the Interest Payment Date in March
2005, the Coupon Rate for such Distribution Period.
"Investment Company Event" means the receipt by the Company and the
--------------------------
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Trust is
or, within 90 days of the date of such opinion will be considered an "investment
company" that is required to be registered under the Investment Company Act of
1940, as amended which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the issuance of
the Debentures.
"Liquidation Amount" means the stated amount of $1,000.00 per Trust
-------------------
Security.
"Maturity Date" means December 15, 2034.
-------------
"Officers' Certificate" means a certificate signed by the Chairman of
----------------------
the Board, the Chief Executive Officer, the Vice Chairman, the President, any
Managing Director or any Vice President, and by the Treasurer, an Assistant
Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 14.6 if and to
the extent required by the provisions of such Section.
"Opinion of Counsel" means an opinion in writing signed by legal
--------------------
counsel, who may be an employee of or counsel to the Company, or may be other
counsel reasonably satisfactory to the Trustee. Each such opinion shall include
the statements provided for in Section 14.6 if and to the extent required by the
provisions of such Section.
"OTS" means the Office of Thrift Supervision and any successor federal
---
agency that is primarily responsible for regulating the activities of savings
and loan holding companies.
The term "outstanding," when used with reference to Debentures, means,
-----------
subject to the provisions of Section 7.4, as of any particular time, all
Debentures authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except:
(a) Debentures theretofore canceled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided, however, that, if such Debentures, or portions
-------- -------
thereof, are to be redeemed prior to maturity thereof, notice of such redemption
shall have been given as provided in Section 10.3 or provision satisfactory to
the Trustee shall have been made for giving such notice; and
(c) Debentures paid pursuant to Section 2.6 or in lieu of or
in substitution for which other Debentures shall have been authenticated and
delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the
Company and the Trustee is presented that any such Debentures are held by bona
fide holders in due course.
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Debenture means every previous
--------------------
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and, for purposes of this definition, any Debenture
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Debenture.
"Principal Office of the Trustee," or other similar term, means the
--------------------------------
office of the Trustee, at which at any particular time its corporate trust
business shall be principally administered, which at the time of the execution
of this Indenture shall be Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
"Redemption Date" has the meaning set forth in Section 10.1.
---------------
"Redemption Price" means 100% of the principal amount of the Debentures
----------------
being redeemed, plus accrued and unpaid interest (including any Additional
Interest) on such Debentures to the Redemption Date.
"Responsible Officer" means, with respect to the Trustee, any officer
--------------------
within the Principal Office of the Trustee, including any vice-president, any
assistant vice-president, any secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or other officer of the Principal
Trust Office of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular 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.
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time or any successor legislation.
"Securityholder," "holder of Debentures," or other similar terms, means
--------------
any Person in whose name at the time a particular Debenture is registered on the
register kept by the Company or the Trustee for that purpose in accordance with
the terms hereof.
"Senior Indebtedness" means, with respect to the Company, (i) the
--------------------
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for all borrowed and purchased money and (B) indebtedness evidenced by
securities, debentures, notes, bonds or other similar instruments issued by the
Company; (ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations of
the Company under any title retention agreement; (iv) all obligations of the
Company for the reimbursement of any letter of credit, any banker's acceptance,
any security purchase facility, any repurchase agreement or similar arrangement,
any interest rate swap, any other hedging arrangement, any obligation under
options or any similar credit or other transaction; (v) all obligations of the
Company associated with derivative products such as interest and foreign
exchange rate contracts, commodity contracts, and similar arrangements; (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
Persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise including, without limitation, similar
obligations arising from off-balance sheet guarantees and direct credit
substitutes; and (vii) all obligations of the type referred to in clauses (i)
through (vi) above of other Persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by the Company),
whether incurred on or prior to the date of this Indenture or thereafter
incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this
Indenture and guarantees in respect of such Debentures, (3) trade accounts
payable of the Company arising in the ordinary course of business (such trade
accounts payable being pari passu in right of payment to the Debentures), or (4)
obligations with respect to which (a) in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
obligations are pari passu, junior or otherwise not superior in right of payment
to the Debentures and (b) the Company, prior to the issuance thereof, has
notified (and, if then required under the applicable guidelines of the
regulating entity, has received approval from) the Federal Reserve (if the
Company is a bank holding company) or the OTS (if the Company is a savings and
loan holding company). Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
"Special Event" means any of a Capital Treatment Event, an Investment
-------------
Company Event or a Tax Event.
"Special Redemption Date" has the meaning set forth in Section 10.2.
-----------------------
"Special Redemption Price" means the price set forth in the following
--------------------------
table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:
- ----------------------------------------- --------------------------------------
Month in which Special Special Redemption Price
---------------------- ------------------------
Redemption Date Occurs
----------------------
- ----------------------------------------- --------------------------------------
March 2005 104.625%
- ----------------------------------------- --------------------------------------
June 2005 104.300%
- ----------------------------------------- --------------------------------------
September 2005 104.000%
- ----------------------------------------- --------------------------------------
- ----------------------------------------- --------------------------------------
December 2005 103.650%
- ----------------------------------------- --------------------------------------
March 2006 103.350%
- ----------------------------------------- --------------------------------------
June 2006 103.000%
- ----------------------------------------- --------------------------------------
September 2006 102.700%
- ----------------------------------------- --------------------------------------
December 2006 102.350%
- ----------------------------------------- --------------------------------------
March 2007 102.050%
- ----------------------------------------- --------------------------------------
June 2007 101.700%
- ----------------------------------------- --------------------------------------
September 2007 101.400%
- ----------------------------------------- --------------------------------------
December 2007 101.050%
- ----------------------------------------- --------------------------------------
March 2008 100.750%
- ----------------------------------------- --------------------------------------
June 2008 100.450%
- ----------------------------------------- --------------------------------------
September 2008 100.200%
- ----------------------------------------- --------------------------------------
December 2008 and thereafter 100.000%
- ----------------------------------------- --------------------------------------
plus, in each case, accrued and unpaid interest (including any
Additional Interest) on such Debentures to the Special Redemption Date.
"Subsidiary" means with respect to any Person, (i) any corporation at
----------
least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
"Tax Event" means the receipt by the Company and the Trust of an
----------
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations) (an "Administrative Action") or judicial decision
----------------------
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Company or the Trust and whether or not subject to
review or appeal, which amendment, clarification, change, Administrative Action
or decision is enacted, promulgated or announced, in each case on or after the
date of original issuance of the Debentures, 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; (ii) interest payable by the Company on
the Debentures is not, or within 90 days of the date of such opinion, will not
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes; or (iii) 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.
"3-Month LIBOR" has the meaning set forth in Section 2.10.
-------------
"Telerate Page 3750" has the meaning set forth in Section 2.10.
------------------
"Trust" shall mean First Bank Statutory Trust III, a Delaware statutory
-----
trust, or any other similar trust created for the purpose of issuing Capital
Securities in connection with the issuance of Debentures under this Indenture,
of which the Company is the sponsor.
"Trust Securities" means Common Securities and Capital Securities of
----------------
the Trust.
"Trustee" means Wilmington Trust Company, and, subject to the
-------
provisions of Article VI hereof, shall also include its successors and assigns
as Trustee hereunder.
ARTICLE II.
DEBENTURES
----------
Section 2.1. Authentication and Dating. Upon the execution and
-------------------------
delivery of this Indenture, or from time to time thereafter, Debentures in an
aggregate principal amount not in excess of $41,238,000.00 may be executed and
delivered by the Company to the Trustee for authentication, and the Trustee,
upon receipt of a written authentication order from the Company, shall thereupon
authenticate and make available for delivery said Debentures to or upon the
written order of the Company, signed by its Chairman of the Board of Directors,
Chief Executive Officer, Vice Chairman, the President, one of its Managing
Directors or one of its Vice Presidents without any further action by the
Company hereunder. Notwithstanding anything to the contrary contained herein,
the Trustee shall be fully protected in relying upon the aforementioned
authentication order and written order in authenticating and delivering said
Debentures. In authenticating such Debentures, and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon:
(a) a copy of any Board Resolution or Board Resolutions relating
thereto and, if applicable, an appropriate record of any action
taken pursuant to such resolution, in each case certified by the
Secretary or an Assistant Secretary of the Company, as the case
may be; and
(b) an Opinion of Counsel prepared in accordance with Section 14.6
which shall also state:
(1) that such Debentures, when authenticated and delivered
by the Trustee and issued by the Company in each case in the
manner and subject to any conditions specified in such Opinion of
Counsel, will constitute valid and legally binding obligations of
the Company, subject to or limited by applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership,
moratorium and other statutory or decisional laws relating to or
affecting creditors' rights or the reorganization of financial
institutions (including, without limitation, preference and
fraudulent conveyance or transfer laws), heretofore or hereafter
enacted or in effect, affecting the rights of creditors
generally; and
(2) that all laws and requirements in respect of the
execution and delivery by the Company of the Debentures have been
complied with and that authentication and delivery of the
Debentures by the Trustee will not violate the terms of this
Indenture.
The Trustee shall have the right to decline to authenticate and deliver
any Debentures under this Section if the Trustee, being advised in writing by
counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing holders.
The definitive Debentures shall be typed, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Debentures, as evidenced by their
execution of such Debentures.
Section 2.2. Form of Trustee's Certificate of Authentication. The
-------------------------------------------------
Trustee's certificate of authentication on all Debentures shall be in
substantially the following form:
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By
----------------------------------
Authorized Signer
Section 2.3. Form and Denomination of Debentures. The Debentures
-----------------------------------
shall be substantially in the form of Exhibit A attached hereto. The Debentures
shall be in registered, certificated form without coupons and in minimum
denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof.
Any attempted transfer of the Debentures in a block having an aggregate
principal amount of less than $100,000.00 shall be deemed to be void and of no
legal effect whatsoever. Any such purported transferee shall be deemed not to be
a holder of such Debentures for any purpose, including, but not limited to the
receipt of payments on such Debentures, and such purported transferee shall be
deemed to have no interest whatsoever in such Debentures. The Debentures shall
be numbered, lettered, or otherwise distinguished in such manner or in
accordance with such plans as the officers executing the same may determine with
the approval of the Trustee as evidenced by the execution and authentication
thereof.
Section 2.4. Execution of Debentures. The Debentures shall be signed
-----------------------
in the name and on behalf of the Company by the manual or facsimile signature of
its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman,
President, one of its Managing Directors or one of its Executive Vice
Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as
shall bear thereon a certificate of authentication substantially in the form
herein before recited, executed by the Trustee or the Authenticating Agent by
the manual signature of an authorized signer, shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee or the Authenticating Agent upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee or the Authenticating
Agent, or disposed of by the Company, such Debentures nevertheless may be
authenticated and delivered or disposed of as though the Person who signed such
Debentures had not ceased to be such officer of the Company; and any Debenture
may be signed on behalf of the Company by such Persons as, at the actual date of
the execution of such Debenture, shall be the proper officers of the Company,
although at the date of the execution of this Indenture any such person was not
such an officer.
Every Debenture shall be dated the date of its authentication.
Section 2.5 Exchange and Registration of Transfer of Debentures.
------------------------------------------------------
The Company shall cause to be kept, at the office or agency maintained for the
purpose of registration of transfer and for exchange as provided in Section 3.2,
a register (the "Debenture Register") for the Debentures issued hereunder in
-------------------
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration and transfer of all Debentures as in this
Article II provided. The Debenture Register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time.
Debentures to be exchanged may be surrendered at the Principal Office
of the Trustee or at any office or agency to be maintained by the Company for
such purpose as provided in Section 3.2, and the Company shall execute, the
Company or the Trustee shall register and the Trustee or the Authenticating
Agent shall authenticate and make available for delivery in exchange therefor
the Debenture or Debentures which the Securityholder making the exchange shall
be entitled to receive. Upon due presentment for registration of transfer of any
Debenture at the Principal Office of the Trustee or at any office or agency of
the Company maintained for such purpose as provided in Section 3.2, the Company
shall execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in the
name of the transferee or transferees a new Debenture for a like aggregate
principal amount. Registration or registration of transfer of any Debenture by
the Trustee or by any agent of the Company appointed pursuant to Section 3.2,
and delivery of such Debenture, shall be deemed to complete the registration or
registration of transfer of such Debenture.
All Debentures presented for registration of transfer or for exchange
or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by the holder or his
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or
register a transfer of any Debenture for a period of 15 days next preceding the
date of selection of Debentures for redemption.
Notwithstanding anything herein to the contrary, Debentures may not be
transferred except in compliance with the restricted securities legend set forth
below, unless otherwise determined by the Company, upon the advice of counsel
expert in securities law, in accordance with applicable law:
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures. In
---------------------------------------------------
case any Debenture shall become mutilated or be destroyed, lost or stolen, the
Company shall execute, and upon its written request the Trustee shall
authenticate and deliver, a new Debenture bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case the applicant for a substituted Debenture shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and the Trustee evidence to
their satisfaction of the destruction, loss or theft of such Debenture and of
the ownership thereof.
The Trustee may authenticate any such substituted Debenture and deliver
the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Debenture, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature or has
been called for redemption in full shall become mutilated or be destroyed, lost
or stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless and, in case of destruction, loss or theft, evidence
satisfactory to the Company and to the Trustee of the destruction, loss or theft
of such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition that, to the
extent permitted by applicable law, the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
Section 2.7. Temporary Debentures. Pending the preparation of
----------------------
definitive Debentures, the Company may execute and the Trustee shall
authenticate and make available for delivery temporary Debentures that are
typed, printed or lithographed. Temporary Debentures shall be issuable in any
authorized denomination, and substantially in the form of the definitive
Debentures in lieu of which they are issued but with such omissions, insertions
and variations as may be appropriate for temporary Debentures, all as may be
determined by the Company. Every such temporary Debenture shall be executed by
the Company and be authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with the same effect, as the definitive
Debentures. Without unreasonable delay the Company will execute and deliver to
the Trustee or the Authenticating Agent definitive Debentures and thereupon any
or all temporary Debentures may be surrendered in exchange therefor, at the
principal corporate trust office of the Trustee or at any office or agency
maintained by the Company for such purpose as provided in Section 3.2, and the
Trustee or the Authenticating Agent shall authenticate and make available for
delivery in exchange for such temporary Debentures a like aggregate principal
amount of such definitive Debentures. Such exchange shall be made by the Company
at its own expense and without any charge therefor except that in case of any
such exchange involving a registration of transfer the Company may require
payment of a sum sufficient to cover any tax, fee or other governmental charge
that may be imposed in relation thereto. Until so exchanged, the temporary
Debentures shall in all respects be entitled to the same benefits under this
Indenture as definitive Debentures authenticated and delivered hereunder.
Section 2.8. Payment of Interest and Additional Interest. Interest
--------------------------------------------
at the Interest Rate and any Additional Interest on any Debenture that is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date for Debentures shall be paid to the Person in whose name said Debenture (or
one or more Predecessor Securities) is registered at the close of business on
the regular record date for such interest installment except that interest and
any Additional Interest payable on the Maturity Date shall be paid to the Person
to whom principal is paid.
Each Debenture shall bear interest for the period beginning on (and
including) the date of original issuance and ending on (but excluding) the
Interest Payment Date in March 2005 at a rate per annum of 4.54%, and shall bear
interest for each successive Distribution Period beginning on or after the
Interest Payment Date in March 2005 at a rate per annum equal to the 3-Month
LIBOR, determined as described in Section 2.10, plus 2.18% (the "Coupon Rate"),
-----------
applied to the principal amount thereof, until the principal thereof becomes due
and payable, and on any overdue principal and to the extent that payment of such
interest is enforceable under applicable law (without duplication) on any
overdue installment of interest (including Additional Interest) at the Interest
Rate in effect for each applicable period compounded quarterly. Interest shall
be payable (subject to any relevant Extension Period) quarterly in arrears on
each Interest Payment Date with the first installment of interest to be paid on
the Interest Payment Date in March 2005.
Any interest on any Debenture, including Additional Interest, that is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
-------------------
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debentures (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing at least
25 days prior to the date of the proposed payment of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date for the payment of such Defaulted Interest which shall not
be more than 15 nor less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first class postage prepaid, to each Securityholder
at its address as it appears in the Debenture Register, not less than 10 days
prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
such Debentures (or their respective Predecessor Securities) are registered on
such special record date and shall be no longer payable.
The Company may make payment of any Defaulted Interest on any
Debentures in any other lawful manner after notice given by the Company to the
Trustee of the proposed payment method; provided, however, the Trustee in its
-------- -------
sole discretion deems such payment method to be practical.
Any interest (including Additional Interest) scheduled to become
payable on an Interest Payment Date occurring during an Extension Period shall
not be Defaulted Interest and shall be payable on such other date as may be
specified in the terms of such Debentures.
The term "regular record date" as used in this Section shall mean the
close of business on the 5th Business Day preceding the applicable Interest
Payment Date.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, that were carried by such other Debenture.
Section 2.9. Cancellation of Debentures Paid, etc. All Debentures
--------------------------------------
surrendered for the purpose of payment, redemption, exchange or registration of
transfer, shall, if surrendered to the Company or any paying agent, be
surrendered to the Trustee and promptly canceled by it, or, if surrendered to
the Trustee or any Authenticating Agent, shall be promptly canceled by it, and
no Debentures shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. All Debentures canceled by any
Authenticating Agent shall be delivered to the Trustee. The Trustee shall
destroy all canceled Debentures unless the Company otherwise directs the Trustee
in writing. If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
surrendered to the Trustee for cancellation.
Section 2.10. Computation of Interest. The amount of interest payable
-----------------------
for each Distribution Period will be calculated by applying the Interest Rate to
the principal amount outstanding at the commencement of the Distribution Period
on the basis of the actual number of days in the Distribution Period concerned
divided by 360. All percentages resulting from any calculations on the
Debentures will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
(a) "3-Month LIBOR" means the London interbank offered interest
-------------
rate for three-month, U.S. dollar deposits determined by the Trustee in the
following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S.
dollar deposits having a three-month maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date (as defined below). "Telerate Page 3750" means the display
designated as "Page 3750" on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other
service or services as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related
Determination Date, the Trustee will request the principal London
offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar
deposits having a three-month maturity as of 11:00 a.m. (London time)
on such Determination Date. If at least two quotations are provided,
3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested
in clause (2) above, the Trustee will request four major New York City
banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If
at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested
in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined
with respect to the Distribution Period immediately preceding such
current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity
that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on
the related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.
(b) The Interest Rate for any Distribution Period will at no time
be higher than the maximum rate then permitted by New York law as the same may
be modified by United States law.
(c) "Determination Date" means the date that is two London Banking
------------------
Days (i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.
(d) The Trustee shall notify the Company, the Institutional Trustee
and any securities exchange or interdealer quotation system on which the Capital
Securities are listed, of the Coupon Rate and the Determination Date for each
Distribution Period, in each case as soon as practicable after the determination
thereof but in no event later than the thirtieth (30th) day of the relevant
Distribution Period. Failure to notify the Company, the Institutional Trustee or
any securities exchange or interdealer quotation system, or any defect in said
notice, shall not affect the obligation of the Company to make payment on the
Debentures at the applicable Coupon Rate. Any error in the calculation of the
Coupon Rate by the Trustee may be corrected at any time by notice delivered as
above provided. Upon the request of a holder of a Debenture, the Trustee shall
provide the Coupon Rate then in effect and, if determined, the Coupon Rate for
the next Distribution Period.
(e) Subject to the corrective rights set forth above, all
certificates, communications, opinions, determinations, calculations, quotations
and decisions given, expressed, made or obtained for the purposes of the
provisions relating to the payment and calculation of interest on the Debentures
and distributions on the Capital Securities by the Trustee or the Institutional
Trustee will (in the absence of willful default, bad faith and manifest error)
be final, conclusive and binding on the Trust, the Company and all of the
holders of the Debentures and the Capital Securities, and no liability shall (in
the absence of willful default, bad faith or manifest error) attach to the
Trustee or the Institutional Trustee in connection with the exercise or
non-exercise by either of them or their respective powers, duties and
discretion.
Section 2.11. Extension of Interest Payment Period. So long as no
---------------------------------------
Extension Event of Default has occurred and is continuing, the Company shall
have the right, from time to time, and without causing an Event of Default, to
defer payments of interest on the Debentures by extending the interest payment
period on the Debentures at any time and from time to time during the term of
the Debentures, for up to 20 consecutive quarterly periods (each such extended
interest payment period, an "Extension Period"), during which Extension Period
no interest (including Additional Interest) shall be due and payable (except any
Additional Sums that may be due and payable). No Extension Period may end on a
date other than an Interest Payment Date. During an Extension Period, interest
will continue to accrue on the Debentures, and interest on such accrued interest
will accrue at an annual rate equal to the Interest Rate in effect for such
Extension Period, compounded quarterly from the date such interest would have
been payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as "Additional Interest"). At the end of
--------------------
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Debentures (together with Additional Interest thereon); provided,
--------
however, that no Extension Period may extend beyond the Maturity Date; provided
- ------- --------
further, however, that during any such Extension Period, the Company shall not
- ------- -------
and shall not permit any Affiliate to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's or such Affiliate's capital stock (other
than payments of dividends or distributions to the Company) or make any
guarantee payments with respect to the foregoing or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company or any Affiliate that rank pari passu in all
respects with or junior in interest to the Debentures (other than, with respect
to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions
of shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholders' rights plan, or the issuance of rights, stock
or other property under any stockholders' rights plan, or the redemption or
repurchase of rights pursuant thereto, (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock and any cash payments in lieu of fractional shares issued in
connection therewith, or (f) payments under the Capital Securities Guarantee).
Prior to the termination of any Extension Period, the Company may further extend
such period, provided that such period together with all such previous and
further consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest to the extent permitted by
applicable law. The Company must give the Trustee notice of its election to
begin or extend an Extension Period by the close of business at least 5 Business
Days prior to the Interest Payment Date with respect to which interest on the
Debentures would have been payable except for the election to begin or extend
such Extension Period. The Trustee shall give notice of the Company's election
to begin a new Extension Period to the Securityholders.
Section 2.12. CUSIP Numbers. The Company in issuing the Debentures
-------------
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use CUSIP numbers in notices of redemption as a convenience to
Securityholders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Debentures or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Debentures, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee in
writing of any change in the CUSIP numbers.
Section 2.13. Global Debentures. (a) Upon the election of the holder
------------------
of outstanding Debentures, which election need not be in writing, the Debentures
owned by such holder shall be issued in the form of one or more Global
Debentures registered in the name of the Depositary or its nominee. Each Global
Debenture issued under this Indenture shall be registered in the name of the
Depositary designated by the Company for such Global Debenture or a nominee
thereof, delivered to such Depositary or a nominee thereof or custodian therefor
and shall contain such legends as may be required by the Depositary and each
such Global Debenture shall constitute a single Debenture for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Debenture may be exchanged in whole or in part for Debentures registered,
and no transfer of a Global Debenture in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Debenture or a
nominee thereof unless (i) such Depositary advises the Trustee and the Company
in writing that such Depositary is no longer willing or able to properly
discharge its responsibilities as Depositary with respect to such Global
Debenture, and no qualified successor is appointed by the Company within ninety
(90) days of receipt by the Company of such notice, (ii) such Depositary ceases
to be a clearing agency registered under the Exchange Act and no successor is
appointed by the Company within ninety (90) days after obtaining knowledge of
such event, (iii) the Company executes and delivers to the Trustee a Company
order stating that the Company elects to terminate the book-entry system through
the Depositary or (iv) an Event of Default shall have occurred and be
continuing. Upon the occurrence of any event specified in clause (i), (ii),
(iii) or (iv) above, the Trustee shall notify the Depositary and instruct the
Depositary to notify all owners of beneficial interests in such Global Debenture
of the occurrence of such event and of the availability of Debentures to such
owners of beneficial interests requesting the same. Upon the issuance of such
Debentures and the registration in the Debenture Register of such Debentures in
the names of the holders of the beneficial interests therein, the Trustee shall
recognize such holders of beneficial interests as holders.
(c) If any Global Debenture is to be exchanged for other Debentures
or canceled in part, or if another Debenture is to be exchanged in whole or in
part for a beneficial interest in any Global Debenture, then either (i) such
Global Debenture shall be so surrendered for exchange or cancellation as
provided in this Article II or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or canceled, or equal to the principal amount of such other Debentures
to be so exchanged for a beneficial interest therein, as the case may be, by
means of an appropriate adjustment made on the records of the Debenture
registrar, whereupon the Trustee, in accordance with the Applicable Depositary
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Debenture by the Depositary, accompanied by registration
instructions, the Company shall execute and the Trustee shall authenticate and
deliver any Debentures issuable in exchange for such Global Debenture (or any
portion thereof) in accordance with the instructions of the Depositary. The
Trustee shall not be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be fully protected in relying on, such
instructions.
(d) Every Debenture authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Debenture or any
portion thereof shall be authenticated and delivered in the form of, and shall
be, a Global Debenture, unless such Debenture is registered in the name of a
Person other than the Depositary for such Global Debenture or a nominee thereof.
(e) Debentures distributed to holders of Book-Entry Capital
Securities (as defined in the Declaration) upon the dissolution of the Trust
shall be distributed in the form of one or more Global Debentures registered in
the name of a Depositary or its nominee, and deposited with the Debentures
registrar, as custodian for such Depositary, or with such Depositary, for credit
by the Depositary to the respective accounts of the beneficial owners of the
Debentures represented thereby (or such other accounts as they may direct).
Debentures distributed to holders of Capital Securities other than Book-Entry
Capital Securities upon the dissolution of the Trust shall not be issued in the
form of a Global Debenture or any other form intended to facilitate book-entry
trading in beneficial interests in such Debentures.
(f) The Depositary or its nominee, as the registered owner of a
Global Debenture, shall be the holder of such Global Debenture for all purposes
under this Indenture and the Debentures, and owners of beneficial interests in a
Global Debenture shall hold such interests pursuant to the Applicable Depositary
Procedures. Accordingly, any such owner's beneficial interest in a Global
Debenture shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Depositary Participants. The Debentures registrar and the Trustee shall be
entitled to deal with the Depositary for all purposes under this Indenture
relating to a Global Debenture (including the payment of principal and interest
thereon and the giving of instructions or directions by owners of beneficial
interests therein and the giving of notices) as the sole holder of the Debenture
and shall have no obligations to the owners of beneficial interests therein.
Neither the Trustee nor the Debentures registrar shall have any liability in
respect of any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global
Debenture shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its Depositary Participants.
(h) No holder of any beneficial interest in any Global Debenture
held on its behalf by a Depositary shall have any rights under this Indenture
with respect to such Global Debenture, and such Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such Global Debenture for all purposes whatsoever. None of the Company, the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of a Global Debenture or maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by a
Depositary or impair, as between a Depositary and such holders of beneficial
interests, the operation of customary practices governing the exercise of the
rights of the Depositary (or its nominee) as holder of any Debenture.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
-----------------------------------
Section 3.1. Payment of Principal, Premium and Interest; Agreed
-------------------------------------------------------
Treatment of the Debentures.
- ---------------------------
(a) The Company covenants and agrees that it will duly and
punctually pay or cause to be paid the principal of and premium, if any, and
interest and any Additional Interest and other payments on the Debentures at the
place, at the respective times and in the manner provided in this Indenture and
the Debentures. Each installment of interest on the Debentures may be paid (i)
by mailing checks for such interest payable to the order of the holders of
Debentures entitled thereto as they appear on the registry books of the Company
if a request for a wire transfer has not been received by the Company or (ii) by
wire transfer to any account with a banking institution located in the United
States designated in writing by such Person to the paying agent no later than
the related record date. Notwithstanding the foregoing, so long as the holder of
this Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Institutional Trustee.
(b) The Company will treat the Debentures as indebtedness, and the
amounts payable in respect of the principal amount of such Debentures as
interest, for all United States federal income tax purposes. All payments in
respect of such Debentures will be made free and clear of United States
withholding tax to any beneficial owner thereof that has provided an Internal
Revenue Service Form W8 BEN (or any substitute or successor form) establishing
its non-United States status for United States federal income tax purposes.
(c) As of the date of this Indenture, the Company has no present
intention to exercise its right under Section 2.11 to defer payments of interest
on the Debentures by commencing an Extension Period.
(d) As of the date of this Indenture, the Company believes that the
likelihood that it would exercise its right under Section 2.11 to defer payments
of interest on the Debentures by commencing an Extension Period at any time
during which the Debentures are outstanding is remote because of the
restrictions that would be imposed on the Company's ability to declare or pay
dividends or distributions on, or to redeem, purchase or make a liquidation
payment with respect to, any of its outstanding equity and on the Company's
ability to make any payments of principal of or interest on, or repurchase or
redeem, any of its debt securities that rank pari passu in all respects with (or
junior in interest to) the Debentures.
Section 3.2. Offices for Notices and Payments, etc. So long as any
--------------------------------------
of the Debentures remain outstanding, the Company will maintain in Wilmington,
Delaware, an office or agency where the Debentures may be presented for payment,
an office or agency where the Debentures may be presented for registration of
transfer and for exchange as in this Indenture provided and an office or agency
where notices and demands to or upon the Company in respect of the Debentures or
of this Indenture may be served. The Company will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. Until otherwise designated from time to time by the Company in
a notice to the Trustee, or specified as contemplated by Section 2.5, such
office or agency for all of the above purposes shall be the office or agency of
the Trustee. In case the Company shall fail to maintain any such office or
agency in Wilmington, Delaware, or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside Wilmington, Delaware,
where the Debentures may be presented for registration of transfer and for
exchange in the manner provided in this Indenture, and the Company may from time
to time rescind such designation, as the Company may deem desirable or
expedient; provided, however, that no such designation or rescission shall in
-------- -------
any manner relieve the Company of its obligation to maintain any such office or
agency in Wilmington, Delaware, for the purposes above mentioned. The Company
will give to the Trustee prompt written notice of any such designation or
rescission thereof.
Section 3.3. Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 6.9, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 3.4. Provision as to Paying Agent.
----------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee, it will cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.4,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest, if
any, on the Debentures (whether such sums have been paid to it by the
Company or by any other obligor on the Debentures) in trust for the
benefit of the holders of the Debentures;
(2) that it will give the Trustee prompt written notice
of any failure by the Company (or by any other obligor on the
Debentures) to make any payment of the principal of and premium, if
any, or interest, if any, on the Debentures when the same shall be due
and payable; and
(3) that it will, at any time during the continuance of any
Event of Default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of and premium, if any, or interest or
other payments, if any, on the Debentures, set aside, segregate and hold in
trust for the benefit of the holders of the Debentures a sum sufficient to pay
such principal, premium, interest or other payments so becoming due and will
notify the Trustee in writing of any failure to take such action and of any
failure by the Company (or by any other obligor under the Debentures) to make
any payment of the principal of and premium, if any, or interest or other
payments, if any, on the Debentures when the same shall become due and payable.
Whenever the Company shall have one or more paying agents for the
Debentures, it will, on or prior to each due date of the principal of and
premium, if any, or interest, if any, on the Debentures, deposit with a paying
agent a sum sufficient to pay the principal, premium, interest or other payments
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.
(c) Anything in this Section 3.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debentures, or for any other reason, pay, or
direct any paying agent to pay to the Trustee all sums held in trust by the
Company or any such paying agent, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.4 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 3.4 is subject
to Sections 12.3 and 12.4.
Section 3.5. Certificate to Trustee. The Company will deliver to the
----------------------
Trustee on or before 120 days after the end of each fiscal year, so long as
Debentures are outstanding hereunder, a Certificate stating that in the course
of the performance by the signers of their duties as officers of the Company
they would normally have knowledge of any default during such fiscal year by the
Company in the performance of any covenants contained herein, stating whether or
not they have knowledge of any such default and, if so, specifying each such
default of which the signers have knowledge and the nature and status thereof.
Section 3.6. Additional Sums. If and for so long as the Trust is the
---------------
holder of all Debentures and the Trust is required to pay any additional taxes
(including withholding taxes), duties, assessments or other governmental charges
as a result of a Tax Event, the Company will pay such additional amounts
("Additional Sums") on the Debentures as shall be required so that the net
----------------
amounts received and retained by the Trust after paying taxes (including
withholding taxes), duties, assessments or other governmental charges will be
equal to the amounts the Trust would have received if no such taxes, duties,
assessments or other governmental charges had been imposed. Whenever in this
Indenture or the Debentures there is a reference in any context to the payment
of principal of or interest on the Debentures, such mention shall be deemed to
include mention of payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made; provided, however,
-------- -------
that the deferral of the payment of interest during an Extension Period pursuant
to Section 2.11 shall not defer the payment of any Additional Sums that may be
due and payable.
Section 3.7. Compliance with Consolidation Provisions. The Company
-----------------------------------------
will not, while any of the Debentures remain outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other Person unless the provisions of Article XI hereof are
complied with.
Section 3.8. Limitation on Dividends. If Debentures are initially
-----------------------
issued to the Trust or a trustee of such Trust in connection with the issuance
of Trust Securities by the Trust (regardless of whether Debentures continue to
be held by such Trust) and (i) there shall have occurred and be continuing an
Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest on
the Debentures by extending the interest payment period as provided herein and
such period, or any extension thereof, shall be continuing, then the Company
shall not, and shall not allow any Affiliate of the Company to, (x) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Company) or make any guarantee payments with respect to the foregoing or (y)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company or any Affiliate that
rank pari passu in all respects with or junior in interest to the Debentures
(other than, with respect to clauses (x) and (y) above, (1) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
Section 3.9. Covenants as to the Trust. For so long as the Trust
---------------------------
Securities remain outstanding, the Company shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
-------- -------
Company under this Indenture may succeed to the Company's ownership of such
Common Securities. The Company, as owner of the Common Securities, shall, except
in connection with a distribution of Debentures 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 the Declaration, cause the Trust (a) to remain a statutory trust,
(b) to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes, and (c) to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.
Section 3.10. Additional Junior Indebtedness. The Company shall not,
------------------------------
and it shall not cause or permit any Subsidiary of the Company to, incur, issue
or be obligated on any Additional Junior Indebtedness, either directly or
indirectly, by way of guarantee, suretyship or otherwise, other than Additional
Junior Indebtedness (i) that, by its terms, is expressly stated to be either
junior and subordinate or pari passu in all respects to the Debentures, and (ii)
of which the Company has notified (and, if then required under the applicable
guidelines of the regulating entity, has received approval from) the Federal
Reserve, if the Company is a bank holding company, or the OTS, if the Company is
a savings and loan holding company.
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS
----------------------------------
BY THE COMPANY AND THE TRUSTEE
------------------------------
Section 4.1. Securityholders' Lists. The Company covenants and
----------------------
agrees that it will furnish or caused to be furnished to the Trustee:
(a) on each regular record date for the Debentures, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Securityholders of the Debentures as of such record date; and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
except that no such lists need be furnished under this Section 4.1 so long as
the Trustee is in possession thereof by reason of its acting as Debenture
registrar.
Section 4.2. Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debentures (1) contained in the most recent list furnished to it as
provided in Section 4.1 or (2) received by it in the capacity of Debentures
registrar (if so acting) hereunder. The Trustee may destroy any list furnished
to it as provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Debenture for a
period of at least 6 months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Debentures with respect to their rights under this Indenture or under such
Debentures and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within 5 Business Days after the receipt of such application, at its election,
either:
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2, or
(2) inform such applicants as to the approximate number of
holders of Debentures whose names and addresses appear in
the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this
Section 4.2, and as to the approximate cost of mailing to
such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder whose name and address appear in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or
other communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Securities and Exchange Commission, if permitted or
required by applicable law, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the holders of all
Debentures, as the case may be, or would be in violation of applicable law. Such
written statement shall specify the basis of such opinion. If said Commission,
as permitted or required by applicable law, after opportunity for a hearing upon
the objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, said Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Securityholders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every holder of Debentures, by receiving and holding
the same, agrees with Company and the Trustee that neither the Company nor the
Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debentures in accordance with the provisions of subsection (b) of this
Section 4.2, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
-------------------------------------------
UPON AN EVENT OF DEFAULT
------------------------
Section 5.1. Events of Default. "Event of Default," wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) the Company defaults in the payment of any interest upon any
Debenture, including any Additional Interest in respect thereof, following the
nonpayment of any such interest for twenty or more consecutive Distribution
Periods; or
(b) the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debentures as and when the same shall
become due and payable either at maturity, upon redemption, by declaration of
acceleration or otherwise; or
(c) the Company defaults in the performance of, or breaches, any of
its covenants or agreements in this Indenture or in the terms of the Debentures
established as contemplated in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach for
a period of 60 days after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the outstanding Debentures, a
written notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(d) a court of competent jurisdiction shall enter a decree or order
for relief in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or
(e) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or of any substantial
part of its property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due; or
(f) the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (i) the distribution of the Debentures to holders of such Trust
Securities in liquidation of their interests in the Trust, (ii) the redemption
of all of the outstanding Trust Securities or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
If an Event of Default under Section 5.1(a), (d) or (e) occurs and is
continuing with respect to the Debentures, then, and in each and every such
case, unless the principal of the Debentures shall have already become due and
payable, either the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding hereunder, by notice in
writing to the Company (and to the Trustee if given by Securityholders), may
declare the entire principal of the Debentures and the interest accrued thereon,
if any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. If an Event of Default under
Section 5.1(b), (c) or (f) occurs and is continuing with respect to the
Debentures, then, and in each and every such case, unless the principal of the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by Securityholders), may proceed to remedy the default or
breach thereunder by such appropriate judicial proceedings as the Trustee or
such holders shall deem most effectual to remedy the defaulted covenant or
enforce the provisions of this Indenture so breached, either by suit in equity
or by action at law, for damages or otherwise.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Debentures shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Debentures and the principal
of and premium, if any, on the Debentures which shall have become due otherwise
than by acceleration (with interest upon such principal and premium, if any, and
Additional Interest) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other amounts due to the Trustee pursuant
to Section 6.6, if any, and (ii) all Events of Default under this Indenture,
other than the non-payment of the principal of or premium, if any, on Debentures
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein -- then and in every such case the holders
of a majority in aggregate principal amount of the Debentures then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Debentures shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Debentures shall continue as though no such proceeding had been taken.
Section 5.2. Payment of Debentures on Default; Suit Therefor. The
-------------------------------------------------
Company covenants that upon the occurrence of an Event of Default pursuant to
Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to
the Trustee, for the benefit of the holders of the Debentures the whole amount
that then shall have become due and payable on all Debentures for principal and
premium, if any, or interest, or both, as the case may be, with Additional
Interest accrued on the Debentures (to the extent that payment of such interest
is enforceable under applicable law and, if the Debentures are held by the Trust
or a trustee of such Trust, without duplication of any other amounts paid by the
Trust or a trustee in respect thereof); and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including a reasonable compensation to the Trustee, its agents, attorneys and
counsel, and any other amounts due to the Trustee under Section 6.6. In case the
Company shall fail forthwith to pay such amounts upon such demand, the Trustee,
in its own name and as trustee of an express trust, shall be entitled and
empowered to institute any actions or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company or any other obligor on such Debentures and
collect in the manner provided by law out of the property of the Company or any
other obligor on such Debentures wherever situated the moneys adjudged or
decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Bankruptcy Law, or in case a receiver or trustee shall have been appointed for
the property of the Company or such other obligor, or in the case of any other
similar judicial proceedings relative to the Company or other obligor upon the
Debentures, or to the creditors or property of the Company or such other
obligor, the Trustee, irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration of
acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.2, shall be
entitled and empowered, by intervention in such proceedings or otherwise,
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the
Debentures,
(ii) in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the
Trustee and each predecessor Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all
other amounts due to the Trustee under Section 6.6), and of the
Securityholders allowed in such judicial proceedings relative
to the Company or any other obligor on the Debentures, or to
the creditors or property of the Company or such other obligor,
unless prohibited by applicable law and regulations, to vote
on behalf of the holders of the Debentures in any election of a
trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or
Person performing similar functions in comparable proceedings,
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims, and
(iv) to distribute the same after the deduction of its charges and
expenses.
Any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Securityholders to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
amounts due to the Trustee under Section 6.6.
Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Debentures.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
holders of the Debentures, and it shall not be necessary to make any holders of
the Debentures parties to any such proceedings.
Section 5.3. Application of Moneys Collected by Trustee. Any moneys
------------------------------------------
collected by the Trustee pursuant to this Article V shall be applied in the
following order, at the date or dates fixed by the Trustee for the distribution
of such moneys, upon presentation of the several Debentures in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses incurred by, and
reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.6;
Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon
Debentures for principal (and premium, if any), and interest on the Debentures,
in respect of which or for the benefit of which money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due on such Debentures (including Additional Interest); and
Fourth: The balance, if any, to the Company.
Section 5.4. Proceedings by Securityholders. No holder of any
--------------------------------
Debenture shall have any right to institute any suit, action or proceeding for
any remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default with respect to the Debentures and
unless the holders of not less than 25% in aggregate principal amount of the
Debentures then outstanding shall have given the Trustee a written request to
institute such action, suit or proceeding and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred thereby, and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity shall have failed to
institute any such action, suit or proceeding.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Debenture to receive payment of the principal of,
premium, if any, and interest, on such Debenture when due, or to institute suit
for the enforcement of any such payment, shall not be impaired or affected
without the consent of such holder and by accepting a Debenture hereunder it is
expressly understood, intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the Trustee, that no one or
more holders of Debentures shall have any right in any manner whatsoever by
virtue or by availing itself of any provision of this Indenture to affect,
disturb or prejudice the rights of the holders of any other Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
Section 5.5. Proceedings by Trustee. In case of an Event of Default
----------------------
hereunder the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 5.6. Remedies Cumulative and Continuing; Delay or Omission
-------------------------------------------------------
Not a Waiver. Except as otherwise provided in Section 2.6, all powers and
- ------------
remedies given by this Article V to the Trustee or to the Securityholders shall,
to the extent permitted by law, be deemed cumulative and not exclusive of any
other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to the Debentures, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right,
remedy or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right, remedy or power, or shall be construed to
be a waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.4, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee (in accordance with
its duties under Section 6.1) or by the Securityholders.
Section 5.7. Direction of Proceedings and Waiver of Defaults by
-------------------------------------------------------
Majority of Securityholders. The holders of a majority in aggregate principal
- ----------------------------
amount of the Debentures affected (voting as one class) at the time outstanding
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee with respect to such Debentures; provided,
--------
however, that (subject to the provisions of Section 6.1) the Trustee shall have
- -------
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if a Responsible Officer of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability.
The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive (or modify any previously granted waiver of) any past default
or Event of Default, and its consequences, except a default (a) in the payment
of principal of, premium, if any, or interest on any of the Debentures, (b) in
respect of covenants or provisions hereof which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9; provided, however, that if the
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Debentures are held by the Trust or a trustee of such trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
-------- -------
if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section, said default or Event of
Default shall for all purposes of the Debentures and this Indenture be deemed to
have been cured and to be not continuing.
Section 5.8. Notice of Defaults. The Trustee shall, within 90 days
------------------
after the actual knowledge by a Responsible Officer of the Trustee of the
occurrence of a default with respect to the Debentures, mail to all
Securityholders, as the names and addresses of such holders appear upon the
Debenture Register, notice of all defaults with respect to the Debentures known
to the Trustee, unless such defaults shall have been cured before the giving of
such notice (the term "defaults" for the purpose of this Section 5.8 being
hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and
(f) of Section 5.1, not including periods of grace, if any, provided for
therein); provided, however, that, except in the case of default in the payment
-------- -------
of the principal of, premium, if any, or interest on any of the Debentures, the
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the withholding
of such notice is in the interests of the Securityholders.
Section 5.9. Undertaking to Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, that the provisions of
-------- -------
this Section 5.9 shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Securityholder, or group of Securityholders, holding in
the aggregate more than 10% in principal amount of the Debentures outstanding,
or to any suit instituted by any Securityholder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Debenture
against the Company on or after the same shall have become due and payable.
ARTICLE VI.
CONCERNING THE TRUSTEE
----------------------
Section 6.1. Duties and Responsibilities of Trustee. With respect to
--------------------------------------
the holders of Debentures issued hereunder, the Trustee, prior to the occurrence
of an Event of Default with respect to the Debentures and after the curing or
waiving of all Events of Default which may have occurred, with respect to the
Debentures, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants shall be read
into this Indenture against the Trustee. In case an Event of Default with
respect to the Debentures has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to
Debentures and after the curing or waiving of all Events of Default which may
have occurred
(1) the duties and obligations of the Trustee with respect
to Debentures shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be
liable except for the performance of such duties and
obligations with respect to the Debentures as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee, and
(2) in the absence of bad faith on the part of the Trustee,
the Trustee 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
Trustee and conforming to the requirements of this Indenture;
but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.7, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is ground for believing that the repayment of
such funds or liability is not assured to it under the terms of this Indenture
or indemnity satisfactory to the Trustee against such risk is not reasonably
assured to it.
Section 6.2. Reliance on Documents, Opinions, etc. Except as otherwise
------------------------------------
provided in Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, note,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers' Certificate
(unless other evidence in respect thereof be herein specifically prescribed);
and any Board Resolution may be evidenced to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default with respect to the Debentures (that has not
been cured or waived) to exercise with respect to Debentures such of the rights
and powers vested in it by this Indenture, and to use the same degree of care
and skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, coupon or other paper or document, unless requested in writing to do
so by the holders of not less than a majority in aggregate principal amount of
the outstanding Debentures affected thereby; provided, however, that if the
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payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
(including any Authenticating Agent) or attorneys, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent or
attorney appointed by it with due care; and
(h) with the exceptions of defaults under Sections 5.1(a) or (b),
the Trustee shall not be charged with knowledge of any Default or Event of
Default with respect to the Debentures unless a written notice of such Default
or Event of Default shall have been given to the Trustee by the Company or any
other obligor on the Debentures or by any holder of the Debentures.
Section 6.3. No Responsibility for Recitals, etc. The recitals
---------------------------------------
contained herein and in the Debentures (except in the certificate of
authentication of the Trustee or the Authenticating Agent) shall be taken as the
statements of the Company, and the Trustee and the Authenticating Agent assume
no responsibility for the correctness of the same. The Trustee and the
Authenticating Agent make no representations as to the validity or sufficiency
of this Indenture or of the Debentures. The Trustee and the Authenticating Agent
shall not be accountable for the use or application by the Company of any
Debentures or the proceeds of any Debentures authenticated and delivered by the
Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer
-------------------------------------------------------
Agents or Registrar May Own Debentures. The Trustee or any Authenticating Agent
- --------------------------------------
or any paying agent or any transfer agent or any Debenture registrar, in its
individual or any other capacity, may become the owner or pledgee of Debentures
with the same rights it would have if it were not Trustee, Authenticating Agent,
paying agent, transfer agent or Debenture registrar.
Section 6.5. Moneys to be Held in Trust. Subject to the provisions
---------------------------
of Section 12.4, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purpose for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company. So long as no Event of Default shall have
occurred and be continuing, all interest allowed on any such moneys shall be
paid from time to time upon the written order of the Company, signed by the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer
of the Company.
Section 6.6. Compensation and Expenses of Trustee. The Company
----------------------------------------
covenants and agrees to pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. For purposes
of clarification, this Section 6.6 does not contemplate the payment by the
Company of acceptance or annual administration fees owing to the Trustee
pursuant to the services to be provided by the Trustee under this Indenture or
the fees and expenses of the Trustee's counsel in connection with the closing of
the transactions contemplated by this Indenture. The Company also covenants to
indemnify each of the Trustee or any predecessor Trustee (and its officers,
agents, directors and employees) for, and to hold it harmless against, any and
all loss, damage, claim, liability or expense including taxes (other than taxes
based on the income of the Trustee) incurred without negligence or willful
misconduct on the part of the Trustee and arising out of or in connection with
the acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim of liability. The obligations of the
Company under this Section 6.6 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Debentures upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the holders of particular Debentures.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(d), (e) or (f), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other termination of this
Indenture.
Notwithstanding anything in this Indenture or any Debenture to the
contrary, the Trustee shall have no obligation whatsoever to advance funds to
pay any principal of or interest on or other amounts with respect to the
Debentures or otherwise advance funds to or on behalf of the Company.
Section 6.7. Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Sections 6.1 and 6.2, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee, and such certificate, in
the absence of negligence or willful misconduct on the part of the Trustee,
shall be full warrant to the Trustee for any action taken or omitted by it under
the provisions of this Indenture upon the faith thereof.
Section 6.8. Eligibility of Trustee. The Trustee hereunder shall at
----------------------
all times 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 other Person authorized under such laws to exercise
corporate trust powers, having (or whose obligations under this Indenture are
guaranteed by an affiliate having) a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000.00) 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 aforesaid supervising or examining authority, then
for the purposes of this Section 6.8 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 records of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.8, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.9.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of ss. 310(b) of the Trust Indenture Act of 1939, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
described by this Indenture.
Section 6.9. Resignation or Removal of Trustee
---------------------------------
(a) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice of such resignation to the
Company and by mailing notice thereof, at the Company's expense, to the holders
of the Debentures at their addresses as they shall appear on the Debenture
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by order of its Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee, or any Securityholder
who has been a bona fide holder of a Debenture or Debentures for at least six
months may, subject to the provisions of Section 5.9, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor Trustee.
(b) In case at any time any of the following shall occur --
(1) the Trustee shall fail to comply with the provisions
of Section 6.8 after written request therefor by the Company or
by any Securityholder who has been a bona fide holder of a
Debenture or Debentures for at least 6 months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 6.8 and shall fail to resign
after written request therefor by the Company or by any such
Securityholder, or
(3) the Trustee shall become incapable of acting, or shall
be adjudged as bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the Trustee and
appoint a successor Trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one
copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee, or, subject to
the provisions of Section 5.9, any Securityholder who has been
a bona fide holder of a Debenture or Debentures for at least 6
months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any,
as it may deem proper and prescribe, remove the Trustee and
appoint successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within 10
Business Days after such nomination the Company objects thereto, in which case,
or in the case of a failure by such holders to nominate a successor Trustee, the
Trustee so removed or any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.9 provided, may petition any
court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor Trustee as provided in
Section 6.10.
Section 6.10. Acceptance by Successor Trustee. Any successor Trustee
-------------------------------
appointed as provided in Section 6.9 shall execute, acknowledge and deliver to
the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties
and obligations with respect to the Debentures of its predecessor hereunder,
with like effect as if originally named as Trustee herein; but, nevertheless, on
the written request of the Company or of the successor Trustee, the Trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 6.6, execute and deliver an instrument transferring to
such successor Trustee all the rights and powers of the Trustee so ceasing to
act and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee thereunder. Upon request of any
such successor Trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
Trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the provisions of Section
6.6.
If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Debentures as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 6.8.
In no event shall a retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall mail notice of the succession of such
Trustee hereunder to the holders of Debentures at their addresses as they shall
appear on the Debenture Register. If the Company fails to mail such notice
within 10 Business Days after the acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Company.
Section 6.11. Succession by Merger, etc. Any corporation into which
--------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided such
--------
corporation shall be otherwise eligible and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such
Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
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right to adopt the certificate of authentication of any predecessor Trustee or
authenticate Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 6.12. Authenticating Agents. There may be one or more
----------------------
Authenticating Agents appointed by the Trustee upon the request of the Company
with power to act on its behalf and subject to its direction in the
authentication and delivery of Debentures issued upon exchange or registration
of transfer thereof as fully to all intents and purposes as though any such
Authenticating Agent had been expressly authorized to authenticate and deliver
Debentures; provided, however, that the Trustee shall have no liability to the
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Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Debentures. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $50,000,000.00 and being 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 the requirements of such authority, then for the
purposes of this Section 6.12 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.12 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the
Debentures by giving written notice of termination to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Debentures as the
names and addresses of such holders appear on the Debenture Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities with
respect to the Debentures of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to
time reasonable compensation for its services. Any Authenticating Agent shall
have no responsibility or liability for any action taken by it as such in
accordance with the directions of the Trustee.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
------------------------------
Section 7.1. Action by Securityholders. Whenever in this Indenture
-------------------------
it is provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action) the fact that at the time of taking any such action the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by such
Securityholders in person or by agent or proxy appointed in writing, or (b) by
the record of such holders of Debentures voting in favor thereof at any meeting
of such Securityholders duly called and held in accordance with the provisions
of Article VIII, or (c) by a combination of such instrument or instruments and
any such record of such a meeting of such Securityholders or (d) by any other
method the Trustee deems satisfactory.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debentures for the
determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action or revocation of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record date shall be deemed to be Securityholders for the purposes of
determining whether Securityholders of the requisite proportion of outstanding
Debentures have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding Debentures shall be computed
as of the record date; provided, however, that no such authorization, agreement
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or consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than 6 months after the record date.
Section 7.2. Proof of Execution by Securityholders. Subject to the
--------------------------------------
provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument
by a Securityholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
ownership of Debentures shall be proved by the Debenture Register or by a
certificate of the Debenture registrar. The Trustee may require such additional
proof of any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.6.
Section 7.3. Who Are Deemed Absolute Owners. Prior to due
----------------------------------
presentment for registration of transfer of any Debenture, the Company, the
Trustee, any Authenticating Agent, any paying agent, any transfer agent and any
Debenture registrar may deem the Person in whose name such Debenture shall be
registered upon the Debenture Register to be, and may treat him as, the absolute
owner of such Debenture (whether or not such Debenture shall be overdue) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Debenture and for all other purposes; and neither the
Company nor the Trustee nor any Authenticating Agent nor any paying agent nor
any transfer agent nor any Debenture registrar shall be affected by any notice
to the contrary. All such payments so made to any holder for the time being or
upon his order shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Debenture.
Section 7.4. Debentures Owned by Company Deemed Not Outstanding. In
--------------------------------------------------
determining whether the holders of the requisite aggregate principal amount of
Debentures have concurred in any direction, consent or waiver under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided, however, that for the purposes of
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determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Debentures which a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded. Debentures so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section 7.4 if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Debentures and that the pledgee
is not the Company or any such other obligor or Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any such other obligor. In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
Section 7.5. Revocation of Consents; Future Holders Bound. At any
--------------------------------------------
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 7.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action, any holder (in cases where no record date has been
set pursuant to Section 7.1) or any holder as of an applicable record date (in
cases where a record date has been set pursuant to Section 7.1) of a Debenture
(or any Debenture issued in whole or in part in exchange or substitution
therefor) the serial number of which is shown by the evidence to be included in
the Debentures the holders of which have consented to such action may, by filing
written notice with the Trustee at the Principal Office of the Trustee and upon
proof of holding as provided in Section 7.2, revoke such action so far as
concerns such Debenture (or so far as concerns the principal amount represented
by any exchanged or substituted Debenture). Except as aforesaid any such action
taken by the holder of any Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of such Debenture, and of any
Debenture issued in exchange or substitution therefor or on registration of
transfer thereof, irrespective of whether or not any notation in regard thereto
is made upon such Debenture or any Debenture issued in exchange or substitution
therefor.
ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
-------------------------
Section 8.1. Purposes of Meetings. A meeting of Securityholders may
--------------------
be called at any time and from time to time pursuant to the provisions of this
Article VIII for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of such Debentures
under any other provision of this Indenture or under applicable law.
Section 8.2. Call of Meetings by Trustee. The Trustee may at any
---------------------------
time call a meeting of Securityholders to take any action specified in Section
8.1, to be held at such time and at such place as the Trustee shall determine.
Notice of every meeting of the Securityholders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be mailed to holders of Debentures affected at their
addresses as they shall appear on the Debentures Register and, if the Company is
not a holder of Debentures, to the Company. Such notice shall be mailed not less
than 20 nor more than 180 days prior to the date fixed for the meeting.
Section 8.3. Call of Meetings by Company or Securityholders. In case
----------------------------------------------
at any time the Company pursuant to a Board Resolution, or the holders of at
least 10% in aggregate principal amount of the Debentures, as the case may be,
then outstanding, shall have requested the Trustee to call a meeting of
Securityholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such request,
then the Company or such Securityholders may determine the time and the place
for such meeting and may call such meeting to take any action authorized in
Section 8.1, by mailing notice thereof as provided in Section 8.2.
Section 8.4. Qualifications for Voting. To be entitled to vote at
---------------------------
any meeting of Securityholders a Person shall (a) be a holder of one or more
Debentures with respect to which the meeting is being held or (b) a Person
appointed by an instrument in writing as proxy by a holder of one or more such
Debentures. The only Persons who shall be entitled to be present or to speak at
any meeting of Securityholders shall be the Persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.
Section 8.5. Regulations. Notwithstanding any other provisions of
-----------
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.4, at any meeting each holder
of Debentures with respect to which such meeting is being held or proxy therefor
shall be entitled to one vote for each $1,000.00 principal amount of Debentures
held or represented by him; provided, however, that no vote shall be cast or
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counted at any meeting in respect of any Debenture challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Debentures held
by him or instruments in writing as aforesaid duly designating him as the Person
to vote on behalf of other Securityholders. Any meeting of Securityholders duly
called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from
time to time by a majority of those present, whether or not constituting a
quorum, and the meeting may be held as so adjourned without further notice.
Section 8.6. Voting. The vote upon any resolution submitted to any
------
meeting of holders of Debentures with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders or of their representatives by proxy and the serial number or
numbers of the Debentures held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more Persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 8.2. The record
shall show the serial numbers of the Debentures voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 8.7. Quorum; Actions. The Persons entitled to vote a
----------------
majority in principal amount of the Debentures then outstanding shall constitute
a quorum for a meeting of Securityholders; provided, however, that if any action
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is to be taken at such meeting with respect to a consent, waiver, request,
demand, notice, authorization, direction or other action which may be given by
the holders of not less than a specified percentage in principal amount of the
Debentures then outstanding, the Persons holding or representing such specified
percentage in principal amount of the Debentures then outstanding will
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Securityholders, be dissolved. In any other case the meeting may be adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section 8.2,
except that such notice need be given only once not less than 5 days prior to
the date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Debentures then outstanding which
shall constitute a quorum.
Except as limited by the provisos in the first paragraph of Section
9.2, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Debentures then
outstanding; provided, however, that, except as limited by the provisos in the
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first paragraph of Section 9.2, any resolution with respect to any consent,
waiver, request, demand, notice, authorization, direction or other action which
this Indenture expressly provides may be given by the holders of not less than a
specified percentage in principal amount of the Debentures then outstanding may
be adopted at a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid only by the affirmative vote of the holders of a
not less than such specified percentage in principal amount of the Debentures
then outstanding.
Any resolution passed or decision taken at any meeting of holders of
Debentures duly held in accordance with this Section shall be binding on all the
Securityholders, whether or not present or represented at the meeting.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
-----------------------
Section 9.1. Supplemental Indentures without Consent of
-------------------------------------------------------
Securityholders. The Company, when authorized by a Board Resolution, and the
- ---------------
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto, without the consent of the Securityholders, for
one or more of the following purposes:
(a) to evidence the succession of another Person to the Company,
or successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of Debentures as
the Board of Directors shall consider to be for the protection of the holders of
such Debentures, and to make the occurrence, or the occurrence and continuance,
of a default in any of such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth; provided,
--------
however, that in respect of any such additional covenant restriction or
- -------
condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided that any such action shall not materially
--------
adversely affect the interests of the holders of the Debentures;
(d) to add to, delete from, or revise the terms of Debentures,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debentures, including to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.5 (for purposes of assuring that no
registration of Debentures is required under the Securities Act); provided,
--------
however, that any such action shall not adversely affect the interests of the
- -------
holders of the Debentures then outstanding (it being understood, for purposes of
this proviso, that transfer restrictions on Debentures substantially similar to
those that were applicable to Capital Securities shall not be deemed to
materially adversely affect the holders of the Debentures);
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee;
(f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or
(g) to provide for the issuance of and establish the form and terms
and conditions of the Debentures, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or the
Debentures, or to add to the rights of the holders of Debentures.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 9.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 9.2.
Section 9.2. Supplemental Indentures with Consent of
-------------------------------------------------------
Securityholders. With the consent (evidenced as provided in Section 7.1) of the
- ---------------
holders of not less than a majority in aggregate principal amount of the
Debentures at the time outstanding affected by such supplemental indenture
(voting as a class), the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of any supplemental indenture or of modifying in any manner the rights of the
holders of the Debentures; provided, however, that no such supplemental
-------- -------
indenture shall without the consent of the holders of each Debenture then
outstanding and affected thereby (i) change the fixed maturity of any Debenture,
or reduce the principal amount thereof or any premium thereon, or reduce the
rate or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or make the principal thereof or any interest or
premium thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture; provided
--------
further, however, that if the Debentures are held by a trust or a trustee of
- ------- -------
such trust, such supplemental indenture shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities shall have consented to
such supplemental indenture; provided further, however, that if the consent of
-------- ------- -------
the Securityholder of each outstanding Debenture is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities shall
have consented to such supplemental indenture.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Debenture Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 9.3. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture pursuant to the provisions of this Article IX,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 9.4. Notation on Debentures. Debentures authenticated and
-----------------------
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article IX may bear a notation as to any matter provided for
in such supplemental indenture. If the Company or the Trustee shall so
determine, new Debentures so modified as to conform, in the opinion of the Board
of Directors of the Company, to any modification of this Indenture contained in
any such supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee or the Authenticating Agent and delivered in
exchange for the Debentures then outstanding.
Section 9.5. Evidence of Compliance of Supplemental Indenture to be
-------------------------------------------------------
Furnished to Trustee. The Trustee, subject to the provisions of Sections 6.1 and
- --------------------
6.2, shall, in addition to the documents required by Section 14.6, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article IX is authorized or permitted by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee under the provisions of this
Article IX to join in the execution thereof.
ARTICLE X.
REDEMPTION OF SECURITIES
------------------------
Section 10.1. Optional Redemption. The Company shall have the right
--------------------
(subject to the receipt by the Company of prior approval (i) if the Company is a
bank holding company, from the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve or (ii) if the
Company is a savings and loan holding company, from the OTS, if then required
under applicable capital guidelines or policies of the OTS) to redeem the
Debentures, in whole or in part, but in all cases in a principal amount with
integral multiples of $1,000.00, on any Interest Payment Date on or after the
Interest Payment Date in December 2009 (the "Redemption Date"), at the
----------------
Redemption Price.
Section 10.2. Special Event Redemption. If a Special Event shall
------------------------
occur and be continuing, the Company shall have the right (subject to the
receipt by the Company of prior approval (i) if the Company is a bank holding
company, from the Federal Reserve, if then required under applicable capital
guidelines or policies of the Federal Reserve or (ii) if the Company is a
savings and loan holding company, from the OTS, if then required under
applicable capital guidelines or policies of the OTS) to redeem the Debentures
in whole, but not in part, at any Interest Payment Date, within 120 days
following the occurrence of such Special Event (the "Special Redemption Date")
-------------------------
at the Special Redemption Price.
Section 10.3. Notice of Redemption; Selection of Debentures. In case
---------------------------------------------
the Company shall desire to exercise the right to redeem all, or, as the case
may be, any part of the Debentures, it shall cause to be mailed a notice of such
redemption at least 30 and not more than 60 days prior to the Redemption Date or
the Special Redemption Date to the holders of Debentures so to be redeemed as a
whole or in part at their last addresses as the same appear on the Debenture
Register. Such mailing shall be by first class mail. The notice if mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice. In any case, failure to give
such notice by mail or any defect in the notice to the holder of any Debenture
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the CUSIP number, if any,
of the Debentures to be redeemed, the Redemption Date or the Special Redemption
Date, as applicable, the Redemption Price or the Special Redemption Price, as
applicable, at which Debentures are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Debentures, that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portions thereof to be redeemed will cease to accrue. If less than all
the Debentures are to be redeemed the notice of redemption shall specify the
numbers of the Debentures to be redeemed. In case the Debentures are to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion thereof will be
issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Section 10.4. Payment of Debentures Called for Redemption. If notice
-------------------------------------------
of redemption has been given as provided in Section 10.3, the Debentures or
portions of Debentures with respect to which such notice has been given shall
become due and payable on the Redemption Date or Special Redemption Date, as
applicable, and at the place or places stated in such notice at the applicable
Redemption Price or Special Redemption Price and on and after said date (unless
the Company shall default in the payment of such Debentures at the Redemption
Price or Special Redemption Price, as applicable) interest on the Debentures or
portions of Debentures so called for redemption shall cease to accrue. On
presentation and surrender of such Debentures at a place of payment specified in
said notice, such Debentures or the specified portions thereof shall be paid and
redeemed by the Company at the applicable Redemption Price or Special Redemption
Price.
Upon presentation of any Debenture redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Debenture or
Debentures of authorized denominations, in principal amount equal to the
unredeemed portion of the Debenture so presented.
ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
-------------------------------------------------
Section 11.1. Company May Consolidate, etc., on Certain Terms.
-------------------------------------------------------
Nothing contained in this Indenture or in the Debentures shall prevent any
consolidation or merger of the Company with or into any other Person (whether or
not affiliated with the Company) or successive consolidations or mergers in
which the Company or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance, transfer or other disposition of the
property of the Company or its successor or successors as an entirety, or
substantially as an entirety, to any other Person (whether or not affiliated
with the Company, or its successor or successors) authorized to acquire and
operate the same; provided, however, that the Company hereby covenants and
-------- -------
agrees that, upon any such consolidation, merger (where the Company is not the
surviving corporation), sale, conveyance, transfer or other disposition, the due
and punctual payment of the principal of (and premium, if any) and interest on
all of the Debentures in accordance with their terms, according to their tenor,
and the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept or performed by the Company, shall be
expressly assumed by supplemental indenture satisfactory in form to the Trustee
executed and delivered to the Trustee by the entity formed by such
consolidation, or into which the Company shall have been merged, or by the
entity which shall have acquired such property.
Section 11.2. Successor Entity to be Substituted. In case of any such
----------------------------------
consolidation, merger, sale, conveyance, transfer or other disposition and upon
the assumption by the successor entity, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Debentures and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the Company, and
thereupon the predecessor entity shall be relieved of any further liability or
obligation hereunder or upon the Debentures. Such successor entity thereupon may
cause to be signed, and may issue in its own name, any or all of the Debentures
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee or the Authenticating Agent; and, upon the order of
such successor entity instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee or the
Authenticating Agent shall authenticate and deliver any Debentures which
previously shall have been signed and delivered by the officers of the Company,
to the Trustee or the Authenticating Agent for authentication, and any
Debentures which such successor entity thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating Agent for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof.
Section 11.3. Opinion of Counsel to be Given to Trustee. The Trustee,
-----------------------------------------
subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to
the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as
conclusive evidence that any consolidation, merger, sale, conveyance, transfer
or other disposition, and any assumption, permitted or required by the terms of
this Article XI complies with the provisions of this Article XI.
ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
Section 12.1. Discharge of Indenture. When
----------------------
(a) the Company shall deliver to the Trustee for cancellation all
Debentures theretofore authenticated (other than any Debentures
which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.6) and not
theretofore canceled, or
(b) all the Debentures not theretofore canceled or delivered to the
Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within 1 year or
are to be called for redemption within 1 year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds, which shall be immediately due and
payable, sufficient to pay at maturity or upon redemption all
of the Debentures (other than any Debentures which shall have
been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 2.6) not theretofore
canceled or delivered to the Trustee for cancellation,
including principal and premium, if any, and interest due or to
become due to such date of maturity or redemption date, as the
case may be, but excluding, however, the amount of any moneys
for the payment of principal of, and premium, if any, or
interest on the Debentures (1) theretofore repaid to the
Company in accordance with the provisions of Section 12.4, or
(2) paid to any state or to the District of Columbia pursuant
to its unclaimed property or similar laws,
and if in the case of either clause (a) or clause (b) the Company shall also pay
or cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect except for the provisions of
Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall
survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6
and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with, and at the cost and expense
of the Company, shall execute proper instruments acknowledging satisfaction of
and discharging this Indenture. The Company agrees to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the Trustee
in connection with this Indenture or the Debentures.
Section 12.2. Deposited Moneys to be Held in Trust by Trustee.
-------------------------------------------------------
Subject to the provisions of Section 12.4, all moneys deposited with the Trustee
pursuant to Section 12.1 shall be held in trust in a non-interest bearing
account and applied by it to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the holders
of the particular Debentures for the payment of which such moneys have been
deposited with the Trustee, of all sums due and to become due thereon for
principal, and premium, if any, and interest.
Section 12.3. Paying Agent to Repay Moneys Held. Upon the
-------------------------------------------
satisfaction and discharge of this Indenture all moneys then held by any paying
agent of the Debentures (other than the Trustee) shall, upon demand of the
Company, be repaid to it or paid to the Trustee, and thereupon such paying agent
shall be released from all further liability with respect to such moneys.
Section 12.4. Return of Unclaimed Moneys. Any moneys deposited with
--------------------------
or paid to the Trustee or any paying agent for payment of the principal of, and
premium, if any, or interest on Debentures and not applied but remaining
unclaimed by the holders of Debentures for 2 years after the date upon which the
principal of, and premium, if any, or interest on such Debentures, as the case
may be, shall have become due and payable, shall, subject to applicable
escheatment laws, be repaid to the Company by the Trustee or such paying agent
on written demand; and the holder of any of the Debentures shall thereafter look
only to the Company for any payment which such holder may be entitled to
collect, and all liability of the Trustee or such paying agent with respect to
such moneys shall thereupon cease.
ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
----------------------------------------
OFFICERS AND DIRECTORS
----------------------
Section 13.1. Indenture and Debentures Solely Corporate Obligations.
------------------------------------------------------
No recourse for the payment of the principal of or premium, if any, or interest
on any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture, or in any such
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, officer or
director, as such, past, present or future, of the Company or of any successor
Person of the Company, either directly or through the Company or any successor
Person of the Company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Debentures.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
------------------------
Section 14.1. Successors. All the covenants, stipulations, promises
----------
and agreements of the Company in this Indenture shall bind its successors and
assigns whether so expressed or not.
Section 14.2. Official Acts by Successor Entity. Any act or
-------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee,
officer or other authorized Person of any entity that shall at the time be the
lawful successor of the Company.
Section 14.3. Surrender of Company Powers. The Company by instrument
---------------------------
in writing executed by authority of at least 2/3 (two-thirds) of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company and thereupon such power so surrendered shall terminate both as
to the Company, and as to any permitted successor.
Section 14.4. Addresses for Notices, etc. Any notice, consent,
-----------------------------
direction, request, authorization, waiver or demand which by any provision of
this Indenture is required or permitted to be given, made, furnished or served
by the Trustee or by the Securityholders on or to the Company may be given or
served in writing by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company, with the Trustee for the purpose) to the Company, 600 James S.
McDonnell Boulevard, Hazelwood, Missouri 63042, Attention: Lisa K. Vansickle.
Any notice, consent, direction, request, authorization, waiver or demand by any
Securityholder or the Company to or upon the Trustee shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the office of the Trustee, addressed to the Trustee, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate
Trust Administration. Any notice, consent, direction, request, authorization,
waiver or demand on or to any Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
address set forth in the Debenture Register.
Section 14.5. Governing Law. This Indenture and each Debenture shall
-------------
be deemed to be a contract made under the law of the State of New York, and for
all purposes shall be governed by and construed in accordance with the law of
said State, without regard to conflict of laws principles thereof.
Section 14.6. Evidence of Compliance with Conditions Precedent. Upon
------------------------------------------------
any application or demand by the Company to the Trustee to take any action under
any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that in the opinion of the signers all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not in the opinion of such
person, such condition or covenant has been complied with.
Section 14.7. Table of Contents, Headings, etc. The table of contents
--------------------------------
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 14.8. Execution in Counterparts. This Indenture may be
---------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
Section 14.9. Separability. In case any one or more of the provisions
------------
contained in this Indenture or in the Debentures shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Indenture or
of such Debentures, but this Indenture and such Debentures shall be construed as
if such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 14.10. Assignment. The Company will have the right at all
----------
times to assign any of its rights or obligations under this Indenture to a
direct or indirect wholly owned Subsidiary of the Company, provided that, in the
event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, this Indenture is binding upon and inures
to the benefit of the parties hereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties hereto.
Section 14.11. Acknowledgment of Rights. The Company agrees that, with
------------------------
respect to any Debentures held by the Trust or the Institutional Trustee of the
Trust, if the Institutional Trustee of the Trust fails to enforce its rights
under this Indenture as the holder of Debentures held as the assets of such
Trust after the holders of a majority in Liquidation Amount of the Capital
Securities of such Trust have so directed such Institutional Trustee, a holder
of record of such Capital Securities may, to the fullest extent permitted by
law, institute legal proceedings directly against the Company to enforce such
Institutional Trustee's rights under this Indenture without first instituting
any legal proceedings against such trustee or any other Person. Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest (or premium,
if any) or principal on the Debentures on the date such interest (or premium, if
any) or principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company agrees that a holder of record of Capital
Securities of the Trust may directly institute a proceeding against the Company
for enforcement of payment to such holder directly of the principal of (or
premium, if any) or interest on the Debentures having an aggregate principal
amount equal to the aggregate Liquidation Amount of the Capital Securities of
such holder on or after the respective due date specified in the Debentures.
ARTICLE XV.
SUBORDINATION OF DEBENTURES
---------------------------
Section 15.1. Agreement to Subordinate. The Company covenants and
-------------------------
agrees, and each holder of Debentures by such Securityholder's acceptance
thereof likewise covenants and agrees, that all Debentures shall be issued
subject to the provisions of this Article XV; and each holder of a Debenture,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Company of the principal of, and premium, if any,
and interest on all Debentures shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred; provided,
--------
however, that the Debentures shall rank pari passu in right of payment with the
- -------
Company's Floating Rate Junior Subordinated Deferrable Interest Debentures due
April 2032 issued pursuant to an Indenture dated as of April 2002 by and between
the Company and State Street Bank and Trust of Connecticut N.A. and the
Company's Floating Rate Junior Subordinated Deferrable Interest Debentures due
September 20, 2034 issued pursuant to an Indenture dated as of September 20,
2004 by and between the Company and Wilmington Trust Company.
No provision of this Article XV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 15.2. Default on Senior Indebtedness. In the event and during
------------------------------
the continuation of any default by the Company in the payment of principal,
premium, interest or any other payment due on any Senior Indebtedness of the
Company following any grace period, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default and
such acceleration has not been rescinded or canceled and such Senior
Indebtedness has not been paid in full, then, in either case, no payment shall
be made by the Company with respect to the principal (including redemption) of,
or premium, if any, or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing
within 90 days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.
Section 15.3. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company, on account
of the principal (and premium, if any) or interest on the Debentures. Upon any
such dissolution or winding-up or liquidation or reorganization, any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Securityholders or the
Trustee would be entitled to receive from the Company, except for the provisions
of this Article XV, shall be paid by the Company, or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Securityholders or by the Trustee under this Indenture
if received by them or it, directly to the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness, remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debentures to the payment of all Senior Indebtedness, that may at the
time be outstanding, provided that (i) such Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XI of this Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article XI
of this Indenture. Nothing in Section 15.2 or in this Section shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this
Indenture.
Section 15.4. Subrogation. Subject to the payment in full of all
-----------
Senior Indebtedness, the Securityholders shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, applicable to such Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Debentures shall be paid in full. For the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Trustee would
be entitled except for the provisions of this Article XV, and no payment over
pursuant to the provisions of this Article XV to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Debentures be deemed to be a payment or
distribution by the Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article XV are and are intended solely
for the purposes of defining the relative rights of the holders of the
Securities, on the one hand, and the holders of such Senior Indebtedness, on the
other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or
in the Debentures is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Debentures and creditors of the Company, other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article XV of the holders of such Senior
Indebtedness in respect of cash, property or securities of the Company, received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
Section 15.5. Trustee to Effectuate Subordination. Each
---------------------------------------------
Securityholder by such Securityholder's acceptance thereof authorizes and
directs the Trustee on such Securityholder's behalf to take such action as may
be necessary or appropriate to effectuate the subordination provided in this
Article XV and appoints the Trustee such Securityholder's attorney-in-fact for
any and all such purposes.
Section 15.6. Notice by the Company. The Company shall give prompt
----------------------
written notice to a Responsible Officer of the Trustee at the Principal Office
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Debentures
pursuant to the provisions of this Article XV. Notwithstanding the provisions of
this Article XV or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee at the Principal Office of the Trustee shall
have received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
-------- -------
provided for in this Section at least 2 Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Debenture), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within 2 Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness (or a
trustee or representative on behalf of such holder), to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee or
representative on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness.
------------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article XV in respect of any Senior Indebtedness at any time held
by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XV, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior Indebtedness and, subject
to the provisions of Article VI of this Indenture, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Securityholders, the Company or any other Person money or assets to which any
holder of such Senior Indebtedness shall be entitled by virtue of this Article
XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.6.
Section 15.8. Subordination May Not Be Impaired. No right of any
-----------------------------------
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company, or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company,
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Securityholders, without
incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debentures to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company, and any other Person.
Signatures appear on the following page
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
FIRST BANKS, INC.
By /s/ Allen H. Blake
------------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
WILMINGTON TRUST COMPANY, as Trustee
By /s/ Christopher J. Monigle
------------------------------------
Name: Christopher J. Monigle
Title: Asssistant Vice President
EXHIBIT A
FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATIONS UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
First Banks, Inc.
November 23, 2004
First Banks, Inc., a Missouri corporation (the "Company" which term
includes any successor Person under the Indenture hereinafter referred to), for
value received promises to pay to Wilmington Trust Company, not in its
individual capacity but solely as Institutional Trustee for First Bank Statutory
Trust III (the "Holder") or registered assigns, the principal sum of forty-one
million two hundred thirty-eight thousand dollars ($41,238,000.00) on December
15, 2034, and to pay interest on said principal sum from November 23, 2004, or
from the most recent Interest Payment Date (as defined below) to which interest
has been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 15, June 15, September 15 and December 15 of each
year or if such day is not a Business Day, then the next succeeding Business Day
(each such date, an "Interest Payment Date") (it being understood that interest
accrues for any such non-Business Day), commencing on the Interest Payment Date
in March 2005, at an annual rate equal to 4.54% beginning on (and including) the
date of original issuance and ending on (but excluding) the Interest Payment
Date in March 2005 and at an annual rate for each successive period beginning on
(and including) the Interest Payment Date in March 2005, and each succeeding
Interest Payment Date, and ending on (but excluding) the next succeeding
Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR,
determined as described below, plus 2.18% (the "Coupon Rate"), applied to the
principal amount hereof, until the principal hereof is paid or duly provided for
or made available for payment, and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest (including Additional
Interest) at the Interest Rate in effect for each applicable period, compounded
quarterly, from the dates such amounts are due until they are paid or made
available for payment. The amount of interest payable for any period will be
computed on the basis of the actual number of days in the Distribution Period
concerned divided by 360. The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Debenture (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be five Business Days
prior to the day on which the relevant Interest Payment Date occurs. Any such
interest installment not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such regular record date and may be paid to
the Person in whose name this Debenture (or one or more Predecessor Securities)
is registered at the close of business on a special record date.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Trustee will request
the principal London offices of four leading banks in the London interbank
market to provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar deposits
having a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Trustee will
request four major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Debentures will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
-------- -------
mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire transfer by such holder has not been received
by the Company or by wire transfer to an account appropriately designated by the
holder hereof. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Trustee.
So long as no Extension Event of Default has occurred and is
continuing, the Company shall have the right, from time to time, and without
causing an Event of Default, to defer payments of interest on the Debentures by
extending the interest payment period on the Debentures at any time and from
time to time during the term of the Debentures, for up to 20 consecutive
quarterly periods (each such extended interest payment period, an "Extension
Period"), during which Extension Period no interest (including Additional
Interest) shall be due and payable (except any Additional Sums that may be due
and payable). No Extension Period may end on a date other than an Interest
Payment Date. During an Extension Period, interest will continue to accrue on
the Debentures, and interest on such accrued interest will accrue at an annual
rate equal to the Interest Rate in effect for such Extension Period, compounded
quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to
herein as "Additional Interest"). At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however, that no
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Extension Period may extend beyond the Maturity Date; provided further, however,
-------- ------- -------
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to engage in any of the activities or transactions
described on the reverse side hereof and in the Indenture. Prior to the
termination of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The Company must give the
Trustee notice of its election to begin or extend an Extension Period by the
close of business at least 5 Business Days prior to the Interest Payment Date
with respect to which interest on the Debentures would have been payable except
for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has duly executed this certificate.
FIRST BANKS, INC.
By
-------------------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By:
------------------------------------
Authorized Officer
[FORM OF REVERSE OF DEBENTURE]
This Debenture is one of the floating rate junior subordinated
deferrable interest debentures of the Company, all issued or to be issued under
and pursuant to the Indenture dated as of November 23, 2004 (the "Indenture"),
duly executed and delivered between the Company and the Trustee, to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the
Interest Payment Date in December 2009, the Company shall have the right to
redeem the Debentures in whole, but not in part, at any Interest Payment Date,
within 120 days following the occurrence of such Special Event, at the Special
Redemption Price.
In addition, the Company shall have the right to redeem the Debentures,
in whole or in part, but in all cases in a principal amount with integral
multiples of $1,000.00, on any Interest Payment Date on or after the Interest
Payment Date in December 2009, at the Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Notwithstanding the foregoing, any redemption of Debentures by the
Company shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default described in Section 5.1(a), (d) or (e) of
the Indenture shall have occurred and be continuing, upon demand of the Trustee,
the principal of all of the Debentures shall become due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
-------- -------
without the consent of the holders of each Debenture then outstanding and
affected thereby (i) change the fixed maturity of any Debenture, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Debentures at the time outstanding
on behalf of the holders of all of the Debentures to waive (or modify any
previously granted waiver of) any past default or Event of Default, and its
consequences, except a default (a) in the payment of principal of, premium, if
any, or interest on any of the Debentures, (b) in respect of covenants or
provisions hereof or of the Indenture which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9 of the Indenture; provided, however,
-------- -------
that if the Debentures are held by the Trust or a trustee of such trust, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
-------- -------
if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of the Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by the Indenture, said default or Event of
Default shall for all purposes of the Debentures and the Indenture be deemed to
have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest, including Additional Interest, on this Debenture at the time and place
and at the rate and in the money herein prescribed.
The Company has agreed that if Debentures are initially issued to the
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such Trust) and (i) there shall have occurred and be continuing an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee, or (iii) the Company shall
have given notice of its election to defer payments of interest on the
Debentures by extending the interest payment period as provided herein and such
Extension Period, or any extension thereof, shall be continuing, then the
Company shall not, and shall not allow any Affiliate of the Company to, (x)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or its Affiliates' capital stock (other than payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (x) and (y) above, (1)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form
without coupons and in minimum denominations of $100,000.00 and any multiple of
$1,000.00 in excess thereof. As provided in the Indenture and subject to the
transfer restrictions and limitations as may be contained herein and therein
from time to time, this Debenture is transferable by the holder hereof on the
Debenture Register of the Company. Upon due presentment for registration of
transfer of any Debenture at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in
Section 3.2 of the Indenture, the Company shall execute, the Company or the
Trustee shall register and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in the name of the transferee or
transferees a new Debenture for a like aggregate principal amount. All
Debentures presented for registration of transfer or for exchange or payment
shall (if so required by the Company or the Trustee or the Authenticating Agent)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to, the Company and the Trustee or the
Authenticating Agent duly executed by the holder or his attorney duly authorized
in writing. No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
Prior to due presentment for registration of transfer of any Debenture,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Debenture registrar may deem the Person in whose name
such Debenture shall be registered upon the Debenture Register to be, and may
treat him as, the absolute owner of such Debenture (whether or not such
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the principal of, premium, if any, and interest on such Debenture and
for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Debenture registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or
interest on any Debenture, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any supplemental indenture, or
in any such Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, officer or director, as such, past, present or future, of the Company
or of any successor Person of the Company, either directly or through the
Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the
meanings assigned in the Indenture dated as of the date of original issuance of
this Debenture between the Trustee and the Company.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
Exhibit 4.36
=========================================
AMENDED AND RESTATED DECLARATION
OF TRUST
by and among
WILMINGTON TRUST COMPANY,
as Delaware Trustee,
WILMINGTON TRUST COMPANY,
as Institutional Trustee,
FIRST BANKS, INC.
as Sponsor,
and
PETER D. WIMMER, TERRANCE M. MCCARTHY and
LISA K. VANSICKLE,
as Administrators,
Dated as of November 23, 2004
=========================================
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I INTERPRETATION AND DEFINITIONS..........................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II ORGANIZATION...........................................................................................8
Section 2.1. Name...................................................................................8
Section 2.2. Office.................................................................................8
Section 2.3. Purpose................................................................................8
Section 2.4. Authority..............................................................................8
Section 2.5. Title to Property of the Trust.........................................................8
Section 2.6. Powers and Duties of the Trustees and the Administrators...............................9
Section 2.7. Prohibition of Actions by the Trust and the Institutional Trustee.....................12
Section 2.8. Powers and Duties of the Institutional Trustee........................................13
Section 2.9. Certain Duties and Responsibilities of the Trustees and Administrators................14
Section 2.10. Certain Rights of Institutional Trustee...............................................15
Section 2.11. Delaware Trustee......................................................................17
Section 2.12. Execution of Documents................................................................17
Section 2.13. Not Responsible for Recitals or Issuance of Securities................................17
Section 2.14. Duration of Trust.....................................................................17
Section 2.15. Mergers...............................................................................18
ARTICLE III SPONSOR..............................................................................................19
Section 3.1. Sponsor's Purchase of Common Securities...............................................19
Section 3.2. Responsibilities of the Sponsor.......................................................19
Section 3.3. Expenses..............................................................................19
Section 3.4. Right to Proceed......................................................................20
ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS..............................................................20
Section 4.1. Number of Trustees....................................................................20
Section 4.2. Delaware Trustee; Eligibility.........................................................20
Section 4.3. Institutional Trustee; Eligibility....................................................21
Section 4.4. Administrators........................................................................21
Section 4.5. Appointment, Removal and Resignation of Trustees and Administrators...................21
Section 4.6. Vacancies Among Trustees..............................................................23
Section 4.7. Effect of Vacancies...................................................................23
Section 4.8. Meetings of the Trustees and the Administrators.......................................23
Section 4.9. Delegation of Power...................................................................24
Section 4.10. Conversion, Consolidation or Succession to Business...................................24
ARTICLE V DISTRIBUTIONS..........................................................................................24
Section 5.1. Distributions.........................................................................24
ARTICLE VI ISSUANCE OF SECURITIES................................................................................24
Section 6.1. General Provisions Regarding Securities...............................................24
Section 6.2. Paying Agent, Transfer Agent and Registrar............................................25
Section 6.3. Form and Dating.......................................................................25
Section 6.4. Book-Entry Capital Securities.........................................................26
Section 6.5. Mutilated, Destroyed, Lost or Stolen Certificates.....................................27
Section 6.6. Temporary Securities..................................................................28
Section 6.7. Cancellation..........................................................................28
Section 6.8. CUSIP Numbers.........................................................................28
Section 6.9. Rights of Holders; Waivers of Past Defaults...........................................28
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST.................................................................30
Section 7.1. Dissolution and Termination of Trust..................................................30
ARTICLE VIII TRANSFER OF INTERESTS...............................................................................31
Section 8.1. General...............................................................................31
Section 8.2. Transfer Procedures and Restrictions..................................................31
Section 8.3. Deemed Security Holders...............................................................34
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS.....................34
Section 9.1. Liability.............................................................................34
Section 9.2. Exculpation...........................................................................35
Section 9.3. Fiduciary Duty........................................................................35
Section 9.4. Indemnification.......................................................................35
Section 9.5. Outside Businesses....................................................................37
Section 9.6. Compensation; Fee.....................................................................38
ARTICLE X ACCOUNTING.............................................................................................38
Section 10.1. Fiscal Year...........................................................................38
Section 10.2. Certain Accounting Matters............................................................38
Section 10.3. Banking...............................................................................39
Section 10.4. Withholding...........................................................................39
ARTICLE XI AMENDMENTS AND MEETINGS...............................................................................39
Section 11.1. Amendments............................................................................39
Section 11.2. Meetings of the Holders of Securities; Action by Written Consent......................41
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE....................................42
Section 12.1. Representations and Warranties of Institutional Trustee...............................42
Section 12.2. Representations of the Delaware Trustee...............................................42
ARTICLE XIII MISCELLANEOUS.......................................................................................43
Section 13.1. Notices...............................................................................43
Section 13.2. Governing Law.........................................................................44
Section 13.3. Intention of the Parties..............................................................44
Section 13.4. Headings..............................................................................44
Section 13.5. Successors and Assigns................................................................44
Section 13.6. Partial Enforceability................................................................44
Section 13.7. Counterparts..........................................................................45
Annex I....................Terms of Securities
Exhibit A-1................Form of Global Capital Security Certificate
Exhibit A-2................Form of Common Security Certificate
Exhibit B..................Specimen of Initial Debenture
Exhibit C..................Placement Agreement
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FIRST BANK STATUTORY TRUST III
November 23, 2004
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
-----------
effective as of November 23, 2004, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and by the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;
WHEREAS, the Trustees, the Administrators and the Sponsor established
First Bank Statutory Trust III (the "Trust"), a statutory trust under the
-----
Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated
as of November 4, 2004 (the "Original Declaration"), and a Certificate of Trust
--------------------
filed with the Secretary of State of the State of Delaware on November 4, 2004,
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 (as defined
herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, the Trustees, the Administrators and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
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 Declaration constitutes 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 Declaration. The parties hereto
hereby agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.1. Definitions.
-----------
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural and vice
versa.
"Additional Interest" has the meaning set forth in the Indenture.
-------------------
"Administrative Action" has the meaning set forth in paragraph 4(a) of
----------------------
Annex I.
"Administrators" means each of Peter D. Wimmer, Terrance M. McCarthy
--------------
and Lisa K. Vansickle, solely in such Person's capacity as Administrator of the
Trust created and continued hereunder and not in such Person's individual
capacity, or such Administrator's successor in interest in such capacity, or any
successor appointed as herein provided.
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act or any successor rule thereunder.
"Applicable Depositary Procedures" means, with respect to any transfer
---------------------------------
or transaction involving a Book-Entry Capital Security, the rules and procedures
of the Depositary for such Book-Entry Capital Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authorized Officer" of a Person means any Person that is authorized to
------------------
bind such Person.
"Bankruptcy Event" means, with respect to any Person:
----------------
(a) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
(b) such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of such Person of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.
"Book-Entry Capital Securities" means a Capital Security, the ownership
-----------------------------
and transfer of which shall be made through book entries by a Depositary.
"Business Day" means any day other than Saturday, Sunday or any other
------------
day on which banking institutions in New York City or Wilmington, Delaware are
permitted or required by any applicable law or executive order to close.
"Capital Securities" has the meaning set forth in paragraph 1(a) of
-------------------
Annex I.
"Capital Security Certificate" means a definitive Certificate in fully
----------------------------
registered form representing a Capital Security substantially in the form of
Exhibit A-1.
"Capital Treatment Event" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Certificate" means any certificate evidencing Securities.
-----------
"Closing Date" has the meaning set forth in the Placement Agreement.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor legislation.
"Common Securities" has the meaning set forth in paragraph 1(b) of
-----------------
Annex I.
"Common Security Certificate" means a definitive Certificate in fully
---------------------------
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"Company Indemnified Person" means (a) any Administrator; (b) any
----------------------------
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Institutional Trustee
----------------------
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-1600, Attn: Corporate Trust
Administration.
"Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.
-----------
"Covered Person" means: (a) any Administrator, officer, director,
---------------
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.
"Creditor" has the meaning set forth in Section 3.3.
--------
"Debenture Issuer" means First Banks, Inc., a Missouri corporation, in
-----------------
its capacity as issuer of the Debentures under the Indenture.
"Debenture Trustee" means Wilmington Trust Company, as trustee under
------------------
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"Debentures" means the Floating Rate Junior Subordinated Deferrable
----------
Interest Debentures due 2034 to be issued by the Debenture Issuer under the
Indenture.
"Defaulted Interest" has the meaning set forth in the Indenture.
------------------
"Definitive Capital Securities Certificates" means Capital Securities
--------------------------------------------
issued in certificated, fully registered form that are not Global Capital
Securities.
"Depositary" means an organization registered as a clearing agency
----------
under the Exchange Act that is designated as Depositary by the Administrators or
any successor thereto. DTC will be the initial Depositary.
"Depositary Participant" means a broker, dealer, bank, other financial
-----------------------
institution or other Person for whom from time to time the Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.
"Delaware Trustee" has the meaning set forth in Section 4.2.
----------------
"Determination Date" has the meaning set forth in paragraph 4(a) of
-------------------
Annex I.
"Direct Action" has the meaning set forth in Section 2.8(d).
-------------
"Distribution" means a distribution payable to Holders of Securities in
------------
accordance with Section 5.1.
"Distribution Payment Date" has the meaning set forth in paragraph 2(b)
-------------------------
of Annex I.
"Distribution Period" means (i) with respect to the Distribution paid
--------------------
on the first Distribution Payment Date, the period beginning on (and including)
the date of original issuance and ending on (but excluding) the Distribution
Payment Date in March 2005 and (ii) thereafter, with respect to a Distribution
paid on each successive Distribution Payment Date, the period beginning on (and
including) the preceding Distribution Payment Date and ending on (but excluding)
such current Distribution Payment Date.
"Distribution Rate" means, for the Distribution Period beginning on
------------------
(and including) the date of original issuance and ending on (but excluding) the
Distribution Payment Date in March 2005, the rate per annum of 4.54%, and for
each Distribution Period beginning on or after the Distribution Payment Date in
March 2005, the Coupon Rate for such Distribution Period.
"DTC" means The Depository Trust Company or any successor thereto.
---
"Event of Default" means any one of the following events (whatever the
----------------
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of an Indenture Event of Default; or
(b) default by the Trust in the payment of any Redemption Price or
Special Redemption Price of any Security when it becomes due and payable; or
(c) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Institutional Trustee in this
Declaration (other than those specified in clause (a) or (b) above) and
continuation of such default or breach for a period of 60 days after there has
been given, by registered or certified mail to the Institutional Trustee and to
the Sponsor by the Holders of at least 25% in aggregate liquidation amount of
the outstanding Capital Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(d) the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
-------------
from time to time, or any successor legislation.
"Extension Event of Default" has the meaning set forth in the
-----------------------------
Indenture.
"Extension Period" has the meaning set forth in paragraph 2(b) of Annex
----------------
I.
"Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.
---------------
"Fiduciary Indemnified Person" shall mean each of the Institutional
------------------------------
Trustee (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or
Delaware Trustee and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or Delaware Trustee.
"Fiscal Year" has the meaning set forth in Section 10.1.
-----------
"Global Capital Security" means a Capital Securities Certificate
-------------------------
evidencing ownership of Book-Entry Capital Securities.
"Guarantee" means the guarantee agreement to be dated as of the Closing
---------
Date, of the Sponsor in respect of the Capital Securities.
"Holder" means a Person in whose name a Certificate representing 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" means the Indenture dated as of the Closing Date, between
---------
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental indenture may be amended, supplemented or otherwise modified
from time to time.
"Indenture Event of Default" means an "Event of Default" as defined in
---------------------------
the Indenture.
"Institutional Trustee" means the Trustee meeting the eligibility
----------------------
requirements set forth in Section 4.3.
"Interest" means any interest due on the Debentures including any
--------
Additional Interest and Defaulted Interest.
"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 paragraph 4(a)
-------------------------
of Annex I.
"Liquidation" has the meaning set forth in paragraph 3 of Annex I.
-----------
"Liquidation Distribution" has the meaning set forth in paragraph 3 of
-------------------------
Annex I.
"Majority in liquidation amount of the Securities" means Holder(s) of
-------------------------------------------------
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities 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 (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Officers' Certificates" means, with respect to any Person, a
-----------------------
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
providing for it in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read
the covenant or condition and the definitions relating thereto;
(b a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OTS" has the meaning set forth in paragraph 3 of Annex I.
---
"Owner" means each Person who is the beneficial owner of Book-Entry
-----
Capital Securities as reflected in the records of the Depositary or, if a
Depositary Participant is not the beneficial owner, then the beneficial owner as
reflected in the records of the Depositary Participant.
"Paying Agent" has the meaning specified in Section 6.2.
------------
"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.
"Placement Agreement" means the Placement Agreement relating to the
-------------------
offering and sale of Capital Securities in the form of Exhibit C.
"Property Account" has the meaning set forth in Section 2.8(c).
----------------
"Pro Rata" has the meaning set forth in paragraph 8 of Annex I.
--------
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
---
under the Securities Act.
"Quorum" means a majority of the Administrators or, if there are only
------
two Administrators, both of them.
"Redemption Date" has the meaning set forth in paragraph 4(a) of Annex
----------------
I.
"Redemption/Distribution Notice" has the meaning set forth in paragraph
------------------------------
4(e) of Annex I.
"Redemption Price" has the meaning set forth in paragraph 4(a) of Annex
----------------
I.
"Registrar" has the meaning set forth in Section 6.2.
---------
"Relevant Trustee" has the meaning set forth in Section 4.5(a).
----------------
"Responsible Officer" means, with respect to the Institutional Trustee,
-------------------
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Corporate Trust Office of the Institutional 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.
"Restricted Securities Legend" has the meaning set forth in Section
------------------------------
8.2(b).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
---------
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act.
---------
"Securities" means the Common Securities and the Capital Securities.
----------
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time, or any successor legislation.
"Special Event" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Special Redemption Date" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Special Redemption Price" has the meaning set forth in paragraph 4(a)
-------------------------
of Annex I.
"Sponsor" means First Banks, Inc., a Missouri corporation, or any
-------
successor entity in a merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
"Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware
--------------------
Code, 12 Del. C. ss.ss. 3801, et seq. as may be amended from time to time.
"Successor Entity" has the meaning set forth in Section 2.15(b).
----------------
"Successor Delaware Trustee" has the meaning set forth in Section
----------------------------
4.5(e).
"Successor Institutional Trustee" has the meaning set forth in Section
-------------------------------
4.5(b).
"Successor Securities" has the meaning set forth in Section 2.15(b).
--------------------
"Super Majority" has the meaning set forth in paragraph 5(b) of Annex
--------------
I.
"Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.
---------
"10% in liquidation amount of the Securities" means Holder(s) of
-----------------------------------------------
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities 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 (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.
-------------
"Transfer Agent" has the meaning set forth in Section 6.2.
--------------
"Treasury Regulations" means the income tax regulations, including
---------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
--------------
or owing to, the Property Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Institutional Trustee pursuant to the trusts of this
Declaration.
"Trustee" or "Trustees" means each Person who has signed this
------- --------
Declaration 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.
"U.S. Person" means a United States Person as defined in Section
------------
7701(a)(30) of the Code.
ARTICLE II
ORGANIZATION
Section 2.1. Name. The Trust is named "First Bank Statutory Trust
----
III," as such name may be modified from time to time by the Administrators
following written notice to the Holders of the Securities. The Trust's
activities may be conducted under the name of the Trust or any other name deemed
advisable by the Administrators.
Section 2.2. Office. The address of the principal office of the
------
Trust is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-1600. On at least 10 Business Days written
notice to the Holders of the Securities, the Administrators may designate
another principal office, which shall be in a state of the United States or in
the District of Columbia.
Section 2.3. Purpose. The exclusive purposes and functions of the
-------
Trust are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures, (c) to facilitate direct investment in the
assets of the Trust through issuance of the Common Securities and the Capital
Securities and (d) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, 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 2.4. Authority. Except as specifically provided in this
---------
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
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 Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.
Section 2.5. Title to Property of the Trust. Except as provided in
--------------------------------
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, 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.
Section 2.6. Powers and Duties of the Trustees and the
-------------------------------------------------------
Administrators.
- --------------
(a) The Trustees and the Administrators shall conduct the affairs
of the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the Trustees and the Administrators shall
have the authority to enter into all transactions and agreements determined by
the Institutional Trustee to be appropriate in exercising the authority, express
or implied, otherwise granted to the Trustees or the Administrators, as the case
may be, under this Declaration, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) Each Administrator shall have the power and authority
to act on behalf of the Trust with respect to the following
matters:
(A) the issuance and sale of the Securities;
(B) to cause the Trust to enter into, and to execute
and deliver on behalf of the Trust, such agreements as may
be necessary or desirable in connection with the purposes
and function of the Trust, including agreements with the
Paying Agent;
(C) ensuring compliance with the Securities Act,
applicable state securities or blue sky laws;
(D) the sending of notices (other than notices
of default), and other information regarding the Securities
and the Debentures to the Holders in accordance with this
Declaration;
(E) the consent to the appointment of a Paying Agent,
Transfer Agent and Registrar in accordance with this
Declaration, which consent shall not be unreasonably withheld
or delayed;
(F) execution and delivery of the Securities in
accordance with this Declaration;
(G) execution and delivery of closing certificates
pursuant to the Placement Agreement and the application for a
taxpayer identification number;
(H) unless otherwise determined by the Holders of a
Majority in liquidation amount of the Securities or as
otherwise required by the Statutory Trust Act, to execute on
behalf of the Trust (either acting alone or together with
any or all of the Administrators) any documents that the
Administrators have the power to execute pursuant to this
Declaration;
(I) the taking of any action incidental to the
foregoing as the Institutional Trustee may from time to time
determine is necessary or advisable to give effect to the
terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any
particular Holder);
(J) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including Distributions, voting rights,
redemptions and exchanges, and to issue relevant notices to
the Holders of Capital Securities and Holders of Common
Securities as to such actions and applicable record dates; and
(K) to duly prepare and file all applicable tax
returns and tax information reports that are required to be
filed with respect to the Trust on behalf of the Trust.
(ii) As among the Trustees and the Administrators, the
Institutional Trustee shall have the power, duty and authority to act
on behalf of the Trust with respect to the following matters:
(A) the establishment of the Property Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Property Account;
(D) the distribution through the Paying Agent of
amounts owed to the Holders in respect of the Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Securities and the Debentures to the
Holders in accordance with this Declaration;
(G) the distribution of the Trust Property in
accordance with the terms of this Declaration;
(H) to the extent provided in this Declaration, the
winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate
of cancellation with the Secretary of State of the State of
Delaware;
(I) after any Event of Default (provided that such
Event of Default is not by or with respect to the
Institutional Trustee) the taking of any action incidental
to the foregoing as the Institutional Trustee may from time to
time determine is necessary or advisable to give effect to the
terms of this Declaration and protect and conserve the Trust
Property for the benefit of the Holders (without consideration
of the effect of any such action on any particular Holder);
and
(J) to take all action that may be necessary 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.
(iii) The Institutional Trustee shall have the power and
authority to act on behalf of the Trust with respect to any of the
duties, liabilities, powers or the authority of the Administrators
set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not
have a duty to do any such act unless specifically requested to do so
in writing by the Sponsor, and shall then be fully protected in acting
pursuant to such written request; and in the event of a conflict
between the action of the Administrators and the action of the
Institutional Trustee, the action of the Institutional Trustee shall
prevail.
(b) So long as this Declaration remains in effect, the Trust (or
the Trustees or Administrators acting on behalf of the Trust) shall not
undertake any business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, neither the Trustees nor the
Administrators may cause the Trust to (i) acquire any investments or engage in
any activities not authorized by this Declaration, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust
Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected (x) to
cause the Trust to fail or cease to qualify as a "grantor trust" for United
States federal income tax purposes or (y) to require the trust to register as an
Investment Company under the Investment Company Act, (iv) incur any indebtedness
for borrowed money or issue any other debt or (v) take or consent to any action
that would result in the placement of a lien on any of the Trust Property. The
Institutional Trustee shall, at the sole cost and expense of the Trust, defend
all claims and demands of all Persons at any time claiming any lien on any of
the Trust Property adverse to the interest of the Trust or the Holders in their
capacity as Holders.
(c) In connection with the issuance and sale of the Capital
Securities, the Sponsor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an
exemption from the Securities Act;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of the
Capital Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust,
and the advice to the Administrators of actions they must take on
behalf of the Trust, and the preparation for execution and filing of
any documents to be executed and filed by the Trust or on behalf of the
Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such States in connection with the sale
of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and
delivery of, the Placement Agreement providing for the sale of the
Capital Securities; and
(iv) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Holders of a Majority in liquidation amount of the Common
Securities are authorized and directed to conduct the affairs of the Trust and
to operate the Trust so that the Trust will not (i) be deemed to be an
Investment Company required to be registered under the Investment Company Act,
and (ii) fail to be classified as a "grantor trust" for United States federal
income tax purposes. The Administrators and the Holders of a Majority in
liquidation amount of the Common Securities shall not take any action
inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Administrators and the Holders of a Majority in liquidation
amount of the Common Securities are authorized to take any action, not
inconsistent with applicable laws, the Certificate of Trust or this Declaration,
as amended from time to time, that each of the Administrators and the Holders of
a Majority in liquidation amount of the Common Securities determines in their
discretion to be necessary or desirable for such purposes.
(e) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees and the Administrators shall have no obligations with respect to such
expenses (for purposes of clarification, this Section 2.6(e) does not
contemplate the payment by the Sponsor of acceptance or annual administration
fees owing to the Trustees under this Declaration or the fees and expenses of
the Trustees' counsel in connection with the closing of the transactions
contemplated by this Declaration).
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times
in the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.
(h) If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.
Section 2.7. Prohibition of Actions by the Trust and the
-------------------------------------------------------
Institutional Trustee.
- ---------------------
(a) The Trust shall not, and the Institutional Trustee shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds to Holders of
the Securities pursuant to the terms of this Declaration 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 other than as expressly provided herein;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) carry on any "trade or business" as that phrase is used
in the Code; or
(viii) other than as provided in this Declaration (including
Annex I), (A) direct the time, method and place of 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, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required unless
the Trust shall have received a written opinion of counsel to the
effect that such modification will not cause the Trust to cease to be
classified as a "grantor trust" for United States federal income tax
purposes.
Section 2.8. Powers and Duties of the Institutional Trustee.
----------------------------------------------
(a) The legal title to the Debentures shall be owned by and held
of record in the name of the Institutional Trustee in trust for the benefit of
the Trust and the Holders of the Securities. The right, title and interest of
the Institutional Trustee to the Debentures shall vest automatically in each
Person who may hereafter be appointed as Institutional Trustee in accordance
with Section 4.5. Such vesting and cessation of title shall be effective whether
or not conveyancing documents with regard to the Debentures have been executed
and delivered.
(b) The Institutional Trustee shall not transfer its right, title
and interest in the Debentures to the Administrators or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Account") in the name of and under
----------------
the exclusive control of the Institutional Trustee, and maintained in
the Institutional Trustee's trust department, on behalf of the Holders
of the Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Institutional Trustee, deposit
such funds into the Property Account and make payments, or cause the
Paying Agent to make payments, to the Holders of the Capital Securities
and Holders of the Common Securities from the Property Account in
accordance with Section 5.1. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this Declaration;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Capital
Securities and the Common Securities to the extent the Debentures are
redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrators 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 of Securities upon
the occurrence of certain circumstances pursuant to the terms of the
Securities.
(d) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust which arises out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee's duties and obligations under this Declaration; 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 interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of the
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities 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 the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that no Holder of the Common Securities may exercise
-------- -------
such right of subrogation so long as an Event of Default with respect to the
Capital Securities has occurred and is continuing.
(e) The Institutional Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders of the
Securities pursuant to the terms of the Securities and this
Declaration; or
(ii) a Successor Institutional Trustee has been appointed
and has accepted that appointment in accordance with Section 4.5.
(f) The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a Holder of the Debentures
under the Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.
The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.
Section 2.9. Certain Duties and Responsibilities of the Trustees and
-------------------------------------------------------
Administrators.
- ----------------
(a) The Institutional Trustee, before the occurrence of any Event
of Default and after the curing or waiving of all such Events of Default that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Declaration and no implied covenants shall be
read into this Declaration against the Institutional Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to Section
6.9), the Institutional Trustee shall exercise such of the rights and powers
vested in it by this Declaration, 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) The duties and responsibilities of the Trustees and the
Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require any Trustee or
Administrator to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder, or in the
exercise of any of their rights or powers if it shall have reasonable grounds to
believe that repayment of such funds or adequate protection against such risk of
liability is not reasonably assured to it. Whether or not therein expressly so
provided, every provision of this Declaration relating to the conduct or
affecting the liability of or affording protection to the Trustees or
Administrators shall be subject to the provisions of this Article. Nothing in
this Declaration shall be construed to relieve an Administrator or a Trustee
from liability for its own negligent act, its own negligent failure to act, or
its own willful misconduct. To the extent that, at law or in equity, a Trustee
or an Administrator has duties and liabilities relating to the Trust or to the
Holders, such Trustee or such Administrator shall not be liable to the Trust or
to any Holder for such Trustee's or such Administrator's good faith reliance on
the provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Administrators or
the Trustee otherwise existing at law or in equity, are agreed by the Sponsor
and the Holders to replace such other duties and liabilities of the
Administrators or the Trustees.
(c) All payments made by the Institutional Trustee or a Paying
Agent in respect of the Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the
Institutional Trustee or a Paying Agent to make payments in accordance with the
terms hereof. Each Holder, by its acceptance of a Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees and the Administrators are not personally liable to it for any amount
distributable in respect of any Security or for any other liability in respect
of any Security. This Section 2.9(c) does not limit the liability of the
Trustees expressly set forth elsewhere in this Declaration.
(d) The Institutional Trustee shall not be liable for its own acts
or omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any
error of judgment made in good faith by an Authorized Officer of the
Institutional Trustee, unless it shall be proved that the Institutional
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Institutional Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than
a Majority in liquidation amount of the Capital Securities or the
Common Securities, as applicable, relating to the time, method and
place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under this Declaration;
(iii) the Institutional Trustee's sole duty with respect to
the custody, safekeeping and physical preservation of the Debentures
and the Property Account shall be to deal with such property in a
similar manner as the Institutional Trustee deals with similar
property for its fiduciary accounts generally, subject to the
protections and limitations on liability afforded to the
Institutional Trustee under this Declaration;
(iv) the Institutional 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; and money held by the Institutional
Trustee need not be segregated from other funds held by it except in
relation to the Property Account maintained by the Institutional
Trustee pursuant to Section 2.8(c)(i) and except to the extent
otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Administrators or the Sponsor.
Section 2.10. Certain Rights of Institutional Trustee. Subject to the
---------------------------------------
provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall
fully be protected in acting or refraining from acting in good faith upon any
resolution, opinion of counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's written instructions as to the course of action
to be taken and the Institutional Trustee shall take such action, or refrain
from taking such action, as the Institutional Trustee shall be instructed in
writing, in which event the Institutional Trustee shall have no liability except
for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;
(d) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers' Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;
(e) the Institutional 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;
(f) the Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;
(g) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction; provided, that nothing contained in this Section 2.10(g) shall be
taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the
occurrence of an Event of Default (that has not been cured or waived pursuant to
Section 6.7), to exercise such of the rights and powers vested in it by this
Declaration, 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;
(h) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys and the Institutional Trustee shall not be
responsible for any misconduct or negligence on the part of or for the
supervision of, any such agent or attorney appointed with due care by it
hereunder;
(j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;
(k) except as otherwise expressly provided in this Declaration,
the Institutional Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration;
(l) when the Institutional Trustee incurs expenses or renders
services in connection with a Bankruptcy Event, such expenses (including the
fees and expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law or
law relating to creditors rights generally;
(m) the Institutional Trustee shall not be charged with knowledge
of an Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;
(n) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional 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 Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and
(o) no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional 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 Institutional 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 Institutional
Trustee shall be construed to be a duty.
Section 2.11. Delaware Trustee. Notwithstanding any other provision
----------------
of this Declaration other than Section 4.1, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration (except as may be required under the Statutory
Trust Act). Except as set forth in Section 4.1, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807 of the Statutory Trust Act.
Section 2.12. Execution of Documents. Unless otherwise determined
----------------------
in writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute on behalf of the
Trust any documents that the Trustees or the Administrators, as the case may be,
have the power and authority to execute pursuant to Section 2.6.
Section 2.13. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained in this Declaration 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 Declaration, the
Debentures or the Securities.
Section 2.14. Duration of Trust. The Trust, unless earlier
--------------------
dissolved pursuant to the provisions of Article VII hereof, shall be in
existence for 35 years from the Closing Date.
Section 2.15. Mergers.
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(a) The Trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 2.15(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.
(b) The Trust may, with the consent of the Institutional Trustee
and without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:
(i) if the Trust is not the surviving 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 that the Successor Securities rank
----------------------
the same as the Securities rank with respect to Distributions
and payments upon Liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses substantially the same powers and
duties as the Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the
Holders of the Securities (including any Successor Securities) in any
material respect;
(iv) the Institutional Trustee receives written confirmation
from Moody's Investor Services, Inc. and any other nationally
recognized statistical rating organization that rates securities
issued by the initial purchaser of the Capital Securities that it will
not reduce or withdraw the rating of any such securities because of
such merger, conversion, consolidation, amalgamation or replacement;
(v) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vi) prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such matters
to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the Securities (including any
Successor Securities) in any material respect;
(B) following such merger, consolidation, amalgamation
or replacement, neither the Trust nor the Successor Entity
will be required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation
or replacement, the Trust (or the Successor Entity) will
continue to be classified as a "grantor trust" for United
States federal income tax purposes;
(vii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Guarantee;
(viii) the Sponsor owns 100% of the common securities of any
Successor Entity; and
(ix) prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers'
Certificate of the Administrators and an opinion of counsel, each to the
effect that all conditions precedent under this Section 2.15(b) to such
transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall not, except
with the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE III
SPONSOR
Section 3.1. Sponsor's Purchase of Common Securities. On the Closing
---------------------------------------
Date, the Sponsor will purchase all of the Common Securities issued by the Trust
in an amount at least equal to 3% of the capital of the Trust, at the same time
as the Capital Securities are sold.
Section 3.2. Responsibilities of the Sponsor. In connection with
----------------------------------
the issue and sale of the Capital Securities, the Sponsor shall have the
exclusive right and responsibility to engage in, or direct the Administrators to
engage in, the following activities:
(a) to determine the States in which to take appropriate action to
qualify the Trust or to qualify or register for sale all or part of the Capital
Securities 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, to protect the limited liability of the Holders of the
Capital Securities or to enable the Trust to effect the purposes for which it
was created; and
(b) to negotiate the terms of and/or execute on behalf of the
Trust, the Placement Agreement and other related agreements providing for the
sale of the Capital Securities.
Section 3.3. Expenses. In connection with the offering, sale and
--------
issuance of the Debentures to the Trust and in connection with the sale of the
Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer,
shall:
(a) pay all reasonable costs and expenses owing to the Debenture
Trustee pursuant to Section 6.6 of the Indenture;
(b) be responsible for and shall pay all debts and obligations
(other than with respect to the Securities) and all costs and expenses of the
Trust, the offering, sale and issuance of the Securities (including fees to the
placement agents in connection therewith), the costs and expenses (including
reasonable counsel fees and expenses) of the Institutional Trustee and the
Administrators, the costs and expenses relating to the operation of the Trust,
including, without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, Paying Agents, Registrars, Transfer Agents,
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets and the enforcement by the Institutional Trustee of
the rights of the Holders (for purposes of clarification, this Section 3.3(b)
does not contemplate the payment by the Sponsor of acceptance or annual
administration fees owing to the Trustees pursuant to the services to be
provided by the Trustees under this Declaration or the fees and expenses of the
Trustees' counsel in connection with the closing of the transactions
contemplated by this Declaration); and
(c) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
The Sponsor's obligations under this Section 3.3 shall be for the
benefit of, and shall be enforceable by, any Person to whom such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
--------
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 3.3 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 3.3.
Section 3.4 Right to Proceed. The Sponsor acknowledges the rights
----------------
of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.
ARTICLE IV
INSTITUTIONAL TRUSTEE AND ADMINISTRATORS
Section 4.1. Number of Trustees. The number of Trustees shall
--------------------
initially be two, 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 Holder of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holder
of the Common Securities; provided, however, that there shall be a Delaware
-------- -------
Trustee if required by Section 4.2; and there shall always be one Trustee who
shall be the Institutional Trustee, and such Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 2.11
shall have no application to such entity in its capacity as Institutional
Trustee.
Section 4.2. Delaware Trustee; Eligibility.
-----------------------------
(a) If required by the Statutory Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(i) a natural person at least 21 years of age who is a
resident of the State of Delaware; or
(ii) if not a natural person, an entity which is organized
under the laws of the United States or any state thereof or the
District of Columbia, has its principal place of business in the State
of Delaware, and otherwise meets the requirements of applicable law,
including ss. 3807 of the Statutory Trust Act.
(b) the initial Delaware Trustee shall be Wilmington Trust
Company.
Section 4.3. Institutional Trustee; Eligibility.
----------------------------------
(a) There shall at all times be one Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to
the Trust; and
(iii) be a banking corporation or trust company organized
and doing business under the laws of the United States of America or
any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000.00), and
subject to supervision or examination by Federal, state, or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then for
the purposes of this Section 4.3(a)(iii), 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 Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section 4.5.
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act of 1939, as amended, the Institutional Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to this Declaration.
(d) The initial Institutional Trustee shall be Wilmington Trust
Company.
Section 4.4. Administrators. Each Administrator shall be a U.S.
--------------
Person, 21 years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be Peter D. Wimmer, Terrance M. McCarthy and Lisa K.
Vansickle. There shall at all times be at least one Administrator. Except where
a requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken by, and any power of
the Administrators may be exercised by, or with the consent of, any one such
Administrator.
Section 4.5. Appointment, Removal and Resignation of Trustees and
-------------------------------------------------------
Administrators.
- --------------
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of this Section 4.5.
(b) Subject to Section 4.5(a), a Relevant Trustee may resign at
any time by giving written notice thereof to the Holders of the Securities and
by appointing a successor Relevant Trustee. Upon the resignation of the
Institutional Trustee, the Institutional Trustee shall appoint a successor by
requesting from at least three Persons meeting the eligibility requirements
their expenses and charges to serve as the successor Institutional Trustee on a
form provided by the Administrators, and selecting the Person who agrees to the
lowest expense and charges (the "Successor Institutional Trustee"). If the
instrument of acceptance by the successor Relevant Trustee required by this
Section 4.5 shall not have been delivered to the Relevant Trustee within 60 days
after the giving of such notice of resignation or delivery of the instrument of
removal, the Relevant Trustee may petition, at the expense of the Trust, any
federal, state or District of Columbia court of competent jurisdiction for the
appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Relevant
Trustee. The Institutional Trustee shall have no liability for the selection of
such successor pursuant to this Section 4.5.
(c) Unless an Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by an act of the Holders of a
Majority in liquidation amount of the Common Securities. If any Trustee shall be
so removed, the Holders of the Common Securities, by act of the Holders of a
Majority in liquidation amount of the Common Securities delivered to the
Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such
successor Trustee shall comply with the applicable requirements of this Section
4.5. If an Event of Default shall have occurred and be continuing, the
Institutional Trustee or the Delaware Trustee, or both of them, may be removed
by the act of the Holders of a Majority in liquidation amount of the Capital
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). If any Trustee shall be so removed, the Holders of Capital
Securities, by act of the Holders of a Majority in liquidation amount of the
Capital Securities then outstanding delivered to the Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of this Section 4.5. If no
successor Relevant Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.5 within 30 days after
delivery of an instrument of removal, the Relevant Trustee or any Holder who has
been a Holder of the Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any federal, state or
District of Columbia court of competent jurisdiction for the appointment of a
successor Relevant Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a successor Relevant Trustee or
Trustees.
(d) The Institutional Trustee shall give notice of each
resignation and each removal of a Trustee and each appointment of a successor
Trustee to all Holders and to the Sponsor. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Institutional Trustee.
(e) Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee following the procedures in this Section 4.5 (with the
successor being a Person who satisfies the eligibility requirement for a
Delaware Trustee set forth in this Declaration) (the "Successor Delaware
Trustee").
(f) In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Securities and the Trust and (b) shall add to or change any of the provisions of
this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Relevant Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee, such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Securities and the Trust
subject to the payment of all unpaid fees, expenses and indemnities of such
retiring Relevant Trustee.
(g) No Institutional Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Institutional Trustee
or Successor Delaware Trustee, as the case may be.
(h) The Holders of the Capital Securities will have no right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Holders of the Common Securities.
(i) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.
Section 4.6. Vacancies Among Trustees. If a Trustee ceases to hold
------------------------
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, a vacancy shall occur. A resolution certifying the existence of
such vacancy by the Trustees or, if there are more than two, a majority of the
Trustees, shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section 4.5.
Section 4.7. 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 or terminate this Declaration. Whenever a vacancy
in the number of Trustees shall occur, until such vacancy is filled by the
appointment of a Trustee in accordance with Section 4.5, the Institutional
Trustee shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration.
Section 4.8. Meetings of the Trustees and the Administrators.
------------------------------------------------------
Meetings of the Administrators shall be held from time to time upon the call of
an Administrator. Regular meetings of the Administrators may be held in person
in the United States or by telephone, at a place (if applicable) and time fixed
by resolution of the Administrators. Notice of any in-person meetings of the
Trustees with the Administrators or meetings of the Administrators shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic meetings of the Trustees with the Administrators or meetings of
the Administrators 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 a Trustee or an Administrator,
as the case may be, at a meeting shall constitute a waiver of notice of such
meeting except where the Trustee or an Administrator, as the case may be,
attends a meeting for the express purpose of objecting to the transaction of any
activity on the grounds that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Trustees or the Administrators, as the case may be, may be taken at a meeting by
vote of a majority of the Trustees or the Administrators 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 Trustees or the Administrators. Meetings of the Trustees and the
Administrators together shall be held from time to time upon the call of any
Trustee or an Administrator.
Section 4.9. Delegation of Power.
-------------------
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and
(b) the Administrators shall have power to delegate from time to
time to such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
Section 4.10. Conversion, Consolidation or Succession to Business.
------------------------------------------------------
Any Person into which the Institutional Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Institutional Trustee or the Delaware Trustee shall be the successor of the
Institutional Trustee or the Delaware Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article and, provided,
--------
further, that such Person shall file an amendment to the Certificate of Trust
- -------
with the Secretary of State of the State of Delaware as contemplated in Section
4.5(i).
ARTICLE V
DISTRIBUTIONS
Section 5.1. Distributions. Holders shall receive Distributions in
-------------
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of such amounts to Holders.
------------
ARTICLE VI
ISSUANCE OF SECURITIES
Section 6.1. General Provisions Regarding Securities.
---------------------------------------
(a) The Administrators shall, on behalf of the Trust, issue one
series of capital securities substantially in the form of Exhibit A-1
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I and one series of common securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Capital Securities and
the Common Securities. The Capital Securities rank pari passu to, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities as set forth in Annex I.
(b) The Certificates shall be signed on behalf of the Trust by one
or more Administrators. Such signature shall be the facsimile or manual
signature of any Administrator. In case any Administrator of the Trust who shall
have signed any of the Securities shall cease to be such Administrator before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated.
(c) The Capital Securities issued to QIBs shall be, except as
provided in Section 6.4, Book-Entry Capital Securities issued in the form of one
or more Global Capital Securities registered in the name of the Depositary or
its nominee and deposited with the Depositary or a custodian for the Depositary
for credit by the Depositary to the respective accounts of the Depositary
Participants thereof (or such other accounts as they may direct). The Capital
Securities issued to a Person other than a QIB shall be issued in the form of a
Definitive Capital Securities Certificate.
(d) 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.
(e) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and, except as provided in Section 9.1(b) with respect to the Common
Securities, non-assessable.
(f) Every Person, by virtue of having become a Holder in
accordance with the terms of this Declaration, shall be deemed to have expressly
assented and agreed to the terms of, and shall be bound by, this Declaration and
the Guarantee.
Section 6.2. Paying Agent, Transfer Agent and Registrar. The Trust
-------------------------------------------
shall maintain in Wilmington, Delaware, an office or agency where the Capital
Securities may be presented for payment ("Paying Agent"), and an office or
-------------
agency where Securities may be presented for registration of transfer or
exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at
---------------
such office or agency a register for the purpose of registering Securities,
transfers and exchanges of Securities, such register to be held by a registrar
(the "Registrar"). The Administrators may appoint the Paying Agent, the
---------
Registrar and the Transfer Agent and may appoint one or more additional Paying
Agents or one or more co-Registrars, or one or more co-Transfer Agents in such
other locations as it shall determine. The term "Paying Agent" includes any
-------------
additional paying agent, the term "Registrar" includes any additional registrar
---------
or co-Registrar and the term "Transfer Agent" includes any additional transfer
---------------
agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.
Section 6.3. Form and Dating. The Capital Securities and the
-----------------
Institutional Trustee's certificate of authentication thereon 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 Declaration. Certificates may be typed,
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrators, as conclusively evidenced by their
execution thereof. The Securities may have letters, 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 Sponsor). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Institutional
Trustee in writing. Each Capital Security shall be dated on or before 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 Declaration and to the extent applicable, the Institutional
Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby. Capital Securities will be issued only in
blocks having a stated liquidation amount of not less than $100,000.00 and any
multiple of $1,000.00 in excess thereof.
The Capital Securities are being offered and sold by the Trust pursuant
to the Placement Agreement in definitive, registered form without coupons and
with the Restricted Securities Legend.
Section 6.4. Book-Entry Capital Securities.
-----------------------------
(a) A Global Capital Security may be exchanged, in whole or in
part, for Definitive Capital Securities Certificates registered in the names of
Owners only if such exchange complies with Article VIII and (i) the Depositary
advises the Administrators and the Institutional Trustee in writing that the
Depositary is no longer willing or able to properly discharge its
responsibilities with respect to the Global Capital Security, and no qualified
successor is appointed by the Administrators within ninety (90) days of receipt
of such notice, (ii) the Depositary ceases to be a clearing agency registered
under the Exchange Act and the Administrators fail to appoint a qualified
successor within ninety (90) days of obtaining knowledge of such event, (iii)
the Administrators at their option advise the Institutional Trustee in writing
that the Trust elects to terminate the book-entry system through the Depositary,
or (iv) an Indenture Event of Default has occurred and is continuing. Upon the
occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the
Administrators shall notify the Depositary and instruct the Depositary to notify
all Owners of Book-Entry Capital Securities and the Institutional Trustee of the
occurrence of such event and of the availability of Definitive Capital
Securities Certificates to Owners of the Capital Securities requesting the same.
Upon the issuance of Definitive Capital Securities Certificates, the
Administrators and the Institutional Trustee shall recognize the Holders of the
Definitive Capital Securities Certificates as Holders. Notwithstanding the
foregoing, if an Owner of a beneficial interest in a Global Capital Security
wishes at any time to transfer an interest in such Global Capital Security to a
Person other than a QIB, such transfer shall be effected, subject to the
Applicable Depositary Procedures, in accordance with the provisions of this
ERROR! REFERENCE SOURCE NOT FOUND. and Article VIII, and the transferee shall
receive a Definitive Capital Securities Certificate in connection with such
transfer. A holder of a Definitive Capital Securities Certificate that is a QIB
may upon request, and in accordance with the provisions of this ERROR! REFERENCE
SOURCE NOT FOUND. and Article VIII, exchange such Definitive Capital Securities
Certificate for a beneficial interest in a Global Capital Security.
(b) If any Global Capital Security is to be exchanged for
Definitive Capital Securities Certificates or canceled in part, or if any
Definitive Capital Securities Certificate is to be exchanged in whole or in part
for any Global Capital Security, then either (i) such Global Capital Security
shall be so surrendered for exchange or cancellation as provided in this Section
6.4 and Article VIII or (ii) the aggregate liquidation amount represented by
such Global Capital Security shall be reduced, subject to Section 6.3, or
increased by an amount equal to the liquidation amount represented by that
portion of the Global Capital Security to be so exchanged or canceled, or equal
to the liquidation amount represented by such Definitive Capital Securities
Certificates to be so exchanged for any Global Capital Security, as the case may
be, by means of an appropriate adjustment made on the records of the Registrar,
whereupon the Institutional Trustee, in accordance with the Applicable
Depositary Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender to the Administrators or the Registrar of any Global Capital Security
or Securities by the Depositary, accompanied by registration instructions, the
Administrators, or any one of them, shall execute the Definitive Capital
Securities Certificates in accordance with the instructions of the Depositary.
None of the Registrar, Administrators, or the Institutional Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.
(c) Every Definitive Capital Securities Certificate executed and
delivered upon registration or transfer of, or in exchange for or in lieu of, a
Global Capital Security or any portion thereof shall be executed and delivered
in the form of, and shall be, a Global Capital Security, unless such Definitive
Capital Securities Certificate is registered in the name of a Person other than
the Depositary for such Global Capital Security or a nominee thereof.
(d) The Depositary or its nominee, as registered owner of a Global
Capital Security, shall be the Holder of such Global Capital Security for all
purposes under this Declaration and the Global Capital Security, and Owners with
respect to a Global Capital Security shall hold such interests pursuant to the
Applicable Depositary Procedures. The Registrar, the Administrators and the
Institutional Trustee shall be entitled to deal with the Depositary for all
purposes of this Declaration relating to the Global Capital Securities
(including the payment of the liquidation amount of and Distributions on the
Book-Entry Capital Securities represented thereby and the giving of instructions
or directions by Owners of Book-Entry Capital Securities represented thereby and
the giving of notices) as the sole Holder of the Book-Entry Capital Securities
represented thereby and shall have no obligations to the Owners thereof. None of
the Administrators, the Institutional Trustee nor the Registrar shall have any
liability in respect of any transfers effected by the Depositary.
(e) The rights of the Owners of the Book-Entry Capital Securities
shall be exercised only through the Depositary and shall be limited to those
established by law, the Applicable Depositary Procedures and agreements between
such Owners and the Depositary and/or the Depositary Participants; provided,
however, solely for the purpose of determining whether the Holders of the
requisite amount of Capital Securities have voted on any matter provided for in
this Declaration, to the extent that Capital Securities are represented by a
Global Capital Security, the Administrators and the Institutional Trustee may
conclusively rely on, and shall be fully protected in relying on, any written
instrument (including a proxy) delivered to the Institutional Trustee by the
Depositary setting forth the Owners' votes or assigning the right to vote on any
matter to any other Persons either in whole or in part. To the extent that
Capital Securities are represented by a Global Capital Security, the initial
Depositary will make book-entry transfers among the Depositary Participants and
receive and transmit payments on the Capital Securities that are represented by
a Global Capital Security to such Depositary Participants, and none of the
Sponsor, the Administrators or the Institutional Trustee shall have any
responsibility or obligation with respect thereto.
(f) To the extent that a notice or other communication to the
Holders is required under this Declaration, for so long as Capital Securities
are represented by a Global Capital Security, the Administrator and the
Institutional Trustee shall give all such notices and communications to the
Depositary, and shall have no obligations to the Owners.
Section 6.5. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If:
(a) any mutilated Certificates should be surrendered to the
Registrar, or if the Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators
and the Institutional Trustee such security or indemnity as may be required by
them to keep each of them harmless;
then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.5, the Registrar or the Administrators may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 6.6. Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Administrators may prepare and, in the case of the
Capital Securities, the Institutional Trustee shall authenticate, temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Administrators consider
appropriate for temporary Securities. Without unreasonable delay, the
Administrators shall prepare and, in the case of the Capital Securities, the
Institutional Trustee shall authenticate, definitive Securities in exchange for
temporary Securities.
Section 6.7. Cancellation. The Administrators at any time may
------------
deliver Securities to the Institutional Trustee for cancellation. The Registrar
shall forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.
Section 6.8. CUSIP Numbers. The Trust in issuing the Securities may
-------------
use "CUSIP" numbers (if then generally in use), and, if so, the Institutional
Trustee shall use CUSIP numbers in notice of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
-------- -------
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption and that
identification numbers printed on the Securities and any such redemption shall
not be affected by any defect in or omission of such numbers. The Trust shall
promptly notify the Institutional Trustee in writing of any change in the CUSIP
numbers.
Section 6.9. Rights of Holders; Waivers of Past Defaults.
-------------------------------------------
(a) The legal title to the Trust Property is vested exclusively in
the Institutional Trustee (in its capacity as such) in accordance with Section
2.5, and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.
(b) For so long as any Capital Securities remain outstanding, if
upon an Indenture Event of Default, the Debenture Trustee fails or the holders
of not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of a Majority in liquidation amount of the Capital
Securities then outstanding shall have the right to make such declaration by a
notice in writing to the Institutional Trustee, the Sponsor and the Debenture
Trustee.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of a Majority
in liquidation amount of the Capital Securities, by written notice to the
Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Debenture Issuer has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
(B) any accrued Additional Interest on all of the
Debentures,
(C) the principal of (and premium, if any, on) any
Debentures that have become due otherwise than by such
declaration of acceleration and interest and Additional
Interest thereon at the rate borne by the Debentures, and
(D all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture
Trustee and the Institutional Trustee, their agents and
counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures that has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.7 of the Indenture.
The Holders of at least a Majority in liquidation amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default under the Indenture or any Indenture Event of Default, except a
default or Indenture Event of Default in the payment of principal or interest on
the Debentures (unless such default or Indenture Event of Default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Debenture
Trustee) or a default under the Indenture or an Indenture Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.9.
(c) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.9, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
Section 7.1. Dissolution and Termination of Trust.
------------------------------------
(a) The Trust shall dissolve on the first to occur of:
(i) unless earlier dissolved, on December 15, 2039, the
expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor,
the Trust or the Debenture Issuer;
(iii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor (other than in connection with a
merger, consolidation or similar transaction not prohibited by the
Indenture, this Declaration or the Guarantee, as the case may be) or
upon the revocation of the charter of the Sponsor and the expiration
of 90 days after the date of revocation without a reinstatement
thereof;
(iv) upon the distribution of the Debentures to the Holders
of the Securities, upon exercise of the right of the Holder of all of
the outstanding Common Securities to dissolve the Trust as provided in
Annex I hereto;
(v) upon the entry of a decree of judicial dissolution
of the Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
(vi) 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;
or
(vii) before the issuance of any Securities, with the consent
of all of the Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including of the Statutory
Trust Act, and subject to the terms set forth in Annex I, the Institutional
Trustee shall terminate the Trust by filing a certificate of cancellation with
the Secretary of State of the State of Delaware.
(c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
Section 8.1. General.
-------
(a) Subject to Section 8.1(c), where Capital Securities are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal number of Capital Securities
represented by different certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met. To
permit registrations of transfer and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar's
request.
(b) Upon issuance of the Common Securities, the Sponsor shall
acquire and retain beneficial and record ownership of the Common Securities and
for so long as the Securities remain outstanding, and to the fullest extent
permitted by applicable law, the Sponsor shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
-------- -------
Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S.
Person may succeed to the Sponsor's ownership of the Common Securities.
(c) Capital Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Securities. To the fullest extent permitted by
applicable law, any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void and will be deemed to be
of no legal effect whatsoever and any such transferee shall be deemed not to be
the holder of such Capital Securities for any purpose, including but not limited
to the receipt of Distributions on such Capital Securities, and such transferee
shall be deemed to have no interest whatsoever in such Capital Securities.
(d) The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar 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 Registrar
shall cause one or more new Securities of the same tenor 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 Registrar 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 Institutional Trustee pursuant
to Section 6.7. 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 Declaration.
(e) The Trust shall not be required (i) to issue, register the
transfer of, or exchange any Securities during a period beginning at the opening
of business five days before the day of any selection of Securities for
redemption and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Section 8.2. Transfer Procedures and Restrictions.
------------------------------------
(a) The Capital Securities shall bear the Restricted Securities
Legend, which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Institutional Trustee, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act. Upon provision of such satisfactory evidence, the Institutional
Trustee, at the written direction of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.
(b) Except as permitted by Section 8.2(a), each Capital Security
shall bear a legend (the "Restricted Securities Legend") in substantially the
------------------------------
following form and a Capital Security shall not be transferred except in
compliance with such legend, unless otherwise determined by the Sponsor, upon
the advice of counsel expert in securities law, in accordance with applicable
law:
[If the Capital Security is to be Global Capital Security-
THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL
SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME
OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A
WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO FIRST BANK STATUTORY TRUST III OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS
OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY
BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A
NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903
OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS
SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR
ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST
THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE
MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF
AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING
THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR
WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100
SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED
TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS
THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS.
(c) To permit registrations of transfers and exchanges, the Trust
shall execute and the Institutional Trustee shall authenticate Capital
Securities at the Registrar's request.
(d) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Registrar or
the Sponsor may require) in respect of any tax or other governmental charge that
may be imposed in relation to it.
(e) All Capital Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Declaration shall evidence
the same security and shall be entitled to the same benefits under this
Declaration as the Capital Securities surrendered upon such registration of
transfer or exchange.
Section 8.3. Deemed Security Holders. The Trust, the Administrators,
-----------------------
the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
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
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS
Section 9.1. Liability.
---------
(a) Except as expressly set forth in this Declaration, the
Guarantee 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 of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of the
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to the Statutory Trust Act, the Holders of the
Capital Securities 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 9.2. 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 Declaration 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 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, if selected by such Indemnified Person,
has been selected by such Indemnified Person 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 of Securities might properly be paid.
Section 9.3. 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
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.
(b) Whenever in this Declaration 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
Declaration or by applicable law.
Section 9.4. Indemnification.
---------------
(a) The Sponsor shall indemnify, to the full extent permitted by
law, any 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) arising out of or in connection with the
acceptance or administration of this Declaration by reason of the fact that he
is or was an Indemnified Person against expenses (including reasonable
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 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.
(b) The Sponsor shall indemnify, to the full extent permitted by
law, any 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 arising out of or in connection
with the acceptance or administration of this Declaration by reason of the fact
that he is or was an Indemnified Person against expenses (including reasonable
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; provided, however, that no such indemnification
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shall be made in respect of any claim, issue or matter as to which such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that 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 shall deem proper.
(c) To the extent that an 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 (a) and (b) of this Section
9.4, 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 and expenses) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification of an Administrator under paragraphs (a)
and (b) of this Section 9.4 (unless ordered by a court) shall be made by the
Sponsor only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.
(e) To the ullest extent permitted by law, expenses (including
reasonable attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such 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 Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
(f) The Trustees, at the sole cost and expense of the Sponsor,
retain the right to representation by counsel of their own choosing in any
action, suit or any other proceeding for which they are indemnified under
paragraphs (a) and (b) of this Section 9.4, without affecting their right to
indemnification hereunder or waiving any rights afforded to it under this
Declaration or applicable law.
(g) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other paragraphs of this Section 9.4 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 Sponsor or Capital Security
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 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.
(h) The Sponsor or the Trust may purchase and maintain insurance
on behalf of any Person who is or was an 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 Sponsor would have the
power to indemnify him against such liability under the provisions of this
Section 9.4.
(i) For purposes of this Section 9.4, 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
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, (i) continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person; and (ii) survive the termination or expiration
of this Declaration or the earlier removal or resignation of an Indemnified
Person.
Section 9.5. Outside Businesses. Any Covered Person, the Sponsor,
------------------
the Delaware Trustee and the Institutional 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 of Securities shall have no rights by virtue of this
Declaration 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. None of any
Covered Person, the Sponsor, the Delaware Trustee or the Institutional 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 Institutional 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 Institutional 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.
Section 9.6. Compensation; Fee. The Sponsor agrees:
-----------------
(a) to pay to the Trustees from time to time such compensation for
all services rendered by them hereunder as the parties shall agree from time to
time (which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, bad faith or
willful misconduct.
For purposes of clarification, this Section 9.6 does not contemplate
the payment by the Sponsor of acceptance or annual administration fees owing to
the Trustees under this Declaration or the fees and expenses of the Trustees'
counsel in connection with the closing of the transactions contemplated by this
Declaration.
The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this Declaration and the removal or resignation of
any Trustee.
No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 9.6.
ARTICLE X
ACCOUNTING
Section 10.1. 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.
Section 10.2. Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the
Administrators shall keep, or cause to be kept at the principal office of the
Trust in the United States, as defined for purposes of Treasury Regulations
section 301.7701-7, 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, at the Sponsor's expense, in accordance
with generally accepted accounting principles, consistently applied. The books
of account and the records of the Trust shall be examined by and reported upon
(either separately or as part of the Sponsor's regularly prepared consolidated
financial report) as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the Administrators.
(b) The Administrators shall cause to be duly prepared and
delivered to each of the Holders of Securities Form 1099 or such other 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 Administrators
shall endeavor to deliver all such statements within 30 days after the end of
each Fiscal Year of the Trust.
(c) The Administrators, at the Sponsor's expense, shall cause to
be duly prepared at the principal office of the Sponsor in the United States, as
`United States' is defined in Section 7701(a)(9) of the Code (or at the
principal office of the Trust if the Sponsor has no such principal office in the
United States), and filed 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 tax returns required to be filed by the
Administrators on behalf of the Trust with any state or local taxing authority.
Section 10.3. Banking. The Trust shall maintain in the United States,
-------
as defined for purposes of Treasury Regulations section 301.7701-7, 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
- -------
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.
Section 10.4. Withholding. The Institutional Trustee or any Paying
-----------
Agent and the Administrators shall comply with all withholding requirements
under United States federal, state and local law. The Institutional Trustee or
any Paying Agent shall request, and each Holder shall provide to the
Institutional Trustee or any Paying Agent, such forms or certificates as are
necessary to establish an exemption from withholding with respect to the Holder,
and any representations and forms as shall reasonably be requested by the
Institutional Trustee or any Paying Agent to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Administrators 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
Institutional Trustee or any Paying Agent is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, 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 overwithholding,
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 Institutional Trustee or any Paying Agent may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
Section 11.1. Amendments.
----------
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed (i) by the Institutional Trustee, or
(ii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Delaware Trustee, by the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XI, an
amendment may be made, and any such purported amendment shall be valid and
effective only if:
(i) the Institutional Trustee shall have first received
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (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 Declaration (including the
terms of the Securities); and
(ii) the result of such amendment would not be to
(A) cause the Trust to cease to be classified for
purposes of United States federal income taxation as a grantor
trust; or
(B) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
(c) Except as provided in Section 11.1(d), (e) or (h), no
amendment shall be made, and any such purported amendment shall be void and
ineffective, unless the Holders of a Majority in liquidation amount of the
Capital Securities shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or change any
conversion or exchange provisions or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities.
(g) The rights of the Holders of the Capital Securities under
Article IV to appoint and remove Trustees shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Capital
Securities.
(h) This Declaration may be amended by the Institutional Trustee
and the Holders of a Majority in liquidation amount of the Common Securities
without the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of
the Sponsor; or
(iv) modify, eliminate or add to any provision of this
Declaration to such extent as may be necessary to ensure that the
Trust will be classified for United States federal income tax purposes
at all times as a grantor trust and will not be required to register
as an Investment Company (including without limitation to conform to
any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under
the Investment Company Act or written change in interpretation or
application thereof by any legislative body, court, government agency
or regulatory authority) which amendment does not have a material
adverse effect on the rights, preferences or privileges of the Holders
of Securities;
provided, however, that no such modification, elimination or addition
-------- -------
referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any
material respect the powers, preferences or special rights of Holders of Capital
Securities.
Section 11.2. Meetings of the Holders of Securities; Action by
-------------------------------------------------------
Written Consent.
- ---------------
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrators (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 Declaration or the terms
of the Securities. The Administrators 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 of such class of Securities. Such direction shall be given by delivering
to the Administrators one or more calls in a writing stating that the signing
Holders of the Securities wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders of the
Securities calling a meeting shall specify in writing the Certificates held by
the Holders of the Securities exercising the right to call a meeting and only
those Securities represented by such Certificates 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 of the
Securities:
(i) notice of any such meeting shall be given to all the
Holders of the Securities having a right to vote thereat at least 7
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of the Securities
is permitted or required under this Declaration, such vote, consent
or approval may be given at a meeting of the Holders of the Securities.
Any action that may be taken at a meeting of the Holders of the
Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of the
Securities 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 of the Securities 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 of the
Securities entitled to vote who have not consented in writing. The
Administrators may specify that any written ballot submitted to the
Holders of the Securities for the purpose of taking any action without
a meeting shall be returned to the Trust within the time specified by
the Administrators;
(ii) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of Securities 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 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder of the Securities 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 of the Securities were stockholders of a Delaware corporation;
each meeting of the Holders of the Securities shall be conducted by the
Administrators or by such other Person that the Administrators may
designate; and
(iii) unless the Statutory Trust Act, this Declaration, or
the terms of the Securities otherwise provides, the Administrators, in
their sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any
Holders of the Securities, 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; provided, however,
-------- -------
that each meeting shall be conducted in the United States (as that term
is defined in Treasury Regulations section 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE
Section 12.1. Representations and Warranties of Institutional
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Trustee. The initial Institutional Trustee represents and warrants to the Trust
- -------
and to the Sponsor at the date of this Declaration, and each Successor
Institutional Trustee represents and warrants to the Trust and the Sponsor at
the time of the Successor Institutional Trustee's acceptance of its appointment
as Institutional Trustee, that:
(a) the Institutional Trustee is a Delaware banking corporation
with trust powers, duly organized and validly existing under the laws of the
State of Delaware with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional 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 (regardless of
whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by
the Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and
(d) no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Institutional Trustee of this
Declaration.
Section 12.2. Representations of the 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 Declaration, 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) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) 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 considered in a proceeding in equity or at law);
(c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Declaration;
(e) no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Declaration; and
(f) the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, it is an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of Section 3807 of the
Statutory Trust Act.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Notices. All notices provided for in this Declaration
-------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):
First Bank Statutory Trust III
c/o First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(b) if given to the Delaware Trustee, at the Delaware Trustee's
mailing address set forth below (or such other address as the Delaware Trustee
may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(c) if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(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 of to the Trust):
First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(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 13.2. Governing Law. This Declaration and the rights of the
--------------
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
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that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.
Section 13.3. 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 Declaration shall be
interpreted to further this intention of the parties.
Section 13.4. Headings. Headings contained in this Declaration are
--------
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
Section 13.5. Successors and Assigns. Whenever in this Declaration
------------------------
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 Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so expressed.
Section 13.6. Partial Enforceability. If any provision of this
-----------------------
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, 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 13.7. Counterparts. This Declaration may contain more than
------------
one counterpart of the signature page and this Declaration may be executed by
the affixing of the signature of each of the Trustees and Administrators to any
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.
Signatures appear on the following page
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ Christopher J. Monigle
-------------------------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
WILMINGTON TRUST COMPANY,
as Institutional Trustee
By: /s/ Christopher J. Monigle
-------------------------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
FIRST BANKS, INC., as Sponsor
By: /s/ Allen H. Blake
-------------------------------------------------
Name: Allen H. Blake
Title: President and Chief Executive Officer
ADMINISTRATORS OF FIRST BANK STATUTORY TRUST III
By: /s/ Terrance M. McCarthy
-------------------------------------------------
Administrator
By: /s/ Peter D. Wimmer
-------------------------------------------------
Administrator
By: /s/ Lisa K. Vansickle
-------------------------------------------------
Administrator
ANNEX I
TERMS OF SECURITIES
Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of November 23, 2004 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):
1. Designation and Number.
----------------------
(a) 40,000 Floating Rate Capital Securities of First Bank
Statutory Trust III (the "Trust"), with an aggregate stated liquidation amount
with respect to the assets of the Trust of forty million dollars
($40,000,000.00) and a stated liquidation amount with respect to the assets of
the Trust of $1,000.00 per Capital Security, are hereby designated for the
purposes of identification only as the "Capital Securities". The Capital
-------------------
Security Certificates evidencing the Capital Securities shall be substantially
in the form of Exhibit A-1 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.
(b) 1,238 Floating Rate Common Securities of the Trust (the
"Common Securities") will be evidenced by Common Security Certificates
-------------------
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
2. Distributions.
-------------
(a) Distributions will be payable on each Security for the
Distribution Period beginning on (and including) the date of original issuance
and ending on (but excluding) the Distribution Payment Date in March 2005 at a
rate per annum of 4.54% and shall bear interest for each successive Distribution
Period beginning on (and including) the Distribution Payment Date in March 2005,
and each succeeding Distribution Payment Date, and ending on (but excluding) the
next succeeding Distribution Payment Date at a rate per annum equal to the
3-Month LIBOR, determined as described below, plus 2.18% (the "Coupon Rate"),
-----------
applied to the stated liquidation amount thereof, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears will bear interest thereon compounded quarterly at the
applicable Distribution Rate (to the extent permitted by law). Distributions, as
used herein, include cash distributions and any such compounded distributions
unless otherwise noted. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Institutional Trustee
and to the extent the Institutional Trustee has funds available therefor. The
amount of the Distribution payable for any Distribution Period will be
calculated by applying the Distribution Rate to the stated liquidation amount
outstanding at the commencement of the Distribution Period on the basis of the
actual number of days in the Distribution Period concerned divided by 360. All
percentages resulting from any calculations on the Capital Securities will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
(b) Distributions on the Securities will be cumulative,
will accrue from the date of original issuance, and will be payable, subject to
extension of distribution payment periods as described herein, quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year, or if
such day is not a Business Day, then the next succeeding Business Day (each a
"Distribution Payment Date"), commencing on the Distribution Payment Date in
--------------------------
March 2005 when, as and if available for payment. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures, so
long as no Extension Event of Default has occurred and is continuing, by
deferring the payment of interest on the Debentures for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to
-----------------
time, subject to the conditions described below, during which Extension Period
no interest shall be due and payable. During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest will
accrue at an annual rate equal to the Distribution Rate in effect for each such
Extension Period, compounded quarterly from the date such interest would have
been payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as "Additional Interest"). No Extension
--------------------
Period may end on a date other than a Distribution Payment Date. At the end of
any such Extension Period, the Debenture Issuer shall pay all interest then
accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend beyond the
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Maturity Date and provided further, however, that during any such Extension
-------- ------- -------
Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Debenture Issuer's or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Debenture Issuer) or make any guarantee payments with respect to the
foregoing, or (ii) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Debenture
Issuer or any Affiliate that rank pari passu in all respects with or junior in
interest to the Debentures (other than, with respect to clauses (i) and (ii)
above, (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Additional Interest shall
be due and payable during an Extension Period, except at the end thereof, but
each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest. During any
Extension Period, Distributions on the Securities shall be deferred for a period
equal to the Extension Period. If Distributions are deferred, the Distributions
due shall be paid on the date that the related Extension Period terminates to
Holders of the Securities as they appear on the books and records of the Trust
on the record date immediately preceding such date. Distributions on the
Securities must be paid on the dates payable (after giving effect to any
Extension Period) to the extent that the Trust has funds available for the
payment of such distributions in the Property Account of the Trust. The Trust's
funds available for Distribution to the Holders of the Securities will be
limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust on the
relevant record dates. The relevant record dates shall be five days before the
relevant Distribution Payment Date. Distributions payable on any Securities that
are not punctually paid on any Distribution Payment Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, as the
case may be, when due (taking into account any Extension Period), will cease to
be payable to the Person in whose name such Securities are registered 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.
(d) 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 of the
Securities.
3. Liquidation Distribution Upon Dissolution. In the event of the
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation") other than in connection with a redemption of
-----------
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000.00 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
-----------
Distribution"), unless in connection with such Liquidation, the Debentures in an
- ------------
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Distribution Rate
of, and bearing accrued and unpaid interest in an amount equal to the accrued
and unpaid Distributions on, and having the same record date as, such
Securities, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with the Statutory Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the
right at any time to dissolve the Trust (including, without limitation, upon the
occurrence of a Special Event), subject to the receipt by the Debenture Issuer
of prior approval from the Board of Governors of the Federal Reserve System, or
its designated district bank, as applicable, and any successor federal agency
that is primarily responsible for regulating the activities of the Sponsor (the
"Federal Reserve"), if the Sponsor is a bank holding company, or from the Office
---------------
of Thrift Supervision and any successor federal agency that is primarily
responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor
---
is a savings and loan holding company, in either case if then required under
applicable capital guidelines or policies of the Federal Reserve or OTS, as
applicable, and, after satisfaction of liabilities to creditors of the Trust,
cause the Debentures to be distributed to the Holders of the Securities on a Pro
Rata basis in accordance with the aggregate stated liquidation amount thereof.
If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders, after satisfaction of liabilities of creditors of the Trust to
the extent not satisfied by the Debenture Issuer, an amount equal to the
Liquidation Distribution. An early Liquidation of the Trust pursuant to clause
(iv) of Section 7.1(a) of the Declaration shall occur if the Institutional
Trustee determines that such Liquidation is possible by distributing, after
satisfaction of liabilities to creditors of the Trust, to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.
If, upon any such Liquidation the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on such Capital Securities shall be paid to the Holders of the
Trust Securities on a Pro Rata basis, except that if an Event of Default has
occurred and is continuing, the Capital Securities shall have a preference over
the Common Securities with regard to such distributions.
After the date for any distribution of the Debentures upon
dissolution of the Trust (i) the Securities of the Trust will be deemed to be no
longer outstanding, (ii) upon surrender of a Holder's Securities certificate,
such Holder of the Securities will receive a certificate representing the
Debentures to be delivered upon such distribution, (iii) any certificates
representing the Securities still outstanding will be deemed to represent
undivided beneficial interests in such of the Debentures as have an aggregate
principal amount equal to the aggregate stated liquidation amount with an
interest rate identical to the Distribution Rate of, and bearing accrued and
unpaid interest equal to accrued and unpaid distributions on, the Securities
until such certificates are presented to the Debenture Issuer or its agent for
transfer or reissuance (and until such certificates are so surrendered, no
payments of interest or principal shall be made to Holders of Securities in
respect of any payments due and payable under the Debentures; provided, however
-------- -------
that such failure to pay shall not be deemed to be an Event of Default and shall
not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of
Holders of Securities under the Declaration shall cease, except the right of
such Holders to receive Debentures upon surrender of certificates representing
such Securities.
4. Redemption and Distribution.
---------------------------
(a) The Debentures will mature on December 15, 2034. The
Debentures may be redeemed by the Debenture Issuer, in whole or in part, at any
Distribution Payment Date on or after the Distribution Payment Date in December
2009, at the Redemption Price. In addition, the Debentures may be redeemed by
the Debenture Issuer at the Special Redemption Price, in whole but not in part,
at any Distribution Payment Date, upon the occurrence and continuation of a
Special Event within 120 days following the occurrence of such Special Event at
the Special Redemption Price, upon not less than 30 nor more than 60 days'
notice to holders of such Debentures so long as such Special Event is
continuing. In each case, the right of the Debenture Issuer to redeem the
Debentures is subject to the Debenture Issuer having received prior approval
from the Federal Reserve (if the Debenture Issuer is a bank holding company) or
prior approval from the OTS (if the Debenture Issuer is a savings and loan
holding company), in each case if then required under applicable capital
guidelines or policies of the applicable federal agency.
"3-Month LIBOR" means the London interbank offered interest rate for
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three-month, U.S. dollar deposits determined by the Debenture Trustee in the
following order of priority:
(1) the rate (expressed as a percentage per annum) for
U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date (as defined below). "Telerate Page 3750" means
the display designated as "Page 3750" on the Dow Jones Telerate
Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the
purpose of displaying London interbank offered rates for U.S.
dollar deposits;
(2) if such rate cannoy be identified on the related
Determination Date, the Debenture Trustee will request the
principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations
(expressed as percentages per annum) to prime banks in the London
interbank market for U.S. dollar deposits having a three-month
maturity as of 11:00 a.m. (London time) on such Determination
Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as
requested in clause (2) above, the Debenture Trustee will request
four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading
European banks for loans in U.S. dollars as of 11:00 a.m. (London
time) on such Determination Date. If at least two such quotations
are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and
(4) if fewer than two such quotations are provided as
requested in clause (3) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period
immediately preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity
that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on
the related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
"Capital Treatment Event" means the receipt by the Debenture Issuer and
-----------------------
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws, rules or regulations of the
United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of original issuance of the Debentures, there is more than an
insubstantial risk that the Sponsor will not, within 90 days of the date of such
opinion, be entitled to treat an amount equal to the aggregate liquidation
amount of the Capital Securities as "Tier 1 Capital" (or its then equivalent)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding
company, such guidelines applied to the Sponsor as if the Sponsor were subject
to such guidelines); provided, however, that the inability of the Sponsor to
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treat all or any portion of the liquidation amount of the Capital Securities as
Tier l Capital shall not constitute the basis for a Capital Treatment Event, if
such inability results from the Sponsor having cumulative preferred stock,
minority interests in consolidated subsidiaries, or any other class of security
or interest which the Federal Reserve or OTS, as applicable, may now or
hereafter accord Tier 1 Capital treatment in excess of the amount which may now
or hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of
-------- ------- -------
Debentures in connection with the Liquidation of the Trust shall not in and of
itself constitute a Capital Treatment Event unless such Liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.
"Determination Date" means the date that is two London Banking Days
-------------------
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.
"Investment Company Event" means the receipt by the Debenture Issuer
--------------------------
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion, will be considered
an Investment Company that is required to be registered under the Investment
Company Act which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Debentures.
"Maturity Date" means December 15, 2034.
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"Redemption Date" shall mean the date fixed for the redemption of
----------------
Capital Securities, which shall be any Distribution Payment Date on or after the
Distribution Payment Date in December 2009.
"Redemption Price" means 100% of the principal amount of the Debentures
----------------
being redeemed, plus accrued and unpaid Interest on such Debentures to the
Redemption Date.
"Special Event" means a Tax Event, an Investment Company Event or a
--------------
Capital Treatment Event.
"Special Redemption Date" means a date on which a Special Event
-------------------------
redemption occurs, which shall be a Distribution Payment Date.
"Special Redemption Price" means the price set forth in the following
--------------------------
table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:
- ----------------------------------------- --------------------------------------
Month in which Special Special Redemption Price
---------------------- ------------------------
Redemption Date Occurs
----------------------
- ----------------------------------------- --------------------------------------
March 2005 104.625%
- ----------------------------------------- --------------------------------------
June 2005 104.300%
- ----------------------------------------- --------------------------------------
September 2005 104.000%
- ----------------------------------------- --------------------------------------
December 2005 103.650%
- ----------------------------------------- --------------------------------------
March 2006 103.350%
- ----------------------------------------- --------------------------------------
June 2006 103.000%
- ----------------------------------------- --------------------------------------
September 2006 102.700%
- ----------------------------------------- --------------------------------------
December 2006 102.350%
- ----------------------------------------- --------------------------------------
March 2007 102.050%
- ----------------------------------------- --------------------------------------
June 2007 101.700%
- ----------------------------------------- --------------------------------------
September 2007 101.400%
- ----------------------------------------- --------------------------------------
- ----------------------------------------- --------------------------------------
December 2007 101.050%
- ----------------------------------------- --------------------------------------
March 2008 100.750%
- ----------------------------------------- --------------------------------------
June 2008 100.450%
- ----------------------------------------- --------------------------------------
September 2008 100.200%
- ----------------------------------------- --------------------------------------
December 2008 and thereafter 100.000%
- ----------------------------------------- --------------------------------------
plus, in each case, accrued and unpaid Interest on such Debentures to
the Special Redemption Date.
"Tax Event" means the receipt by the Debenture Issuer and the Trust of
---------
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement including any notice or announcement of intent to adopt such
procedures or regulations) (an "Administrative Action") or judicial decision
----------------------
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, 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; (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes; or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
(b) Upon the repayment in full at maturity or redemption in
whole or in part of the Debentures (other than following the distribution of the
Debentures to the Holders of the Securities), the proceeds from such repayment
or payment shall concurrently be applied to redeem Pro Rata at the applicable
Redemption Price or Special Redemption Price, as applicable, Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed; provided, however, that holders of such
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Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).
(c) If fewer than all the outstanding Securities are to be
so redeemed, the Common Securities and the Capital Securities will be redeemed
Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata
from each Holder of Capital Securities.
(d) The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) Redemption or Distribution Procedures.
-------------------------------------
(i) Notice of any redemption of, or notice of
distribution of the Debentures in exchange for, the Securities (a
"Redemption/Distribution Notice") will be given by the Trust by mail to
------------------------------
each Holder of Securities to be redeemed or exchanged not fewer than 30
nor more than 60 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 paragraph 4(e)(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 of such
Securities. Each Redemption/Distribution Notice shall be addressed
to the Holders of such Securities at the address of each such Holder
appearing on the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing thereof with respect
to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) If the Securities are to be redeemed and the Trust
gives a Redemption/Distribution Notice, which notice may only be issued
if the Debentures are redeemed as set out in this paragraph 4 (which
notice will be irrevocable), then, provided that the Institutional
--------
Trustee has a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Institutional Trustee
will pay the relevant Redemption Price or Special Redemption Price,
as applicable, to the Holders of such Securities by check mailed to the
address of each such 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 then immediately prior
to the close of business on the date of such deposit Distributions
will cease to accrue on the Securities so called for redemption and all
rights of Holders of such Securities so called for redemption will
cease, except the right of the Holders of such Securities to receive
the applicable Redemption Price or Special Redemption Price specified
in paragraph 4(a), but without interest on such Redemption Price or
Special Redemption Price. If payment of the Redemption Price or Special
Redemption Price in respect of any Securities is improperly withheld
or refused and not paid either by the Trust or by the Debenture Issuer
as guarantor pursuant to the Guarantee, Distributions on such
Securities will continue to accrue at the Distribution Rate 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 or Special
Redemption Price. In the event of any redemption of the Capital
Securities issued by the Trust in part, the Trust shall not be required
to (i) issue, register the transfer of or exchange any Security during
a period beginning at the opening of business five days before any
selection for redemption of the Capital Securities and ending at the
close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all Holders of the Capital
Securities to be so redeemed or (ii) register the transfer of or
exchange any Capital Securities so selected for redemption, in whole
or in part, except for the unredeemed portion of any Capital Securities
being redeemed in part.
(iii) Redemption/Distribution Notices shall be sent by
the Administrators on behalf of the Trust to (A) in respect of the
Capital Securities, the Holders thereof and (B) in respect of the
Common Securities, the Holder thereof.
(iv) Subject to the foregoing and applicable law
(including, without limitation, United States federal securities laws),
and provided that 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 Capital Securities by tender, in the open market or by
private agreement.
5. Voting Rights - Capital Securities.
----------------------------------
(a) Except as provided under paragraphs 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights. The Administrators are required to call a
meeting of the Holders of the Capital Securities if directed to do so by Holders
of at least 10% in liquidation amount of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion
by the Institutional Trustee in certain circumstances set forth in the last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Capital Securities, voting separately as a class, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to (i)
exercise the remedies available under the Indenture as the holder of the
Debentures, (ii) waive any past default that is waivable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent on behalf of all the
Holders of the Capital Securities to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required;
provided, however, that, where a consent or action under the Indenture would
- -------- -------
require the consent or act of the holders of greater than a simple majority in
aggregate principal amount of Debentures (a "Super Majority") affected thereby,
--------------
the Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Capital Securities outstanding which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. If
the Institutional Trustee fails to enforce its rights under the Debentures after
the Holders of a Majority in liquidation amount of such Capital Securities have
so directed the Institutional Trustee, to the fullest extent permitted by law, a
Holder of the Capital Securities may institute a legal proceeding directly
against the Debenture Issuer to enforce the Institutional Trustee's rights under
the Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the Redemption Date or the Special Redemption Date,
as applicable), then a Holder of record of the Capital Securities may directly
institute a proceeding for enforcement of payment, on or after the respective
due dates specified in the Debentures, to such Holder directly of the principal
of or interest on the Debentures having an aggregate principal amount equal to
the aggregate liquidation amount of the Capital Securities of such Holder. The
Institutional Trustee shall notify all Holders of the Capital Securities of any
default actually known to the Institutional Trustee with respect to the
Debentures unless (x) such default has been cured prior to the giving of such
notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the Holders of such Capital
Securities, except where the default relates to the payment of principal of or
interest on any of the Debentures. Such notice shall state that such Indenture
Event of Default also constitutes an Event of Default hereunder. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of
the Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the Holders of the Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
-------- -------
that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of Holders of the Capital Securities may be given at a separate meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the Securities in the Trust or pursuant to written consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (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 Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.
In no event will Holders of the Capital Securities have the right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Sponsor as the Holder of all of the Common Securities
of the Trust. Under certain circumstances as more fully described in the
Declaration, Holders of Capital Securities have the right to vote to appoint,
remove or replace the Institutional Trustee and the Delaware Trustee.
6. Voting Rights - Common Securities.
---------------------------------
(a) Except as provided under paragraphs 6(b), 6(c) and 7
and as otherwise required by law and the Declaration, the Common Securities will
have no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article IV of the Declaration, to vote to appoint, remove or
replace any Administrators.
(c) Subject to Section 6.9 of the Declaration and only
after each Event of Default (if any) with respect to the Capital Securities has
been cured, waived, or otherwise eliminated and subject to the requirements of
the second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waiving any past
default and its consequences that is waivable under the Indenture, or (iii)
exercising any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable; provided, however, that, where a
-------- -------
consent or action under the Indenture would require a Super Majority, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities which the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. Notwithstanding
this paragraph 6(c), the Institutional Trustee shall not revoke any action
previously authorized or approved by a vote or consent of the Holders of the
Capital Securities. Other than with respect to directing the time, method and
place of conducting any proceeding for any remedy available to the Institutional
Trustee or the Debenture Trustee as set forth above, the Institutional Trustee
shall not take any action described in (i), (ii) or (iii) above, unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights, to the fullest extent
permitted by law, under the Declaration, any Holder of the Common Securities may
institute a legal proceeding directly against any Person to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person.
Any approval or direction of Holders of the Common Securities may be
given at a separate meeting of Holders of the Common Securities convened for
such purpose, at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the 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 the 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 Declaration and the terms of the
Securities.
7. Amendments to Declaration and Indenture.
---------------------------------------
(a) In addition to any requirements under Section 11.1 of
the Declaration, if any proposed amendment to the Declaration provides for, or
the Trustees, Sponsor or Administrators otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Securities, whether by way of amendment to the Declaration or otherwise, or
(ii) the Liquidation of the Trust, other than as described in Section 7.1 of the
Declaration, then the Holders of outstanding Securities, voting together as a
single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; provided, however, if any amendment or proposal referred to in clause
-------- -------
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee
as the holder of the Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Debentures,
the Institutional Trustee shall request the written direction of the Holders of
the Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification, or termination as
directed by a Majority in liquidation amount of the Securities voting together
as a single class; provided, however, that where a consent under the Indenture
-------- -------
would require a Super Majority, the Institutional Trustee may only give such
consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or
modification may be made to the Declaration if such amendment or modification
would (i) cause the Trust to be classified for purposes of United States federal
income taxation as other than a grantor trust, (ii) reduce or otherwise
adversely affect the powers of the Institutional Trustee or (iii) cause the
Trust to be deemed an Investment Company which is required to be registered
under the Investment Company Act.
(d) Notwithstanding any provision of the Declaration, the
right of any Holder of the Capital Securities to receive payment of
distributions and other payments upon redemption or otherwise, on or after their
respective due dates, or to institute a suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder. For the protection and enforcement of the
foregoing provision, each and every Holder of the Capital Securities shall be
entitled to such relief as can be given either at law or equity.
8. 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 of the Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities then outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking. The Capital Securities rank pari passu with and
-------
payment thereon shall be made Pro Rata with the Common Securities except that,
where an Event of Default has occurred and is continuing, the rights of Holders
of the Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price (or Special Redemption Price) of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price (or Special Redemption Price) the
full amount of such Redemption Price (or Special Redemption Price) on all
outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the Redemption Price (or Special Redemption Price) of, the
Capital Securities then due and payable.
10. Acceptance of Guarantee and Indenture. Each Holder of the
-------------------------------------
Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights. The Holders of the Securities shall have
---------------------
no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous. These terms constitute a part of the
-------------
Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee,
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS
EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO FIRST BANK STATUTORY TRUST III OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Certificate Number P-1 40,000 Capital Securities
CUSIP NO. [_______]
November 23, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust III
(liquidation amount $1,000.00 per Capital Security)
First Bank Statutory Trust III, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of capital securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").
Subject to the Declaration (as defined below), the Capital 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 Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of November 23, 2004, among Peter D. Wimmer, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Trust, including the designation of
the terms of the Capital Securities as set forth in Annex I to such amended and
restated declaration as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signatures appear on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST III
By:
-----------------------------------------
Name:
Title: Administrator
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By:
------------------------------------------
Authorized Officer
[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate equal to 4.54% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in March
2005 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in March 2005, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.18% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in March 2005. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
-------- -------
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security 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 Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of
this Capital Security Certificate)
Signature Guarantee:1
1 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION
8.1 OF THE DECLARATION.
Certificate Number C-1 1,238 Common Securities
November 23, 2004
Certificate Evidencing Floating Rate Common Securities
of
First Bank Statutory Trust III
First Bank Statutory Trust III, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that First Banks,
Inc. (the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities"). The Common Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities shall in all respects be
subject to, the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of November 23, 2004, among Peter D. Wimmer, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interest in the assets of the Trust including the designation of the
terms of the Common Securities as set forth in Annex I to such amended and
restated declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
As set forth in the Declaration, when an Event of Default has occurred
and is continuing, the rights of Holders of Common Securities to payment in
respect of Distributions and payments upon Liquidation, redemption or otherwise
are subordinated to the rights of payment of Holders of the Capital Securities.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of undivided beneficial ownership in the
Debentures.
This Common Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST III
By:
--------------------------------------------
Name:
Title: Administrator
[FORM OF REVERSE OF COMMON SECURITY]
Distributions payable on each Common Security will be payable at an
annual rate equal to 4.54% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in March
2005 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in March 2005, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.18% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Common Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Common
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in March 2005. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
-------- -------
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Common
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer.
The Common Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security 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 Common Security Certificate on the
books of the Trust. The agent may substitute another
to act for him or her.
Date:
------------------------------------------------
Signature:
-------------------------------------------
(Sign exactly as your name appears on the other side
of this Common Security Certificate)
Signature:
-------------------------------------------
(Sign exactly as your name appears on the other side
of this Common Security Certificate)
Signature Guarantee2
2 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 Security 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 Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
EXHIBIT B
SPECIMEN OF INITIAL DEBENTURE
(See Document No. 17)
EXHIBIT C
PLACEMENT AGREEMENT
(See Document No. 1)
Exhibit 4.37
-------------------------------------------------
GUARANTEE AGREEMENT
by and between
FIRST BANKS, INC.
and
WILMINGTON TRUST COMPANY
Dated as of November 23, 2004
-------------------------------------------------
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of November 23,
2004, is executed and delivered by First Banks, Inc., a Missouri corporation
(the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation,
as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of First
Bank Statutory Trust III, a Delaware statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of the date hereof among Wilmington Trust Company, not
in its individual capacity but solely as institutional trustee, the
administrators of the Issuer named therein, the Guarantor, as sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof those undivided beneficial
interests, having an aggregate liquidation amount of $40,000,000.00 (the
"Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation. In this Guarantee,
--------------------------------
unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to
this Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to "Articles" or "Sections" are
to Articles or Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of
this Guarantee have the same meanings when used in this Guarantee, unless
otherwise defined in this Guarantee or unless the context otherwise requires;
and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Beneficiaries" means any Person to whom the Issuer is or hereafter
-------------
becomes indebted or liable.
"Capital Securities" has the meaning set forth in the recitals to this
-------------------
Guarantee.
"Common Securities" means the common securities issued by the Issuer to
-----------------
the Guarantor pursuant to the Declaration.
"Corporate Trust Office" means the office of the Guarantee Trustee at
-----------------------
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Guarantee is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust
Administration.
"Covered Person" means any Holder of Capital Securities.
--------------
"Debentures" means the debt securities of the Guarantor designated the
----------
Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 held
by the Institutional Trustee (as defined in the Declaration) of the Issuer.
"Declaration Event of Default" means an "Event of Default" as defined
-----------------------------
in the Declaration.
"Event of Default" has the meaning set forth in Section 2.4(a).
----------------
"Guarantee Payments" means the following payments or distributions,
-------------------
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) which are required to be paid on such Capital Securities to
the extent the Issuer shall have funds available therefor, (ii) the Redemption
Price to the extent the Issuer has funds available therefor, with respect to any
Capital Securities called for redemption by the Issuer, (iii) the Special
Redemption Price to the extent the Issuer has funds available therefor, with
respect to Capital Securities redeemed upon the occurrence of a Special Event,
and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer shall have funds available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
------------------
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Guarantor" means First Banks, Inc. and each of its successors and
---------
assigns.
"Holder" means any holder, as registered on the books and records of
------
the Issuer, of any Capital Securities; provided, however, that, in determining
-------- -------
whether the Holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
-------------------
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of the date hereof between the
---------
Guarantor and Wilmington Trust Company, not in its individual capacity but
solely as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the institutional trustee of the Issuer.
"Issuer" has the meaning set forth in the opening paragraph to this
------
Guarantee.
"Liquidation Distribution" has the meaning set forth in the definition
-------------------------
of "Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means
--------------------------------------------------------------
Holder(s) of outstanding Capital Securities, voting together as a class, but
separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital
Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not
-----------
including liabilities related to taxes) of the Issuer other than obligations of
the Issuer to pay to holders of any Trust Securities the amounts due such
holders pursuant to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a
-----------------------
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:
(a) a statement that the officer signing the Officer's
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by the officer in rendering the Officer's
Certificate;
(c) a statement that the officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of the officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Redemption Price" has the meaning set forth in the Indenture.
----------------
"Responsible Officer" means, with respect to the Guarantee Trustee, any
-------------------
officer within the Corporate Trust Office of the Guarantee Trustee including any
Vice President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also, 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.
"Special Event" has the meaning set forth in the Indenture.
-------------
"Special Redemption Price" has the meaning set forth in the Indenture.
------------------------
"Successor Guarantee Trustee" means a successor Guarantee Trustee
-----------------------------
possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital
------------------
Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 2.1. Powers and Duties of the Guarantee Trustee.
------------------------------------------
(a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders of the Capital Securities, and the Guarantee Trustee
shall not transfer this Guarantee to any Person except a Holder of Capital
Securities exercising his or her rights pursuant to Section 4.4(b) or to a
Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of
its appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer
of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee for the benefit of the Holders of the Capital
Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after curing all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee, and no implied covenants shall be read into this Guarantee against
the Guarantee Trustee. In case an Event of Default has occurred (that has not
been waived pursuant to Section 2.4) and is actually known to a Responsible
Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Guarantee, and use the same degree of
care and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions
of this Guarantee, and the Guarantee Trustee shall not be liable
except for the performance of such duties and obligations
as are specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this
Guarantee; but in the case of any such certificates or opinions
that by any provision hereof are specifically required to be
furnished to the Guarantee Trustee, the Guarantee Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that such Responsible
Officer of the Guarantee Trustee or the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the written direction of the Holders of not less than
a Majority in liquidation amount of the Capital Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or relating to the exercise of any
trust or power conferred upon the Guarantee Trustee under this
Guarantee; and
(iv) no provision of this Guarantee shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds is not reasonably assured to it under the terms of this
Guarantee or security and indemnity, reasonably satisfactory to the
Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
Section 2.2. Certain Rights of Guarantee Trustee.
-----------------------------------
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee shall be sufficiently evidenced by an Officer's
Certificate.
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer's Certificate of the Guarantor
which, upon receipt of such request, shall be promptly delivered by
the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any
re-recording, refiling or re-registration thereof).
(v) The Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to
legal matters 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 Guarantor or any of its Affiliates and may
include any of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration
of this Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee at
the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Guarantee 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 Guarantee Trustee; provided, however, that nothing
-------- -------
contained in this Section 2.2(a)(vi) shall relieve the Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Guarantee.
(vii) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of the Capital Securities, and the
signature of the Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Guarantee, both of which shall be conclusively
evidenced by the Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Guarantee the
Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (i) may request instructions from the
Holders of a Majority in liquidation amount of the Capital Securities,
(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 accordance with such
instructions.
(xi) The Guarantee 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
Guarantee.
(b) No provision of this Guarantee shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law to perform
any such act or acts or to exercise any such right, power, duty or obligation.
No permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.
Section 2.3. Not Responsible for Recitals or Issuance of Guarantee.
--------------------------------------------------------
The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.
Section 2.4. Events of Default; Waiver.
(a) An Event of Default under this Guarantee will occur upon the
failure of the Guarantor to perform any of its payment or other obligations
hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital
Securities may, voting or consenting as a class, on behalf of the Holders of all
of the Capital Securities, waive any past Event of Default and its consequences.
Upon such waiver, any such Event of Default shall cease to exist, and shall be
deemed to have been cured, for every purpose of this Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.5. Events of Default; Notice.
-------------------------
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Capital Securities and the Guarantor, notices of all Events of
Default actually known to a Responsible Officer of the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided,
--------
however, that the Guarantee Trustee shall be protected in withholding such
- -------
notice if and so long as a Responsible Officer of the Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders of the Capital Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received written
notice from the Guarantor or a Holder of the Capital Securities (except in the
case of a payment default), or a Responsible Officer of the Guarantee Trustee
charged with the administration of this Guarantee shall have obtained actual
knowledge thereof.
ARTICLE III
GUARANTEE TRUSTEE
Section 3.1. Guarantee Trustee; Eligibility.
------------------------------
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor, and
(ii) be a 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 Person 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 3.1(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 Guarantee Trustee shall cease to be eligible
to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign
in the manner and with the effect set out in Section 3.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee shall either eliminate such interest or resign to the extent
and in the manner provided by, and subject to this Guarantee.
Section 3.2. Appointment, Removal and Resignation of Guarantee
---------------------------------------------------------
Trustee.
- -------
(a) Subject to Section 3.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor except during an
Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by an instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 3.2 within 60 days after
delivery of an instrument of removal or resignation, the Guarantee Trustee
resigning or being removed may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of
the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to
the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections
7.2 and 7.3 accrued to the date of such termination, removal or resignation.
ARTICLE IV
GUARANTEE
Section 4.1. Guarantee.
---------
(a) The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Issuer), as and when due, regardless of any
defense (except the defense of payment by the Issuer), right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
(b) The Guarantor hereby also agrees to assume any and all
Obligations of the Issuer and in the event any such Obligation is not so
assumed, subject to the terms and conditions hereof, the Guarantor hereby
irrevocably and unconditionally guarantees to each Beneficiary the full
payment, when and as due, of any and all Obligations to such Beneficiaries.
This Guarantee is intended to be for the benefit of, and to be enforceable by,
all such Beneficiaries, whether or not such Beneficiaries have received notice
hereof.
Section 4.2. Waiver of Notice and Demand. The Guarantor hereby waives
---------------------------
notice of acceptance of this Guarantee and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 4.3. Obligations Not Affected. The obligations, covenants,
-------------------------
agreements and duties of the Guarantor under this Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Capital Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions, Redemption Price, Special Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any other
obligation under, arising out of or in connection with, the Capital Securities
(other than an extension of time for payment of Distributions, Redemption Price,
Special Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures or
any extension of the maturity date of the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Capital Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Issuer or any of the assets of
the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 4.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 4.4. Rights of Holders.
-----------------
(a) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee; provided, however, that (subject to
-------- -------
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any
such direction if the Guarantee Trustee being advised by counsel determines that
the action or proceeding so directed may not lawfully be taken or if the
Guarantee Trustee in good faith by its board of directors or trustees, executive
committees or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee's
rights under this Guarantee, without first instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other Person. The Guarantor
waives any right or remedy to require that any such action be brought first
against the Issuer, the Guarantee Trustee or any other Person before so
proceeding directly against the Guarantor.
Section 4.5. Guarantee of Payment. This Guarantee creates a guarantee
--------------------
of payment and not of collection.
Section 4.6. Subrogation. The Guarantor shall be subrogated to all (if
-----------
any) rights of the Holders of Capital Securities against the Issuer in respect
of any amounts paid to such Holders by the Guarantor under this Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
- -------- -------
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Guarantee, if,
after giving effect to any such payment, any amounts are due and unpaid under
this Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
Section 4.7. Independent Obligations. The Guarantor acknowledges that
-----------------------
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 4.3 hereof.
Section 4.8. Enforcement by a Beneficiary. A Beneficiary may enforce
----------------------------
the obligations of the Guarantor contained in Section 4.1(b) directly against
the Guarantor and the Guarantor waives any right or remedy to require that any
action be brought against the Issuer or any other person or entity before
proceeding against the Guarantor. The Guarantor shall be subrogated to all
rights (if any) of any Beneficiary against the Issuer in respect of any amounts
paid to the Beneficiaries by the Guarantor under this Guarantee; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if at the
time of any such payment, and after giving effect to such payment, any amounts
are due and unpaid under this Guarantee.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 5.1. Limitation of Transactions. So long as any Capital
----------------------------
Securities remain outstanding, if (a) there shall have occurred and be
continuing an Event of Default or a Declaration Event of Default or (b) the
Guarantor shall have selected an Extension Period as provided in the Declaration
and such period, or any extension thereof, shall have commenced and be
continuing, then the Guarantor shall not and shall not permit any Affiliate to
(x) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Guarantor's
or such Affiliate's capital stock (other than payments of dividends or
distributions to the Guarantor) or make any guarantee payments with respect to
the foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Guarantor or
any Affiliate that rank pari passu in all respects with or junior in interest to
the Debentures (other than, with respect to clauses (x) and (y) above, (i)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Guarantor in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Guarantor (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of the Event of Default, Declaration Event of Default or
Extension Period, as applicable, (ii) as a result of any exchange or conversion
of any class or series of the Guarantor's capital stock (or any capital stock of
a subsidiary of the Guarantor) for any class or series of the Guarantor's
capital stock or of any class or series of the Guarantor's indebtedness for any
class or series of the Guarantor's capital stock, (iii) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) any declaration of a dividend in connection with
any stockholders' rights plan, or the issuance of rights, stock or other
property under any stockholders' rights plan, or the redemption or repurchase of
rights pursuant thereto, (v) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari passu with or junior to such
stock and any cash payments in lieu of fractional shares issued in connection
therewith, or (vi) payments under this Guarantee).
Section 5.2. Ranking. This Guarantee will constitute an unsecured
-------
obligation of the Guarantor and will rank subordinate and junior in right of
payment to all present and future Senior Indebtedness (as defined in the
Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital
Securities agrees to the foregoing provisions of this Guarantee and the other
terms set forth herein.
The right of the Guarantor to participate in any distribution of assets
of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments hereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
that the Guarantor may enter into in the future or otherwise.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Guarantee shall terminate as to the
-----------
Capital Securities (i) upon full payment of the Redemption Price or Special
Redemption Price of all Capital Securities then outstanding, (ii) upon the
distribution of all of the Debentures to the Holders of all of the Capital
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon dissolution of the Issuer. This Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Guarantee.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Exculpation.
-----------
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor 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 in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed to
be within the scope of the authority conferred on such Indemnified Person by
this Guarantee 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 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 Issuer or the Guarantor and upon such
information, opinions, reports or statements presented to the Issuer or the
Guarantor by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and who, if
selected by such Indemnified Person, has been selected with reasonable care by
such Indemnified Person, 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 of Capital Securities might properly be paid.
Section 7.2. Indemnification.
---------------
(a) The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or willful
misconduct on the part of the Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including, but not limited to, the costs and expenses (including
reasonable legal fees and expenses) of the Indemnified Person defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of the Indemnified Person's powers or duties
hereunder. The obligation to indemnify as set forth in this Section 7.2 shall
survive the resignation or removal of the Guarantee Trustee and the termination
of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this
Section 7.2 of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the Guarantor under
this Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not relieve the Guarantor
from liability under paragraph (a) above unless and to the extent that the
Guarantor did not otherwise learn of such action and such failure results
in the forfeiture by the Guarantor of substantial rights and defenses and (ii)
will not, in any event, relieve the Guarantor from any obligations to any
Indemnified Person other than the indemnification obligation provided in
paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the
Guarantor's choice at the Guarantor's expense to represent the Indemnified
Person in any action for which indemnification is sought (in which case the
Guarantor shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the Indemnified Person or Persons except as set
forth below); provided, however, that such counsel shall be reasonably
-------- -------
satisfactory to the Indemnified Person. Notwithstanding the Guarantor's
election to appoint counsel to represent the Guarantor in an action, the
Indemnified Person shall have the right to employ separate counsel (including
local counsel), and the Guarantor shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the
Guarantor to represent the Indemnified Person would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the Indemnified Person and the
Guarantor and the Indemnified Person shall have reasonably concluded that
there may be legal defenses available to it and/or other Indemnified Person(s)
which are different from or additional to those available to the Guarantor,
(iii) the Guarantor shall not have employed counsel satisfactory to the
Indemnified Person to represent the Indemnified Person within a reasonable
time after notice of the institution of such action or (iv) the Guarantor shall
authorize the Indemnified Person to employ separate counsel at the expense of
the Guarantor. The Guarantor will not, without the prior written consent of
the Indemnified Persons, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Persons are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Person from all
liability arising out of such claim, action, suit or proceeding.
Section 7.3. Compensation; Reimbursement of Expenses. The Guarantor
-----------------------------------------
agrees:
(a) to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by it in accordance with any provision of this
Guarantee (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or willful misconduct.
For purposes of clarification, this Section 7.3 does not contemplate
the payment by the Guarantor of acceptance or annual administration fees owing
to the Guarantee Trustee for services to be provided by the Guarantee Trustee
under this Guarantee or the fees and expenses of the Guarantee Trustee's counsel
in connection with the closing of the transactions contemplated by this
Guarantee. The provisions of this Section 7.3 shall survive the resignation or
removal of the Guarantee Trustee and the termination of this Guarantee.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Successors and Assigns. All guarantees and agreements
-----------------------
contained in this Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Capital Securities then outstanding. Except in connection
with any merger or consolidation of the Guarantor with or into another entity or
any sale, transfer or lease of the Guarantor's assets to another entity, in each
case, to the extent permitted under the Indenture, the Guarantor may not assign
its rights or delegate its obligations under this Guarantee without the prior
approval of the Holders of at least a Majority in liquidation amount of the
Capital Securities.
Section 8.2. Amendments. Except with respect to any changes that do
----------
not adversely affect the rights of Holders of the Capital Securities in any
material respect (in which case no consent of Holders will be required), this
Guarantee may be amended only with the prior approval of the Holders of not
less than a Majority in liquidation amount of the Capital Securities. The
provisions of the Declaration with respect to amendments thereof apply to
the giving of such approval.
Section 8.3. Notices. All notices provided for in this Guarantee 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 Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee Trustee
may give notice of to the Holders of the Capital Securities and the Guarantor):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Capital Securities and to the Guarantee Trustee):
First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Telecopy: 314-592-6621
(c) If given to any Holder of the Capital Securities, at the address
set forth on the books and records of the Issuer.
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 8.4. Benefit. This Guarantee is solely for the benefit of the
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Beneficiaries and, subject to Section 2.1(a), is not separately transferable
from the Capital Securities.
Section 8.5. Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).
Section 8.6. Counterparts. This Guarantee may be executed in one or
------------
more counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.7 Separability. In case one or more of the provisions
------------
contained in this Guarantee shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Guarantee, but this Guarantee
shall be construed as if such invalid or illegal or unenforceable provision had
never been contained herein.
Signatures appear on the following page
THIS GUARANTEE is executed as of the day and year first above written.
FIRST BANKS, INC., as Guarantor
By: /s/ Allen H. Blake
---------------------------------------------
Name: Allen H. Blake
Title: President and Chief Executive Officer
WILMINGTON TRUST COMPANY, as Guarantee Trustee
By: /s/ Christopher J. Monigle
---------------------------------------------
Name: Christopher J. Monigle
Title: Assistant Vice President
Exhibit 4.38
FIRST BANKS, INC.
40,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
-------------------
November 22, 2004
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Ladies and Gentlemen:
First Banks, Inc., a Missouri corporation (the "Company"), and its
financing subsidiary, First Bank Statutory Trust III, a Delaware statutory trust
(the "Trust," and hereinafter together with the Company, the "Offerors"), hereby
confirm their agreement (this "Agreement") with you as placement agents (the
"Placement Agents"), as follows:
Section 1. Issuance and Sale of Securities.
-------------------------------
1.1. Introduction. The Offerors propose to issue and sell at the
------------
Closing (as defined in Section 2.3.1 hereof) 40,000 of the Trust's Floating Rate
Capital Securities, with a liquidation amount of $1,000.00 per capital security
(the "Capital Securities"), to First Tennessee Bank National Association (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A-1 and incorporated herein by
-----------
this reference.
1.2. Operative Agreements. The Capital Securities shall be fully and
--------------------
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and Wilmington Trust Company ("WTC"), as trustee (the
"Guarantee Trustee"), for the benefit from time to time of the holders of the
Capital Securities. The entire proceeds from the sale by the Trust to the
holders of the Capital Securities shall be combined with the entire proceeds
from the sale by the Trust to the Company of its common securities (the "Common
Securities"), and shall be used by the Trust to purchase $41,238,000.00 in
principal amount of the Floating Rate Junior Subordinated Deferrable Interest
Debentures (the "Debentures") of the Company. The Capital Securities and the
Common Securities for the Trust shall be issued pursuant to an Amended and
Restated Declaration of Trust among WTC, as Delaware trustee (the "Delaware
Trustee"), WTC, as institutional trustee (the "Institutional Trustee"), the
Administrators named therein, and the Company, to be dated as of the Closing
Date and in substantially the form heretofore delivered to the Placement Agents
(the "Trust Agreement"). The Debentures shall be issued pursuant to an Indenture
(the "Indenture"), to be dated as of the Closing Date, between the Company and
WTC, as indenture trustee (the "Indenture Trustee"). The documents identified in
this Section 1.2 and in Section 1.1 are referred to herein as the "Operative
Documents."
1.3. Rights of Purchaser. The Capital Securities shall be offered
-------------------
and sold by the Trust directly to the Purchaser without registration of any of
the Capital Securities, the Debentures or the Guarantee under the Securities Act
of 1933, as amended (the "Securities Act"), or any other applicable securities
laws in reliance upon exemptions from the registration requirements of the
Securities Act and other applicable securities laws. The Offerors agree that
this Agreement shall be incorporated by reference into the Subscription
Agreement and the Purchaser shall be entitled to each of the benefits of the
Placement Agents and the Purchaser under this Agreement and shall be entitled to
enforce obligations of the Offerors under this Agreement as fully as if the
Purchaser were a party to this Agreement. The Offerors and the Placement Agents
have entered into this Agreement to set forth their understanding as to their
relationship and their respective rights, duties and obligations.
1.4. Legends. Upon original issuance thereof, and until such time as
-------
the same is no longer required under the applicable requirements of the
Securities Act, the Capital Securities and Debentures certificates shall each
contain a legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
------------------------------
2.1. Exclusive Rights; Purchase Price. From the date hereof until
---------------------------------
the Closing Date (which date may be extended by mutual agreement of the Offerors
and the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.
2.2. Subscription Agreement. The Offerors hereby agree to evidence
-----------------------
their acceptance of the subscription by countersigning a copy of each of the
Subscription Agreement and returning the same to the Placement Agents.
2.3. Closing and Delivery of Payment.
-------------------------------
2.3.1. Closing; Closing Date. The sale and purchase of the
---------------------
Capital Securities by the Offerors to the Purchaser shall take place at a
closing (the "Closing") at the offices of Lewis, Rice & Fingersh, L.C., at 10:00
a.m. (St. Louis time) on November 23, 2004, or such other business day as may be
agreed upon by the Offerors and the Placement Agents (the "Closing Date");
provided, however, that in no event shall the Closing Date occur later than
- -------- -------
November 30, 2004 unless consented to by the Purchaser. Payment by the Purchaser
shall be payable in the manner set forth in the Subscription Agreement and shall
be made prior to or on the Closing Date.
2.3.2. Delivery. Not less than two full business days prior to
--------
the Closing Date, a global Capital Security certificate in definitive form shall
be made available by or on behalf of the Offerors to the Placement Agents and
the Institutional Trustee for inspecting, checking and delivery to the
Depository Trust Company ("DTC") or its custodian.
2.4. Costs and Expenses. Whether or not this Agreement is terminated
------------------
or the sale of the Capital Securities is consummated, the Company hereby
covenants and agrees that it shall pay or cause to be paid (directly or by
reimbursement) all reasonable costs and expenses incident to the performance of
the obligations of the Offerors under this Agreement, including all fees,
expenses and disbursements of counsel and accountants for the Offerors; all
reasonable expenses incurred by the Offerors incident to the preparation,
execution and delivery of the Trust Agreement, the Indenture, and the Guarantee;
and all other reasonable costs and expenses incident to the performance of the
obligations of the Company hereunder and under the Trust Agreement.
2.5. Failure to Close. If any of the conditions to the Closing
----------------
specified in this Agreement shall not have been fulfilled to the satisfaction of
the Placement Agents or if the Closing shall not have occurred on or before
10:00 a.m. (St. Louis time) on November 30, 2004, then each party hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
-------- -------
the obligations of the parties under Sections 2.4, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.
Section 3. Closing Conditions. The obligations of the Purchaser and the
------------------
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1. Opinions of Counsel. On the Closing Date, the Placement Agents
-------------------
shall have received the following favorable opinions, each dated as of the
Closing Date: (a) from Stinson Morrison Hecker LLP, counsel for the Offerors and
addressed to the Purchaser, the Placement Agents and WTC in substantially the
form set forth on Exhibit B-1 attached hereto and incorporated herein by this
-----------
reference, (b) from Richards, Layton & Finger, P.A., special Delaware counsel to
the Offerors and addressed to the Purchaser, the Placement Agents and the
Offerors, in substantially the form set forth on Exhibit B-2 attached hereto and
-----------
incorporated herein by this reference and (c) from Lewis, Rice & Fingersh, L.C.,
special tax counsel to the Offerors, and addressed to the Placement Agents and
the Offerors, in substantially the form set forth on Exhibit B-3 attached hereto
-----------
and incorporated herein by this reference, subject to the receipt by Lewis, Rice
& Fingersh, L.C. of a representation letter from the Company in the form set
forth in Exhibit B-3 completed in a manner reasonably satisfactory to Lewis,
-----------
Rice & Fingersh, L.C. (collectively, the "Offerors' Counsel Opinions"). In
rendering the Offerors' Counsel Opinions, counsel to the Offerors may rely as to
factual matters upon certificates or other documents furnished by officers,
directors and trustees of the Offerors (copies of which shall be delivered to
the Placement Agents and the Purchaser) and by government officials, and upon
such other documents as counsel to the Offerors may, in their reasonable
opinion, deem appropriate as a basis for the Offerors' Counsel Opinions. Counsel
to the Offerors may specify the jurisdictions in which they are admitted to
practice and that they are not admitted to practice in any other jurisdiction
and are not experts in the law of any other jurisdiction. If the Offerors'
counsel is not admitted to practice in the State of New York, the opinion of
Offerors' counsel may assume, for purposes of the opinion, that the laws of the
State of New York are substantively identical, in all respects material to the
opinion, to the internal laws of the state in which such counsel is admitted to
practice. Such Offerors' Counsel Opinions shall not state that they are to be
governed or qualified by, or that they are otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
3.2. Officer's Certificate. At the Closing Date, the Purchaser and
---------------------
the Placement Agents shall have received certificates from an authorized officer
of the Company, dated as of the Closing Date, stating that (i) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and (iii)
covering such other matters as the Placement Agents may reasonably request.
3.3. Administrator's Certificate. At the Closing Date, the Purchaser
---------------------------
and the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment. The
----------------------------------------------------------
purchase of and payment for the Capital Securities as described in this
Agreement and pursuant to the Subscription Agreement shall (a) not be prohibited
by any applicable law or governmental regulation, (b) not subject the Purchaser
or the Placement Agents to any penalty or, in the reasonable judgment of the
Purchaser and the Placement Agents, other onerous conditions under or pursuant
to any applicable law or governmental regulation, and (c) be permitted by the
laws and regulations of the jurisdictions to which the Purchaser and the
Placement Agents are subject.
3.5. Consents and Permits. The Company and the Trust shall have
--------------------
received all consents, permits and other authorizations, and made all such
filings and declarations, as may be required from any person or entity pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree to which the Company or the Trust is
a party or to which either is subject, in connection with the transactions
contemplated by this Agreement.
3.6. Information. Prior to or on the Closing Date, the Offerors
-----------
shall have furnished to the Placement Agents such further information,
certificates, opinions and documents addressed to the Purchaser and the
Placement Agents, which the Placement Agents may reasonably request, including,
without limitation, a complete set of the Operative Documents or any other
documents or certificates required by this Section 3; and all proceedings taken
by the Offerors in connection with the issuance, offer and sale of the Capital
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
Section 4. Conditions to the Offerors' Obligations. The obligations of the
---------------------------------------
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1. Executed Agreement. The Offerors shall have received from the
-------------------
Placement Agents an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations. The Placement Agents shall
--------------------------------
have fulfilled all of their other obligations and duties required to be
fulfilled under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. Except as set
----------------------------------------------
forth on the Disclosure Schedule (as defined in Section 11.1) attached hereto,
if any, the Offerors jointly and severally represent and warrant to the
Placement Agents and the Purchaser as of the date hereof and as of the Closing
Date as follows:
5.1. Securities Law Matters.
----------------------
(a) Neither the Company nor the Trust, nor any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on any of their behalf has, directly or
indirectly, made offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration under the
Securities Act of any of the Capital Securities, the Guarantee or the Debentures
(collectively, the "Securities") or any other securities to be issued, or which
may be issued, by the Purchaser.
(b) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf has (i) other than the
Placement Agents, offered for sale or solicited offers to purchase the
Securities, or (ii) engaged in any form of offering, general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities.
(c) The Securities satisfy the eligibility requirements of Rule
144A (d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving
effect to the offering and sale of the Capital Securities and the consummation
of the transactions described in this Agreement, will be an "investment company"
or an entity "controlled" by an "investment company," in each case within the
meaning of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.
(e) Neither the Company nor the Trust has paid or agreed to pay
to any person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.
5.2. Organization, Standing and Qualification of the Trust. The
---------------------------------------------------------
Trust has been duly created and is validly existing in good standing as a
statutory trust under the Delaware Statutory Trust Act (the "Statutory Trust
Act") with the power and authority to own property and to conduct the business
it transacts and proposes to transact and to enter into and perform its
obligations under the Operative Documents. The Trust is duly qualified to
transact business as a foreign entity and is in good standing in each
jurisdiction in which such qualification is necessary, except where the failure
to so qualify or be in good standing would not have a material adverse effect on
the Trust. The Trust is not a party to or otherwise bound by any agreement other
than the Operative Documents. The Trust is and will, under current law, be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation.
5.3. Trust Agreement. The Trust Agreement has been duly authorized
---------------
by the Company and, on the Closing Date, will have been duly executed and
delivered by the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Delaware Trustee and the
Institutional Trustee, will be a valid and binding obligation of the Company and
such Administrators, enforceable against them in accordance with its terms,
subject to (a) applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation and other laws relating to or affecting creditors'
rights generally, and (b) general principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law) ("Bankruptcy and
Equity"). Each of the Administrators of the Trust is an employee or a director
of the Company or of a financial institution subsidiary of the Company and has
been duly authorized by the Company to execute and deliver the Trust Agreement.
5.4. Guarantee Agreement and the Indenture. Each of the Guarantee
-------------------------------------
and the Indenture has been duly authorized by the Company and, on the Closing
Date, will have been duly executed and delivered by the Company, and, assuming
due authorization, execution and delivery by the Guarantee Trustee, in the case
of the Guarantee, and by the Indenture Trustee, in the case of the Indenture,
will be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities. The Capital
----------------------------------------------
Securities and the Common Securities have been duly authorized by the Trust
Agreement and, when issued and delivered against payment therefor on the Closing
Date to the Purchaser, in the case of the Capital Securities, and to the
Company, in the case of the Common Securities, will be validly issued and
represent undivided beneficial interests in the assets of the Trust. None of the
Capital Securities or the Common Securities is subject to preemptive or other
similar rights. On the Closing Date, all of the issued and outstanding Common
Securities will be directly owned by the Company free and clear of any pledge,
security interest, claim, lien or other encumbrance.
5.6. Debentures. The Debentures have been duly authorized by the
----------
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture, and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture enforceable
against the Company in accordance with their terms, subject to Bankruptcy and
Equity.
5.7. Power and Authority. This Agreement has been duly authorized,
-------------------
executed and delivered by the Company and the Trust and constitutes the valid
and binding obligation of the Company and the Trust, enforceable against the
Company and the Trust in accordance with its terms, subject to Bankruptcy and
Equity.
5.8. No Defaults. The Trust is not in violation of the Trust
-----------
Agreement or, to the knowledge of the Administrators, any provision of the
Statutory Trust Act. The execution, delivery and performance by the Company or
the Trust of this Agreement or the Operative Documents to which it is a party,
and the consummation of the transactions contemplated herein or therein and the
use of the proceeds therefrom, will not conflict with or constitute a breach of,
or a default under, or result in the creation or imposition of any lien, charge
or other encumbrance upon any property or assets of the Trust, the Company or
any of the Company's Subsidiaries (as defined in Section 5.11 hereof) pursuant
to any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Trust, the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound, or to which any of the property or
assets of any of them is subject, except for a conflict, breach, default, lien,
charge or encumbrance which could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect nor will such action result in any
violation of the Trust Agreement or the Statutory Trust Act or require the
consent, approval, authorization or order of any court or governmental agency or
body. As used herein, the term "Material Adverse Effect" means any one or more
effects that individually or in the aggregate are material and adverse to the
Offerors' ability to consummate the transactions contemplated herein or in the
Operative Documents or any one or more effects that individually or in the
aggregate are material and adverse to the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Company
and its Subsidiaries taken as whole, whether or not occurring in the ordinary
course of business.
5.9. Organization, Standing and Qualification of the Company. The
----------------------------------------------------------
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of Missouri, with all requisite corporate power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of the Company
to be so qualified would not, singly or in the aggregate, have a Material
Adverse Effect.
5.10. Subsidiaries of the Company. Each of the Company's significant
---------------------------
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
---------
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiary to be so qualified would not, singly or in the aggregate,
have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of the Significant Subsidiaries (a) have been duly authorized and
are validly issued, (b) are fully paid and nonassessable, and (c) are wholly
owned, directly or indirectly, by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, restriction upon voting or
transfer, preemptive rights, claim, equity or other defect.
5.11. Permits. The Company and each of its subsidiaries (as defined
-------
in Section 1-02(x) of Regulation S-X to the Securities Act) (the "Subsidiaries")
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not, singly or in the
aggregate, have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorizations, approvals, orders,
licenses, certificates or permits which, singly or in the aggregate, if the
failure to be so licensed or approved is the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate, have a Material Adverse
Effect; and the Company and its Subsidiaries are in compliance with all
applicable laws, rules, regulations and orders and consents, the violation of
which would, singly or in the aggregate, have a Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals. Neither the Company
---------------------------------------
nor any of its Subsidiaries is in violation of its respective articles or
certificate of incorporation, charter or by-laws or similar organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which either the
Company or any of its Subsidiaries is a party, or by which it or any of them may
be bound or to which any of the property or assets of the Company or any of its
Subsidiaries is subject, the effect of which violation or default in performance
or observance would have, singly or in the aggregate, a Material Adverse Effect.
5.13. Holding Company Registration and Deposit Insurance. The Company
--------------------------------------------------
is duly registered (i) as a bank holding company or financial holding company
under the Bank Holding Company Act of 1956, as amended, and the regulations of
the Board of Governors of the Federal Reserve System (the "Federal Reserve") or
(ii) as a savings and loan holding company under the Home Owners' Loan Act of
1933, as amended, and the regulations of the Office of Thrift Supervision (the
"OTS"), and the deposit accounts of the Company's Subsidiary depository
institutions are insured by the Federal Deposit Insurance Corporation ("FDIC")
to the fullest extent permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are pending or
threatened.
5.14. Financial Statements.
--------------------
(a) The consolidated balance sheets of the Company and all of
its Subsidiaries as of December 31, 2003 and December 31, 2002 and related
consolidated income statements and statements of changes in shareholders' equity
for the three years ended December 31, 2003 together with the notes thereto, and
the consolidated balance sheets of the Company and all of its Subsidiaries as of
September 30, 2004 and the related consolidated income statements and statements
of changes in shareholders' equity for the nine months then ended, copies of
each of which have been provided to the Placement Agents (together, the
"Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
disclosed therein) and fairly present in all material respects the financial
position and the results of operations and changes in shareholders' equity of
the Company and all of its Subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to normal
recurring year-end adjustments, none of which shall be material). The books and
records of the Company and all of its Subsidiaries have been, and are being,
maintained in all material respects in accordance with generally accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.
(b) The information in the Company's most recently filed (i)
FR Y-9C filed with the Federal Reserve if the Company is a bank holding company,
(ii) FR Y-9SP filed with the Federal Reserve if the Company is a small bank
holding company or (iii) H-(b)11 filed with the OTS if the Company is a savings
and loan holding company (the "Regulatory Report"), previously provided to the
Placement Agents fairly presents in all material respects the financial position
of the Company and, where applicable, all of its Subsidiaries as of the end of
the period represented by such Regulatory Report.
(c) Since the respective dates of the Financial Statements and
the Regulatory Report, there has been no material adverse change or development
with respect to the financial condition or earnings of the Company and all of
its Subsidiaries, taken as a whole.
(d) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.15. Exchange Act Reporting. The reports filed with the Securities
----------------------
and Exchange Commission (the "Commission") by the Company under the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the regulations thereunder
at the time they were filed with the Commission complied as to form in all
material respects with the requirements of the 1934 Act and such reports did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, except to
the extent superseded by a subsequent report filed by the Company with the
Commission.
5.16. Regulatory Enforcement Matters. Neither the Company nor any of
------------------------------
its Subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to, any investigation with respect
to, any cease-and-desist order, agreement, consent agreement, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been since January 1, 2001, a recipient of
any supervisory letter from, or since January 1, 2001, has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their ability or authority to pay dividends or make distributions to
their shareholders or make payments of principal or interest on their debt
obligations, their management or their business (each, a "Regulatory
Agreement"), nor has the Company or any of its Subsidiaries been advised since
January 1, 2001, by any Regulatory Agency that it is considering issuing or
requesting any such Regulatory Agreement. There is no material unresolved
violation, criticism or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Company or any of its
Subsidiaries. As used herein, the term "Regulatory Agency" means any federal or
state agency charged with the supervision or regulation of depository
institutions, bank, financial or savings and loan holding companies, or engaged
in the insurance of depository institution deposits, or any court,
administrative agency or commission or other governmental agency, authority or
instrumentality having supervisory or regulatory authority with respect to the
Company or any of its Subsidiaries. Neither the Company nor any of the
Subsidiaries is currently unable to pay dividends or make distributions to its
shareholders with respect to any class of its equity securities, or prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise, and, in the reasonable
judgment of the Company's management, neither the Company nor any of the
Subsidiaries will be unable in the foreseeable future to pay dividends or make
distributions with respect to any class of equity securities, or be prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise.
5.17. No Material Change. Since December 31, 2003, there has been no
------------------
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business, prospects or results of operations
of the Company or its Subsidiaries on a consolidated basis, whether or not
arising in the ordinary course of business.
5.18. No Undisclosed Liabilities. Neither the Company nor any of
--------------------------
its Subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the Financial Statements and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of the Company and all of its
Subsidiaries since the date of the most recent balance sheet included in the
Financial Statements.
5.19. Litigation. No charge, investigation, action, suit or
----------
proceeding is pending or, to the knowledge of the Offerors, threatened, against
or affecting the Company or its Subsidiaries or any of their respective
properties before or by any courts or any regulatory, administrative or
governmental official, commission, board, agency or other authority or body, or
any arbitrator, wherein an unfavorable decision, ruling or finding could have,
singly or in the aggregate, a Material Adverse Effect.
5.20. Deferral of Interest Payments on Debentures. The Company has no
-------------------------------------------
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents. Each
---------------------------------------------------------
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
6.1. Organization, Standing and Qualification.
----------------------------------------
(a) FTN Financial Capital Markets is a division of First
Tennessee Bank National Association, a national banking association duly
organized, validly existing and in good standing under the laws of the United
States, with full power and authority to own, lease and operate its properties
and conduct its business as currently being conducted. FTN Financial Capital
Markets is duly qualified to transact business as a foreign corporation and is
in good standing in each other jurisdiction in which it owns or leases property
or conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of FTN Financial Capital Markets.
(b) Keefe, Bruyette & Woods, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own, lease and operate its properties
and conduct its business as currently being conducted. Keefe, Bruyette & Woods,
Inc. is duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of Keefe, Bruyette & Woods, Inc.
6.2. Power and Authority. The Placement Agent has all requisite
-------------------
power and authority to enter into this Agreement, and this Agreement has been
duly and validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3. General Solicitation. In the case of the offer and sale of the
--------------------
Capital Securities, no form of general solicitation or general advertising was
used by the Placement Agent or its representatives including, but not limited
to, advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
6.4. Purchaser. The Placement Agent has made such reasonable inquiry
---------
as is necessary to determine that the Purchaser is acquiring the Capital
Securities for its own account, except as contemplated in Section 7.8 hereto,
and that the Purchaser does not intend to distribute the Capital Securities in
contravention of the Securities Act or any other applicable securities laws.
6.5. Qualified Purchasers. The Placement Agent has not offered or
--------------------
sold and will not arrange for the offer or sale of the Capital Securities except
(i) to those the Placement Agent reasonably believes are "accredited investors"
(as defined in Rule 501 of Regulation D), or (ii) in any other manner that does
not require registration of the Capital Securities under the Securities Act. In
connection with each such sale, the Placement Agent has taken or will take
reasonable steps to ensure that the purchaser is aware that (a) such sale is
being made in reliance on an exemption under the Securities Act and (b) future
transfers of the Capital Securities will not be made except in compliance with
applicable securities laws.
6.6. Offering Circulars. Neither the Placement Agent nor its
------------------
representatives will include any non-public information about the Company, the
Trust or any of their Affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
Section 7. Covenants of the Offerors. The Offerors covenant and agree with
-------------------------
the Placement Agents and the Purchaser as follows:
7.1. Compliance with Representations and Warranties. During the
------------------------------------------------
period from the date of this Agreement to the Closing Date, the Offerors shall
use their best efforts and take all action necessary or appropriate to cause
their representations and warranties contained in Section 5 hereof to be true as
of the Closing Date, after giving effect to the transactions contemplated by
this Agreement, as if made on and as of the Closing Date.
7.2. Sale and Registration of Securities. The Offerors and their
------------------------------------
Affiliates shall not nor shall any of them permit any person acting on their
behalf (other than the Placement Agents), to directly or indirectly (i) sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that would or could be integrated
with the sale of the Capital Securities in a manner that would require the
registration under the Securities Act of the Securities or (ii) make offers or
sales of any such Security, or solicit offers to buy any such Security, under
circumstances that would require the registration of any of such Securities
under the Securities Act.
7.3. Use of Proceeds. The Trust shall use the proceeds from the sale
---------------
of the Capital Securities and the Common Securities to purchase the Debentures
from the Company.
7.4. Investment Company. The Offerors shall not engage, or permit
-------------------
any Subsidiary to engage, in any activity which would cause it or any Subsidiary
to be an "investment company" under the provisions of the Investment Company
Act.
7.5. Reimbursement of Expenses. If the sale of the Capital
--------------------------
Securities provided for herein is not consummated (i) because any condition set
forth in Section 3 hereof is not satisfied, or (ii) because of any refusal,
inability or failure on the part of the Company or the Trust to perform any
agreement herein or comply with any provision hereof other than by reason of a
breach by the Placement Agents, the Company shall reimburse the Placement Agents
upon demand for all of their pro rata share of out-of-pocket expenses (including
reasonable fees and disbursements of counsel) in an amount not to exceed
$50,000.00 that shall have been incurred by them in connection with the proposed
purchase and sale of the Capital Securities. Notwithstanding the foregoing, the
Company shall have no obligation to reimburse the Placement Agents for their
out-of-pocket expenses if the sale of the Capital Securities fails to occur
because the Placement Agents fail to fulfill a condition set forth in Section 4.
7.6. Solicitation and Advertising. In connection with any offer or
----------------------------
sale of any of the Securities, the Offerors shall not, nor shall either of them
permit any of their Affiliates or any person acting on their behalf, other than
the Placement Agents, to engage in any form of general solicitation or general
advertising (as defined in Regulation D).
7.7. Compliance with Rule 144A(d)(4) under the Securities Act. So
--------------------------------------------------------
long as any of the Securities are outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Offerors
will, during any period in which they are not subject to and in compliance with
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the Offerors are not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser in connection with any proposed
transfer, any information required to be provided by Rule 144A(d)(4) under the
Securities Act, if applicable. This covenant is intended to be for the benefit
of the holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities. The information provided by the
Offerors pursuant to this Section 7.7 will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
7.8. Transfer Notice. The Offerors acknowledge that First Tennessee
---------------
Bank National Association ("First Tennessee") may transfer the Capital
Securities that it is purchasing, in whole or in part, at any time and from time
to time following the Closing Date by delivering the notice (the "Transfer
Notice") attached as Exhibit A to the Subscription Agreement.
7.9. Quarterly Reports. Within 50 days of the end of each calendar
-----------------
year quarter and within 100 days of the end of each calendar year during which
the Debentures are issued and outstanding and the Purchaser holds any of the
Capital Securities, the Offerors shall submit to the Purchaser a completed
quarterly report in the form attached hereto as Exhibit D as well as a copy of
----------
the applicable Regulatory Report for the Company. If First Tennessee transfers
any or all of the Capital Securities as contemplated under Section 7.8, in
addition to the reporting obligations of the Offerors to the Purchaser provided
for in this Section 7.9, the Offerors shall submit to the trustee designated in
the Transfer Notice such periodic reports as may be required by such trustee in
the form and at such times as such trustee may require. The Offerors acknowledge
and agree that such designated trustee and its successors and assigns are third
party beneficiaries of this Section 7.9.
7.10. Book-Entry Registration. Each Offeror will cooperate with the
------------------------
Placement Agents and use all commercially reasonable efforts to make the Capital
Securities, and in the event the Debentures are distributed to holders of the
Capital Securities, to make the Debentures, eligible for clearance and
settlement as book-entry securities through the facilities of DTC, and will
execute, deliver and comply with all representations made to, and agreements
with, DTC and Nasdaq's PORTAL system.
Section 8. Covenants of the Placement Agents. The Placement Agents
------------------------------------
covenant and agree with the Offerors that, during the period from the date of
this Agreement to the Closing Date, the Placement Agents shall use their best
efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 6 to be true as of Closing
Date, after giving effect to the transactions contemplated by this Agreement, as
if made on and as of the Closing Date. The Placement Agents further covenant and
agree not to engage in hedging transactions with respect to the Capital
Securities unless such transactions are conducted in compliance with the
Securities Act.
Section 9. Indemnification.
---------------
9.1. Indemnification Obligation. The Offerors shall jointly and
--------------------------
severally indemnify and hold harmless the Placement Agents and the Purchaser and
each of their respective agents, employees, officers and directors and each
person that controls either of the Placement Agents or the Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and agents, employees, officers and directors or any such controlling person of
either of the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors, or (b) any
omission or alleged omission to state in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Placement Agents or the Purchaser by the Offerors a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Indemnified Party for any legal and other expenses as such
expenses are reasonably incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, judgments, liability, expense or action described in this Section 9.1.
In addition to their other obligations under this Section 9, the Offerors hereby
agree that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of, or based upon, or
related to the matters described above in this Section 9.1, they shall reimburse
each Indemnified Party on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Indemnified Party
shall promptly return such amounts to the Offerors together with interest,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by First
Tennessee Bank National Association (the "Prime Rate"). Any such interim
reimbursement payments which are not made to an Indemnified Party within 30 days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
9.2. Conduct of Indemnification Proceedings. Promptly after receipt
--------------------------------------
by an Indemnified Party under this Section 9 of notice of the commencement of
any action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
-------- -------
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (ii) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.
9.3. Contribution. If the indemnification provided for in this
------------
Section 9 is required by its terms, but is for any reason held to be unavailable
to or otherwise insufficient to hold harmless an Indemnified Party under Section
9.1 in respect of any losses, claims, damages, liabilities or expenses referred
to herein or therein, then the Offerors shall contribute to the amount paid or
payable by such Indemnified Party as a result of any losses, claims, damages,
judgments, liabilities or expenses referred to herein (i) in such proportion as
is appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the Indemnified Party, on the other hand, from the offering of
such Capital Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Offerors, on the one hand, and the Placement Agents,
on the other hand, in connection with the statements or omissions or
inaccuracies in the representations and warranties herein or other breaches
which resulted in such losses, claims, damages, judgments, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Offerors, on the one hand, and the Placement
Agents, on the other hand, shall be deemed to be in the same proportion, in the
case of the Offerors, as the total price paid to the Offerors for the Capital
Securities sold by the Offerors to the Purchaser (net of the compensation paid
to the Placement Agents hereunder, but before deducting expenses), and in the
case of the Placement Agents, as the compensation received by them, bears to the
total of such amounts paid to the Offerors and received by the Placement Agents
as compensation. The relative fault of the Offerors and the Placement Agents
shall be determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission of a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Offerors
or the Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The provisions set forth in Section 9.2 with respect to notice of commencement
of any action shall apply if a claim for contribution is made under this Section
9.3; provided, however, that no additional notice shall be required with respect
-------- -------
to any action for which notice has been given under Section 9.2 for purposes of
indemnification. The Offerors and the Placement Agents agree that it would not
be just and equitable if contribution pursuant to this Section 9.3 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in this Section
9.3. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, judgments, liabilities or expenses referred to in this
Section 9.3 shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim. In no
event shall the liability of the Placement Agents hereunder be greater in amount
than the dollar amount of the compensation (net of payment of all expenses)
received by the Placement Agents upon the sale of the Capital Securities giving
rise to such obligation. No person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
9.4. Additional Remedies. The indemnity and contribution agreements
-------------------
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5. Additional Indemnification. The Company shall indemnify and
--------------------------
hold harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents.
-----------------------------------------------
10.1. Reliance. In performing their duties under this Agreement, the
--------
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.
10.2. Rights of Placement Agents. In connection with the performance
--------------------------
of their duties under this Agreement, the Placement Agents shall not be liable
for any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.
Section 11. Miscellaneous.
-------------
11.1. Disclosure Schedule. The term "Disclosure Schedule," as used
-------------------
herein, means the schedule, if any, attached to this Agreement that sets forth
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in Section 5 hereof; provided,
that any item set forth in the Disclosure Schedule as an exception to a
representation or warranty shall be deemed an admission by the Offerors that
such item represents an exception, fact, event or circumstance that is
reasonably likely to result in a Material Adverse Effect. The Disclosure
Schedule shall be arranged in paragraphs corresponding to the section numbers
contained in Section 5. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the immediately preceding sentence, the mere listing
(or inclusion of a copy) of a document or other item in the Disclosure Schedule
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein unless the representation or warranty has to do with the
existence of the document or other item itself. Information provided by the
Company in response to any due diligence questionnaire shall not be deemed part
of the Disclosure Schedule and shall not be deemed to be an exception to one or
more representations or warranties contained in Section 5 hereof unless such
information is specifically included on the Disclosure Schedule in accordance
with the provisions of this Section 11.1.
11.2. Legal Expenses. At Closing, the Placement Agents shall provide
--------------
a credit for the Offerors' transaction-related legal expenses in the amount of
$10,000.00.
11.3. Non-Disclosure. Except as required by applicable law, including
--------------
without limitation securities laws and regulations promulgated thereunder, (i)
the Offerors shall not, and will cause their advisors and representatives not
to, issue any press release or other public statement regarding the transactions
contemplated by this Agreement or the Operative Documents prior to or on the
Closing Date and (ii) following the Closing Date, the Offerors shall not include
in any press release, other public statement or other communication regarding
the transactions contemplated by this Agreement or the Operative Documents, any
reference to the Placement Agents, WTC, the Purchaser, the term "PreTS" or any
derivations thereof, or the terms and conditions of this Agreement or the
Operative Documents. Notwithstanding anything to the contrary, the Offerors may
(1) consult any tax advisor regarding U.S. federal income tax treatment or tax
structure of the transaction contemplated under this Agreement and the Operative
Documents and (2) disclose to any and all persons, without limitation of any
kind, the U.S. Federal income tax structure (in each case, within the meaning of
Treasury Regulation ss. 1.6011-4) of the transaction contemplated under this
Agreement and the Operative Documents and all materials of any kind (including
opinions or other tax analyses) that are provided to you relating to such tax
treatment and tax structure. For this purpose, "tax structure" is limited to any
facts relevant to the U.S. federal income tax treatment of the transaction and
does not include information relating to identity of the parties.
11.4. Notices. Prior to the Closing, and thereafter with respect to
-------
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Telecopier: 901-435-4706
Telephone: 800-456-5460
Attention: James D. Wingett
and
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Telecopier: 212-403-2000
Telephone: 212-403-1004
Attention: Mitchell Kleinman, General Counsel
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Telecopier: 314-241-6056
Telephone: 314-444-7600
Attention: Thomas C. Erb, Esq.
and
Sidley Austin Brown & Wood LLP
787 7th Avenue
New York, New York 10019
Telecopier: 212-839-5599
Telephone: 212-839-5300
Attention: Renwick Martin, Esq.
if to the Offerors, to:
First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Telecopier: 314-592-6621
Telephone: 314-592-6603
Attention: Lisa K. Vansickle
with a copy to:
Stinson Morrison Hecker LLP
1201 Walnut Street
Kansas City, Missouri 64106
Telecopier: 816-474-4208
Telephone: 816-691-3351
Attention: C. Robert Monroe, Esq.
All such notices and communications shall be deemed to have been duly
given (i) at the time delivered by hand, if personally delivered, (ii) five
business days after being deposited in the mail, postage prepaid, if mailed,
(iii) when answered back, if telexed, (iv) the next business day after being
telecopied, or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Offerors, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.5. Parties in Interest, Successors and Assigns. Except as
------------------------------------------------
expressly set forth herein, this Agreement is made solely for the benefit of the
Placement Agents, the Purchaser and the Offerors and any person controlling the
Placement Agents, the Purchaser or the Offerors and their respective successors
and assigns; and no other person shall acquire or have any right under or by
virtue of this Agreement. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
11.6. Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
11.7. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
11.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO
CONFLICTS OF LAWS) OF THE STATE OF NEW YORK.
11.9. Entire Agreement. This Agreement, together with the Operative
-----------------
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the Operative Documents and the other
documents delivered in connection with the transaction contemplated by this
Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.10. Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected, it being intended that all of the Placement Agents' and the
Purchaser's rights and privileges shall be enforceable to the fullest extent
permitted by law.
11.11. Survival. The Placement Agents and the Offerors, respectively,
--------
agree that the representations, warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument delivered pursuant
hereto shall remain in full force and effect and shall survive the delivery of,
and payment for, the Capital Securities.
Signatures appear on the following page
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
FIRST BANKS, INC.
By: /s/ Allen H. Blake
----------------------------------------------
Name: Allen H. Blake
--------------------------------------------
Title: President and Chief Executive Officer
-------------------------------------------
FIRST BANK STATUTORY TRUST III
By: /s/ Lisa K. Vansickle
----------------------------------------------
Name: Lisa K. Vansickle
--------------------------------------------
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank National Association,
as a Placement Agent
By: /s/ James D. Wingett
------------------------------------------------------------
Name: James D. Wingett
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Title: Senior Vice President
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KEEFE, BRUYETTE & WOODS, INC.,
a New York corporation, as a Placement Agent
By: /s/ Peter J. Wirth
-----------------------------------------------------------
Name: Peter J. Wirth
----------------------------------------------------------
Title: Managing Director
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EXHIBIT A
---------
FORM OF SUBSCRIPTION AGREEMENT
------------------------------
FIRST BANK STATUTORY TRUST III
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
November 23, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust III (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 600 James S. McDonnell Boulevard, Hazelwood,
Missouri 63042 (the "Company" and, collectively with the Trust, the "Offerors"),
and First Tennessee Bank National Association (the "Purchaser").
RECITALS:
A. The Trust desires to issue 40,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be
combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and WTC, as trustee (the "Indenture");
and
C. In consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby
agrees to purchase from the Trust 40,000 Capital Securities at a price equal to
$1,000.00 per Capital Security (the "Purchase Price") and the Trust agrees to
sell such Capital Securities to the Purchaser for said Purchase Price. The
rights and preferences of the Capital Securities are set forth in the
Declaration. The Purchase Price is payable in immediately available funds on
November 23, 2004, or such other business day as may be designated by the
Purchaser, but in no event later than November 30, 2004 (the "Closing Date").
The Offerors shall provide the Purchaser wire transfer instructions no later
than 1 day following the date hereof.
1.2. The Placement Agreement, dated November 22, 2004 (the
"Placement Agreement"), among the Offerors and the placement agents identified
therein (the "Placement Agents") includes certain representations and
warranties, covenants and conditions to closing and certain other matters
governing the Offering. The Placement Agreement is hereby incorporated by
reference into this Agreement and the Purchaser shall be entitled to each of the
benefits of the Placement Agents and the Purchaser under the Placement Agreement
and shall be entitled to enforce the obligations of the Offerors under such
Placement Agreement as fully as if the Purchaser were a party to such Placement
Agreement.
1.3. Anything herein or in the Placement Agreement notwithstanding,
the Offerors acknowledge and agree that, so long as Purchaser holds some or all
of the Capital Securities, the Purchaser may in its discretion from time to time
transfer or sell, or sell or grant participation interests in, some or all of
such Capital Securities to one or more parties, provided that any such
transaction complies, as applicable, with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and any other
applicable securities laws, is pursuant to an exemption therefrom, or is
otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the
Capital Securities, the Debentures or the Guarantee have been registered under
the Securities Act or any other applicable securities law, are being offered for
sale by the Trust in transactions not requiring registration under the
Securities Act, and may not be offered, sold, pledged or otherwise transferred
by the Purchaser except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as
contemplated under Section 1.3 hereof, it is purchasing the Capital Securities
for its own account, for investment, and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of the Securities
Act or other applicable securities laws, subject to any requirement of law that
the disposition of its property be at all times within its control and subject
to its ability to resell such Capital Securities pursuant to an effective
registration statement under the Securities Act or under Rule 144A or any other
exemption from registration available under the Securities Act or any other
applicable securities law.
2.3. The Purchaser represents and warrants that neither the
Offerors nor the Placement Agents are acting as a fiduciary or financial or
investment adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying
(for purposes of making any investment decision or otherwise) upon any advice,
counsel or representations (whether written or oral) of the Offerors or of the
Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisers in connection herewith to the extent it has deemed
necessary, (b) it has had a reasonable opportunity to ask questions of and
receive answers from officers and representatives of the Offerors concerning
their respective financial condition and results of operations and the purchase
of the Capital Securities, and any such questions have been answered to its
satisfaction, (c) it has had the opportunity to review all publicly available
records and filings concerning the Offerors and it has carefully reviewed such
records and filings that it considers relevant to making an investment decision,
and (d) it has made its own investment decisions based upon its own judgment,
due diligence and advice from such advisers as it has deemed necessary and not
upon any view expressed by the Offerors or the Placement Agents.
2.6. The Purchaser represents and warrants that it is a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act. If the
Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A
under the Securities Act, it owns and invests on a discretionary basis not less
than U.S. $25,000,000.00 in securities of issuers that are not affiliated with
it. The Purchaser is not a participant-directed employee plan, such as a 401(k)
plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F)
of Rule 144A that holds the assets of such a plan, unless investment decisions
with respect to the plan are made solely by the fiduciary, trustee or sponsor of
such plan.
2.7. The Purchaser represents and warrants that on each day from
the date on which it acquires the Capital Securities through and including the
date on which it disposes of its interests in the Capital Securities, either (i)
it is not (a) an "employee benefit plan" (as defined in Section 3(3) of the
United States Employee Retirement Income Security Act of 1974, as amended
("ERISA")) which is subject to the provisions of Part 4 of Subtitle B of Title I
-----
of ERISA, or any entity whose underlying assets include the assets of any such
plan (an "ERISA Plan"), (b) any other "plan" (as defined in Section 4975(e)(1)
----------
of the United States Internal Revenue Code of 1986, as amended (the "Code"))
----
which is subject to the provisions of Section 4975 of the Code or any entity
whose underlying assets include the assets of any such plan (a "Plan"), (c) an
----
entity whose underlying assets include the assets of any such ERISA Plan or
other Plan by reason of Department of Labor regulation section 2510.3-101 or
otherwise, or (d) a governmental or church plan that is subject to any federal,
state or local law which is substantially similar to the provisions of Section
406 of ERISA or Section 4975 of the Code (a "Similar Law"); or (ii) the
------------
purchase, holding and disposition of the Capital Securities by it will satisfy
the requirements for exemptive relief under Prohibited Transaction Class
Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a
----
similar exemption, or, in the case of a plan subject to a Similar Law, will not
result in a non-exempt violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the
Capital Securities as principal for its own account for investment and, except
as contemplated under Section 1.3 hereof, not for sale in connection with any
distribution thereof. It was not formed solely for the purpose of investing in
the Capital Securities, and additional capital or similar contributions were not
specifically solicited from any person owning a beneficial interest in it for
the purpose of enabling it to purchase any Capital Securities. The Purchaser is
not a (i) partnership, (ii) common trust fund or (iii) special trust, pension,
profit sharing or other retirement trust fund or plan in which the partners,
beneficiaries or participants, as applicable, may designate the particular
investments to be made or the allocation of any investment among such partners,
beneficiaries or participants, and except as contemplated under Section 1.3
hereof, it agrees that it shall not hold the Capital Securities for the benefit
of any other person and shall be the sole beneficial owner thereof for all
purposes and that it shall not sell participation interests in the Capital
Securities or enter into any other arrangement pursuant to which any other
person shall be entitled to a beneficial interest in the distribution on the
Capital Securities. The Capital Securities purchased directly or indirectly by
the Purchaser constitute an investment of no more than 40% of its assets. The
Purchaser understands and agrees that any purported transfer of the Capital
Securities to a purchaser which would cause the representations and warranties
of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab
initio and the Offerors retain the right to resell any Capital Securities sold
to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power
and authority to execute and deliver this Agreement, to make the representations
and warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.10. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.11. The Purchaser represents and warrants that this Agreement has
been duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.
2.13. The Purchaser understands that no public market exists for any
of the Capital Securities, and that it is unlikely that a public market will
ever exist for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
Fax: 901-435-7983
Unless otherwise expressly provided herein, notices shall be
deemed to have been given on the date of mailing, except notice of change of
address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
3.6. This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
3.7. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Offerors' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
--------------------------------------------------
Print Name:
-----------------------------------------
Title:
----------------------------------------------
FIRST BANKS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FIRST BANK STATUTORY TRUST III
By:
------------------------------------------
Name:
----------------------------------------
Title: Administrator
EXHIBIT A TO SUBSCRIPTION AGREEMENT
-----------------------------------
FORM OF TRANSFER NOTICE
[DATE]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Dear Sir or Madam:
The undersigned hereby notifies you of the transfer of [________] of
the Capital Securities of First Bank Statutory Trust III, such transfer to be
effective on [DATE OF TRANSFER]. In accordance with Section 7.9 of the Placement
Agreement dated November 22, 2004 between the Offerors and the placement agents
named therein (the "Placement Agreement"), periodic reports shall be delivered
to [_______________] on each March 15, June 15, September 15 and December 15
during the term of the Capital Securities, commencing [___________], in the form
attached thereto. Capitalized terms used in this notice and not otherwise
defined shall have the meanings ascribed to such terms in the Placement
Agreement.
As the Institutional Trustee and Registrar, you are hereby instructed
to notify The Depository Trust Company of the transfer of Capital Securities to
[_______________], if such notification is required as a Fast Automated
Securities Transfer Program Agent for DTC. The undersigned hereby certifies that
this notice has been delivered to the Company, and Wilmington Trust Company has
no duty or obligation to provide such notice.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
cc: First Banks, Inc.
EXHIBIT B-1
-----------
FORM OF COMPANY COUNSEL OPINION
-------------------------------
November 23, 2004
First Tennessee Bank National Association FTN Financial Capital Markets
845 Crossover Lane, Suite 150 845 Crossover Lane, Suite 150
Memphis, Tennessee 38117 Memphis, Tennessee 38117
Wilmington Trust Company Keefe, Bruyette & Woods, Inc.
Rodney Square North 787 7th Avenue, 4th Floor
1100 North Market Street New York, New York 10019
Wilmington, Delaware 19890-1600
Ladies and Gentlemen:
We have acted as counsel to First Banks, Inc. (the "Company"), a
Missouri corporation in connection with a certain Placement Agreement, dated
November 22, 2004, (the "Placement Agreement"), between the Company and First
Bank Statutory Trust III (the "Trust"), on one hand, and FTN Financial Capital
Markets and Keefe, Bruyette & Woods, Inc. (the "Placement Agents"), on the other
hand. Pursuant to the Placement Agreement, and subject to the terms and
conditions stated therein, the Trust will issue and sell to First Tennessee Bank
National Association (the "Purchaser"), $40,000,000.00 aggregate principal
amount of Floating Rate Capital Securities (liquidation amount $1,000.00 per
capital security) (the "Capital Securities").
Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State of Missouri.
We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended;
and (b) such corporate documents, records, information and certificates of the
Company and the Subsidiaries, certificates of public officials or government
authorities and other documents as we have deemed necessary or appropriate as a
basis for the opinions hereinafter expressed. As to certain facts material to
our opinions, we have relied, with your permission, upon statements,
certificates or representations, including those delivered or made in connection
with the above-referenced transaction, of officers and other representatives of
the Company and the Subsidiaries and the Trust.
As used herein, the phrases "to the best of our knowledge" or "known to
us" or other similar phrases mean the actual knowledge of the attorneys who have
had active involvement in the transactions described above or who have prepared
or signed this opinion letter, or who otherwise have devoted substantial
attention to legal matters for the Company.
Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:
1. The Company is validly existing and in good standing under the laws
of the State of Missouri and is duly registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended. Each of the Significant
Subsidiaries is validly existing and in good standing under the laws of its
jurisdiction of organization. Each of the Company and the Significant
Subsidiaries has full corporate power and authority to own or lease its
properties and to conduct its business as such business is currently conducted
in all material respects. To the best of our knowledge, all outstanding shares
of capital stock of the Significant Subsidiaries have been duly authorized and
validly issued, and are fully paid and nonassessable except to the extent such
shares may be deemed assessable under 12 U.S.C. Section 1831o or 12 U.S.C.
Section 55, and are owned of record and beneficially, directly or indirectly, by
the Company.
2. The issuance, sale and delivery of the Debentures in accordance with
the terms and conditions of the Placement Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Capital Securities and the Common Securities by the Trust do not
give rise to any preemptive or other rights to subscribe for or to purchase any
shares of capital stock or equity securities of the Company or the Significant
Subsidiaries pursuant to the corporate Articles of Incorporation or Charter,
By-Laws or other governing documents of the Company or the Significant
Subsidiaries, or, to the best of our knowledge, any agreement or other
instrument to which either the Company or the Subsidiaries is a party or by
which the Company or the Significant Subsidiaries may be bound.
3. The Company has all requisite corporate power to enter into and
perform its obligations under the Placement Agreement and the Subscription
Agreement, and the Placement Agreement and the Subscription Agreement have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their terms, except as the enforcement thereof may be limited
by general principles of equity and by bankruptcy or other laws affecting
creditors' rights generally, and except as the indemnification and contribution
provisions thereof may be limited under applicable laws and certain remedies may
not be available in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered by
the Company, are entitled to the benefits of the Indenture and are legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor
any of the Subsidiaries is in breach or violation of, or default under, with or
without notice or lapse of time or both, its Articles of Incorporation or
Charter, By-Laws or other governing documents (including without limitation, the
Trust Agreement). The execution, delivery and performance of the Placement
Agreement and the Operative Documents and the consummation of the transactions
contemplated by the Placement Agreement and the Operative Documents do not and
will not (i) result in the creation or imposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the Company or
the Subsidiaries, or (ii) conflict with, constitute a material breach or
violation of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of (A) the
Articles of Incorporation or Charter, By-Laws or other governing documents of
the Company or the Subsidiaries, or (B) to the best of our knowledge, any
material contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease, franchise, license or any other agreement or instrument to which
the Company or the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or the Subsidiaries or any of
their respective properties which, in the case of each of (i) or (ii) above, is
material to the Company and the Subsidiaries on a consolidated basis.
7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of Missouri in connection with the transactions
contemplated by the Placement Agreement and the Operative Documents in
connection with the offer and sale of the Capital Securities as contemplated by
the Placement Agreement and the Operative Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at
law or in equity is pending or threatened to which the Company, the Trust or the
Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is
pending or threatened against or affecting the Company, the Trust or the
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Company, the Trust and the Subsidiaries on a
consolidated basis.
9. Assuming the truth and accuracy of the representations and
warranties of the Placement Agents in the Placement Agreement and the Purchaser
in the Subscription Agreement, it is not necessary in connection with the
offering, sale and delivery of the Capital Securities, the Debentures and the
Guarantee Agreement (or the Guarantee) to register the same under the Securities
Act of 1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.
10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of numbered paragraph
1 of this opinion is based solely upon certain certificates and confirmations
issued by the applicable governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.
With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Delaware or New York,
we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Richards, Layton & Finger, P.A.
with respect to matters of Delaware law and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of Missouri, without regard to conflict of law provisions.
The opinions expressed herein are rendered to you solely pursuant to
Section 3.1(a) of the Placement Agreement. As such, they may be relied upon by
you only and may not be used or relied upon by any other person for any purpose
whatsoever without our prior written consent.
Very truly yours,
EXHIBIT B-2
-----------
FORM OF DELAWARE COUNSEL OPINION
--------------------------------
To Each of the Persons
Listed on Schedule A Hereto
Re: First Bank Statutory Trust III
------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Bank Statutory
Trust III, a Delaware statutory trust (the "Trust"), in connection with the
matters set forth herein. At your request, this opinion is being furnished to
you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust (the "Certificate of Trust"),
as filed in the office of the Secretary of State of the State of Delaware (the
"Secretary of State") on November 4, 2004;
(b) The Declaration of Trust, dated as of November 4, 2004, among First
Banks, Inc., a Missouri corporation (the "Company"), Wilmington Trust Company, a
Delaware banking corporation ("WTC"), as trustee and the administrators named
therein (the "Administrators");
(c) The Amended and Restated Declaration of Trust of the Trust, dated
as of November 23, 2004 (including the form of Capital Securities Certificate
attached thereto as Exhibit A-1 and the terms of the Capital Securities attached
as Annex I) (the "Declaration of Trust"), among the Company, as sponsor, WTC, as
Delaware trustee (the "Delaware Trustee") and institutional trustee (the
"Institutional Trustee"), the Administrators and the holders, from time to time,
of undivided beneficial interests in the assets of the Trust;
(d) The Placement Agreement, dated November 22, 2004 (the "Placement
Agreement"), among the Company, the Trust, and FTN Financial Capital Markets and
Keefe, Bruyette & Woods, Inc., as placement agents;
(e) The Subscription Agreement, dated November 23, 2004 (the
"Subscription Agreement"), among the Trust, the Company and First Tennessee Bank
National Association (the documents identified in items (c) through (e) being
collectively referred to as the "Operative Documents");
(f) The Capital Securities being issued on the date hereof (the
"Capital Securities");
(g) The Common Securities being issued on the date hereof (the "Common
Securities") (the documents identified in items (f) and (g) being collectively
referred to as the "Trust Securities"); and
(h) A Certificate of Good Standing for the Trust, dated November 22,
2004, obtained from the Secretary of State.
Capitalized terms used herein and not otherwise defined are used as
defined in the Declaration of Trust, except that reference herein to any
document shall mean such document as in effect on the date hereof. This opinion
is being delivered pursuant to Section 3.1 of the Placement Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (h) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (h) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
of Trust constitutes the entire agreement among the parties thereto with respect
to the subject matter thereof, including with respect to the creation,
operation, and termination of the Trust, and that the Declaration of Trust and
the Certificate of Trust are in full force and effect and have not been amended
further, (ii) that there are no proceedings pending or contemplated, for the
merger, consolidation, liquidation, dissolution or termination of the Trust,
(iii) except to the extent provided in paragraph 1 below, the due creation, due
formation or due organization, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, formation or organization, (iv) that each
party to the documents examined by us is qualified to do business in each
jurisdiction where such qualification is required generally or necessary in
order for such party to enforce its rights under the documents examined by us,
(v) the legal capacity of each natural person who is a party to the documents
examined by us, (vi) except to the extent set forth in paragraph 2 below, that
each of the parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such documents,
(vii) except to the extent provided in paragraph 3 below, that each of the
parties to the documents examined by us has duly authorized, executed and
delivered such documents, (viii) the receipt by each Person to whom a Capital
Security is to be issued by the Trust (the "Capital Security Holders") of a
Capital Security Certificate for the Capital Security and the payment for the
Capital Securities acquired by it, in accordance with the Declaration of Trust
and the Subscription Agreement, (ix) that the Capital Securities are issued and
sold to the Holders of the Capital Securities in accordance with the Declaration
of Trust and the Subscription Agreement, (x) the receipt by the Person (the
"Common Securityholder") to whom the common securities of the Trust representing
common undivided beneficial interests in the assets of the Trust (the "Common
Securities" and, together with the Capital Securities, the "Trust Securities")
are to be issued by the Trust of a Common Security Certificate for the Common
Securities and the payment for the Common Securities acquired by it, in
accordance with the Declaration of Trust, (xi) that the Common Securities are
issued and sold to the Common Securityholder in accordance with the Declaration
of Trust, (xii) that each of the parties to the documents reviewed by us has
agreed to and received the stated consideration for the incurrence of its
obligations under such documents and (xiii) that each of the documents reviewed
by us (other than the Declaration of Trust) is a legal, valid, binding and
enforceable obligation of the parties thereto in accordance with the terms
thereof. We have not participated in the preparation of any offering materials
with respect to the Trust Securities and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder that are
currently in effect.
We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Declaration of Trust with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents.
We express no opinion as to the enforceability of any particular
provision of the Declaration of Trust or the other Operative Documents relating
to remedies after default.
We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of rights to
object to jurisdiction or venue, or consents to jurisdiction or venue, (ii)
waivers of rights to (or methods of) service of process, or rights to trial by
jury, or other rights or benefits bestowed by operation of law, (iii) waivers of
any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
variations of provisions which are not capable of waiver or variation under the
Uniform Commercial Code ("UCC") of the State, (v) the grant of powers of
attorney to any person or entity, or (vi) exculpation or exoneration clauses,
indemnity clauses, and clauses relating to releases or waivers of unmatured
claims or rights.
We have made no examination of, and no opinion is given herein as to
the Trustee's or the Trust's title to or other ownership rights in, or the
existence of any liens, charges or encumbrances on, or adverse claims against,
any asset or property held by the Institutional Trustee or the Trust. We express
no opinion as to the creation, validity, attachment, perfection or priority of
any mortgage, security interest or lien in any asset or property held by the
Institutional Trustee or the Trust.
We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring, after
the date hereof on the matters addressed in this opinion letter, and we assume
no responsibility to inform you of additional or changed facts, or changes in
law, of which we may become aware.
We express no opinion as to any requirement that any party to the
Operative Documents (or any other persons or entities purportedly entitled to
the benefits thereof) qualify or register to do business in any jurisdiction in
order to be able to enforce its rights thereunder or obtain the benefits
thereof.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a statutory trust under the Delaware Statutory Trust Act (12 Del. C.
-------
ss. 3801, et seq.) (the "Act"). All filings required under the laws of the State
-- ---
of Delaware with respect to the creation and valid existence of the Trust as a
statutory trust have been made.
2. Under the Declaration of Trust and the Act, the Trust has the trust
power and authority to (A) execute and deliver the Operative Documents, (B)
perform its obligations under such Operative Documents and (C) issue the Trust
Securities.
3. The execution and delivery by the Trust of the Operative Documents,
and the performance by the Trust of its obligations thereunder, have been duly
authorized by all necessary trust action on the part of the Trust.
4. The Declaration of Trust constitutes a legal, valid and binding
obligation of the Company, the Trustees and the Administrators, and is
enforceable against the Company, the Trustees and the Administrators, in
accordance with its terms.
5. Each of the Operative Documents constitutes a legal, valid and
binding obligation of the Trust, enforceable against the Trust, in accordance
with its terms.
6. The Capital Securities have been duly authorized for issuance by
the Declaration of Trust, and, when duly executed and delivered to and paid for
by the purchasers thereof in accordance with the Declaration of Trust, the
Subscription Agreement and the Placement Agreement, the Capital Securities will
be validly issued, fully paid and, subject to the qualifications set forth in
paragraph 8 below, nonassessable undivided beneficial interests in the assets of
the Trust and will entitle the Capital Securities Holders to the benefits of the
Declaration of Trust. The issuance of the Capital Securities is not subject to
preemptive or other similar rights under the Act or the Declaration of Trust.
7. The Common Securities have been duly authorized for issuance by the
Declaration of Trust and, when duly executed and delivered to the Company as
Common Security Holder in accordance with the Declaration of Trust, will be
validly issued, fully paid and, subject to paragraph 8 below and Section 9.1(b)
of the Declaration of Trust (which provides that the Holder of the Common
Securities are liable for debts and obligations of Trust), nonassessable
undivided beneficial interests in the assets of the Trust and will entitle the
Common Security Holder to the benefits of the Declaration of Trust. The issuance
of the Common Securities is not subject to preemptive or other similar rights
under the Act or the Declaration of Trust.
8. Under the Declaration of Trust and the Act, the Holders of the
Capital Securities, as beneficial owners of the Trust, will 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. We note that the Holders of the Capital Securities and the Holder
of the Common Securities may be obligated, pursuant to the Declaration of Trust,
(A) to provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers or exchanges of Capital Security
Certificates and the issuance of replacement Capital Security Certificates, and
(B) to provide security or indemnity in connection with requests of or
directions to the Institutional Trustee to exercise its rights and powers under
the Declaration of Trust.
9. Neither the execution, delivery and performance by the Trust of the
Operative Documents, nor the consummation by the Trust of any of the
transactions contemplated thereby, requires the consent or approval of, the
authorization of, the withholding of objection on the part of, the giving of
notice to, the filing, registration or qualification with, or the taking of any
other action in respect of, any governmental authority or agency of the State of
Delaware, other than the filing of the Certificate of Trust with the Secretary
of State (which Certificate of Trust has been duly filed).
10. Neither the execution, delivery and performance by the Trust of the
Trust Documents, nor the consummation by the Trust of the transactions
contemplated thereby, (i) is in violation of the Declaration of Trust or of any
law, rule or regulation of the State of Delaware applicable to the Trust or (ii)
to the best of our knowledge, without independent investigation, violates,
contravenes or constitutes a default under, or results in a breach of or in the
creation of any lien (other than as permitted by the Operative Documents) upon
any property of the Trust under any indenture, mortgage, chattel mortgage, deed
of trust, conditional sales contract, bank loan or credit agreement, license or
other agreement or instrument to which the Trust is a party or by which it is
bound.
11. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as amended, the Trust will not be subject to any tax, fee or
governmental charge under the laws of the State of Delaware.
The opinions expressed in paragraph 4, 5, 6, 7 and 8 above are subject,
as to enforcement, to the effect upon the Declaration of Trust of (i)
bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation,
fraudulent conveyance and transfer, and other similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) principles of
equity, including applicable law relating to fiduciary duties (regardless of
whether considered and applied in a proceeding in equity or at law), and (iii)
the effect of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
We consent to your relying as to matters of Delaware law upon this
opinion in connection with the Placement Agreement. We also consent to Lewis,
Rice & Fingersh, L.C.'s and Stinson Morrison Hecker LLP's relying as to matters
of Delaware law upon this opinion in connection with opinions to be rendered by
them on the date hereof pursuant to the Placement Agreement.
Except as stated above, without our prior written consent, this opinion
may not be furnished or quoted to, or relied upon by, any other Person for any
purpose.
Very truly yours,
SCHEDULE A
----------
Wilmington Trust Company
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
First Tennessee Bank National Association
First Banks, Inc.
EXHIBIT B-3
-----------
FORM OF TAX COUNSEL OPINION
---------------------------
First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
First Bank Statutory Trust III
c/o First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Ladies and Gentlemen:
We have acted as special tax counsel to First Banks, Inc. and to First
Bank Statutory Trust III in connection with the proposed issuance of (i)
Floating Rate Capital Securities, liquidation amount $1,000.00 per Capital
Security (the "Capital Securities") of First Bank Statutory Trust III, a
statutory business trust created under the laws of Delaware (the "Trust"),
pursuant to the terms of the Amended and Restated Declaration of Trust dated as
of the date hereof by First Banks, Inc., a Missouri corporation (the "Company"),
Wilmington Trust Company, as Delaware trustee, Wilmington Trust Company, as
institutional trustee, and Peter D. Wimmer, Terrance M. McCarthy and Lisa K.
Vansickle, as Administrators (the "Trust Agreement"), (ii) Junior Subordinated
Deferrable Interest Debentures (the "Corresponding Debentures") of the Company
issued pursuant to the terms of an Indenture dated as of the date hereof from
the Company to Wilmington Trust Company, as trustee (the "Indenture"), which
Debentures are to be sold by the Company to the Trust, and (iii) the Guarantee
Agreement of the Company with respect to the Capital Securities dated as of the
date hereof (the "Guarantee") between the Company and Wilmington Trust Company,
as guarantee trustee.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion including (i)
the Indenture, (ii) the form of the Corresponding Debentures attached as an
exhibit to the Indenture, (iii) the Trust Agreement, (iv) the Guarantee, and (v)
the forms of Capital Securities Certificate attached as an exhibit to the Trust
Agreement (collectively the "Documents"). Furthermore, we have relied upon
certain representations made by the Company and upon the opinion of Richards,
Layton & Finger, P.A. as to certain matters of Delaware law. In such
examination, we have assumed the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, the authenticity of the originals of such
latter documents, the genuineness of all signatures and the correctness of all
representations made therein. We have further assumed that there are no
agreements or understandings contemplated therein other than those contained in
the Documents.
Based upon the foregoing, and assuming (i) that the final Documents
will be substantially identical to the forms examined, (ii) full compliance with
all the terms of the final Documents, and (iii) the accuracy of representations
made by the Company and delivered to us, we are of the opinion that:
(a) The Corresponding Debentures will be classified as
indebtedness of the Company for U.S. federal income tax
purposes.
(b) The Trust will be characterized as a grantor trust and not as
an association taxable as a corporation for U.S. federal
income tax purposes.
The opinions expressed above are based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, published interpretations by the Internal Revenue Service of the
Code and such Treasury regulations, and existing court decisions, any of which
could be changed at any time. Any such changes may or may not be retroactively
applied, and may result in federal income tax consequences that differ from
those reflected in the opinions set forth above. We note that there is no
authority directly on point dealing with securities such as the Capital
Securities or with transactions of the type described herein, and that the
authorities on which this opinion is based are subject to various
interpretations. Further, you should be aware that opinions of counsel have no
official status and are not binding on the Internal Revenue Service or the
courts. Accordingly, we can provide no assurance that the interpretation of the
federal income tax laws set forth in our opinions will prevail if challenged by
the IRS in an administrative or judicial proceeding.
We have also assumed that each transaction contemplated herein will be
carried out strictly in accordance with the Documents. Any variance in the facts
may result in Federal income tax consequences that differ from those reflected
in the opinions set forth above.
Additionally, we undertake no obligation to update this opinion in the
event there is either a change in the legal authorities, in the facts (including
the taking of any action by any party to any of the transactions described in
the Documents relating to such transactions) or in the Documents on which this
opinion is based, or an inaccuracy in any of the representations upon which we
have relied in rendering this opinion.
We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.
This letter is delivered for the benefit of the specified addressees
and may not be relied upon by any other person. No portion of this letter may be
quoted or otherwise referred to in any document or delivered to any other person
or entity without the express written consent of Lewis, Rice & Fingersh, L.C.
This opinion letter is rendered as of the date set forth above.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
Lewis, Rice & Fingersh, L.C.
500 N. Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Lawrence H. Weltman, Esq.
Re: Representations Concerning the Issuance of Junior Subordinated
Deferrable Interest Debentures (the "Debentures") to First Bank
Statutory Trust III (the "Trust") and Sale of Trust Securities (the
"Trust Securities") of the Trust
Ladies and Gentlemen:
In accordance with your request, First Banks, Inc. (the "Company")
hereby makes the following representations in connection with the preparation of
your opinion letter as to the United States federal income tax consequences of
the issuance by the Company of the Debentures to the Trust and the sale of the
Trust Securities.
Company hereby represents that:
1. The sole assets of the Trust will be the Debentures, any interest
paid on the Debentures to the extent not distributed, proceeds of the
Debentures, or any of the foregoing.
2. The Company intends to use the net proceeds from the sale of the
Debentures for general corporate purposes.
3. The Trust was not formed to conduct any trade or business and is
not authorized to conduct any trade or business. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of Trust Securities to acquire the Debentures, and
(iii) engaging only in activities necessary or incidental thereto.
4. The Trust was formed to facilitate direct investment in the assets
of the Trust, and the existence of multiple classes of ownership is incidental
to that purpose. There is no intent to provide holders of such interests in the
Trust with diverse interests in the assets of the Trust.
5. The Company intends to create a debtor-creditor relationship
between the Company, as debtor, and the Trust, as a creditor, upon the issuance
and sale of the Debentures to the Trust by the Company. The Company will (i)
record and at all times continue to reflect the Debentures as indebtedness on
its separate books and records for financial accounting purposes, and (ii) treat
the Debentures as indebtedness for all United States tax purposes.
6. During each year, the Trust's income will consist solely of
payments made by the Company with respect to the Debentures. Such payments will
not be derived from the active conduct of a financial business by the Trust.
Both the Company's obligation to make such payments and the measurement of the
amounts payable by the Company are defined by the terms of the Debentures.
Neither the Company's obligation to make such payments nor the measurement of
the amounts payable by the Company is dependent on income or profits of Company
or any affiliate of the Company.
7. The Company expects that it will be able to make, and will make,
timely payment of amounts identified by the Debentures as principal and interest
in accordance with the terms of the Debentures with available capital or
accumulated earnings.
8. The Company presently has no intention to defer interest payments
on the Debentures, and it considers the likelihood of such a deferral to be
remote because, if it were to exercise its right to defer payments of interest
with respect to the Debentures, it would not be permitted to declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company or any
affiliate of the Company (other than payments of dividends or distributions to
the Company) or make any payment of principal of or interest or premium, if any,
on or repay, repurchase, or redeem any debt securities of the Company or any
affiliate of the Company that rank pari passu in all respects with or junior in
interest to the Debentures, in each case subject to limited exceptions stated in
Section 2.11 of the Indenture to be entered into in connection with the issuance
of the Debentures.
9. Immediately after the issuance of the Debentures, the debt-to-
equity ratio of the Company (as determined for financial accounting purposes,
but excluding deposit liabilities from the Company's debt) will be within
standard depository institution industry norms and, in any event, will be no
higher than four to one (4 : 1).
10. To the best of our knowledge, the Company is currently in
compliance with all federal, state, and local capital requirements, except to
the extent that failure to comply with any such requirements would not have a
material adverse effect on the Company and its affiliates.
11. The Company will not issue any class of common stock or preferred
stock senior to the Debentures during their term.
12. The Internal Revenue Service has not challenged the interest
deduction on any class of the Company's subordinated debt in the last ten (10)
years on the basis that such debt constitutes equity for federal income tax
purposes.
The above representations are accurate as of the date below and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
FIRST BANKS, INC.
Date: November 22, 2004 By: ______________________________
Title: ____________________________
EXHIBIT C
---------
SIGNIFICANT SUBSIDIARIES
------------------------
The San Francisco Company
First Bank
EXHIBIT D
---------
FORM OF QUARTERLY REPORT
------------------------
First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20__
Tier 1 to Risk Weighted Assets _________%
Ratio of Double Leverage _________%
Non-Performing Assets to Loans and OREO _________%
Ratio of Reserves to Non-Performing Loans _________%
Ratio of Net Charge-Offs to Loans _________%
Return on Average Assets (annualized)** _________%
Net Interest Margin (annualized)** _________%
Efficiency Ratio _________%
Ratio of Loans to Assets _________%
Ratio of Loans to Deposits _________%
Total Assets $__________
Year to Date Income $__________
- -------------------
*A table describing the quarterly report calculation procedures is provided
on page D-2
** To annualize Return on Average Assets and Net Interest Margin do the
following:
1st Quarter-multiply income statement item by 4, then divide by balance sheet
item(s)
2nd Quarter-multiply income statement item by 2,then divide by balance sheet
item(s)
3rd Quarter-divide income statement item by 3,then multiply by 4, then divide
by balance sheet item(s)
4th Quarter-should already be an annual number
NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS
Financial Definitions
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Report Item Corresponding FRY-9C or LP Line Items with Line
Item corresponding Schedules Description of Calculation
- ----------------------- -------------------------------------------------- ---------------------------------------------------
"Tier 1 Capital" to BHCK7206 Tier 1 Risk Ratio: Core Capital (Tier 1)/
Risk Weighted Assets Schedule HC-R Risk-Adjusted Assets
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Double (BHCP0365)/(BHCP3210) Total equity investments in subsidiaries divided
Leverage Schedule PC in the LP by the total equity capital. This field is
calculated at the parent company level.
"Subsidiaries" include bank, bank holding
company, and nonbank subsidiaries.
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Non-Performing Assets (BHCK5525-BHCK3506+BHCK5526-BHCK3507+BHCK2744)/ Total Nonperforming Assets (NPLs+Foreclosed Real
to Loans and OREO (BHCK2122+BHCK2744) Estate+Other Nonaccrual & Repossessed Assets)/
Schedules HC-C, HC-M & HC-N Total Loans + Foreclosed Real Estate
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Reserves to (BHCK3123+BHCK3128)/(BHCK5525-BHCK3506+BHCK5526- Total Loan Loss and Allocated Transfer Risk
Non-Performing Loans BHCK3507) Reserves/ Total Nonperforming Loans (Nonaccrual +
Schedules HC & HC-N Restructured)
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Net (BHCK4635-BHCK4605)/(BHCK3516) Net charge offs for the period as a percentage of
Charge-Offs to Loans Schedules HI-B & HC-K average loans.
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Return on Assets (BHCK4340/BHCK3368) Net Income as a percentage of Assets.
Schedules HI & HC-K
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Net Interest Margin (BHCK4519)/(BHCK3515+BHCK3365+BHCK3516+BHCK3401+ (Net Interest Income Fully Taxable Equivalent, if
BHCK985) available / Average Earning Assets)
Schedules HI Memorandum and HC-K
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Efficiency Ratio (BHCK4093)/(BHCK4519+BHCK4079) (Noninterest Expense)/ (Net Interest Income
Schedule HI Fully Taxable Equivalent, if available, plus
Noninterest Income)
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Loans to (BHCKB528+BHCK5369)/BHCK2170) Total Loans & Leases (Net of Unearned Income &
Assets Schedule HC Gross of Reserve)/ Total Assets
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Loans to (BHCKB528+BHCK5369)/(BHDM6631+BHDM6636+BHFN6631+ Total Loans & Leases (Net of Unearned Income &
Deposits BHFN6636) Gross of Reserve)/ Total Deposits (Includes
Schedule HC Domestic and Foreign Deposits)
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Total Assets (BHCK2170) The sum of total assets. Includes cash and
Schedule HC balances due from depository institutions;
securities; federal funds sold and securities
purchased under agreements to resell; loans and
lease financing receivables; trading assets;
premises and fixed assets; other real estate owned;
investments in unconsolidated subsidiaries and
associated companies; customer's liability on
acceptances outstanding; intangible assets; and
other assets.
- ----------------------- -------------------------------------------------- ---------------------------------------------------
Net Income (BHCK4300) The sum of income (loss) before extraordinary
Schedule HI items and other adjustments and extraordinary
items; and other adjustments, net of income
taxes.
- ----------------------- -------------------------------------------------- ---------------------------------------------------
First Banks, Inc.
Disclosure Schedule
to the
Placement Agreement
Section 5.10 Subsidiaries of the Company - All issued and outstanding
------------------------------
common stock of The San Francisco Company, a wholly owned subsidiary of the
Company, and First Bank, a wholly owned subsidiary of The San Francisco
Company, has been pledged to Wells Fargo Bank, National Association as the
Agent for the ratable benefit of certain lenders pursuant to the terms of
that certain Secured Credit Agreement dated as of August 14, 2003 among the
Company, the Lenders signatory thereto and the Agent, as amended by that
certain First Amendment to Secured Credit Agreement dated as of August 12,
2004 (the "Credit Agreement").
Section 5.16 Regulatory Enforcement Matters - Pursuant to the terms of the
------------------------------
Credit Agreement, the Company has agreed not to pay any dividends on its
common stock and is limited as to the amount of any dividend paid on its
preferred stock during any 12 month period.
Exhibit 4.39
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE
WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN
ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
First Banks, Inc.
November 23, 2004
First Banks, Inc., a Missouri corporation (the "Company" which term
includes any successor Person under the Indenture hereinafter referred to), for
value received promises to pay to Wilmington Trust Company, not in its
individual capacity but solely as Institutional Trustee for First Bank Statutory
Trust III (the "Holder") or registered assigns, the principal sum of forty-one
million two hundred thirty-eight thousand dollars ($41,238,000.00) on December
15, 2034, and to pay interest on said principal sum from November 23, 2004, or
from the most recent Interest Payment Date (as defined below) to which interest
has been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 15, June 15, September 15 and December 15 of each
year or if such day is not a Business Day, then the next succeeding Business Day
(each such date, an "Interest Payment Date") (it being understood that interest
accrues for any such non-Business Day), commencing on the Interest Payment Date
in March 2005, at an annual rate equal to 4.54% beginning on (and including) the
date of original issuance and ending on (but excluding) the Interest Payment
Date in March 2005 and at an annual rate for each successive period beginning on
(and including) the Interest Payment Date in March 2005, and each succeeding
Interest Payment Date, and ending on (but excluding) the next succeeding
Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR,
determined as described below, plus 2.18% (the "Coupon Rate"), applied to the
principal amount hereof, until the principal hereof is paid or duly provided for
or made available for payment, and on any overdue principal and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest (including Additional
Interest) at the Interest Rate in effect for each applicable period, compounded
quarterly, from the dates such amounts are due until they are paid or made
available for payment. The amount of interest payable for any period will be
computed on the basis of the actual number of days in the Distribution Period
concerned divided by 360. The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Debenture (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be five Business Days
prior to the day on which the relevant Interest Payment Date occurs. Any such
interest installment not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such regular record date and may be paid to
the Person in whose name this Debenture (or one or more Predecessor Securities)
is registered at the close of business on a special record date.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Trustee will request
the principal London offices of four leading banks in the London interbank
market to provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar deposits
having a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Trustee will
request four major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.
The Interest Rate for any Distribution Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
All percentages resulting from any calculations on the Debentures will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
-------- -------
mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire transfer by such holder has not been received
by the Company or by wire transfer to an account appropriately designated by the
holder hereof. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Institutional Trustee, the payment of the principal of and
interest on this Debenture will be made in immediately available funds at such
place and to such account as may be designated by the Trustee.
So long as no Extension Event of Default has occurred and is
continuing, the Company shall have the right, from time to time, and without
causing an Event of Default, to defer payments of interest on the Debentures by
extending the interest payment period on the Debentures at any time and from
time to time during the term of the Debentures, for up to 20 consecutive
quarterly periods (each such extended interest payment period, an "Extension
Period"), during which Extension Period no interest (including Additional
Interest) shall be due and payable (except any Additional Sums that may be due
and payable). No Extension Period may end on a date other than an Interest
Payment Date. During an Extension Period, interest will continue to accrue on
the Debentures, and interest on such accrued interest will accrue at an annual
rate equal to the Interest Rate in effect for such Extension Period, compounded
quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to
herein as "Additional Interest"). At the end of any such Extension Period the
--------------------
Company shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however, that no
-------- -------
Extension Period may extend beyond the Maturity Date; provided further, however,
-------- ------- -------
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to engage in any of the activities or transactions
described on the reverse side hereof and in the Indenture. Prior to the
termination of any Extension Period, the Company may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Company may commence a new Extension Period, subject to
the foregoing requirements. No interest or Additional Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The Company must give the
Trustee notice of its election to begin or extend an Extension Period by the
close of business at least 5 Business Days prior to the Interest Payment Date
with respect to which interest on the Debentures would have been payable except
for the election to begin or extend such Extension Period.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has duly executed this certificate.
FIRST BANKS, INC.
By /s/ Allen H. Blake
----------------------------------
Name: Allen H. Blake
Title: President and
Chief Executive Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Debentures referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By:/s/ Chrisopher J. Monigle
----------------------------------
Authorized Officer
REVERSE OF DEBENTURE
This Debenture is one of the floating rate junior subordinated
deferrable interest debentures of the Company, all issued or to be issued under
and pursuant to the Indenture dated as of November 23, 2004 (the "Indenture"),
duly executed and delivered between the Company and the Trustee, to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to the
Interest Payment Date in December 2009, the Company shall have the right to
redeem the Debentures in whole, but not in part, at any Interest Payment Date,
within 120 days following the occurrence of such Special Event, at the Special
Redemption Price.
In addition, the Company shall have the right to redeem the Debentures,
in whole or in part, but in all cases in a principal amount with integral
multiples of $1,000.00, on any Interest Payment Date on or after the Interest
Payment Date in December 2009, at the Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date or
Special Redemption Date, as applicable, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the Redemption Date or the Special Redemption Date, as applicable, all
the Debentures so called for redemption at the appropriate Redemption Price or
Special Redemption Price.
If all, or less than all, the Debentures are to be redeemed, the
Company will give the Trustee notice not less than 45 nor more than 60 days,
respectively, prior to the Redemption Date or Special Redemption Date, as
applicable, as to the aggregate principal amount of Debentures to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Debentures or portions thereof (in integral
multiples of $1,000.00) to be redeemed.
Notwithstanding the foregoing, any redemption of Debentures by the
Company shall be subject to the receipt of any and all required regulatory
approvals.
In case an Event of Default described in Section 5.1(a), (d) or (e) of
the Indenture shall have occurred and be continuing, upon demand of the Trustee,
the principal of all of the Debentures shall become due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
without the consent of the holders of each Debenture then outstanding and
affected thereby (i) change the fixed maturity of any Debenture, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the
Debentures, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders
of which are required to consent to any such supplemental indenture.
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Debentures at the time outstanding
on behalf of the holders of all of the Debentures to waive (or modify any
previously granted waiver of) any past default or Event of Default, and its
consequences, except a default (a) in the payment of principal of, premium, if
any, or interest on any of the Debentures, (b) in respect of covenants or
provisions hereof or of the Indenture which cannot be modified or amended
without the consent of the holder of each Debenture affected, or (c) in respect
of the covenants contained in Section 3.9 of the Indenture; provided, however,
that if the Debentures are held by the Trust or a trustee of such trust, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver, provided, further, that
if the consent of the holder of each outstanding Debenture is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of the Indenture
and the Company, the Trustee and the holders of the Debentures shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by the Indenture, said default or Event of
Default shall for all purposes of the Debentures and the Indenture be deemed to
have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest, including Additional Interest, on this Debenture at the time and place
and at the rate and in the money herein prescribed.
The Company has agreed that if Debentures are initially issued to the
Trust or a trustee of such Trust in connection with the issuance of Trust
Securities by the Trust (regardless of whether Debentures continue to be held by
such Trust) and (i) there shall have occurred and be continuing an Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Capital Securities Guarantee, or (iii) the Company shall
have given notice of its election to defer payments of interest on the
Debentures by extending the interest payment period as provided herein and such
Extension Period, or any extension thereof, shall be continuing, then the
Company shall not, and shall not allow any Affiliate of the Company to, (x)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or its Affiliates' capital stock (other than payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (x) and (y) above, (1)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, if any, (2) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (3) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (4) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (5) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).
The Debentures are issuable only in registered, certificated form
without coupons and in minimum denominations of $100,000.00 and any multiple of
$1,000.00 in excess thereof. As provided in the Indenture and subject to the
transfer restrictions and limitations as may be contained herein and therein
from time to time, this Debenture is transferable by the holder hereof on the
Debenture Register of the Company. Upon due presentment for registration of
transfer of any Debenture at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in
Section 3.2 of the Indenture, the Company shall execute, the Company or the
Trustee shall register and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in the name of the transferee or
transferees a new Debenture for a like aggregate principal amount. All
Debentures presented for registration of transfer or for exchange or payment
shall (if so required by the Company or the Trustee or the Authenticating Agent)
be duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to, the Company and the Trustee or the
Authenticating Agent duly executed by the holder or his attorney duly authorized
in writing. No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax, fee or other governmental charge that may be
imposed in connection therewith.
Prior to due presentment for registration of transfer of any Debenture,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Debenture registrar may deem the Person in whose name
such Debenture shall be registered upon the Debenture Register to be, and may
treat him as, the absolute owner of such Debenture (whether or not such
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the principal of, premium, if any, and interest on such Debenture and
for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Debenture registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Debenture.
No recourse for the payment of the principal of or premium, if any, or
interest on any Debenture, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any supplemental indenture, or
in any such Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, officer or director, as such, past, present or future, of the Company
or of any successor Person of the Company, either directly or through the
Company or any successor Person of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of the Indenture and the issue of the Debentures.
Capitalized terms used and not defined in this Debenture shall have the
meanings assigned in the Indenture dated as of the date of original issuance of
this Debenture between the Trustee and the Company.
THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES THEREOF.
EXHIBIT 4.40
FIRST BANK STATUTORY TRUST III
FIRST BANKS, INC.
SUBSCRIPTION AGREEMENT
November 23, 2004
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among First Bank
Statutory Trust III (the "Trust"), a statutory trust created under the Delaware
Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq.), First Banks, Inc., a Missouri corporation, with its
principal offices located at 600 James S. McDonnell Boulevard, Hazelwood,
Missouri 63042 (the "Company" and, collectively with the Trust, the "Offerors"),
and First Tennessee Bank National Association (the "Purchaser").
RECITALS:
A. The Trust desires to issue 40,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, Wilmington
Trust Company ("WTC"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
WTC, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and WTC, as trustee (the "Indenture"); and
C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust 40,000 Capital Securities at a price equal to $1,000.00
per Capital Security (the "Purchase Price") and the Trust agrees to sell such
Capital Securities to the Purchaser for said Purchase Price. The rights and
preferences of the Capital Securities are set forth in the Declaration. The
Purchase Price is payable in immediately available funds on November 23, 2004,
or such other business day as may be designated by the Purchaser, but in no
event later than November 30, 2004 (the "Closing Date"). The Offerors shall
provide the Purchaser wire transfer instructions no later than 1 day following
the date hereof.
1.2. The Placement Agreement, dated November 22, 2004 (the "Placement
Agreement"), among the Offerors and the placement agents identified therein (the
"Placement Agents") includes certain representations and warranties, covenants
and conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.
1.3. Anything herein or in the Placement Agreement notwithstanding, the
Offerors acknowledge and agree that, so long as Purchaser holds some or all of
the Capital Securities, the Purchaser may in its discretion from time to time
transfer or sell, or sell or grant participation interests in, some or all of
such Capital Securities to one or more parties, provided that any such
transaction complies, as applicable, with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and any other
applicable securities laws, is pursuant to an exemption therefrom, or is
otherwise not subject thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that none of the Capital
Securities, the Debentures or the Guarantee have been registered under the
Securities Act or any other applicable securities law, are being offered for
sale by the Trust in transactions not requiring registration under the
Securities Act, and may not be offered, sold, pledged or otherwise transferred
by the Purchaser except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto.
2.2. The Purchaser represents and warrants that, except as contemplated
under Section 1.3 hereof, it is purchasing the Capital Securities for its own
account, for investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the Securities Act or
other applicable securities laws, subject to any requirement of law that the
disposition of its property be at all times within its control and subject to
its ability to resell such Capital Securities pursuant to an effective
registration statement under the Securities Act or under Rule 144A or any other
exemption from registration available under the Securities Act or any other
applicable securities law.
2.3. The Purchaser represents and warrants that neither the Offerors nor
the Placement Agents are acting as a fiduciary or financial or investment
adviser for the Purchaser.
2.4. The Purchaser represents and warrants that it is not relying (for
purposes of making any investment decision or otherwise) upon any advice,
counsel or representations (whether written or oral) of the Offerors or of the
Placement Agents.
2.5. The Purchaser represents and warrants that (a) it has consulted with
its own legal, regulatory, tax, business, investment, financial and accounting
advisers in connection herewith to the extent it has deemed necessary, (b) it
has had a reasonable opportunity to ask questions of and receive answers from
officers and representatives of the Offerors concerning their respective
financial condition and results of operations and the purchase of the Capital
Securities, and any such questions have been answered to its satisfaction, (c)
it has had the opportunity to review all publicly available records and filings
concerning the Offerors and it has carefully reviewed such records and filings
that it considers relevant to making an investment decision, and (d) it has made
its own investment decisions based upon its own judgment, due diligence and
advice from such advisers as it has deemed necessary and not upon any view
expressed by the Offerors or the Placement Agents.
2.6. The Purchaser represents and warrants that it is a "qualified
institutional buyer" as defined under Rule 144A under the Securities Act. If the
Purchaser is a dealer of the type described in paragraph (a)(1)(ii) of Rule 144A
under the Securities Act, it owns and invests on a discretionary basis not less
than U.S. $25,000,000.00 in securities of issuers that are not affiliated with
it. The Purchaser is not a participant-directed employee plan, such as a 401(k)
plan, or any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F)
of Rule 144A that holds the assets of such a plan, unless investment decisions
with respect to the plan are made solely by the fiduciary, trustee or sponsor of
such plan.
2.7. The Purchaser represents and warrants that on each day from the date
on which it acquires the Capital Securities through and including the date on
which it disposes of its interests in the Capital Securities, either (i) it is
not (a) an "employee benefit plan" (as defined in Section 3(3) of the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
-----
which is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA,
or any entity whose underlying assets include the assets of any such plan (an
"ERISA Plan"), (b) any other "plan" (as defined in Section 4975(e)(1) of the
-----------
United States Internal Revenue Code of 1986, as amended (the "Code")) which is
----
subject to the provisions of Section 4975 of the Code or any entity whose
underlying assets include the assets of any such plan (a "Plan"), (c) an entity
----
whose underlying assets include the assets of any such ERISA Plan or other Plan
by reason of Department of Labor regulation section 2510.3-101 or otherwise, or
(d) a governmental or church plan that is subject to any federal, state or local
law which is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (a "Similar Law"); or (ii) the purchase, holding and
------------
disposition of the Capital Securities by it will satisfy the requirements for
exemptive relief under Prohibited Transaction Class Exemption ("PTCE") 84-14,
----
PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 or a similar exemption, or, in the
case of a plan subject to a Similar Law, will not result in a non-exempt
violation of such Similar Law.
2.8. The Purchaser represents and warrants that it is acquiring the
Capital Securities as principal for its own account for investment and, except
as contemplated under Section 1.3 hereof, not for sale in connection with any
distribution thereof. It was not formed solely for the purpose of investing in
the Capital Securities, and additional capital or similar contributions were not
specifically solicited from any person owning a beneficial interest in it for
the purpose of enabling it to purchase any Capital Securities. The Purchaser is
not a (i) partnership, (ii) common trust fund or (iii) special trust, pension,
profit sharing or other retirement trust fund or plan in which the partners,
beneficiaries or participants, as applicable, may designate the particular
investments to be made or the allocation of any investment among such partners,
beneficiaries or participants, and except as contemplated under Section 1.3
hereof, it agrees that it shall not hold the Capital Securities for the benefit
of any other person and shall be the sole beneficial owner thereof for all
purposes and that it shall not sell participation interests in the Capital
Securities or enter into any other arrangement pursuant to which any other
person shall be entitled to a beneficial interest in the distribution on the
Capital Securities. The Capital Securities purchased directly or indirectly by
the Purchaser constitute an investment of no more than 40% of its assets. The
Purchaser understands and agrees that any purported transfer of the Capital
Securities to a purchaser which would cause the representations and warranties
of Section 2.6 and this Section 2.8 to be inaccurate shall be null and void ab
initio and the Offerors retain the right to resell any Capital Securities sold
to non-permitted transferees.
2.9. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.10. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.11. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.
2.12. The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.
2.13. The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: First Banks, Inc.
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Attention: Lisa K. Vansickle
Fax: 314-592-6621
To the Purchaser: First Tennessee Bank National Association
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Attention: David Work
Fax: 901-435-7983
Unless otherwise expressly provided herein, notices shall be
deemed to have been given on the date of mailing, except notice of change of
address, which shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:/s/ David S. Work
-------------------------------------
Print Name: David S. Work
-----------------------------
Title: Executive Vice President
----------------------------------
FIRST BANKS, INC.
By: /s/ Allen H. Blake
--------------------------------------
Name: Allen H. Blake
------------------------------------
Title: President and Chief Executive
Officer
-----------------------------------
FIRST BANK STATUTORY TRUST III
By: /s/ Lisa K. Vansickle
--------------------------------------
Name: Lisa K. Vansickle
-----------------------------------
Title: Administrator
EXHIBIT A TO SUBSCRIPTION AGREEMENT
-----------------------------------
FORM OF TRANSFER NOTICE
[DATE]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Dear Sir or Madam:
The undersigned hereby notifies you of the transfer of [________] of
the Capital Securities of First Bank Statutory Trust III, such transfer to be
effective on [DATE OF TRANSFER]. In accordance with Section 7.9 of the Placement
Agreement dated November 22, 2004 between the Offerors and the placement agents
named therein (the "Placement Agreement"), periodic reports shall be delivered
to [_______________] on each March 15, June 15, September 15 and December 15
during the term of the Capital Securities, commencing [___________], in the form
attached thereto. Capitalized terms used in this notice and not otherwise
defined shall have the meanings ascribed to such terms in the Placement
Agreement.
As the Institutional Trustee and Registrar, you are hereby instructed
to notify The Depository Trust Company of the transfer of Capital Securities to
[_______________], if such notification is required as a Fast Automated
Securities Transfer Program Agent for DTC. The undersigned hereby certifies that
this notice has been delivered to the Company, and Wilmington Trust Company has
no duty or obligation to provide such notice.
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
cc: First Banks, Inc.
Exhibit 4.41
Certificate Number P-1 40,000 Capital Securities
CUSIP NO. 319278 AA 5
THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR
CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO
TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
TO FIRST BANK STATUTORY TRUST III OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (II) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE
DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
November 23, 2004
Certificate Evidencing Floating Rate Capital Securities
of
First Bank Statutory Trust III
(liquidation amount $1,000 per Capital Security)
First Bank Statutory Trust III, a statutory trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of capital securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000 per capital security) (the "Capital Securities").
Subject to the Declaration (as defined below), the Capital 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 Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of November 23, 2004, among Peter D. Wimmer, Terrance M.
McCarthy and Lisa K. Vansickle, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, First
Banks, Inc., as Sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Trust, including the designation of
the terms of the Capital Securities as set forth in Annex I to such amended and
restated declaration as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
Signature appears on following page
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
FIRST BANK STATUTORY TRUST III
By:/s/ Lisa K. Vansickle
--------------------------------
Name: Lisa K. Vansickle
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
WILMINGTON TRUST COMPANY,
as the Institutional Trustee
By: /s/ Christopher J. Monigle
--------------------------------
Authorized Officer
REVERSE OF CAPITAL SECURITY
Distributions payable on each Capital Security will be payable at an
annual rate equal to 4.54% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in March
2005 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in March 2005, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.18% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in March 2005. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Extension Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
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 Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
---------------------------------------
Signature:
----------------------------------
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:1
- ----------------------------------
1 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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
Exhibit 10.10
First Banks, Inc. Executive Incentive Compensation Plan
OBJECTIVES
o Promote superior short- and long-term financial performance of the
institution through the efforts of key executive officers.
o Reward those key executive officers who deliver solid results with
market-competitive incentives; provide above-market incentives for those
who far exceed expectations.
o Attract, motivate, and retain skilled and experienced individuals who can
increase the size and profitability of the institution.
ELIGIBLE PARTICIPANTS
The Chairman of the Board of First Banks, Inc. will annually determine those
eligible to participate in the Plan. Aside from the CEO, the Plan is designed
for the handful of executive officers whose impact is felt in every region and
business unit of the company and whose contribution to the organization's
success is difficult to measure by objective criteria alone. Although it is
anticipated that individuals such as the CFO, COO, CCO, Director of Sales and
Marketing, Director of Operations, and Director of Technology would be eligible
participants, the Chairman of the Board retains full discretion to determine
eligibility in the Plan. Lineal descendants of James F. Dierberg and their
spouses are not eligible to participate in the Plan, regardless of position.
Employees who are hired or promoted into eligible positions between January 1st
and August 31st of the Plan Year will be considered for participation on a
prorated basis.
INCENTIVE COMPENSATION FUNDING
Funding of incentive compensation is based on the weighted average Return On
Equity (ROE) for First Banks, Inc. For the CEO, the weighted average ROE is
defined as the current plan year ROE times 60% plus the preceding year's ROE
times 25% plus the ROE two years prior times 15%. For all other participants,
the weighted average ROE is defined as the current plan year ROE times 75% plus
the preceding year's ROE times 25%. For purposes of this Plan, ROE is calculated
using the net income and equity as reported in the company's annual report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, except
that (1) equity does not include unrealized gain or loss on derivatives; and (2)
extraordinary gain on the sale of branches, business lines, or other assets that
would otherwise represent 5% or more of net income shall be excluded for
purposes of calculating ROE for purposes of the Plan.
There are separate funding formulae for the CEO and all other participants, as
outlined below. If the weighted average ROE is less than Threshold (12.5%), no
incentive amount will be generated.
CEO Funding Formula:
- --------------------
40(weighted average ROE)(100) - 12.5)(CEO's annual base salary at end of plan
year). Incentive may not exceed 300% of salary.
Other Participants Funding Formula:
- -----------------------------------
30((weighted average ROE)(100) - 12.5)0.8(total of all participants' annual base
salaries at end of plan year). Incentive may not exceed 150% of salary.
See the Attachment to the Executive Incentive Plan: Incentive Funding, for a
graphical representation of the formulas.
INCENTIVE COMPENSATION DISTRIBUTION
Distributions of incentive funds, if any, are handled separately for the CEO and
all other participants. For the CEO, the amount funded under the incentive
formula outlined above will be the amount distributed to the CEO, unless
determined otherwise by the Board of Directors.
For executives other than the CEO, the funding generated by the incentive
formula outlined above is the Incentive Pool. Absent special circumstances
outlined later, the amount of funds in the Incentive Pool will be the total
amount distributed to participants.
The funds in the Incentive Pool will be distributed among the participants
proportionately based on the ratio of each participant's annual base salary at
the end of the Plan Year to the aggregate of all participants' annual base
salaries at the end of the Plan Year, provided however, that the CEO may
exercise discretion in awarding a greater or lesser amount to any one or more
participants, such that the total amount funded is ultimately awarded among all
participants. Such discretion will be exercised based on the CEO's best judgment
as to the relative contributions (or lack thereof) made by each participant
toward improving ROE during the Plan Year.
NEW PARTICIPANTS
The funding and distributions for individuals who become participants between
January 1st and August 31st of the Plan Year will be prorated for the number of
full months during such year that they are participants. There shall be no
funding or distribution for individuals who become participants after August
31st of the Plan Year.
SPECIAL CIRCUMSTANCES
1. Significant Extraordinary Items. Significant extraordinary items may be
taken into consideration and such adjustments made (upward or downward)
as deemed appropriate by the Board of Directors.
2. Participant Receives Performance Rating Below "Achieves Performance
Requirements." The CEO has the discretion to reduce the funding of the
Incentive Pool if one or more participants receive a performance review
below "Achieves Performance Requirements" (or equivalent). The funding
may be reduced up to an amount equal to the reduction in distribution
to the executive(s) failing to receive a "Achieves Performance
Requirements" review or better. The purpose of this provision is to
prevent distortions that might otherwise occur if one or more
executives received little or no distribution and the total amount of
funding had to be allocated among the remaining participants.
3. Fewer than Three Participants aside from the CEO. If for any reason
there are fewer than three participants in the Plan other than the CEO,
the Chairman of the Board has the discretion to increase or decrease
the total funding up to 20% of the participants' total salaries.
SALARY AND EMPLOYEE BENEFIT ADMINISTRATION
Payments made pursuant to the Plan will not be used in determining benefit
levels under any employee benefits program.
PAYMENT DATE
Payments will be made to eligible participants as soon as practical following
the close of the Plan Year and the determination of financial results.
Participants must be employed by First Banks, Inc., its Subsidiaries or
Affiliates on the date that payments are made, unless payment is required
earlier under applicable State laws or regulations.
TERMINATION
Those participants whose employment is terminated during the Plan Year due to
retirement, death or disability are eligible to be considered for an award at
such time as other award determinations are made. Such awards, if any, will be
prorated through the date of termination and are payable at the time all other
awards under this Plan are made. Participants who voluntarily terminate during
the Plan Year, or whose employment is terminated involuntarily for any reason,
are not eligible to receive an award under the Plan.
PLAN NONCONTRACTUAL
Nothing herein contained shall be construed as a commitment or agreement on the
part of any person employed by First Banks, Inc. or any of its Subsidiaries or
Affiliates to continue such person's employment with First Banks, Inc., its
Subsidiaries or Affiliates, and nothing herein contained shall be construed as a
commitment or agreement on the part of First Banks, Inc., its Subsidiaries or
Affiliates to continue the employment of or the annual rate of compensation of
any such person for any period, and all participants shall remain subject to
discharge to the same extent as if the Plan had never been put into effect.
PLAN AMENDMENTS
The Board of Directors may amend or terminate the Plan at any time.
EFFECTIVE DATE
The foregoing has been approved by the Board of Directors, effective January 1,
2004.
Exhibit 10.11
FIRST BANKS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
SECTION 1
Definitions
1.1 Affiliate. "Affiliate" means any corporation, partnership, joint venture,
---------
association or similar organization or entity that is required to be aggregated
with the Company pursuant to Code Section 414(b), (c), or (m).
1.2 Beneficiary. "Beneficiary" means the individual or individuals designated
-----------
by the Participant pursuant to Section 5.4 of the Plan.
1.3 Code. "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time. Any reference to a section of the Code includes any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
1.4 Company. "Company" means FIRST BANKS, INC., located at 11901 Olive
-------
Boulevard, St. Louis, Missouri 63141, employer tax identification number
43-1175538, which Company has established the Plan, as set forth herein.
1.5. Compensation. "Compensation" means total taxable salary, bonuses and
------------
commissions paid to a Participant by the Employer (determined without regard to
any amounts in the Participant's Deferred Compensation Account).
1.6. Deferred Compensation Account. "Deferred Compensation Account" means the
-----------------------------
bookkeeping account maintained under the Plan in the Participant's name to
reflect amounts deferred under the Plan pursuant to Section 3 (as adjusted under
Section 4) and any Employer discretionary Contributions made on behalf of the
Participant (as adjusted under Section 4).
1.7. Deferral Election. "Deferral Election" means a written notice filed by the
-----------------
Participant with the Employer specifying the Compensation or bonus to be
deferred by the Participant.
1.8. Distribution Date. "Distribution Date" means the date a Participant
-----------------
terminates employment or association with the Employer for whatever reason.
1.9. Early Retirement Date. "Early Retirement Date" means the date the
---------------------
Participant attains 55 years of age and has been employed by the Company or its
Affiliates for at least 10 years.
1.10. Effective Date. "Effective Date" means September 1, 1999.
--------------
1.11. Employee. "Employee" means an employee of an Employer who meets the
--------
eligibility criteria set forth in Subsection 3.1 of the Plan and who is a member
of a select group of management or highly compensated employees as defined under
ERISA or the regulations thereunder.
1.12. Employer. "Employer" means, individually, the Company and each Affiliate
--------
of the Company that adopts the Plan in accordance with Subsections 7.1. The
Company and any Affiliates that adopt the Plan are sometimes collectively
referred to herein as the "Employers."
1.13. ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time. Any reference to a section of ERISA includes any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
1.15. Normal Retirement Date. "Normal Retirement Date" means the date the
----------------------
Participant attains 65 years of age.
1.16. Participant. "Participant" means an Employee who meets the eligibility
-----------
criteria set forth in Subsection 3.1 and who has made a Deferral Election in
accordance with the terms of the Plan.
1.17. Plan. "Plan" means the provisions of the Plan, as set forth herein.
----
1.18. Plan Administrator. The "Plan Administrator" means the Company.
------------------
1.19 Plan Year. "Plan Year" means the calendar year. However, if the Effective
---------
Date of the Plan is other than January 1 of a year, the initial Plan year shall
be a short Plan year, beginning on the Effective Date and ending on the
following December 31.
1.20. Unforeseeable Financial Emergency. "Unforeseeable Financial Emergency"
---------------------------------
means a severe financial hardship of the Participant resulting from:
a) A sudden and unexpected illness or accident of the Participant
or of a dependent the Participant (as defined in Section
152(a) of the Code);
b) Loss of Participant's property to casualty; or
c) Such other similar extraordinary and unforeseeable
circumstances resulting from events beyond the control of the
Participant.
Whether a Participant has an Unforeseeable Financial Emergency shall be
determined in the sole discretion of the Plan Administrator.
1.21. Valuation Date. "Valuation Date" means the each business day. A business
--------------
day is any day the New York Stock Exchange (NYSE) is open for trading.
1.22. Other Definitions. In addition to the terms defined in this Section 1,
-----------------
other terms are defined when first used in later Sections of this Plan.
SECTION 2
Purpose and Administration
2.1. Purpose. The Company has established the Plan primarily for the purpose of
-------
providing deferred compensation to a select group of management or highly
compensated employees of the Employers. The Plan is intended to be a top-hat
plan described in Section 201(2) of ERISA. The Company intends that the Plan
(and each Trust under the Plan as described in Subsection 6.1) shall be treated
as unfunded for tax purposes and for purposes of Title I of ERISA. An Employer's
obligations hereunder, if any, to a Participant (or to a Participant's
beneficiary) shall be unsecured and shall be a mere promise by the Employer to
make payments hereunder in the future. A Participant (or the Participant's
beneficiary) shall be treated as a general unsecured creditor of the Employer.
2.2. Administration. The Plan shall be administered by the Plan Administrator.
--------------
The Company may designate a committee or individual to carry out the
administration of the Plan on behalf of the Company who shall serve at the
pleasure of the Company's Board of Directors and may be removed by such Board
with or without cause. Any individual so designated may resign upon written
notice to the Company's Board of Directors. The Company shall have full power
and authority to designate those persons employed by the Company who may
participate in the Plan.
The Plan Administrator shall have the powers, rights, and duties set forth in
the Plan and shall have the power, in the Plan Administrator's sole and absolute
discretion, to determine all questions arising under the Plan, including the
determination of the rights of all persons with respect to the Plan and to
interpret the provisions of the Plan and remedy any ambiguities,
inconsistencies, or omissions. Any decisions of the Plan Administrator shall be
final and binding on all persons with respect to the Plan and the benefits
provided under the Plan.
If a Participant is assisting the Plan Administrator (either individually or as
a member of a committee), the Participant may not decide or determine any matter
or question concerning such Participant's benefits under the Plan that the
Participant would not have the right to decide or determine if the Participant
were not serving as the Plan Administrator.
SECTION 3
Eligibility, Participation, Deferral Elections,
and Employer Contributions
3.1. Eligibility and Participation. Subject to the conditions and limitations
-----------------------------
of the Plan, all employees with a position ranking of Vice President or above
and earning an annual base salary of at least $75,000 per Plan Year are eligible
to participate in the Plan. Annual base salary shall be determined based either
on an employee's base salary for the preceding calendar year (for current
employees) or on an employee's base salary for the current year (for employee's
hired during the Plan year and employees receiving a change in his or her base
salary during the Plan Year).
An Employee shall become a participant in the Plan, effective the first
day of the month thirty (30) days following designation by the Employer that the
Employee is eligible to participate, provided, however, that the election form
is returned to the Plan Administrator within the time prescribed by the Plan
Administrator. Thereafter, an Employee who meets the eligibility requirements
stated herein may also become a participant in the Plan effective January 1st of
the following Plan Year in which he or she meets the eligibility requirements,
provided the election form is returned to the Plan Administrator on or before
December 1 of the year in which he or she meets the eligibility requirements. An
employee who meets the eligibility requirements and does not return the election
form to the Plan Administrator on or before December 1 of the Plan year in which
he or she first meets the eligibility requirements set forth above must again
meet the eligibility requirements in order to participate in the Plan. A
Participant shall remain a participant in the Plan until the entire balance of
the Participant's Deferred Compensation Account has been distributed.
3.2. Rules for Deferral Elections. Any person meeting the eligibility
----------------------------
requirement of Subsection 3.1 may make a Deferral Election to defer receipt of
Compensation he or she otherwise would be entitled to receive for a Plan Year in
accordance with the rules set forth below:
a) All Deferral Elections must be made in writing on the form
prescribed by the Plan and will be effective only when filed
with the Plan Administrator no later than the date specified by
the Plan Administrator. In no event may a Deferral Election be
made later than the last day of the Plan Year preceding the
Plan Year in which the amount being deferred would otherwise be
made available to the Participant. However, in the case of a
Participant's initial year of employment or association with an
Employer, the Participant may make a Deferral Election with
respect to compensation for services to be performed subsequent
to such Deferral Election, provided such election is made no
later than 30 days after the date the Participant first becomes
eligible for the Plan. Furthermore, in the case of a short
initial Plan year, each Participant may make a Deferral
Election with respect to compensation for services to be
performed subsequent to such Deferral Election, provided such
election is made no later than 30 days after the Effective
Date.
b) With respect to Plan years following the Participant's initial
year in the Plan, failure to complete a subsequent Deferral
Election shall constitute a waiver of the Participant's right
to elect a different amount of Compensation to be deferred for
each such Plan Year and shall be considered an affirmation and
ratification to continue the Participant's existing Deferral
Election. However, a Participant may, prior to the beginning of
any Plan Year, elect to increase or decrease the amount of
Compensation to be deferred for the next following Plan Year
by filing another Deferral Election with the Plan Administrator
in accordance with paragraph (a) above.
c) A Deferral Election in effect for a Plan Year may not be
modified during the Plan Year, except that a Participant may
terminate the Participant's Deferral Election during a Plan
Year in the event of an Unforeseeable Financial Emergency.
3.3 Amounts Deferred. Commencing on the effective date of participation, a
----------------
Participant may elect to defer (a) up to 25% of the Participant's Compensation
for a Plan Year and (b) up to 100% of the Participant's bonus/commissions for a
Plan Year. The amount of Compensation and bonus/commissions deferred by a
Participant shall be credited to the Participant's Deferred Compensation Account
as of the Valuation Date coincident with or immediately following the date such
Compensation and bonus/commission would, but for the Participant's Deferral
Election, be payable to the Participant.
3.4. Employer Discretionary Contributions. An Employer may, in its sole
------------------------------------
discretion, credit to the Deferred Compensation Account of any Participant
employed by that Employer an amount determined by the Employer in its sole
discretion (an "Employer Discretionary Contribution") for a Plan Year. Any
Employer Discretionary Contribution for a Plan year will be credited to a
Participant's Deferred Compensation Account as of the Valuation Date specified
by the Employer.
SECTION 4
Deferred Compensation Accounts
4.1. Deferred Compensation Accounts. All amounts deferred pursuant to one or
------------------------------
more deferral Elections under the Plan and any Employer discretionary
Contributions shall be credited to a Participant's Deferred Compensation Account
and shall be adjusted under Subsection 4.2.
4.2. Deferral Account Adjustments and Investment Options. As of each Valuation
---------------------------------------------------
Date, the Plan Administrator shall adjust amounts in a Participant's Deferred
Compensation Account to reflect earnings (or losses) in the Investment Options
(as defined in Subsection 4.4) attributable to the Participant's Deferred
Compensation Account. Earnings (or losses) on amounts in a Participant's
Deferred Compensation Account shall accrue commencing on the date the Deferred
Compensation Account first has a positive balance and shall continue to accrue
until the entire balance in the Participant's Deferred Compensation Account has
been distributed. Earnings (or losses) shall be credited to a Participant's
Deferred Compensation Account based on the realized rate of return (net of any
expenses and taxes paid from the Trust) on the Investment Options attributable
to the Participant's Deferred Compensation Account.
4.3. Vesting. A Participant shall be fully vested in the amounts in the
-------
Participant's Deferred Compensation Account attributable to the Participant's
Deferral Elections. If Employer Discretionary Contributions are made under the
Plan, a Participant shall be vested in the amount in the Participant's Deferred
Compensation Account attributable to Employer Discretionary Contributions in
accordance with the Five Year Vesting Schedule.
Nonforfeitable Percentage
-------------------------
Less than five (5) years............... 0%
Five (5) or more years................. 100%
Vesting for Participants will be determined by Years of Service with the
Employer.
For the purpose of determining a Participant's vested benefit with respect to
Employer Discretionary Contributions, a "Year of Service" means each
twelve-month period of employment or association with the Company and the
Affiliates. Notwithstanding the foregoing, a Participant shall be fully vested
in the entire balance in the Participant's Deferred Compensation Account upon
the Participant's Normal Retirement Date, death or becoming disabled (as
provided in Subsection 5.2 below), provided the date on which the Participant
dies or becomes disabled occurs while the Participant is actively employed by or
associated with the Employer. The portion of a Participant's Deferred
Compensation Account in which the Participant is not fully vested shall be
forfeited to the Employer by the Participant.
Notwithstanding the vesting schedule set forth above, the balance in a
Participant's Deferred Compensation Account attributable to Employer
Discretionary contributions will be forfeited (and neither the Participant nor
the Participant's beneficiaries will have any rights thereto) if the
Participant's employment with the Employer is terminated for Good Cause. "Good
Cause" means the Participant's gross negligence, fraud, dishonesty, or willful
violation of any law or significant policy of the Employer that is committed in
connection with the Participant's employment by or association with the
Employer. Whether a Participant has been terminated for Good Cause shall be
determined by the Plan Administrator.
4.4. Investment Options. The Plan Administrator may establish procedures
------------------
governing the ability of the Participant to give investment directions, which
procedures may be modified from time to time by the Plan Administrator, in the
sole discretion of the Plan Administrator. Currently, Participant may make
written Investment Option instructions to the Plan Administrator for transfers
between Investment Options as of any Valuation Date. Generally, a Participant
may specify a percentage or dollar amount to be reallocated from one or more
Divisions, as well as the proportional allocation to the applicable Divisions.
The Plan Administrator, in its sole discretion, may offer a range of
investments from which a Participant can select and direct investment in for
their individual Account. Such investment options may be changed added, deleted
or modified from time to time in the Plan Administrator's sole discretion.
Currently, each Division has different objectives and policies which provide the
Participant with a variety of investment alternatives.
SECTION 5
Payment of Benefits
5.1. Payment upon Retirement. Payment of the vested portion of a Participant's
-----------------------
Deferred Compensation Account shall be made as soon as administratively possible
following the last business day of the month in which the Participant's
Distribution Date occurs. Payment of the vested portion of a Participant's
Deferred Compensation Account shall be made in accordance with the Participant's
Election. Currently, the options being offered to Participants are 1) monthly
payments over five (5) years; 2) monthly payments over ten (10) years; or 3) a
single lump sum payment. These payment options may be changed, added, deleted or
modified in the Plan Administrator's sole discretion. A Participant may change
his or her benefit payment so long as said change is made, in writing to the
Plan Administrator, at least thirteen (13) months prior to the commencement of
payment of benefits. The amount of each monthly payment will equal the current
balance multiplied by a fraction: the numerator is 1 and the denominator is the
number of remaining payments, including the current one. For example, if this is
the first of a five (5) year (60 month) payout, the payment would be 1/60th of
the current balance. The next payment would be 1/59th, and so on.
5.2. Payment Upon Disability. In the event a Participant becomes disabled (as
-----------------------
defined below) while the Participant is employed by or associated with an
Employer, payment of the Participant's Deferred Compensation Account shall be
made (or shall commence) as soon as practicable after the Valuation Date
coincident with or next following the date on which the Plan Administrator
determines that the Participant is disabled. Payment of the vested portion of a
Participant's Deferred Compensation Account shall be made in accordance with the
Participant's election. Currently, the options being offered to a Participant
who is disabled are (1) monthly payments over five (5) years; (2) monthly
payments over ten (10) years; or (3) a single lump sum payment. These payment
options may be changed, added, deleted or modified in the Plan Administrator's
sole discretion. A Participant may change his or her benefit payment so long as
said change is made, in writing, at least thirteen (13) months prior to the
commencement of payment of benefits. Further, a Participant who has previously
selected a 5 or 10 year monthly payment may, in the event of disability, change
said benefit payment at any time prior to the commencement of payment of
benefits to a lump sum payment with the written consent of the Plan
Administrator. For purposes of this Subsection 5.2, a Participant shall be
considered disabled if the Participant is unable to engage in any substantially
gainful activity by reason of any medically determined physical or mental
impairment that can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve months. Whether
a Participant is disabled for purposes of the Plan shall be determined by the
Plan Administrator, and in making such determination, the Plan Administrator may
rely on the opinion of a physician (or physicians) selected by the Plan
Administrator for such purpose.
5.3. Payment Upon Death of a Participant. A Participant's Deferred Compensation
-----------------------------------
Account shall be paid to the Participant's beneficiary (designated in accordance
with Subsection 5.4) as follows:
1. Death Prior to Commencement of Benefits. If the Participant
---------------------------------------
dies prior to the commencement of Benefit payments to him or
her, the Employer shall pay the Participant's Vested Benefits
to the Participant's Beneficiary or Beneficiaries designated
in accordance with Section 5.4 below in a single lump sum.
Such payment shall be made as soon as administratively
feasible following the death of the Participant.
2. Death After Commencement of Benefits. If the Participant dies
------------------------------------
after the commencement of Benefit payments to him or her, but
prior to the completion of all such payments due and owing
under the Plan, the Employer shall continue to make such
payments to the Participant's Beneficiary or Beneficiaries
designated in accordance with Section 5.4 below in the manner
and over the period that applied to the Participant at the
time of his or her death.
Such continuing payments shall commence as soon as
administratively feasible following the Employer's receipt of
notice of the Participant's death, provided the Employer is
furnished with a death certificate and such other
documentation and information as the Employer may reasonably
require.
5.4. Beneficiary. If a Participant is married on the date of the Participant's
-----------
death, the Participant's beneficiary shall be the Participant's spouse, unless
the Participant names a beneficiary or beneficiaries (other than the
Participant's spouse) to receive the balance of the Participant's Deferred
Compensation Account in the event of the Participant's death prior to the
payment of the Participant's entire Deferred Compensation Account. To be
effective, any beneficiary designation must be filed in writing with the Plan
Administrator in accordance with rules and procedures adopted by the Plan
Administrator for that purpose. A Participant may revoke an existing beneficiary
designation by filing another written beneficiary designation with the Plan
Administrator at any time and without the consent of prior beneficiaries. The
latest beneficiary designation received by the Plan Administrator shall be
controlling. If no beneficiary is named by a Participant, or if the Participant
survives all of the Participant's named beneficiaries and does not designate
another beneficiary, the Participant's Deferred Compensation Account shall be
paid in the following order of precedence:
a) The Participant's spouse;
b) The Participant's children (including adopted children) per
stirpes; or
c) The Participant's estate.
5.5 Payment Upon Termination of Employment. In the event a Participant
--------------------------------------
terminates his employment with Employer for any reason other than Retirement
(early or normal), Death or Disability, payment of the vested portion of a
Participant's Deferred Compensation Account (which is not forfeited pursuant to
Section 4.3) shall be made in a single lump sum as soon as administratively
possible following the last business day of the month in which the Participant's
Distribution Date occurs.
5.5. Unforeseeable Financial Emergency. If the Plan Administrator determines
---------------------------------
that a Participant has incurred an Unforeseeable Financial Emergency, the
Participant may receive in cash the portion of the balance of the Participant's
Deferred Compensation Account needed to satisfy the Unforeseeable Financial
Emergency, but only if the Unforeseeable Financial Emergency may not be relieved
(a) through reimbursement or compensation by insurance or otherwise or (b) by
liquidation of the Participant's assets to the extent the liquidation of such
assets would not itself cause severe financial hardship. A payment on account of
an Unforeseeable Financial Emergency shall not be in excess of the amount needed
to relieve such Unforeseeable Financial Emergency and shall be made as soon as
practicable following the date on which the Plan Administrator approves such
payment.
5.6. Withholding of Taxes. In connection with the Plan, the Employer shall
--------------------
withhold any applicable Federal, state or local income tax and employment taxes,
including Social Security taxes, at such time and in such amounts as is
necessary to comply with applicable laws and regulations.
SECTION 6
MISCELLANEOUS
6.1. Funding. Each Employer under the Plan shall establish and maintain one or
-------
more grantor trusts (individually, a "Trust") to hold assets to be used for
payment of benefits under the Plan. A Trust shall conform with the terms of
Internal Revenue Service Revenue Procedure 92-64 (or any subsequent
administrative ruling). The assets of the Trust with respect to benefits payable
to the Participants employed by or associated with an Employer shall remain the
assets of such Employer subject to the claims of its general creditors. Any
payments by a Trust of benefits provided to a Participant under the Plan shall
be considered payment by the applicable Employer and shall discharge such
Employer from any further liability under the Plan for such payments.
6.2. Interests Not Transferable. Except as to withholding of any tax under the
--------------------------
laws of the United States or any state or locality, no benefit payable at any
time under the Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, or any other encumbrance of any kind or to
any attachment, garnishment, or other legal process of any kind. Any attempt by
a person (including a Participant or a Participant's beneficiary) to anticipate,
alienate, sell, transfer, assign, pledge, or otherwise encumber any benefits
under the Plan, whether currently or thereafter payable, shall be void. If any
person shall attempt to, or shall alienate, sell, transfer, assign, pledge or
otherwise encumber such person's benefits under the Plan, or if by any reason of
such person's bankruptcy or other event happening at any time, such benefits
would devolve upon any other person or would not be enjoyed by the person
entitled thereto under the Plan, then the Plan Administrator, in the Plan
Administrator's sole discretion, may terminate the interest in any such benefits
of the person otherwise entitled thereto under the Plan and may hold or apply
such benefits in such manner as the Plan Administrator may deem proper.
6.3. Forfeitures and Unclaimed Amounts. Unclaimed amounts shall consist of the
---------------------------------
amounts in the Deferred Compensation Account of a Participant that cannot be
distributed because of the Plan Administrator's inability, after a reasonable
search, to locate a Participant or the Participant's beneficiary, as applicable,
within a period of two years after the Distribution Date upon which the payment
of benefits became due. Unclaimed amounts shall be forfeited at the end of such
two-year period. These forfeitures will reduce the obligations of the Employer,
if any, under the Plan. After an unclaimed amount has been forfeited, the
Participant or beneficiary, as applicable, shall have no further right to
amounts in the Participant's Deferred Compensation Account.
6.4. Controlling Law. The law of the state of Missouri shall be controlling in
---------------
all matters relating to the Plan to the extent not preempted by Federal Law.
6.5. Number. Words in the plural shall include the singular, and the singular
------
shall include the plural.
6.6. Action by the Employers. Except as otherwise specifically provided herein,
-----------------------
any action required of or permitted to be taken by an Employer under the Plan
shall be by resolution of its Board of Directors or by resolution of a duly
authorized committee of its Board of Directors or by action of a person or
persons authorized by resolution of such Board of Directors or such committee.
6.7. No Fiduciary Relationship. Nothing contained in this Plan, and no action
-------------------------
taken pursuant to its provisions by either the Employers or the Participants
shall create, or be construed to create a fiduciary relationship between the
Employer and the Participant, a designated beneficiary, other beneficiaries of
the Participant, or any other person.
6.8. Claims Procedures. Any person (hereinafter referred to as a "Claimant")
-----------------
who believes that he or she is being denied a benefit to which he or she may be
entitled under the Plan may file a written request for such benefit with the
Plan Administrator. Such written request must set forth the Claimant's claim and
must be addressed to the Plan Administrator, 11901 Olive Boulevard, St. Louis,
Missouri 63141. Upon receipt of a claim, the Plan Administrator shall advise the
Claimant that a reply will be forthcoming within ninety days and shall deliver a
reply within ninety days. The Plan Administrator may, however, extend the reply
period for an additional ninety days for reasonable cause. If the claim is
denied in whole or in part, the Plan Administrator shall issue a written
determination, using language calculated to be understood by the Claimant,
setting forth:
a) The specific reason or reasons for such denial;
b) The specific reference to pertinent provisions of the Plan upon which
such denial is based;
c) A description of any additional material or information necessary for
the Claimant to perfect the Claimant's claim and an explanation why
such material or such information is necessary; and
d) Appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review, and the time limits for
requesting such a review.
Within sixty days after the receipt by the Claimant of the written determination
described above, the Claimant may request in writing, that the Plan
Administrator review the Plan Administrator's determination. The request must be
addressed to the Plan Administrator, at 11901 Olive Boulevard, St. Louis,
Missouri 63141. The Claimant or the Claimant's duly authorized representative
may, but need not, review the pertinent documents and submit issues and comments
in writing for consideration by the Plan Administrator. If the claimant does not
request a review of the Plan Administrator's determination within such sixty day
period, the Claimant shall be barred and estopped from challenging the Plan
Administrator's determination. Within sixty days after the Plan Administrator's
receipt of a request for review, the Plan Administrator will review the
determination. After considering all materials presented by the Claimant, the
Plan Administrator will render a written determination, written in a manner
calculated to be understood by the Claimant setting forth the specific reasons
for the decision and containing specific references to the pertinent provisions
of the Plan on which the decision is based. If special circumstances require
that the sixty day time period be extended, the Plan Administrator will so
notify the Claimant and will render the decision as soon as practicable, but no
later than one hundred twenty days after receipt of the request for review.
6.9. Notice. Any notice required or permitted to be given under the provisions
------
of the Plan shall be in writing, and shall be signed by the party giving or
making the same. If such notice, consent or demand is mailed to a party hereto,
it shall be sent by United Stated certified mail, postage prepaid, addressed to
such party's last known address as shown on the records of the Employers.
Notices to the Plan Administrator should be sent in care of the Plan
Administrator to 11901 Olive Boulevard, St. Louis, Missouri 63141. The date of
such mailing shall be deemed the date of notice. Either party may change the
address to which notice is to be sent by giving notice of the change of address
in the manner set forth above.
6.10 Unsecured General Creditor Status of Employee. The Employer's obligation
---------------------------------------------
hereunder shall be an unfunded and unsecured promise to pay money in the future.
To the extent that any person acquires a right to receive payments from the
Employer under the provisions hereof, such right shall be no greater than the
right of any unsecured general creditor of the Employer; no such person shall
have nor require any legal or equitable right, interest or claim in or to any
property or assets of the Employer.
6.11 No Contract of Employment. Nothing contained herein shall be construed to
-------------------------
be a contract of employment for any term of years, nor as conferring upon the
Employee the right to continue to be employed by the Employer in his or her
present capacity, or in any capacity. It is expressly understood by the parties
hereto that this Plan relates to the payment of deferred compensation for the
Employee's services and is not intended to be an employment contract.
6.12 Heading. The headings of the Plan have been inserted for convenience of
-------
reference only and are to be ignored in any construction of the provisions
hereof.
SECTION 7
Employer Participation
7.1. Adoption of Plan. Any Affiliate of the Company may, with the approval of
----------------
the Company, adopt the Plan by filing with the Company a resolution of its Board
of Directors to that effect.
7.2. Withdrawal from the Plan by Employer. Any Employer shall have the right,
------------------------------------
at any time, upon the approval of, and under such conditions as may be provided
by the Plan Administrator, to withdraw from the Plan by delivering to the Plan
Administrator written notice of its election so to withdraw. Upon receipt of
such notice by the Plan Administrator, the portion of the Deferred Compensation
Account of Participants and beneficiaries attributable to amounts deferred while
the Participants were employed by or associated with such withdrawing Employer
shall be distributed from the Trust at the direction of the Plan Administrator
in cash at such time or times as the Plan Administrator in the Plan
Administrator's dole discretion, may deem to be in the best interest of such
Participants and their beneficiaries. To the extent the amounts held in the
Trust for the benefit of such Participants and beneficiaries are not sufficient
to satisfy the Employer's obligation to such Participants and their
beneficiaries accrued on account of their employment with the Employer, the
remaining amount necessary to satisfy such obligation shall be an obligation of
the Employer, and the other Employers shall have no further obligation to such
Participants and beneficiaries with respect to such amounts.
SECTION 8
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the right at any time
to modify, amend or terminate the Plan at its sole and exclusive direction;
provided however, that except as provided below, any amendment or termination of
the Plan shall not reduce or eliminate any balance in a Participant's Deferred
compensation Account accrued through the date of such amendment or termination.
Upon termination of the Plan, the Company may provide that notwithstanding the
Participant's Distribution Date, all Deferred Compensation Account balances will
be distributed on a date selected by the Company. Notice of any amendment or
termination shall be given to each Participant and Beneficiary of any deceased
Participant entitled to benefits.
SECTION 9
Change of Control
9.1. Overriding Provisions Applicable During a Restricted Period. The following
-----------------------------------------------------------
provisions of this Section 9 will become effective on a Restricted Date as the
result of a Change of Control and will remain in effect during the Restricted
Period beginning on that date until the following related Unrestricted Date, and
during the Restricted Period, will supersede any of the Provisions of the Plan
to the extent necessary to eliminate any inconsistencies between the provisions
of this Section 9 and any other provisions of the Plan, including any
supplements thereto.
9.2. Suspension of Part of All of the Overriding Provisions. If a majority of
------------------------------------------------------
the members of the Entire Board are Continuing Directors (provided such majority
is equal to the same number as constituted a majority of the Entire Board
immediately prior to the Change of Control), by the affirmative vote of a
majority of the Entire Board and a majority of those members of the Entire Board
who are Continuing Directors, all or a designated portion or portions of the
following provisions of this Section 9 may be declared not applicable as to the
specified transaction or event. No portion of the provisions of this Section 9
will apply to any transaction or event to the extent such portion is
inconsistent with the requirements of applicable law.
9.3. Definitions. For purposes of this Section 9, the definitions set forth in
-----------
Paragraphs (a) through (k) below will apply. Definitions set forth elsewhere in
the Plan also will apply to the provisions set forth in this Section 9, except
that where a definition set forth elsewhere in the Plan and a definition set
forth in this Subsection conflict, the definition set forth in this Subsection
will govern.
a) "Acquiring Person" will mean any Person, who or which, together
with all and Associates of such Person, is the Beneficial Owner of
shares of Common stock of the Company constituting more than 20
percent of the common stock then outstanding.
b) "Affiliate" and "Associate" will have the meaning described to such
terms in Rule b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Act").
c) "Beneficial Owner" will have the meaning ascribed to such term in
Rule 1 3d-3 of the Act.
d) "Board of Directors" will mean the Board of Directors of the
Company.
e) A "Change of Control" will be deemed to occur (i) upon any Person
becoming an Acquiring Person if the Board of Directors has not
recommended that stockholders of the Company tender or otherwise
sell their common stock to such Acquiring Person; (ii) upon the
approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case, with respect to which
persons who were stockholders of the Company immediately prior to
such reorganization, merger or consolidation, do not, immediately
thereafter, own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, consolidated or merged Company's then outstanding
securities; or (iii) upon a liquidation or dissolution of the
Company or the sale of all or substantially all of the Company's
assets.
f) "Continuing Director" will mean:
(i) any member of the Board of Directors immediately prior
to a Change of Control, or
(ii) any successor of a Continuing Director who is
recommended or elected to such continuing Director by
a majority of the Continuing Directors then in office
and is neither an Acquiring Person, an Affiliate of
an Acquiring Person, nor a representative or nominee
of an Acquiring Person or of any such Affiliate while
such person is a member of the Board of Directors.
Notwithstanding the foregoing, a successor will not be deemed to be a
Continuing Director unless, immediately prior to his or her appointment
or election, a majority of the members of the Entire Board were
Continuing Directors (and unless such majority is equal to the same
number as constituted a majority of the Entire Board immediately prior
to the Change of Control).
g) "Person" will mean any individual, firm, corporation or other
entity, and will any "group" as that term is used in Rule 13d-5(b)
of the Act.
h) "Restricted Date" will mean the date on which a Change of Control
occurs.
i) "Restricted Period" will mean the period beginning on a Restricted
Date and ending on the fifth anniversary of such Restricted Date.
j) "Unrestricted Date" will mean the last day of a Restricted Period.
k) "Entire Board" will mean the total number of members of the Board
of Directors that there would be if there were no vacancies on such
Board.
9.4. Benefits Vested on Restricted Date. Effective on a Restricted Date, the
----------------------------------
balances in the Deferred Compensation Accounts (including any contributions and
investment earnings after that date) of each Participant who is a Participant in
the Plan on that date will become fully vested and nonforfeitable.
9.5. Prohibition Against Amendment. During the Restricted Period, the
-----------------------------
provisions of the Section 9 may not be amended or deleted and may not be
superseded by any other provision of the Plan (including the provisions of any
exhibit or supplement thereto).
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly
authorized officers on this 1st day of September 1999.
FIRST BANKS, INC.
By: /s/ Allen H. Blake
--------------------------------------
Its : President, Chief Executive Officer and
Chief Financial Officer
ATTEST: /s/ John G. Kitson
-------------------------
Its: Senior Vice President
Director of Human Resources
Exhibit 10.12
FIRST AMENDMENT TO
------------------
FIRST BANKS, INC.
-----------------
NONQUALIFIED DEFERRED COMPENSATION PLAN
---------------------------------------
First Banks, Inc. ("Employer"), hereby makes this First Amendment to
the First Banks, Inc. Nonqualified Deferred Compensation Plan ("Plan").
WITNESSETH:
WHEREAS, Employer is desirous of amending its Plan in order to provide
participation by more executives in the Plan; and
WHEREAS, Section 8 of the Plan gives the Employer the authority to
amend the Plan.
NOW THEREFORE, in consideration of the above premises, the Employer
hereby amends the Plan as follows:
1. Section 1.5 of Section 1 is hereby deleted in its entirety and
the following is inserted in lieu thereof:
1.5 Compensation. "Compensation" means total taxable salary,
------------
bonus, fees and commissions paid to a Participant by the Employer (determined
without regard to any amounts in the Participant's Deferred Compensation
Account).
2. Section 1.9 of Section 1 is amended by inserting after the
word "by" and before the word "Company" appearing in the third line of said
paragraph the words "or associated with".
3. Section 1.16 of Section 1 is hereby revoked in its entirety
and the following is inserted in lieu thereof:
1.16 Participant. "Participant" means an Employee and Director
-----------
who meet the eligibility criteria set forth in Sub-Section 3.1 and who has made
a Deferral Election in accordance with the terms of the Plan.
4. Section 1 is hereby amended by adding the following paragraph
at the end thereof:
1.23 Director. "Director" means any director of First Banks,
--------
Inc., or any other participating entity who receives fees as and for his/her
services as a director.
5. Paragraph 3.1 of Section 3 is hereby amended by adding the
following at the end thereof:
Subject to the conditions and limitations of the Plan, any
Director is eligible to participate in the Plan. A Director shall become a
Participant in the Plan immediately upon attending the first Director's meeting
after the date of this Amendment, provided, however, that the election form is
returned to the Plan Administrator within the time prescribed by the Plan
Administrator. A Director who does not return the election form to the Plan
Administrator within the time prescribed therefore, will not become a
Participant in the Plan until the election form is returned to the Plan
Administrator.
6. Paragraph 3.3 of Section 3 is hereby deleted and the following
inserted in lieu thereof:
3.3 Amounts Deferred. Commencing on the effective date of
----------------
participation, an Employee may elect to defer (a) up to 25% of the Employee's
Compensation for a Plan year, (b) up to 100% of the Participant's
bonus/commissions for a Plan year. A Director may elect to defer up to 100% of
the Director's fees. The amount of compensation bonus/commissions and fees
deferred by a Participant shall be credited to the Participant's Deferred
Compensation Account, as of the valuation date coincident with or immediately
following the date such compensation, bonus/commission and fees would, but for
the Participant's Deferral Election, be payable to the Participant.
7. Paragraph 5.5 of Section 5 shall be amended by inserting after
the word "employment" and before the word "with" appearing in the second line of
said paragraph the words "or his association".
8. This Amendment shall be effective on the 1st day of September
2000.
9. In all other respects, the Plan shall remain unchanged and in
full force and effect.
IN WITNESS WHEREOF, the Employer has executed this First Amendment to
First Banks, Inc. Nonqualified Deferred Compensation Plan this 1st day of
September 2000.
FIRST BANKS, INC.
By: /s/ John G. Kitson
------------------------------
EMPLOYER
EXHIBIT 21.1
FIRST BANKS, INC.
Subsidiaries
The following is a list of our subsidiaries and the jurisdiction of
incorporation or organization.
Jurisdiction of Incorporation
Name of Subsidiary of Organization
------------------ ---------------
The San Francisco Company Delaware
First Bank Missouri
First Land Trustee Corp. Missouri
FB Commercial Finance, Inc. Missouri
Missouri Valley Partners, Inc. Missouri
Bank of San Francisco Realty Investors, Inc. California
Star Lane Holdings Trust Statutory Trust Connecticut
Star Lane Trust New York
Small Business Loan Source LLC Nevada
Small Business Loan Source Funding Corporation Delaware
EXHIBIT 31
CERTIFICATIONS REQUIRED BY
RULE 13a-(14)(a) OR RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Allen H. Blake, certify that:
1. I have reviewed this Annual Report on Form 10-K (the "Report") of First
Banks, Inc. (the "Registrant");
2. Based on my knowledge, this Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the Registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this Report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this Report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
Report based on such evaluation; and
c) Disclosed in this Report any change in the Registrant's
internal control over financial reporting that occurred during
the Registrant's most recent fiscal quarter (the Registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial
reporting; and
5. The Registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the audit committee of the
Registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Registrant's ability to record, process, summarize and report
financial information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal control over financial reporting.
Date: March 25, 2005
FIRST BANKS, INC.
By: /s/ Allen H. Blake
-----------------------------------------------
Allen H. Blake
President, Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer and
Principal Financial and Accounting Officer)
EXHIBIT 32
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350
I, Allen H. Blake, President, Chief Executive Officer and Chief
Financial Officer of First Banks, Inc. (the "Company"), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Annual Report on Form 10-K of the Company for the annual period
ended December 31, 2004 (the "Report") fully complies with the requirements of
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: March 25, 2005
/s/ Allen H. Blake
-----------------------------------------------
Allen H. Blake
President, Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer and Principal
Financial and Accounting Officer)