-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fomdpEVyPqUD8CVRJ12kH3lYZEYpJjSonjObA0lXME6c9jP1EFQK5hbMOJdOjNKZ OCtwDUtBY6X+DLSeAbpNyg== 0000083246-94-000012.txt : 19940331 0000083246-94-000012.hdr.sgml : 19940331 ACCESSION NUMBER: 0000083246-94-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPUBLIC NEW YORK CORP CENTRAL INDEX KEY: 0000083246 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 132764867 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07436 FILM NUMBER: 94518814 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 Commission File No. 1-7436 REPUBLIC NEW YORK CORPORATION (Exact Name of Registrant as Specified in its Charter) Maryland 13-2764867 (State or Other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) No.) 452 Fifth Avenue, New York, N.Y. 10018 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (212) 525-6100 ------------------ Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- --------------------- Common Stock, Par Value $5.00 Per Share....... New York Stock Exchange The International Stock Exchange of the United Kingdom & The Republic of Ireland Ltd. Cumulative Preferred Stock, Floating Rate Series B.......... New York Stock Exchange $3.375 Cumulative Convertible Preferred Stock................. New York Stock Exchange $1.9375 Cumulative Preferred Stock........................... New York Stock Exchange 8 3/8% Notes Due 1996........... New York Stock Exchange 8 3/8% Debentures Due 2007...... New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE. ------------------ 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 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 the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of Common Stock of the registrant held by non-affiliates at March 8, 1994 was $1,876,476,830.63 based on the closing price on the New York Stock Exchange Composite Tape on such date. The number of shares outstanding of each of the registrant's classes of common stock, as of March 8, 1994: 52,533,288. Documents Incorporated by Reference: Document Location in Form 10-K -------- --------------------- 1993 Annual Report to Stockholders, to the extent indicated.............. Parts I, II, III and IV Proxy Statement for 1994 Annual Meeting, to the extent indicated..... Parts I and III PART I Item 1. Business REPUBLIC NEW YORK CORPORATION Republic New York Corporation (the "Corporation"), incorporated in Maryland in 1973, is a bank holding company that commenced operations in July, 1974. At December 31, 1993, the Corporation had consolidated total assets of $39.5 billion and stockholders' equity of $2.7 billion. Its principal asset is the capital stock of Republic National Bank of New York (the "Bank"). At December 31, 1993, the Bank accounted for approximately 75% of the consolidated assets and, for the year ended December 31, 1993, accounted for approximately 75% of consolidated revenues and 85% of consolidated net income of the Corporation. The Corporation's other significant banking subsidiary, formerly known as The Manhattan Savings Bank, is Republic Bank for Savings ("RBS"). See "Republic Bank for Savings". Republic Factors Corp. ("Factors"), which commenced operations in 1977, is the other significant subsidiary of the Corporation. See "Republic Factors Corp." The executive offices of the Corporation are located at 452 Fifth Avenue, New York, New York 10018 (telephone 212-525-6100). As used herein, the term "Corporation" includes the subsidiaries of the Corporation and the terms "Bank" and "RBS" include the subsidiaries of the Bank and RBS, respectively, unless the context indicates otherwise. The Corporation acquired SafraCorp California, the owner of all the outstanding shares of SafraBank (California), on September 20, 1993 for which the Corporation paid approximately $6,500,000 to Edmond J. Safra, the owner of all the outstanding shares of SafraCorp California and the principal stockholder of the Corporation. Pursuant to the Purchase Agreement between Mr. Safra and the Corporation, such payment approximated the consolidated net book value of SafraCorp California on September 20, 1993. Such purchase price was determined by a committee of independent directors of the Corporation, which had received an opinion from investment bankers retained by it, to the effect that the consideration to be paid was fair to the Corporation from a financial point of view. Effective September 21, 1993, SafraBank (California) converted from a state-chartered bank to a national banking association and changed its name to Republic Bank California N.A. Effective December 1, 1993, SafraCorp California was merged into the Corporation. Thereafter, on January 13, 1994, substantially all of the assets of Republic International Bank of New York (California), the Bank's Edge Act subsidiary in Beverly Hills, California, were transferred to and its liabilities assumed by Republic Bank California N.A. REPUBLIC NATIONAL BANK OF NEW YORK The Bank, a national banking association organized in 1965, commenced operations in January, 1966. The Bank provides a variety of banking and financial services worldwide to corporations, financial institutions, governmental units and individuals. At December 31, 1993, the Bank had total assets of $29.7 billion, total deposits of $19.2 billion and stockholder's equity of $2.2 billion. At December 31, 1993 the Bank was the fifteenth largest commercial bank in the United States based on total deposits. The Bank's headquarters and principal banking office is located at 452 Fifth Avenue, New York, New York. The Bank has 34 domestic branch banking offices in New York City and the suburban counties of Westchester and Rockland. The Bank maintains foreign branch offices in London, Milan, Buenos Aires, Santiago, Hong Kong, Singapore, Tokyo and the Cayman Islands; wholly-owned foreign banking subsidiaries in London, England, Montreal, Canada, Nassau, The Bahamas, Singapore, Montevideo, Uruguay and the Cayman Islands; and an Edge Act subsidiary in Miami, Florida. The Bank also has foreign representative offices in Beijing, Beirut, Buenos Aires, Caracas, Jakarta, Mexico City, Montevideo, Moscow, Punta del Este, Rio de Janeiro, and Taipei. The Bank's facilities are supplemented by a network of correspondent banks throughout the world. International Banking The Bank is active in international banking where it operates principally as a wholesale bank. It has been its policy to deal primarily with foreign governments, their agencies, foreign central banks and foreign commercial banks as borrowers or guarantors. At December 31, 1993, approximately 75% of the Bank's cross-border net outstandings were to or guaranteed by such entities. The Bank's international banking services include accepting deposits, extending credit, forfait financing, buying and selling foreign exchange, buying and selling banknotes denominated in various currencies, issuing letters of credit and bankers' acceptances and handling the collection and transfer of money. The Bank increased its international banking services capabilities in 1993 with the acquisition of Citibank's World Banknote Services business and with the acquisition of Bank Leumi (Canada). The Banknote Services business ships U.S. dollars to and from financial institutions in nearly 40 countries. The acquisition of Bank Leumi (Canada) provided the Bank with entry into the Toronto market and added an additional office in Montreal. Through its International Private Banking Department, headquartered in New York City, the Bank offers a full range of financial services to individuals who are citizens or residents of countries other than the United States, including accepting deposits, buying and selling foreign exchange, banknotes denominated in various currencies, precious metals and financial instruments, issuing letters of credit and handling the collection and transfer of money. An analysis of the Corporation's international operations for each of the years in the three years ended December 31, 1993 is contained in the following sections of its 1993 Annual Report to Stockholders filed as an Exhibit to this Report which is hereby incorporated herein by reference: (a) Note 13 of the Notes to Consolidated Financial Statements on page 69 in such report for allocation of the Corporation's total assets, total operating revenue, income (loss) before income taxes and net income (loss) among geographic areas for each of the years in the three years ended December 31, 1993; and (b) "Management's Discussion and Analysis - Liability and Asset Management" on pages 35 through 44 in such report for other relevant information on international operations. For information concerning the Corporation's outstandings in certain foreign countries, see "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Cross-border Outstandings" on pages 43 and 44 and "Allowance for Possible Loan Losses" on pages 42 and 43 in the 1993 Annual Report to Stockholders. Safra Republic Holdings S.A. Safra Republic Holdings S.A. ("Safra Republic"), a Luxembourg holding company, is principally engaged, through wholly-owned banking subsidiaries in Switzerland, Luxembourg, France, Guernsey and Gibraltar, in international private banking and commercial banking, offering a range of private banking services primarily to wealthy individuals. At December 31, 1993, the Bank owned approximately 48.8%, Saban S.A., the Corporation's principal stockholder, owned approximately 20.7% and international investors owned approximately 30.5% of the outstanding shares of Safra Republic. At December 31, 1993, Safra Republic had total assets of $11.3 billion, total deposits of $7.3 billion and total shareholders' equity of approximately $1.3 billion. Safra Republic's client services include the accepting of a wide variety of deposits and the execution of transactions in foreign exchange, precious metals, securities and banknotes. Safra Republic also provides credit facilities, portfolio management and investment advisory services and safekeeping and other fiduciary services. In addition, Safra Republic offers commercial banking services to governments, government agencies, banks and corporations. Domestic Banking The Bank provides a full range of domestic banking services, including commercial, consumer installment and mortgage loans to individuals and businesses. It also accepts deposits, including time and savings deposits and regular and special checking accounts, and issues large denomination negotiable certificates of deposit of $100,000 or more. Through its Domestic Corporate Lending Department, the Bank services the financing requirements of large national companies, middle-market companies and other businesses in the New York metropolitan area and selected markets outside of New York. Information concerning the composition of the Corporation's domestic and international loan portfolio is presented in the section "Loan Portfolio" under "Operating Information" found on page 7 of this report. The Corporation also engages in factoring activities through Factors, a wholly-owned subsidiary of the Corporation. See "Republic Factors Corp." Other banking facilities usually associated with a full-service commercial bank are offered, among which are safe deposit boxes, safekeeping and custodial services, collections and remittances, letters of credit and foreign exchange. The Bank's Trust Department provides a broad range of fiduciary services to both individual and corporate accounts. The following table sets forth the percentages of the Corporation's domestic and international assets and liabilities, based upon the location of the obligor or customer, at December 31 in each of the last three years.
ASSETS LIABILITIES Domestic International Domestic International 1993............ 68.1% 31.9% 59.7% 40.3% 1992............ 59.2 40.8 65.2 34.8 1991............ 53.2 46.8 62.3 37.7
Precious Metals, Foreign Exchange, Securities and Derivative Transactions The Bank is a dealer in gold and silver bullion and coins for sale to commercial and industrial users and investors. For this activity, the Bank receives and sells gold and silver on consignment, and the Bank maintains its own inventory. In its precious metals activities, the Bank, from time to time, takes positions in precious metals for its own account, but such positions are taken within guidelines and limits established by the Bank's Board of Directors at what are considered by management to be prudent levels. Position limits are periodically reviewed and changed as appropriate to account for changing market conditions and to minimize risks. At December 31, 1993, approximately $24.8 million of the Bank's inventory in precious metals was unhedged. Also, with respect to gold and silver bullion and gold coins, significant activities of the Bank include buying and simultaneously selling for future delivery, other arbitraging between markets when, in each case, the respective premium or differential derived provides an attractive return relative to alternative investment opportunities, and writing and purchasing options with other participants in the over-the-counter institutional and interbank market. Sales of precious metals for future delivery are generally done through futures contracts executed on major commodity exchanges in the United States. The Bank is one of the authorized purchasers to which the United States Mint sells its gold bullion coins for distribution throughout the world. Income from each of these activities is treated as income from precious metals. The Bank also derives income from acting as a licensed depository of precious metals for various commodity exchanges. On December 31, 1993, the Bank acquired Mase Westpac Limited from Westpac Banking Corporation of Australia and changed the name to Republic Mase Bank Limited ("Republic Mase"). Republic Mase is one of the five members of the London gold fixing. Republic Mase, an authorized U.K. banking institution, engages in global wholesale trading in gold, silver, platinum and palladium, including spot, forward and options dealing, and provides financial services to central banks, international financial institutions and institutional investors. Republic Mase also offers production and inventory financing to mining companies, industrial manufacturers and end-users. It has subsidiaries in Australia and Hong Kong. The New York branch of Republic Mase is in the process of being liquidated, with all its activities being transferred to the Bank. In Australia, Republic Mase Australia Limited ("RMAL") acts as a primary market-maker in the domestic and international bullion markets. RMAL provides a full range of services to Australian and Asian gold producers. Republic Mase's subsidiary in Hong Kong, Republic Mase Hong Kong Limited, operates on behalf of Republic Mase as a primary market-maker servicing the financial requirements of its Far East and Asian clients, notably in Japan, Taiwan, Hong Kong and China. In its foreign exchange trading and arbitrage activities, the Bank, from time to time, takes positions in foreign currencies for its own account, but such positions are taken only in currencies and within guidelines and limits established by the Bank's Board of Directors at what are considered by management to be prudent levels. Position limits are periodically reviewed and changed, as appropriate, to minimize the risks inherent in these activities, such as currency revaluations, exchange controls and other regulatory and political policies of foreign governments. The Bank's activities in foreign exchange also involve servicing the needs of its customers, including other banks, which do not require the Bank to assume large positions in foreign currencies. It has been the Bank's policy to hedge all significant assets and liabilities due in foreign currencies to United States dollars. Investment securities represent a significant portion of the Corporation's interest-earning assets. The Corporation attempts to manage the return on its assets while also considering the creditworthiness of borrowers and counterparties, the interest rate sensitivity of the assets and the maturity of such assets. To balance these criteria while maintaining an adequate return, the Corporation's investment securities portfolio consists primarily of debt securities issued by the United States Government and United States government agencies. In addition, the Corporation will invest in debt securities issued by U.S. states and other political subdivisions, as well as bonds, debentures and redeemable preferred stock of highly-rated corporations. Republic Forex Options Corporation ("RFOC"), an operating subsidiary of the Bank, is a foreign currency options participant on the Philadelphia Stock Exchange. RFOC is a market-maker in foreign currency options and trades for its own account. Information concerning derivative instruments is contained in the 1993 Annual Report to Stockholders in the section entitled "Management's Discussion and Analysis - Liability and Asset Management - Off-balance Sheet Financial Instruments" on pages 44 through 46 and in Note 1G and Notes 15 and 16 of the Notes to Consolidated Financial Statements on page 56 and pages 70 through 73, respectively, in such report all of which are hereby incorporated herein by reference. REPUBLIC BANK FOR SAVINGS RBS, a wholly-owned New York State chartered savings bank subsidiary of the Corporation, is engaged in the granting of mortgages on residential real property located primarily in New York State, including one to four family dwellings, units within condominium projects or units within cooperative housing projects. RBS' deposit activities include accepting savings, demand, money market, fixed-rate individual retirement, Keogh and NOW accounts. RBS also provides consumer credit and is active in the bond market. At December 31, 1993, RBS had total assets of $6.1 billion, total deposits of $4.8 billion and total stockholder's equity of $478 million. RBS' headquarters and principal banking office is located at 415 Madison Avenue, New York, New York. RBS has 24 full service branch banking offices in New York City and Nassau, Suffolk and Westchester counties and 8 additional branches in Broward and Dade counties, Florida. REPUBLIC FACTORS CORP. Factors is a wholly-owned subsidiary of the Corporation. Factors purchases, without recourse, accounts receivable from approximately 450 clients. These receivables are due on average in 60 days from over 55,000 customers primarily in the retail apparel industry throughout the United States. In addition, certain clients receive payment for these receivables prior to their maturity date. From time to time, Factors makes advances in excess of the receivables purchased. These advances are seasonal in nature and may be either secured or unsecured. Letters of credit accommodations are also provided. For these services, Factors earns commissions, interest and service fees. For the year ended December 31, 1993, Factors factored approximately $4.8 billion of sales making it the fifth largest factor in the United States based on such sales volume. Factors' headquarters and principal office is located at 452 Fifth Avenue, New York, New York. In addition, Factors has offices located in Los Angeles, California and Charlotte, North Carolina. OTHER FINANCIAL SERVICES Republic New York Securities Corporation. Republic New York Securities Corporation ("RNYSC"), a wholly-owned subsidiary of the Corporation, commenced operations on November 2, 1992 as a full- service securities brokerage whose principal activities are prime brokerage, securities borrowing and lending, margin lending, third party research and vendor services, correspondent clearing, and asset management and fiduciary services offered primarily to institutional investors and high net worth individuals. On January 10, 1994, the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") granted approval to RNYSC to underwrite and deal in all forms of debt and equity securities. RNYSC is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. and the New York Stock Exchange, Inc. In addition, it is an associate member of the American Stock Exchange and the Philadelphia Stock Exchange. RNYSC is also a member of the commodity exchanges set forth below. In connection with the expansion of RNYSC's activities, in February 1994, Republic Clearing Corporation ("RCC",) a wholly- owned subsidiary of the Corporation, was merged into RNYSC in order to consolidate associated securities, back office, record keeping and related functions into one business unit. RNYSC is registered with the Commodity Futures Trading Commission and the National Futures Association as a futures commission merchant. RNYSC acts primarily as a commodities broker to the Bank in executing for the Bank's account futures contracts and options on futures contracts on the commodity exchanges listed below. It acts to facilitate the Bank's activities as a dealer in precious metals, financial instruments and foreign exchange. RNYSC also acts as a futures commission merchant for the general public to execute futures contracts and options on futures contracts covering gold and silver bullion and coins, various financial instruments and foreign currencies. As a result of the merger with RCC, RNYSC is now a clearing member of the Commodity Exchange Inc. and the Chicago Mercantile Exchange and is also a non-clearing member of the New York Futures Exchange and the Philadelphia Board of Trade. Republic New York Securities International Limited. On February 24, 1994, Republic New York Securities International Limited ("RNYSIL"), the Corporation's wholly-owned London based subsidiary, became a member of the Securities and Futures Authority. It is anticipated that RNYSIL will commence operations in the second quarter of 1994 and will provide a range of financial services in European markets to institutional investors and high net worth individuals, including prime brokerage, securities borrowing and lending, third party research and vendor services, and the processing of transactions related to equity, fixed income and derivative instruments. The business to be conducted by RNYSIL is intended to complement the business of RNYSC. Republic Asset Management Corporation. Republic Asset Management Corporation ("RAM"), the Corporation's wholly-owned subsidiary, commenced operations in the second quarter of 1993. RAM provides a broad range of investment, economic and financial advice to individuals, corporations and governments, among others. RAM is a registered investment adviser under the Investment Company Act of 1940 and is registered as a commodity trading adviser and commodity pool operator with the Commodity Futures Trading Commission. OPERATING INFORMATION This section provides, on a consolidated basis, certain statistical data concerning the Corporation and supplements information contained in the 1993 Annual Report to Stockholders which is incorporated hereinbelow by reference. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential Information on the Corporation's consolidated average balances of assets, liabilities and stockholders' equity, computed principally on the basis of daily averages, and the interest income earned and the interest expense paid and the average rates earned and paid for each of the years in the five years ended December 31, 1993 is found in the table entitled "Average Balances, Net Interest Differential, Average Rates Earned and Paid" on pages 84 and 85 in the Corporation's 1993 Annual Report to Stockholders which is incorporated herein by reference. Interest income on certain tax-exempt obligations included in such table has been adjusted to a fully-taxable equivalent basis using the tax rate of 44% in 1993 and 42% for all other periods. Information on the approximate effect on net interest income of changes in volume of interest-earning assets and interest-bearing liabilities and the rates earned or paid thereon for the three years ended December 31, 1993 is found on pages 29 and 30 in "Management's Discussion and Analysis - Results of Operations - Net Interest Income" in such report which is also incorporated herein by reference. Information concerning the Corporation's interest rate sensitivity gap position at December 31, 1993 is found on page 35 in "Management's Discussion and Analysis - Liability and Asset Management" in the Corporation's 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Deposits Information concerning the Corporation's deposits, classified by major categories, at December 31 in each of the last three years is contained in the 1993 Annual Report to Stockholders in the section entitled "Management's Discussion and Analysis - Liability and Asset Management - Liability Management - Deposits" on pages 35 through 37 in such report which is hereby incorporated herein by reference. Information on the interest rates paid by deposit type is contained on pages 84 and 85 of the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Investment Portfolio For information on the Corporation's portfolio of investment securities, see "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Investment Portfolio" on pages 39 and 40 of the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Loan Portfolio The following table sets forth the composition of the Corporation's domestic and foreign loan portfolios at December 31 in each of the past five years.
December 31, 1993 1992 1991 1990 1989 (In thousands) Domestic: Real estate-residential mortgage...... $1,310,718 $1,454,416 $1,313,793 $1,166,779 $1,117,277 Real estate-commercial................ 1,854,377 2,107,112 2,222,714 2,377,126 472,146 Banks and other financial institutions....................... 7,384 14,841 18,434 78,177 55,077 Broker loans.......................... 678,490 307,018 250,000 306,002 225,000 Commercial and industrial............. 2,152,691 1,859,595 1,848,587 1,968,525 1,704,132 Loans to individuals.................. 90,218 51,305 71,286 320,349 344,915 All other............................. 16,915 59,852 51,008 43,977 38,916 --------- --------- --------- --------- --------- 6,110,793 5,854,139 5,775,822 6,260,935 3,957,463 --------- --------- --------- --------- --------- Foreign: Broker loans 732,812 --- --- --- --- Government and official institutions....................... 429,232 341,320 453,639 450,359 528,800 Banks and other financial institutions....................... 68,416 288,682 279,587 353,275 297,817 Commercial and all other.............. 2,262,130 1,672,038 2,271,625 2,167,939 1,897,890 --------- --------- --------- --------- --------- 3,492,590 2,302,040 3,004,851 2,971,573 2,724,507 Total loans............................ 9,603,383 8,156,179 8,780,673 9,232,508 6,681,970 Less unearned income................. (94,825) (148,722) (211,715) (227,649) (101,581) ---------- ---------- ---------- ---------- --------- Loans, net of unearned income.......... $9,508,558 $8,007,457 $8,568,958 $9,004,859 $6,580,389 =========== =========== =========== =========== ===========
Maturity Distribution and Interest Sensitivity of Loans Information presenting the maturity distribution of the Corporation's domestic and foreign loan portfolios at December 31, 1993 and an analysis of the interest sensitivity of such portfolios at such date is contained in the section entitled "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Loan Portfolio" on page 41 in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Risk Elements Information presenting the risk elements of the Corporation's domestic and foreign loan portfolios and foreign outstandings at December 31, 1993, 1992 and 1991, including past due, non-accrual and other nonperforming assets, is contained in the section entitled "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Cross-border Outstandings" on pages 43 and 44 and "Allowance for Possible Loan Losses" on pages 42 and 43 in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. For information presenting off-balance sheet risk of financial instruments together with related risk concentrations, see Note 16 of the Notes to Consolidated Financial Statements accompanying the Corporation's financial statements in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. For information relating to the effect on the Corporation's 1993 income of loans classified as non-accrual and restructured and other information on outstandings in certain debtor countries, see Note 5 of the Notes to the Consolidated Financial Statements and "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Cross-border Outstandings" on pages 43 and 44 and "Allowance for Possible Loan Losses" on pages 42 and 43 in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Management periodically reviews the loan portfolio, particularly non-accrual and restructured loans. The review may result in a determination that a loan should be placed on a non-accrual status for income recognition. In addition, to the extent that management identifies potential losses in the loan portfolio, it reduces the book value of such loans, through charge-offs, to their estimated collectible value. The Corporation's policy is to classify as non-accrual any loan on which payment of principal or interest is 90 days or more past due. In addition, a loan will be classified as non-accrual if, in the opinion of management, based upon a review of the borrower's or guarantor's financial condition, collateral value and other factors, payment is questionable, even though payments are not 90 days or more past due. When a loan, other than a well secured residential mortgage loan, is classified as non-accrual, any unpaid interest is reversed against current income. The loan remains in a non-accrual classification until such time as the loan is brought current, when it may be returned to accrual classification. When principal and interest on a non-accrual loan are brought current, if in management's opinion future payments are questionable, the loan would remain classified as non-accrual. Subsequent payments of either interest or principal received on a partially charged-off non-accrual or restructured loan are first applied to any remaining balance outstanding, until the loan is reduced to its net realizable value, then to recoveries and lastly to income. Interest is included in income thereafter only to the extent received in cash. The large number of consumer installment loans and the relatively small dollar amount of each makes an individual review impracticable. The Corporation charges off any consumer installment loan which is past due 90 days or more. Residential mortgage loans are placed on non-accrual status when the mortgagor is in bankruptcy, or foreclosure proceedings are instituted, at which time the loan ceases to accrue interest. Any accrued interest receivable remains in interest income as an obligation of the borrower. Credit Risk Management and Allowance for Possible Loan Losses Information presenting the Corporation's allowance for possible loan losses, amounts of domestic loans by loan category and total foreign loans charged-off and recoveries of such loans previously charged-off, loans, net of unearned income, and related ratios is contained in the section entitled "Management's Discussion and Analysis - Liability and Asset Management - Asset Management - Allowance for Possible Loan Losses" on pages 42 and 43 in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Credit risk and exposure to loss are inherent parts of the banking business. Management seeks to manage and minimize these risks through its loan and investment policies and loan review procedures. Senior management establishes and continually reviews lending and investment criteria and approval procedures that it believes reflect the risk averse nature of the Corporation. The loan review procedures are set to monitor adherence to the established criteria and to ensure that on a continuing basis such standards are enforced and maintained. Management's objective in establishing lending and investment standards is to minimize the risk of loss and provide for income generation through pricing policies. In the case of foreign investments and loans, management emphasizes investments and loans to, or with guarantees of, governments, government agencies or banks. In addition, the Corporation places particular emphasis on the matching of the maturity and interest rate sensitivity of assets and liabilities. By this policy, the Corporation seeks to minimize the effect of rate changes, largely externally influenced and difficult to control, on the portfolio and to limit its exposure largely to credit risks over which it has more direct control. One technique which the Corporation utilizes to achieve these goals are interest rate and currency swaps designed to protect against rate and currency fluctuations. The Corporation's loan portfolios are regularly reviewed and monitored by the Credit Review Department, which, each quarter, prepares a report containing recommendations as to the amount of loans to be charged-off. During the preparation of the report, the Credit Review Department consults with lending officers and the heads of the lending departments. The report is then submitted for consideration to certain members of Executive Management who determine the amount of loans to be charged-off. The Credit Policy Committee subsequently reviews the loans to be charged-off and ratifies Executive Management's decision. Rules and formulae relative to the adequacy of the allowance, although useful as guidelines to management, are not final determinants. In addition, any loan or portion thereof which is classified as a "loss" by regulatory examiners (examinations are generally made annually) is charged-off. Consistent with its policy of maintaining an adequate allowance for possible loan losses, management generally charges-off a loan, or a portion thereof, when a loss is probable. The allocation of the allowance for possible loan losses between the Corporation's domestic and foreign components is contained in Note 5 of the Notes to the Consolidated Financial Statements found on page 59 of the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. In anticipation of the restructuring programs of various Latin American obligors, a large provision for possible loan losses was taken in 1989. Extensive foreign charge-offs related to restructuring countries debt were taken in 1989 and 1990. In 1991 and 1992, as the value of foreign obligations stabilized, the previously provided foreign provision was reallocated to domestic obligations as the domestic economy continued to deteriorate. Domestic charge-offs exceeded foreign charge-offs in 1991, 1992 and 1993. In order to comply with certain regulatory reporting requirements, management has prepared the following allocation of the Corporation's allowance for possible loan losses among various categories of the loan portfolio for each of the years in the five- year period ended December 31, 1993. In management's opinion, such allocation has, at best, a limited utility. It is based on management's assessment as of a given point in time of the risk characteristics of each of the component parts of the total loan portfolio and is subject to changes as and when the risk factors of each such component part change. Such allocation is not indicative of either the specific amounts or the loan categories in which future charge-offs may be taken, nor should it be taken as an indicator of future loss trends. In addition, by presenting such allocation, management does not mean to imply that the allocation is exact or that the allowance has been precisely determined from such allocation.
December 31, 1993 Allocation of the Allowance for Possible Loan Losses by Category Domestic Foreign Total Percent Amount Percent Amount Percent Amount (Dollars in thousands) Real estate loans................. 42% $ 80,000 8% $ 10,000 29% $ 90,000 Commercial and industrial loans... 40 75,000 25 30,000 34 105,000 Other loans....................... 3 5,000 41 50,000 17 55,000 Unallocated....................... 15 29,499 26 32,356 20 61,855 --- -------- --- -------- --- -------- Total............................. 100% $189,499 100% $122,356 100% $311,855 === ======== === ========= === ========
December 31, 1992 Allocation of the Allowance for Possible Loan Losses by Category Domestic Foreign Total Percent Amount Percent Amount Percent Amount (Dollars in thousands) Real estate loans................. 37% $ 60,000 13% $10,000 29% $ 70,000 Commercial and industrial loans... 34 55,000 25 20,000 31 75,000 Other loans........................ 1 1,000 50 40,000 17 41,000 Unallocated........................ 28 45,699 12 9,321 23 55,020 --- -------- --- ------- --- -------- Total.............................. 100% $161,699 100% $79,321 100% $241,020 === ======== === ======= === ========
December 31, 1991 Allocation of the Allowance for Possible Loan Losses by Category Domestic Foreign Total Percent Amount Percent Amount Percent Amount (Dollars in thousands) Real estate loans.................. 45% $ 45,000 4% $ 5,000 22% $ 50,000 Commercial and industrial loans.... 25 25,000 4 5,000 13 30,000 Other loans........................ 1 1,000 43 55,000 25 56,000 Unallocated........................ 29 29,842 49 61,612 40 91,454 --- -------- --- -------- --- -------- Total.............................. 100% $100,842 100% $126,612 100% $227,454 === ======== === ======== === ========
December 31, 1990 Allocation of the Allowance for Possible Loan Losses by Category Domestic Foreign Total Percent Amount Percent Amount Percent Amount (Dollars in thousands) Real estate loans.................. 85% $35,000 1% $ 1,000 15% $ 36,000 Commercial and industrial loans.... 12 5,000 2 3,000 3 8,000 Other loans........................ 2 1,000 74 146,000 62 147,000 Unallocated........................ 1 310 23 45,324 20 45,634 --- -------- --- -------- --- -------- Total.............................. 100% $41,310 100% $195,324 100% $236,634 === ======= === ======== === ========
December 31, 1989 Allocation of the Allowance for Possible Loan Losses by Category Domestic Foreign Total Percent Amount Percent Amount Percent Amount (Dollars in thousands) Real estate loans.................. 51% $ 17,000 __% $ 1,000 6% $ 18,000 Commercial and industrial loans.... 27 9,000 1 3,000 4 12,000 Other loans........................ 3 1,000 71 179,000 63 180,000 Unallocated........................ 19 6,629 28 70,872 27 77,501 --- -------- --- ------- --- -------- Total.............................. 100% $ 33,629 100% $253,872 100% $287,501 === ======== === ======== === ========
At December 31, in each of the years 1993 through 1989, the Corporation's allowance for possible loan losses represented approximately 198%, 128%, 145%, 159% and 326%, respectively, of total non-accrual and restructured loans. The coverage of the allowance for loan losses to non-accrual and restructured loans is only one subjective measure of the adequacy of the allowance for loan losses that management utilizes. The Corporation's policy is to maintain an allowance for loan losses that is adequate to absorb all inherent credit losses in the Corporation's credit portfolios, including off-balance sheet credit instruments. Inherent losses are unconfirmed losses that probably exist based upon known information regarding the credit quality and portfolio characteristics prevailing as of the date of the evaluation. Future events are expected to confirm these losses, at which time these amounts will be charged off against the allowance for loan losses. The Corporation performs a comprehensive and consistently applied analysis of the various factors that affect collectibility that is in accordance with regulatory guidance. The process is complex and includes several different analyses of the portfolio. Management analyzes its portfolio by three main components: individually significant loans, homogeneous groups or pools of loans, and other segmentations of the portfolio into pools of loans with similar risk characteristics, such as risk classification, type of loan, industry group, collateral, size and maturity and country risk characteristics. The individually significant loans represent larger more problematic loans which are individually assessed as to collectibility. For homogeneous portfolios, principally the consumer retail portfolio, the Corporation utilizes the prior year's loss experience to estimate an amount necessary to provide for the upcoming twelve months of expected losses. For the other segmentations of the portfolio, historical loss rates are calculated for loans with similar characteristics. These loss rates are updated quarterly and are based upon the loss experience incurred for more than the last five years. While the historical loss rates provide a starting point for the Corporation's analysis, historical losses are not by themselves a sufficient basis to determine the appropriate level of the allowance for loan losses. The actual rate selected for the analysis may differ from the calculated loss rate as the historical rate may be adjusted upward or downward to reflect current and anticipated business and economic conditions and other factors which are likely to cause the current portfolio to differ from historical experience. The Corporation's allowance also reflects a margin for the imprecision in the estimates of expected credit losses. The resultant allowance for loan losses is viewed by management as a single, unallocated allowance available for all credit losses and any segmentation thereof is done only for compliance with reporting requirements. Financial Ratios The following table presents average stockholders' equity as a percentage of average assets and the Corporation's returns on average stockholders' equity and average total assets (based on net income) and its dividend payout ratio (based on net income applicable to Common Stock) for each of the years in the three years ended December 31, 1993.
Year Ended December 31, ----------------------------- 1993 1992 1991 Average stockholders' equity as a percentage of average assets... 6.33% 6.43% 5.93% Return on average stockholders' equity........................... 12.73 11.95 12.33 Return on average total assets................................... .81 .77 .73 Dividend payout ratio............................................ 20.80 22.67 24.10
The rate of the quarterly dividend payable on the Corporation's Common Stock, adjusted to reflect a three-for-two stock split distributed on October 21, 1991, was $.213 per share commencing with the dividend payment on April 1, 1989, was increased to $.22 per share commencing with the dividend payment on April 1, 1990, was increased to $.233 per share with the dividend payment on April 1, 1991, was increased to $.25 per share commencing with the dividend payment on January 1, 1992, was increased to $.27 per share commencing with the dividend payment on April 1, 1993 and will be increased to $.33 commencing with the dividend payable on April 1, 1994. Competition All of the Corporation's banking activities are highly competitive. The Bank and RBS compete actively with other commercial banks, savings and loan associations, financing companies, credit unions and other financial institutions located throughout the United States and, in some of their activities, with government agencies. For international business, the Bank competes with other United States banks which have foreign installations and with other major foreign banks located throughout the world. Employees As of December 31, 1993, the Corporation had approximately 5,300 full-time equivalent employees. Customers It is the opinion of management that there is no single customer or affiliated group of customers whose deposits, if withdrawn, would have a material adverse effect on the business of the Corporation. For information concerning transactions with persons related to the Corporation and its management see Item 13 in Part III of this Report and the section entitled "Transactions with Management and Related Persons" found on pages 19 and 20 under "Election of Directors" in the Corporation's definitive Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting of Stockholders filed pursuant to Section 14 of the Securities Exchange Act of 1934, which is hereby incorporated herein by reference. SUPERVISION AND REGULATION General The Corporation is a bank holding company within the meaning of the United States Bank Holding Company Act of 1956, as amended (the "BHCA"), and is registered as such with the Federal Reserve Board. As a registered bank holding company, the Corporation is subject to substantial regulation and supervision by the Federal Reserve Board. The Corporation's subsidiary banks are subject to regulation and supervision by federal and state bank regulatory agencies, including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation ("FDIC") and the New York State Banking Department. Federal banking and other laws impose a number of requirements and restrictions on the operations and activities of depository institutions. In addition, the federal banking agencies are currently implementing recently enacted legislation that might result in additional substantial restrictions on operations and activities and increased operating costs. The BHCA requires the prior approval of the Federal Reserve Board for the acquisition by a bank holding company of more than 5% of the voting stock or substantially all of the assets of any bank or bank holding company. In addition, the BHCA prohibits the Corporation from acquiring direct or indirect control of more than a 5% interest in a bank or bank holding company located in a state other than New York unless the laws of such state expressly authorize such acquisition. Also, under the BHCA, bank holding companies are prohibited, with certain exceptions, from engaging in, or from acquiring more than 5% of the voting stock of any company engaging in, activities other than banking or managing or controlling banks or furnishing services to or performing services for their subsidiaries. The BHCA also authorizes the Federal Reserve Board to permit bank holding companies to engage in, and to acquire or retain shares of companies that engage in, activities which the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The effect of the Federal Reserve Board's findings under this standard has been to expand the financially related activities in which bank holding companies may engage. The Federal Reserve Act imposes restrictions on extensions of credit by subsidiary banks of a bank holding company to the bank holding company or certain of its subsidiaries, on investments in the stock or other securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower. Further, under the BHCA and the Federal Reserve Board's regulations, a bank holding company, as well as certain of its subsidiaries, is prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services. Under longstanding policy of the Federal Reserve Board, a bank holding company is expected to act as a source of financial strength for its subsidiary banks and to commit resources to support such banks. As a result of such policy, the Corporation may be required to commit resources to its subsidiary banks in circumstances where it might not do so absent such policy. There are also various requirements and restrictions imposed by the laws of the United States and the State of New York and by regulations of the Federal Reserve System, of which the Bank is a member, affecting the operations of the Corporation, the Bank and their subsidiaries, including the requirement to maintain reserves against deposits, restrictions relating to the nature and amount of loans that may be made by the Bank, the interest that may be charged thereon and restrictions relating to investments, branching and other activities of the Corporation, the Bank and their subsidiaries. RNYSC is subject to supervision and regulation by the Federal Reserve Board, the Securities and Exchange Commission, the New York Stock Exchange, the National Association of Securities Dealers and the Commodity Futures Trading Commission. RAM is also subject to supervision and regulation by the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission. As a registered investment adviser and a commodity trading adviser, RAM is also subject to the provisions of the Investment Advisers Act of 1940 and the Commodity Exchange Act, respectively. Both RNYSC and RAM are subject to the rules and regulations applicable to broker-dealers and investment advisers, respectively, in each state in which they operate. Capital Requirements The Corporation is subject to risk-based capital requirements for bank holding companies. The requirements provide that the minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit and derivative instruments) be equal to 8.0% of risk- weighted assets. Of this amount, at least half must be composed of common equity, minority interest, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1 capital"). The remainder may consist of certain amounts of subordinated debt and cumulative preferred stock and a limited amount of the allowance for loan losses ("Tier 2 capital"). A final rule that became effective in 1993 requires the deduction of intangible assets recorded prior to February 19, 1992, purchased mortgage servicing rights and purchased credit card relationships, subject to certain minimums. In addition to the risk-based capital requirements described above, the Corporation must maintain a minimum leverage ratio of 3% (defined as Tier 1 capital divided by consolidated quarterly average total assets). Bank holding companies that are experiencing significant growth or are actively seeking acquisitions are expected to maintain a leverage ratio of 4% to 5%. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), which became law on December 19, 1991, further requires the federal bank regulatory agencies bi-annually to review risk-based capital standards to ensure that they adequately address interest rate risk, concentration of credit risk and risks from non-traditional activities. Regulations incorporating concentrations of credit risk and risk from non-traditional activities into bank capital requirements were proposed on March 29, 1993 and reproposed in modified form on February 22, 1994 and are currently being reviewed by the Corporation. The Corporation does not believe that the proposed regulations will materially affect the Corporation's level of Tier 1 capital. FDICIA also revised bank regulatory structures embodied in several other federal banking statutes, required the federal banking regulators to set five capital levels ranging from "well capitalized" to "critically undercapitalized", authorized federal banking regulators to intervene in connection with the deterioration of a bank's capital level, placed limits on real estate lending and tightened audit requirements. If a banking institution fails to meet the capital guidelines, banking regulators could require it to raise additional capital to meet such capital requirements. An "undercapitalized" bank must develop a capital restoration plan approved by the appropriate bank regulators and the bank's compliance with such plan must be guaranteed by its parent holding company. The liability of the parent holding company under any such guarantee is limited to the lesser of 5% of the bank's assets at the time it became "undercapitalized" or the amount needed to comply with the capital plan and is accorded a priority, in the event of the bankruptcy of the parent holding company, over the parent's general unsecured creditors. Legislation enacted as part of the Omnibus Budget Reconciliation Act of 1993 provides for a preference in right of payment of certain claims realized in the "liquidation or other resolution" of any depository institution insured by the FDIC. That statute requires claims to be paid in the following order of priority: (i) administrative expenses of the receiver; (ii) any deposit liability of the institution; (iii) any other general or senior liability of the institution (which is not an obligation described in clause (iv) or (v) below); (iv) any obligation subordinated to depositors or general creditors (which is not an obligation described in clause (v) below); and (v) any obligation to shareholders or members (including any depository institution holding company or any shareholder or creditor of such company). For purposes of the statute, deposit liabilities would include any deposit payable at an office of the insured depository institution located in the United States, but would not include any deposit payable at an office outside the United States or any international banking facility deposit. The banking supervisory authorities in the Group of Ten countries and Luxembourg adopted a framework for standardizing bank capital adequacy requirements in the international banking system. The framework establishes minimum levels of capital for international banks and ties the capital a bank must hold to its risk-weighted asset mix. The Corporation and certain of its banking subsidiaries are located in such countries and are subject to the framework's requirements, as implemented by the appropriate local supervisory authority. Insurance Premiums FDICIA also revised sections of the Federal Deposit Insurance Act affecting bank regulation, deposit insurance and funding of the Bank Insurance Fund ("BIF") administered by the FDIC. Among the significant revisions that could have an impact on the Corporation is the authority granted the FDIC to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish semiannual assessments on BIF member banks so as to maintain the BIF at the designated reserve ratio defined in FDICIA. On September 15, 1992, the FDIC adopted final rules that revised the assessments paid by insured depository institutions for deposit insurance. The amended regulations increased the deposit insurance assessment for certain members of the BIF effective for the first semiannual period of 1993, and thereafter, and adopted a transitional risk-based deposit insurance assessment system. Under the FDIC's plan, the assessment of 23 cents per $100 of domestic deposits for all depository institutions was changed, effective January 1, 1993, to an assessment based on a depository institution's assessment risk classification depending on whether it is considered "well capitalized", "adequately capitalized" or "undercapitalized" and on certain supervisory evaluations of the institution as "healthy", cause for "supervisory concern" and cause for "substantial supervisory concern" (designated as supervisory subgroups "A", "B" and "C", respectively, for reference purposes). Under the assessment rate schedule adopted, a well capitalized bank in subgroup "A" will be assessed at the current rate of 23 cents per $100 of domestic deposits. For purposes of the FDIC's deposit insurance assessment rules, an institution will be considered "well capitalized" if it has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a Tier 1 leverage ratio of at least 5%; "adequately capitalized" if it has a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a Tier 1 leverage ratio of at least 4%; and "undercapitalized" if it does not meet either of the foregoing standards. FDICIA generally limits the FDIC's ability to protect all deposits, including those exceeding the $100,000 insurance limit and foreign deposits. The legislation also provides that only "well capitalized banks" and "adequately capitalized banks" can use brokered deposits. "Adequately capitalized banks" can accept brokered deposits only if they first obtain waivers from the FDIC and they cannot pay above-market rates on such deposits. "Well capitalized banks" and "adequately capitalized banks" can insure accounts on a pass-through basis established under certain qualified employee benefit plans. Miscellaneous Significant provisions of FDICIA require federal banking regulators to draft standards in a number of other areas to assure bank safety and soundness, including internal controls, information systems and internal audit systems, credit underwriting, asset growth, compensation, loan documentation and interest rate exposure. FDICIA requires the regulators to establish maximum ratios of classified assets to capital, and minimum earnings sufficient to absorb losses without impairing capital. The legislation also contains provisions which tighten independent auditing requirements, restrict the activities of state-chartered banks, amend various consumer banking laws, limit the ability of "undercapitalized banks" to borrow from the Federal Reserve's discount window, and require federal banking regulators to perform annual on-site bank examinations and set standards for real estate lending. To date, the banking regulators have issued proposed regulations and in some cases adopted final regulations under FDICIA covering (i) real estate lending standards, requiring depository institutions to develop and implement internal procedures, including setting specific loan-to-value ratios for various types of real estate loans; (ii) revisions to the risk-based capital rules to account for interest rate risk, concentration of credit risk, and the risks posed by "non-traditional activities"; (iii) rules requiring depository institutions to develop and implement internal procedures to evaluate and control credit and settlement exposure to their correspondent banks; (iv) risk-based FDIC insurance premiums; (v) rules prohibiting, with certain exceptions, state banks from making equity investments of the types and amount not permissible for national banks; and (vi) rules addressing various "safety and soundness" issues, including operations and managerial standards, standards for asset quality, earnings and stock valuations, and compensation standards for the officers, directors, employees and principal shareholders of the depository institution. The Corporation cannot, at this stage, determine what impact, if any, such rules and regulations may have on its financial condition or operations. It is anticipated that such rules and regulations and other provisions of FDICIA will result in increased costs for the banking industry due to increased FDIC assessments and in more limitations on activities by all but the most well capitalized depository institutions. It should be noted that the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") provides for cross-guarantees of the liabilities of insured depository institutions pursuant to which any bank or savings association subsidiary of a bank holding company may be required to reimburse the FDIC for any loss or anticipated loss to the FDIC that arises from a default of any of such holding company's subsidiary banks or savings associations or for assistance provided by the FDIC to such an institution in danger of default. The domestic banking subsidiaries of the Corporation are subject to such a cross-guarantee. The federal International Lending Supervision Act of 1983 (the "Act") requires banking institutions to maintain a special reserve out of current income against certain international assets. A special reserve will be required if the relevant bank regulatory agency determines that the quality of the assets has been impaired by a protracted inability of public or private borrowers in a foreign country to make payments on their external indebtedness or that no definite prospects exist for orderly restoration of debt service. To date, the foregoing provisions of the Act have not affected the reserves maintained by the Corporation. It is not possible to predict the extent to which the provisions of the Act requiring the establishment of special reserves will affect the Corporation's earnings in the future. Dividends The Corporation's ability to pay dividends is dependent upon its receipt of dividends from its subsidiaries and on its earnings from investments. In 1990, the Comptroller of the Currency and the Federal Reserve Board, regarding state-chartered banks that are members of the Federal Reserve System, enacted amendments to the restrictions relating to the way in which national banks calculate their dividend payment capacity, aligning the treatment of loan loss reserves for dividend payment purposes with regulatory reporting standards. The current rule provides, among other things, that national banks cannot include provisions to their loan loss reserves as part of income when calculating the amount of dividends they may pay. National banks are also required to use only capital surplus that represents earnings, not paid-in capital, when calculating permissible dividends. The approval of the Comptroller of the Currency is required if the total of all dividends declared or proposed to be declared by the Bank in any calendar year exceeds the Bank's net profits, as defined, for that year combined with its retained net profits for the preceding two calendar years. The Comptroller of the Currency also has authority under the Financial Institutions Supervisory Act to prohibit a national bank from engaging in what, in his opinion, constitutes an unsafe or unsound practice in conducting its business. The payment of dividends could, depending upon the financial condition of the Bank, be deemed to constitute such an unsafe or unsound practice. Similarly, in respect of RBS, New York State banking law requires the approval of the Superintendent of Banks if the total of all dividends declared were to exceed net profits as defined. In addition, the agreement pursuant to which the Corporation acquired RBS provides that dividends may not be paid by RBS if its primary or total capital is, or as a result of any such dividend payment would be, below the minimum amounts required by applicable regulations. Based on the Bank's and RBS' financial position at December 31, 1993, under the foregoing formulae, the Bank may declare dividends in 1994 without approval of the Comptroller of the Currency, and RBS could declare aggregate dividends in 1994, without regulatory approval, of approximately $187 million and $19 million, respectively, plus an additional amount equal to their respective net profits for 1994 up to the date of any dividend declaration. There are no regulatory or contractual restrictions on Factors' ability to pay dividends to the Corporation. EFFECT OF GOVERNMENTAL POLICIES The earnings of the Corporation, the Bank and RBS are affected not only by general economic conditions, both domestic and foreign, but also by legislative and regulatory changes which, among other things, affect lending rates and costs and by the monetary and fiscal policies of the United States government, its agencies, including the Federal Reserve Board, and of foreign governments and international agencies. The policies of the various governmental authorities influence to a significant extent the growth of bank loans, investments and deposits. The nature and impact of future changes in such monetary and fiscal policies on the Corporation's, the Bank's and RBS' future business and earnings are not predictable. Item 2. Properties The Corporation has its principal offices in its world headquarters building at 452 Fifth Avenue, New York, New York 10018, which is owned and occupied principally by the Bank, and also owns properties in Miami, Florida, Buenos Aires, Argentina, Santiago, Chile, Montevideo, Uruguay, Milan, Italy and London, England, which house the Bank's offices in those locations. The Bank and RBS also own other properties in New York City, which are principally occupied by branches. All of the remainder of the Corporation's offices and other facilities throughout the world are leased. Item 3. Legal Proceedings The nature of its business generates a certain amount of litigation against the Corporation involving matters arising in the ordinary course of the Corporation's business. None of the legal proceedings currently pending or threatened to which the Corporation or its subsidiaries is a party or to which any of their properties are subject will have, in the opinion of management of the Corporation, a material effect on the business or financial condition of the Corporation or its subsidiaries. Item 4. Submission of Matters to a Vote of Security Holders No meetings of security holders were held during the fourth quarter of 1993. Item 10. Directors and Executive Officers of the Corporation (a) Names, Ages and Positions The names, ages and positions of the executive officers of the Corporation are as follows:
Position with Position with Name Age the Corporation* the Bank* - ---- --- --------------- ------------- Walter H. Weiner.... 63 Chairman of the Board and Chairman of the Board and Chief Executive Officer Chief Executive Officer Jeffrey C. Keil..... 50 President Vice Chairman of the Board Peter A. Cohen...... 47 Vice Chairman --- Cyril S. Dwek....... 57 Vice Chairman Vice Chairman of the Board Ernest Ginsberg..... 63 Vice Chairman and Vice Chairman of the Board General Counsel Vito S. Portera..... 51 Vice Chairman Vice Chairman of the Board Dov C. Schlein...... 46 Vice Chairman President Nathan Hasson....... 48 Vice Chairman Vice Chairman of the Board and Treasurer - -------------- * Except for Peter A. Cohen, a director of the Corporation, each of the above-named officers is a director of both the Corporation and the Bank.
Each of the above executive officers is a member of the respective Management Executive Committees of the Corporation and the Bank, except for Peter A. Cohen who is not a member the Bank's Management Executive Committee. The term of each such officer is for a year, which runs from the annual meeting of the Board of Directors of the Corporation and the Bank, respectively, following the Annual Meeting of Stockholders of each, until the next such Annual Meeting or until removed by the respective Board of Directors. Each of the above officers' service in his current position is indicated in his biography below. Mr. Edmond J. Safra is the Honorary Chairman of the Board of Directors of the Corporation and the Bank. Mr. Safra is Chairman of the Board of Republic National Bank of New York (Suisse) S.A., the Bank's affiliate in Geneva, Switzerland. In addition, Mr. Safra is a principal stockholder of the Corporation, owning approximately 28.4% of the Corporation's outstanding Common Stock, as of March 8, 1994, through his ownership of all the outstanding shares of Saban S.A., which owns directly and indirectly 14,959,436 shares of the Corporation's Common Stock and of another corporation which owns 29,776 shares of the Corporation. The advice of Mr. Safra, as the principal stockholder, is often sought by the Corporation with respect to major policy decisions and other significant matters. (b) Biographies of Corporation's Executive Officers The biographical information for the past five years for the above executive officers of the Corporation is as follows: Walter H. Weiner has been a director and Chairman of the Board of the Corporation and the Bank and a director of RBS for over five years. Mr. Weiner also serves as a member of RBS' Compensation and Benefits, Credit Review and Executive Committees. Jeffrey C. Keil has been a director and President of the Corporation and a director and a Vice Chairman of the Board of the Bank and a director of RBS for over five years. Mr. Keil also serves as a member of RBS' Executive Committee. Peter A. Cohen has been a director and a Vice Chairman of the Corporation since November 1992. Since such time he also has been Chairman of RNYSC. From February 1990 to November 1992, Mr. Cohen was a consultant, principally with Andrew Lauren & Co. Prior to February 1990, Mr. Cohen was Chairman and Chief Executive Officer of Shearson Lehman Hutton, Inc. Cyril S. Dwek has been a director of the Corporation and the Bank and a Vice Chairman of the Corporation and a Vice Chairman of the Board of the Bank in charge of the International Department for over five years. Mr. Dwek has been a director of RBS since April 1990. Ernest Ginsberg has been a director and a Vice Chairman and General Counsel of the Corporation and a director and a Vice Chairman of the Board of the Bank for over five years. Until July 1990, he had also been General Counsel of the Bank for over five years. Mr. Ginsberg has been a director of RBS and a member of its Executive Committee for over five years. Vito S. Portera has been a director of the Corporation for over five years and a Vice Chairman of the Corporation since April 1989. He has been a director and a Vice Chairman of the Board of the Bank and RBS for over five years. Mr. Portera also has been Chairman of the Board of Republic International Bank of New York, the Miami, Florida Edge Act subsidiary of the Bank, for over five years. Dov C. Schlein has been a director and a Vice Chairman of the Corporation and a director and President of the Bank and a director of RBS for over five years. Mr. Schlein also serves as a member of RBS' Compensation and Benefits and Executive Committees. Nathan Hasson was elected a director and appointed a Vice Chairman of the Corporation in January 1993. He has been a director and a Vice Chairman of the Board of the Bank for over five years in charge of its Financial Management Group. He also serves as Treasurer of the Bank and RBS. Mr. Hasson has been a director of RBS since April 1990. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Information on the market prices of the Corporation's Common Stock, dividend payments on the Common Stock, the number of stockholders of record and related matters may be found in the section entitled "Security Market Information" on page 49 in the Corporation's 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Item 6. Selected Financial Data Data for each of the years in the five-year period ended December 31, 1993 on the Corporation's operating income, net income, including earnings per share data, assets, long-term debt, dividends and other relevant matters are presented in the section entitled "Selected Financial Data" on pages 82 and 83 in the Corporation's 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The section entitled "Management's Discussion and Analysis" on pages 28 through 49 in the 1993 Annual Report to Stockholders is hereby incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The financial statements of the Corporation as of December 31, 1993 and 1992 and for each of the years in the three year period ended December 31, 1993 are found on pages 50 through 53 in the 1993 Annual Report to Stockholders and, together with the accompanying notes thereto found on pages 55 through 76 and the Independent Auditors' Report on Financial Statements found on page 77 in such report, are hereby incorporated herein by reference. Selected quarterly data presented on page 80 in such Annual Report in the section entitled "Selected Financial Data" are also hereby incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant See Item 10 in Part I of this Report for information on executive officers of the Corporation. Information concerning the directors of the Corporation and nominees for election as directors thereof is presented on pages 2 through 5 in the section entitled"Election of Directors" in the Corporation's definitive Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting of Stockholders filed pursuant to Section 14 of the Securities Exchange Act of 1934, which is hereby incorporated herein by reference. Item 11. Executive Compensation Information concerning compensation of executive officers of the Corporation is presented in the section "Compensation of Directors and Executive Officers - Executive Officers" found on pages 9 through 18 under "Election of Directors" in the Corporation's definitive Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting of Stockholders filed pursuant to Section 14 of the Securities Exchange Act of 1934, which is hereby incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information concerning the number of shares of Common Stock of the Corporation beneficially owned by certain owners and management is presented on pages 2 through 5 in the section "Election of Directors" and page 21 in the section entitled "Ownership of Voting Securities" in the Corporation's definitive Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting of Stockholders filed pursuant to Section 14 of the Securities Exchange Act of 1934, which is hereby incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information concerning transactions between the Corporation and executive officers and directors and certain related persons is presented in the section "Transactions with Management and Related Persons" found on pages 19 and 20 under "Election of Directors" in the Corporation's definitive Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting of Stockholders filed pursuant to Section 14 of the Securities Exchange Act of 1934 and in Note 17 of the Notes to Consolidated Financial Statements accompanying the Corporation's financial statements in the 1993 Annual Report to Stockholders, both of which are hereby incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits (i) Financial Statements of Republic New York Corporation and Subsidiaries, included in the Annual Report to Stockholders for the year 1993 (on pages indicated below) and incorporated herein by reference: Page Consolidated Statements of Condition, December 31, 1993 and 1992................................................ 50 Consolidated Statements of Income, Years ended December 31, 1993, 1992 and 1991................................. 51 Consolidated Statements of Changes in Stockholders' Equity, Years ended December 31, 1993, 1992 and 1991.... 52 Consolidated Statements of Cash Flows, Years ended December 31, 1993, 1992 and 1991........................ 53 Notes to Consolidated Financial Statements.............. 55 Independent Auditors' Report on Financial Statements.... 77 (ii) Financial Statement Schedules of Republic New York Corporation (Parent Company Only) are shown in the notes to the respective financial statements. See Note 19 of the Notes to Consolidated Financial Statements accompanying the Corporation's financial statements in the 1993 Annual Report to Stockholders which is hereby incorporated herein by reference. (iii) Exhibits 3(a) Articles of Incorporation as amended through April 21, 1993. (b) By-Laws of the Corporation as amended through July 20, 1988. (1) 4(a) Articles Supplementary creating a series of Cumulative Preferred Stock, Floating Rate Series B dated March 7, 1984. (2) (b) Articles Supplementary creating a series of Dutch Auction Rate Transferable Securities, Preferred Stock, Series A and Series B, dated March 27, 1986. (2) (c) Articles Supplementary creating a series of Money Market Cumulative Preferred Stock, dated July 22, 1987. (2) (d) Articles Supplementary creating a series of Remarketed Preferred Stock, dated July 29, 1987. (2) (e) Articles Supplementary creating a series of $3.375 Cumulative Convertible Preferred Stock, dated May 14, 1991. (2) (f) Articles Supplementary creating a series of $1.9375 Cumulative Preferred Stock, dated February 26, 1992. (2) (g) Indenture, dated as of May 1, 1986, between Republic New York Corporation and Manufacturers Hanover Trust Company, as Trustee, for the issuance of the Corporation's 8 3/8% Notes Due 1996. (3) (h) Indenture dated January 15, 1987 between Republic New York Corporation and Bankers Trust Company, as Trustee, for the issuance of the Corporation's Putable Capital Notes. (4) (i) Standard Multiple - Series Indenture Provisions, dated as of May 15, 1986. (5) (j) Senior Indenture, dated as of May 15, 1986, between Republic New York Corporation and Manufacturers Hanover Trust Company, as Trustee. (5) (k) First Supplemental Indenture to Senior Indenture, dated as of May 15, 1991. (6) (l) Second Supplemental Indenture to Senior Indenture, dated as of April 15, 1993. (7) (m) Subordinated Indenture dated as of May 15, 1986, between Republic New York Corporation and Bankers Trust Company, as Trustee. (8) (n) First Supplemental Indenture to Subordinated Indenture, dated as of May 15, 1991. (6) (o) Second Supplemental Indenture to Subordinated Indenture, dated as of April 15, 1993. (7) (p) Subordinated Indenture, dated as of October 15, 1992, between Republic New York Corporation and Citibank, N.A., as Trustee. (9) (q) First Supplemental Indenture to 1992 Subordinated Indenture, dated as of April 15, 1993. (7) (r) Form of Senior Security. (10) (s) Form of Subordinated Security. (10) 10(a) Copy of agreement dated May 27, 1988 among Vito S. Portera and Republic New York Corporation and Republic National Bank of New York. (11) (b) Amended and Restated Deferral Agreement dated December 31, 1993 between Walter H. Weiner and Republic New York Corporation. (c) Form of Amended and Restated Deferral Agreement. (d) Form of Deferral Agreement. (e) 1994 Performance Based Incentive Compensation Plan (as approved by the Board of Directors of the Corporation on January 19, 1994 subject to stockholder approval). (12) 11 Computation of Earnings Per Share of Common Stock. 12 Calculation of Ratios of Earnings to Fixed Charges - Consolidated. 13 Annual Report to Stockholders for year 1993 (to the extent incorporated herein by reference). 21 Subsidiaries of the Corporation. 23 Consents of Experts and Counsel. (1) Incorporated herein by reference to such Exhibit filed with the Corporation's Annual Report on Form 10-K for its fiscal year ended December 31, 1988 (Exhibit 3(b)). (2) Filed herewith in Exhibit 3(a). (3) Incorporated herein by reference to such Exhibit filed with the Corporation's Registration Statement on Form S-3, No. 33-5074 (Exhibit 4.2). (4) Incorporated herein by reference to such Exhibit filed with the Corporation's Annual Report on Form 10-K for its fiscal year ended December 31, 1987 (Exhibit 4(y)). (5) Incorporated herein by reference to such Exhibits filed with the Corporation's Registration Statement on Form S-3, No. 33-5804 (Exhibits 4(a) and 4(b), respectively). (6) Incorporated herein by reference to such Exhibits filed with the Corporation's Registration Statement on Form S-3, No. 33-40703 (Exhibits 4(c) and 4(e), respectively). (7) Incorporated herein by reference to such Exhibits filed with the Corporation's Registration Statement on Form S-3, No. 33-49507, Amendment No. 1 (Exhibits 4(d), 4(g) and 4(i), respectively). (8) Incorporated herein by reference to such Exhibit filed with the Corporation's Current Report on Form 8-K dated February 8, 1989 (Exhibit 4(c)). (9) Incorporated herein by reference to such Exhibit filed with the Corporation's Registration Statement on Form S-3, No. 33-48651, Post-Effective Amendment No. 2 (Exhibit 4(f)). (10) Incorporated herein by reference to such Exhibits filed with the Corporation's Current Report on Form 8-K dated August 6, 1992 (Exhibits 4(h) and 4(i), respectively). (11) Incorporated herein by reference to such Exhibits filed with the Corporation's Annual Report on Form 10-K for its fiscal year ended December 31, 1991 (Exhibit 10(b)). (12) Incorporated herein by reference to such Exhibit filed with the Corporation's definitive Proxy Statement dated March 16, 1994 (Exhibit 99). (b)The following reports on Form 8-K were filed during the last quarter of the annual period covered by this Report: (i) Report dated October 21, 1993 regarding the issuance of $250 million aggregate principal amount of the Corporation's 5 7/8% Subordinated Notes due 2008, and filing the Corporation's press release announcing Results for Third Quarter and Nine Month Period Ended September 30, 1993. (ii) Report dated October 22, 1993 regarding the issuance of $250 million aggregate principal amount of the Corporation's 5 7/8% Subordinated Notes due 2008, and filing the Corporation's press release announcing Results for Third Quarter and Nine Month Period Ended September 30, 1993. 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. Dated: March 29, 1994 REPUBLIC NEW YORK CORPORATION By: WALTER H. WEINER --------------------------- (Chairman of the Board) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date - --------- ----- ---- Director and Chairman of the Board WALTER H. WEINER (Principal Executive Officer) March 29, 1994 - ------------------------- Executive Vice President and Comptroller (Principal Financial and JOHN D. KABERLE, JR. Accounting Officer) March 29, 1994 - -------------------------- KURT ANDERSEN Director March 29, 1994 - ------------------------- PETER A. COHEN Director March 29, 1994 - ------------------------- ALBERT S. CORWEN Director March 29, 1994 - ------------------------- CYRIL S. DWEK Director March 29, 1994 - ------------------------- ERNEST GINSBERG Director March 29, 1994 - ------------------------- NATHAN HASSON Director March 29, 1994 - ------------------------- MORRIS HIRSCH Director March 29, 1994 - ------------------------- - ------------------------- (Jeffrey C. Keil) Director PETER KIMMELMAN Director March 29, 1994 - ------------------------- LEONARD LIEBERMAN Director March 29, 1994 - ------------------------- WILLIAM C. MACMILLEN, JR. Director March 29, 1994 - ------------------------- MARTIN F. MERTZ Director March 29, 1994 - ------------------------- JAMES L. MORICE Director March 29, 1994 - ------------------------- E. DANIEL MORRIS Director March 29, 1994 - ------------------------- JANET L. NORWOOD Director March 29, 1994 - ------------------------- JOHN A. PANCETTI Director March 29, 1994 - ------------------------- - ------------------------- Director (Javier Perez de Cuellar) VITO S. PORTERA Director March 29, 1994 - ------------------------- WILBUR M. RABINOWITZ Director March 29, 1994 - ------------------------- WILLIAM P. ROGERS Director March 29, 1994 - ------------------------- DOV C. SCHLEIN Director March 29, 1994 - ------------------------- JACQUES TAWIL Director March 29, 1994 - ------------------------- PETER WHITE Director March 29, 1994 - -------------------------
REPUBLIC NEW YORK CORPORATION FORM 10-K EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 3(a) Articles of Incorporation as amended through April 21, 1993. 10(b) Amended and Restated Deferral Agreement dated December 31, 1993 between Walter H. Weiner and Republic New York Corporation. (c) Form of Amended and Restated Deferral Agreement. (d) Form of Deferral Agreement. 11 Computation of Earnings per Share of Common Stock. 12 Calculation of Ratios of Earnings to Fixed Charges - Consolodated. 13 Annual Report to Stockholders for year 1993 (to the extent incorporated herein by reference). 21 Subsidiaries of the Corporation. 23 Consents of Experts and Counsel. EX-3.A 2 ARTICLES OF INCORPORATION OF REPUBLIC NEW YORK CORPORATION FIRST: THE UNDERSIGNED, STEPHEN E. GILHULEY, whose post office address is 53 Wall Street, New York, New York 10005, being at least eighteen years of age, does under and by virtue of the General Laws of the State of Maryland authorizing the formation of corporations, as an incorporator, hereby form a corporation. SECOND: The name of the Corporation is: REPUBLIC NEW YORK CORPORATION THIRD: The Corporation shall have the following purposes and powers: (1) To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any and all securities; as such term is hereinafter defined, issued or created by any corporation, firm, organization, association or other entity, public or private, whether formed under the laws of the United States of America or of any state, commonwealth, territory, dependency or possession thereof, or of any foreign country or of any political subdivision, territory, dependency, possession or municipality thereof, or issued or created by the United States of America or any state or commonwealth thereof or any foreign country, or by any agency, subdivision, territory, dependency, possession or municipality of any of the foregoing, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. The term "securities" as used in these Articles of Incorporation shall mean any and all notes, stocks, treasury stocks, bonds, debentures, evidences of indebtedness, certificates of interest or participation in any profit-sharing agreement, collateral-trust certificates, preorganization certificates or subscriptions, transferable shares, investment contracts, voting trust certificates, certificates of deposit for a security, fractional undivided interests in oil, gas, or other mineral rights, or, in general, any interests or instruments commonly known as "securities", or any and all certificates of interest or participation in, temporary or interim certificates for, receipts for, guaranties of, or warrants or rights to subscribe to or purchase, any of the foregoing. (2) To make, establish and maintain investments in securities, real estate and other property, and to supervise, manage and do any and all other acts and things to enhance, protect or preserve such investments. (3) To engage in and carry on the business of traders, brokers and dealers in commodities (which term as used in these Articles of Incorporation includes contracts for the future delivery thereof) of every kind, character or description whatsoever, and, whether or not in connection therewith, to purchase, borrow, acquire, hold, exchange, sell, distribute, lend, mortgage, pledge, or otherwise dispose of, or import or export or turn to account in any manner and generally to deal in or otherwise effect any and all transactions of every kind, character or description whatsoever in or with respect to commodities and products, merchandise, articles of commerce, materials, personal property, of every kind, character or description whatsoever and any interest therein, and instruments evidencing rights to acquire such interests, to guarantee any and all obligations relating to transactions made on any board of trade, commodities exchange, or similar institution, and to do any and all things which may be useful in connection with or incidental to the conduct of such business. (4) To cause to be organized under the laws of the United States of America or of any state, commonwealth, territory, dependency or possession thereof, or of any foreign country or of any political subdivision, territory, dependency, possession or municipality thereof, one or more corporations, firms, organizations, associations or other entities and to cause the same to be dissolved, wound up, liquidated, merged or consolidated. (5) To create, purchase or otherwise acquire (in whole or in part), own, and in any manner sell, transfer or otherwise dispose of businesses, corporations, enterprises and other entities, and to act as a parent company or holding company in relation to such entities. (6) To acquire by purchase or exchange, or by transfer to or by merger or consolidation with the Corporation or any corporation, firm, organization, association or other entity directly or indirectly owned or controlled by, or under common ownership or control with, the Corporation, or to otherwise acquire, the whole or any part of the business, good will, rights, or other assets of any corporation, firm, organization, association or other entity, and to undertake or assume in connection therewith the whole or any part of the liabilities and obligations thereof, to effect any such acquisition in whole or in part by delivery of cash or other property, including securities issued by the Corporation, or by any other lawful means. (7) To make loans and give other forms of credit, with or without security, and to negotiate and make contracts and agreements in connection therewith. (8) To aid by loan, subsidy, guaranty or in any other lawful manner any corporation directly or indirectly owning or controlling the Corporation or any corporation, firm, organization, association or other entity of which any securities are in any manner directly or indirectly held by the Corporation or by any such owning or controlling corporation or in which the Corporation, any such owning or controlling corporation, or any such corporation, firm, organization, association or entity may be or become otherwise interested; to guarantee the payment of dividends on any stock issued by any such owning or controlling corporation or any such corporation, firm, organization, association or entity; to guarantee or, with or without recourse against any such owning or controlling corporation or any such corporation, firm, organization, association or entity, to assume the payment of the principal of, or the interest on, any obligations issued or incurred by such owning or controlling corporation or such corporation, firm, organization, association or entity; to do any and all other acts and things for the enhancement, protection or preservation of any securities which are in any manner, directly or indirectly, held, guaranteed or assumed by the Corporation or by any such owning or controlling corporation, and to do any and all acts and things designed to accomplish any such purpose. (9) To borrow money for any business, object or purpose of the Corporation from time to time, without limit as to amount; to issue any kind of indebtedness, whether or not in connection with borrowing money, including evidences of indebtedness convertible into stock of the Corporation or of any other corporation directly or indirectly owning or controlling the Corporation, to secure the payment of any evidence of indebtedness by the creation of any interest in any of the property or rights of the Corporation, whether at that time owned or thereafter acquired. (10) To the extent permitted by law, to render service, assistance, counsel and advice to, and to act as representative or agent in any capacity (whether managing, operating, financial, purchasing, selling, advertising or otherwise) of, any individual, corporation, firm, organization, association or other entity; as such representative or agent, to develop, exploit, promote, conduct, manage, operate, improve, extend or liquidate any business or property, real or personal; and to aid, conduct, manage or operate any lawful enterprise in connection therewith. (11) To engage in any commercial, financial, mercantile, industrial, manufacturing, marine, exploration, mining, agricultural, research, licensing, servicing, or agency business not prohibited by law, and any, some or all of the foregoing. The purposes and powers specified in the foregoing paragraphs shall, except where otherwise expressed, be in no wise limited or restricted by reference to , or inference from, the terms of any other paragraph of this or any other Article of these Articles of Incorporation, but the purposes and powers specified in each of the foregoing paragraphs of this Article shall be regarded as independent, and construed as powers as well as objects and purposes. The Corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations of a similar character by the General Laws of the State of Maryland now or hereafter in force, and the enumeration herein of any specific purposes or powers shall not be held to limit or restrict in any manner the exercise by the Corporation of any powers, rights or privileges so granted or conferred and shall be in addition to the general powers of corporations under the General Laws of the State of Maryland. FOURTH: The post office address of the principal office of the Corporation in Maryland is c/o The Corporation Trust Incorporated, First Maryland Building, 25 South Charles Street, Baltimore, Maryland 21201. The name of the registered agent of the Corporation in Maryland is The Corporation Trust Incorporated, a corporation of the State of Maryland, and the post office address of the resident agent is First Maryland Building, 25 South Charles Street, Baltimore, Maryland 21201. FIFTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is TWO THOUSAND (2,000) shares, of which ONE THOUSAND (1,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock"), and ONE THOUSAND (1,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of FIVE THOUSAND DOLLARS ($5,000). Each share of Common Stock shall be equal to every other share of Common Stock in every respect. Subject to any exclusive voting rights which may vest in holders of Preferred Stock under the provisions of any series of the Preferred Stock fixed by the Board of Directors pursuant to authority herein provided, the shares of Common Stock shall entitle the holders thereof to one vote for each share upon all matters upon which stockholders have the right to vote. The following is a description of the preferences, rights, voting powers, restrictions and qualifications of the Preferred Stock of the Corporation: (1) The Board of Directors shall have authority to classify and reclassify any unissued shares of the Preferred Stock, by fixing or altering in any one or more respects from time to time before issuance, the preferences, rights, voting powers, restrictions and qualifications of, the dividends on, the times and prices of redemption of, and the conversion rights of, such shares; provided, that the Board of Directors shall not classify or reclassify any of such shares into shares of the Common Stock. Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Preferred Stock shall include, without limitation, subject to the provisions of the charter, authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing or altering one or more of the following: (a) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall remain part of the authorized Preferred Stock and be subject to classification and reclassification as provided in this Article FIFTH; (b) whether or not and, if so, the rates and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of Preferred Stock, and the status of any such dividends as cumulative or non-cumulative and as participating or non- participating; (c) whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights; (d) whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine; (e) whether or not the shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof; (f) the rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of Preferred Stock; (g) whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this paragraph, and, if so, the terms and conditions thereof; (h) any other preferences, rights, restrictions and qualifications of shares of such class or series, not inconsistent with law and these Articles of Incorporation. SIXTH. The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of the Corporation's stock of any class, whether now or hereafter authorized, and securities convertible into shares of its stock of any class or classes, whether now or hereafter authorized, for such considerations as the Board of Directors may deem advisable and without any action by the stockholders. SEVENTH. The number of Directors shall be four, which number may be increased or decreased pursuant to the By-Laws of the Corporation but shall never be less than three. The names of the persons who are to serve as Directors until the first annual meeting of the stockholders or until their successors are duly chosen and qualify are as follows: Rene Cohen, Ernest Ginsberg, John R. Lytle and Peter White. EIGHTH. The By-Laws of the Corporation may be made, altered, amended or repealed by the Board of Directors. The books of the Corporation (subject to the provisions of the laws of the State of Maryland) may be kept outside of the State of Maryland at such places as from time to time may be designated by the Board of Directors. NINTH. (1) The Corporation shall indemnify any 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 Corporation) by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including attorneys' fees), 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 Corporation, 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 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 Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (2) The Corporation shall indemnify any 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 Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including attorneys' fees) 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 Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation, unless and only to the extent that the court in which such action or suit was brought, or a court of equity in the county in which the Corporation has its principal office, 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. (3) The Corporation may indemnify any person who is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the extent and under the circumstances provided by paragraphs 1 and 2 of this Article NINTH with respect to a person who is or was a director or officer of the Corporation. (4) Any indemnification under paragraph 1, 2 or 3 of this Article NINTH (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth therein. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum (as defined in the by-laws of the Corporation) consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. (5) Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding if authorized in the specific case by a preliminary determination following one of the procedures set forth in the next preceding paragraph that there is a reasonable basis for a belief that the director, officer, employee or agent met the applicable standard of conduct set forth in paragraph 1 or 2 of this Article NINTH upon receipt of an undertaking by or on behalf of the director, officer, employee or agent reasonably assuring that such amount will be repaid unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article NINTH. (6) The indemnification provided by this Article NINTH shall not be deemed exlusive of any other rights to which those seeking indemnification may be entitled under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (7) By action of its Board of Directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or of any corporation a majority of the voting stock of which is owned by the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, 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 Corporation would have the power or would be required to indemnify him against such liability under the provisions of this Article NINTH or of the General Corporation Law of the State of Maryland. TENTH. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization of which one or more of its directors or officers are directors, officers or employees or in which one or more of its directors or officers have a financial interest, as the holder of any amount of its capital stock or otherwise, shall be void or voidable or otherwise affected for this reason or because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction or solely because his or their votes are counted for such purpose; provided, however, that in any such case the facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee thereof and the Board of Directors or committee in good faith specifically authorizes the contract or transaction, or the facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of the stockholders. ELEVENTH. No holder of shares of stock of any class or any other securities, whether now or hereafter authorized, shall be entitled as a matter of right to subscribe for or purchase or receive any stock of any class or any securities convertible into shares of stock of any class, or to any right of subscription to, or to any warrant or option for the purchase of, any thereof other than such (if any) as the Board of Directors, in its discretion, may determine from time to time; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding. TWELFTH. Notwithstanding any provision of law requiring a greater proportion than a majority of the votes of all classes or of any class of stock entitled to be cast to take or authorize any action, the Corporation may take or authorize such action upon the concurrence of a majority of the aggregate number of the votes entitled to be cast thereon. THIRTEENTH. The Corporation reserves the right from time to time to amend, alter, change or repeal any provision contained in these Articles of Incorporation, including any provision setting forth the terms or rights of any of its capital stock, in the manner now or hereafter authorized by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, the undersigned incorporator of REPUBLIC NEW YORK CORPORATION has signed these Articles of Incorporation this 20th day of September, 1973. /S/ Stephen E. Gilhuley (Stephen E. Gilhuley) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation") , hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu thereof the following: "FIFTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is TWELVE MILLION (12,000,000) shares, of which TWO MILLION (2,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock") , and TEN MILLION (10,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of FIFTY MILLION DOLLARS ($50,000,000)." SECOND: By unanimous written consent pursuant to Section 58 of Article 23 of the Annotated Code of Maryland, the Board of Directors of the Corporation on April 2, 1974, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at a Special Meeting of Stockholders. THIRD: Notice setting forth the said amendment of the charter and stating that a purpose of the meeting of the Stockholders would be to take action thereon, was duly waived pursuant to Section 46 of Article 23 of the Annotated Code of Maryland by all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at a Special Meeting held on April 4, 1974, by affirmative vote of two-thirds of all the votes entitled to be cast thereon. FOURTH: The amendment of the charter of the Corporation as hereinabove set forth has been duly advised by the Board of Directors and approved by the Stockholders of the Corporation. FIFTH: (a) The total number of shares of all classes of stock which the Corporation was heretofore authorized to issue is Two Thousand (2,000) shares, divided into One Thousand (1,000) shares of Preferred Stock without par value and One Thousand (1,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Five Thousand Dollars ($5,000) . (b) The total number of shares of all classes of stock is increased by this amendment to Twelve Million (12,000,000) shares, divided into Two Million (2,000,000) shares of Preferred Stock without par value and Ten Million (10,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Fifty Million Dollars ($50,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, and qualifications, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and by its Secretary on April 4, 1974. REPUBLIC NEW YORK CORPORATION By /s/ Peter White Peter White (President) Attest: /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) THE UNDERSIGNED, President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Peter White Peter White (President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu there of the following: "FIFTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is SEVENTEEN MILLION (17,000,000) shares of which SEVEN MILLION (7,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock"), and TEN MILLION (10,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of FIFTY MILLION DOLLARS ($50,000,000)." SECOND: The Board of Directors of the Corporation on January 17, 1978 at a duly convened meeting thereof duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at the Annual Meeting thereof to be held on April 20, 1978. THIRD: Notice setting forth the said amendment of the charter and stating that a purpose of the Annual Meeting of the Stockholders would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporations and Associations Article of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at the Annual Meeting held on April 20, 1978, by affirmative vote of two- thirds of all the votes entitled to be cast thereon. FOURTH: The amendment of the charter of the Corporation as hereinabove set forth has been duly advised by the Board of Directors and approved by the Stockholders of the Corporation. FIFTH: (a) As of immediately before this amendment, the total number of shares of all classes of stock which the Corporation was authorized to issue is Twelve Million (12,000,000) shares, divided into Two Million (2,000,000) shares of Preferred Stock without par value and Ten Million (10,000,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Fifty Million Dollars ($50,000,000). (b) As amended, the total number of shares of all classes of stock which the Corporation has authority to issue is Seventeen Million (17,000,000) shares, divided into Seven Million (7,000,000) shares of Preferred Stock without par value and Ten Million (10,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Fifty Million Dollars ($50,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualification and terms and conditions of redemption, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation, and such description has not been changed by the amendment of the charter of the Corporation herein set forth. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to be signed in its name and on its behalf by its President and witnessed by its Secretary on April 20, 1978. REPUBLIC NEW YORK CORPORATION By /s/ Peter White Peter White (President) Witnessed: /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) THE UNDERSIGNED, President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Peter White Peter White (President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu thereof the following "FIFTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is FIFTY-SEVEN MILLION (57,000,000) shares, of which SEVEN MILLION (7,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock") , and FIFTY MILLION (50,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000)". SECOND: The Board of Directors of the Corporation, by unanimous written consent dated July 10, 1980, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at a Special Meeting thereof to be held on August 1, 1980. THIRD: Notice, setting forth the said amendment of the charter and stating that the purpose of the Special Meeting of the Stockholders, called thereby, would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporation and Associations Articles of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at a Special Meeting held on August 1, 1980, by affirmative vote of a majority of all the votes entitled to be cast thereon as permitted by the charter of the Corporation. FOURTH: (a) As of immediately before this amendment, the total shares of all classes of stock which the Corporation was authorized to issue is Seventeen Million (17,000,000) shares, divided into Seven Million (7,000,000) shares of Preferred Stock without par value and Ten Million (10,000,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Fifty Million Dollars ($50,000,000). (b) As amended, the total number of shares of all classes of stock which the Corporation has authority to issue is Fifty- seven Million (57,000,000) shares, divided into Seven Million (7,000,000) shares of Preferred Stock without par value and Fifty Million (50,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualification and terms and conditions of redemption, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation, and such description has not been changed by the amendment of the charter of the Corporation herein set forth. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to be signed in its name and on its behalf by a Senior Vice President and witnessed by an Assistant Secretary on August 1, 1980. REPUBLIC NEW YORK CORPORATION By /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) Witnessed: /s/ William F. Rosenblum Jr. William F. Rosenblum (Assistant Secretary) THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu thereof the following "FIFTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is SIXTY-FIVE MILLION (65,000,000) shares, of which FIFTEEN MILLION (15,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock"), and FIFTY MILLION (50,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of TWO HUNDRED FIFTY MILLION DOLLARS ($250,000,000)". SECOND: The Board of Directors of the Corporation, at a meeting held on January 21, 1981, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at the Annual Meeting thereof to be held on April 22, 1981. THIRD: Notice, setting forth the said amendment of the charter and stating that the purpose of the Annual Meeting of the Stockholders, called thereby, would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporation and Associations Articles of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at the Annual Meeting held on April 22, 1981, by affirmative vote of a majority of all the votes entitled to be cast thereon as permitted by the charter of the Corporation. FOURTH: (a) As of immediately before this amendment, the total shares of all classes of stock which the Corporation was authorized to issue is Fifty-Seven Million (57,000,000) shares, divided into Seven Million (7,000,000) shares of Preferred Stock without par value and Fifty Million (50,000,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000). (b) As amended, the total number of shares of all classes of stock which the Corporation has authority to issue is Sixty- Five Million (65,000,000) shares, divided into Fifteen Million (15,000,000) shares of Preferred Stock without par value and Fifty Million (50,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualification and terms and conditions of redemption, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation, and such description has not been changed by the amendment of the charter of the Corporation herein set forth. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to be signed in its name and on its behalf by a Senior Vice President and witnessed by an Assistant Secretary on April 22, 1981. REPUBLIC NEW YORK CORPORATION By: /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) Witnessed: /s/ Laurence R. Stern Laurence R. Stern (Assistant Secretary) THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out in its entirety Article NINTH of the Articles of Incorporation and inserting in lieu thereof the following: "NINTH: The Corporation shall indemnify (a) its directors to the full extent provided by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures provided by such laws; (b) its officers to the same extent it shall indemnify its directors; and (c) its officers who are not directors to such further extent as shall be authorized by the Board of Directors and be consistent with law. The foregoing shall not limit the authority of the corporation to indemnify other employees and agents consistent with law." SECOND: The Board of Directors of the Corporation, at a meeting held on January 19, 1983, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at the Annual Meeting thereof to be held on April 20, 1983. THIRD: Notice, setting forth the said amendment of the charter and stating that the purpose of the Annual Meeting of the Stockholders, called thereby, would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporation and Associations Articles of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at the Annual Meeting held on April 20, 1983, by affirmative vote of a majority of all the votes entitled to be cast thereon as permitted by the charter of the Corporation. FOURTH: This amendment does not increase the authorized stock of the Corporation. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to be signed in its name and on its behalf by a Senior Vice President and witnessed by an Assistant Secretary on April 20, 1983. REPUBLIC NEW YORK CORPORATION By /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) Witnessed: /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Assistant Secretary) THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Ernest Ginsberg Ernest Ginsberg (Senior Vice President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu thereof the following: "FIFTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is ONE HUNDRED SIXTY FIVE million (165,000,000) shares, of which FIFTEEN million (15,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock"), and ONE HUNDRED FIFTY million (150,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of SEVEN HUNDRED FIFTY million dollars ($750,000,000)." SECOND: The Board of Directors of the Corporation, at a meeting held on July 17, 1991, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at a Special Meeting thereof to be held on September 4, 1991. THIRD: Notice, setting forth the said amendment of the charter and stating that the purpose of the Special Meeting of the Stockholders, called thereby, would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporation and Associations Article of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at a Special Meeting held on September 4, 1991, by affirmative vote of a majority of all the votes entitled to be cast thereon as permitted by the charter of the Corporation. FOURTH: (a) As of immediately before this amendment, the total shares of all classes of stock which the Corporation was authorized to issue is Sixty-Five Million (65,000,000) shares, divided into Fifteen Million (15,000,000) shares of Preferred Stock without par value and Fifty Million (50,000,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000). (b) As amended, the total number of shares of all classes of stock which the Corporation has authority to issue is One Hundred Sixty-Five Million (165,000,000) shares, divided into Fifteen Million (15,000,000) shares of Preferred Stock without par value and One Hundred Fifty Million (150,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Seven Hundred Fifty Million Dollars ($750,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualification and terms and conditions of redemption, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation, and such description has not been changed by the amendment of the charter of the Corporation herein set forth. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to be signed in its name and on its behalf by a Senior Vice President and witnessed by an Assistant Secretary on September 4, 1991. REPUBLIC NEW YORK CORPORATION /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Senior Vice President) Witnessed: /s/ Steven J. Wright Steven J. Wright (Assistant Secretary) THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Senior Vice President) REPUBLIC NEW YORK CORPORATION ARTICLES OF AMENDMENT Republic New York Corporation, a Maryland corporation, having its principal office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended by striking out the first paragraph of Article FIFTH of the Articles of Incorporation and inserting in lieu thereof the following: "FIFTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is ONE HUNDRED SEVENTY million (170,000,000) shares, of which TWENTY million (20,000,000) shares shall be shares of Preferred Stock without par value (hereinafter called "Preferred Stock"), and ONE HUNDRED FIFTY million (150,000,000) shares shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share (hereinafter called "Common Stock") having an aggregate par value of SEVEN HUNDRED FIFTY million dollars ($750,000,000)." SECOND: The Board of Directors of the Corporation, at a meeting held on January 20, 1993, duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the Stockholders of the Corporation at the Annual Meeting thereof to be held on April 21, 1993. THIRD: Notice, setting forth the said amendment of the charter and stating that one of the purposes of the Annual Meeting of the Stockholders, called thereby, would be to take action thereon, was duly given pursuant to Section 2-504 of the Corporations and Associations Article of the Annotated Code of Maryland to all Stockholders entitled to vote thereon. The amendment of the charter of the Corporation as hereinabove set forth was approved by the Stockholders of the Corporation at the Annual Meeting held on April 21, 1993, by the affirmative vote of a majority of all the votes entitled to be cast thereon as permitted by the charter of the Corporation. FOURTH: (a) As of immediately before this amendment, the total shares of all classes of stock which the Corporation was authorized to issue is One Hundred Sixty-Five Million (165,000,000) shares, divided into Fifteen Million (15,000,000) shares of Preferred Stock without par value and One Hundred Fifty Million (150,000,000) shares of Common Stock with the par value of Five Dollars ($5.00) per share having an aggregate par value of Seven Hundred Fifty Million Dollars ($750,000,000). (b) As amended, the total number of shares of all classes of stock which the Corporation has authority to issue is One Hundred Seventy Million (170,000,000) shares, divided into Twenty Million (20,000,000) shares of Preferred Stock without par value and One Hundred Fifty Million (150,000,000) shares of Common Stock of the par value of Five Dollars ($5.00) per share having an aggregate par value of Seven Hundred Fifty Million Dollars ($750,000,000). (c) A description of each class of stock of the Corporation with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualification and terms and conditions of redemption, of each class of the authorized capital stock as increased, is set forth in the charter of the Corporation, and such description has not been changed by the amendment of the charter of the Corporation herein set forth. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by a Senior Vice President and witnessed by a Deputy Corporate Secretary on April 21, 1993. REPUBLIC NEW YORK CORPORATION /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Senior Vice President) Witnessed: /s/ Patricia J. Howard Patricia J. Howard (Deputy Corporate Secretary) THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who executed on behalf of said Corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said Corporation, the foregoing Articles of Amendment to be the corporate act of said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Senior Vice President) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the charter of the Corporation, the Board of Directors has duly divided and classified 2,000,000 shares of the Preferred Stock of the Corporation into a series designated $2.125 Cumulative Preferred Stock and has provided for the issuance of such series. SECOND: The terms of the $2.125 Cumulative Preferred Stock as set by the Board of Directors are as follows: 1. $2.125 Cumulative Preferred Stock: 2,000,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as $2.125 Cumulative Preferred Stock (hereinafter sometimes called the "Series A Stock"). The term "Articles of Incorporation" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends: The holders of the Series A Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the purpose, cash dividends at the rate of $2.125 per share per annum, and no more, payable quarterly on the first day of January, April, July and October of each year. Such dividends shall be payable from, and shall be cumulative from, the date of original issue of each share, so that if in any quarterly dividend period (being the period between such dividend payment dates) dividends at the rate of $2.125 per share per annum shall not have been declared and paid or set apart for payment on all outstanding shares of Series A Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Series A Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Series A Stock with respect to the payment of dividends. 3. Voting Rights: (i) The holders of the Series A Stock shall have the voting power and rights set forth and referred to in this paragraph 3 and in paragraph 7, and shall have no other voting power or rights except as otherwise from time to time required by law. (ii) Whenever dividends on the Series A Stock shall be unpaid as a whole or in part for six consecutive dividend periods, then at the annual meeting of stockholders next following omission of the sixth successive dividend or any part thereof and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Series A Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Series A Stock, either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting right, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 3 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of the Series A Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting right) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 3 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the Series A Stock. At elections for such Directors, each holder of Series A Stock shall be entitled to one vote for each share held. The holders of Series A Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders, next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 3 of the holders of Series A Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 3 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Series A Stock remain outstanding, the consent of the holders of at least two-thirds of the shares of the Series A Stock outstanding at the time given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined in paragraph 5) to the Series A Stock, or (b) The authorization, creation or issuance of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the Series A Stock unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on the Series A Stock and all outstanding shares of stock ranking on a parity (as that term is defined in paragraph 5) with the Series A Stock (the Series A Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of the Series A Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock or Series A Stock or the creation and issuance of other series of Preferred Stock, in each case ranking on a parity with or junior to the Series A Stock with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The foregoing voting provision shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Series A Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 5 to effect such redemption. 4. Liquidation: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series A Stock shall have preference and priority over the Common Stock for payment out of the assets of the Corporation or proceeds thereof, whether from capital or surplus, of $25 per share (the "liquidation value") together with the amount of any dividends accrued and unpaid thereon, and after such payment the holders of Series A Stock shall be entitled to no other payments. If, in such case, the assets of the Corporation or proceeds thereof shall be insufficient to make the full liquidating payment of $25 per share and accrued and unpaid dividends on the Series A Stock and liquidating payments on any other outstanding series of Parity Stock (including accrued and unpaid dividends, if any), then such assets and proceeds shall be distributed among the holders of the Series A Stock and any other outstanding series of Parity Stock ratably in accordance with the respective amounts which would be payable on all series of Parity Stock (including accrued and unpaid dividends, if any) if all such liquidating amounts payable were paid in full. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation. 5. Redemption: Subject to the restriction set forth in the next paragraph, the Series A Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at the following optional redemption prices (but not less than $25 per share) during the 12 months' period ending September 30 of the years indicated below, in each case plus accrued and unpaid dividends to the date of redemption: 1978 .. $27.125 1983 .. $26.594 1988 .. $26.063 1993 .. $25.531 1979 .. 27.019 1984 .. 26.488 1989 .. 25.956 1994 .. 25.425 1980 .. 26.913 1985 .. 26.381 1990 .. 25.850 1995 .. 25.319 1981 .. 26.806 1986 .. 26.275 1991 .. 25.744 1996 .. 25.213 1982 .. 26.700 1987 .. 26.169 1992 .. 25.638 1997 .. 25.106 and thereafter at $25.00 The Corporation, however, shall not have the right under this paragraph 5 to redeem any of the Series A Stock as part of a refunding operation prior to October 1, 1982 by the application of moneys borrowed or from proceeds from the sale of stock ranking prior to or on a parity with, as to dividends or the distribution of assets upon liquidation, the Series A Stock, if such moneys borrowed have an annual interest cost to the Corporation (calculated without any consideration of income tax effect), or such stock has a dividend cost to the Corporation (so calculated), less than the annual dividend rate of the Series A Stock. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the Series A Stock as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series A Stock; and (ii) on a parity with the Series A Stock as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series A Stock, if the holders of such class of stock and the Series A Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their resp dividend rates or liquidation prices, without preference or priority one over the other. The Series A Stock is also subject to redemption and may be redeemed on and after October 1, 1988, through the operation of the Sinking Fund as hereinafter provided in paragraph 6. At the option of the Corporation, shares of Series A Stock redeemed or otherwise acquired (including sinking fund acquisitions) may be restored to the status of authorized but unissued shares of Preferred Stock. In the case of any redemption, the Corporation shall give notice of such redemption to the holders of the Series A Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Series A Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not more than 60 days and not less than 30 days previous to the date fixed for redemption. In the event such notice is not given to any stockholder such failure to give notice shall not affect the notice given to other stockholders. If less than the whole amount of outstanding Series A Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Series A Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series A Stock as stockholders in the Corporation, except the right to receive the redemption price plus dividends accrued and unpaid to the date of redemption (without interest) upon surrender of the certificate representing the Series A Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Series A Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of 6 years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Series A Stock so called for redemption shall look only to the Corporation for payment of the redemption price. 6. Sinking Fund: As and for a sinking fund for the redemption of the Series A Stock, the Corporation shall set aside in trust, when and as appropriated by the Board of Directors out of funds legally available for the purpose, on or before the next business day preceding October 1 in each of the years 1988 to 2007, inclusive, as a sinking fund payment, an amount in cash sufficient to redeem on each such October 1, 100,000 shares of Series A Stock; each such sinking fund payment shall (and, at the Corporation's option, each additional sinking fund payment provided for by the second succeeding sentence may) be applied on October 1 to the redemption of Series A Stock at the redemption price of $25 per share, plus an amount equal to the dividends accrued and unpaid on such shares to the date of redemption. The sinking fund payments provided for in the preceding sentence shall be cumulative. Concurrently with the making of each annual sinking fund payment provided for in the next preceding sentence, the Corporation may, at its option, make an additional payment in cash (the "Additional Payment") sufficient to redeem up to an additional 100,000 shares of Series A Stock at the redemption price of $25 per share plus accrued and unpaid dividends to the date of redemption; the right of the Corporation to make such an Additional Payment in each year shall be non-cumulative and to the extent not exercised in any year shall terminate. Any sinking fund payments required by the first sentence of this paragraph 6 shall be subject to decrease, at the election of the Corporation, by the application in satisfaction of all or part of such sinking fund payment of shares of Series A Stock theretofore redeemed either pursuant to paragraph 5 or pursuant to any Additional Payment or otherwise acquired by the Corporation, provided such shares have not been applied in reduction of any prior sinking fund payment. Notice of redemption, the manner of selection of shares to be redeemed and the effect of depositing in trust funds for the redemption of such shares shall be as set forth in paragraph 5. If the Board of Directors should for any reason fail to appropriate sinking fund payments for 100,000 shares in each year starting in 1988 (or otherwise redeem 100,000 shares annually by crediting shares voluntarily redeemed or otherwise acquired) then the Board of Directors may not thereafter (i) pay any dividends or make any other distribution (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) on the Common Stock or any other capital stock of the Corporation ranking on a parity with or junior to the Series A Stock with respect to the payment of dividends or the distribution of assets on liquidation or (ii) purchase, redeem or otherwise acquire any shares of capital stock of the Corporation ranking junior to the Series A Stock with respect to the payment of dividends or the distribution of assets on liquidation. 7. Limitation on Merger and Sale of Assets and on Disposition of the Voting Stock of the Bank: So long as any shares of Series A Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of Series A Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation is the Corporation or a Qualified Successor Company or the transferee of such assets is a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in each case as may be required to comply with applicable law, including without limitation any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of the Series A Stock in exchange for the Series A Stock shares of preferred stock having at least the same relative rights and preferences as the Series A Stock (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 7, holders of all series of Parity Stock which are granted such voting rights (of which the Series A Stock is the initial series) shall vote as a class, and each holder of Series A Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted to them. The foregoing voting provisions will not apply if, in connection with the matter specified, provision is made for the redemption or retirement of all outstanding Series A Stock. 8. Parity Stock: So long as any shares of Series A Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends were paid in full, and in any distribution of assets upon liquidation, ratably in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 9. For the Purposes Hereof: (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation and shares called for redemption pursuant to either paragraph 5 or paragraph 6, funds for the redemption of which shall have been deposited in trust pursuant to either paragraph 5 or paragraph 6. (ii) The amount of dividends "accrued" on any share of Series A Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Series A Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the liquidation value of such share at the annual dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on October 6, 1977. REPUBLIC NEW YORK CORPORATION By /s/ Peter White Peter White (President) Attest: /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the charter of the Corporation, the Board of Directors has duly divided and classified 1,000,000 shares of the Preferred Stock of the Corporation into a series designated $3.125 Cumulative Preferred Stock and has provided for the issuance of such series. SECOND: The terms of the $3.125 Cumulative Preferred Stock as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 1. $3.125 Cumulative Preferred Stock: 1,000,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as $3.125 Cumulative Preferred Stock (hereinafter sometimes called the "Series B Stock"). The term "Articles of Incorporation" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends: The holders of the Series B Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the purpose, cash dividends at the rate of $3.125 per share per annum, and no more, payable quarterly on the first day of January, April, July and October of each year, with the first such dividend being payable January 1, 1981. Such dividends shall be payable from, and shall be cumulative from, the date of original issue of each share, so that if in any quarterly dividend period (being the period between such dividend payment dates or, in the case of the first such period, from the date of original issue to January 1, 1981) dividends at the rate of $3.125 per share per annum shall not have been paid or declared and set apart for payment on all outstanding shares of Series B Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Series B Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Series B Stock with respect to the payment of dividends; provided , however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the resolutions providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding Series B Stock shall have been paid or declared and set apart for payment. 3. Voting Rights: (i) The holders of the Series B Stock shall have the voting power and rights set forth and referred to in this paragraph 3 and in paragraph 6, and shall have no other voting power or rights except as otherwise from time to time required by law. (ii) Whenever dividends on the Series B Stock shall be unpaid as a whole or in part for six consecutive quarterly dividend periods, then at the annual meeting of stockholders next following omission of the sixth successive quarterly dividend or any part thereof and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Series B Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Series B Stock, either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 3 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of the Series B Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 3 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the Series B Stock. At elections for such Directors, each holder of Series B Stock shall be entitled to one vote for each share held. The holders of Series B Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders, next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 3 of the holders of Series B Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 3 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Series B Stock remain outstanding, the affirmative vote or consent of the holders of at least two-thirds of the shares of the Series B Stock outstanding at the time given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined in paragraph 5) to the Series B Stock, or (b) The authorization, creation or issuance of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the Series B Stock unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on the Series B Stock and all outstanding shares of stock ranking on a parity (as that term is defined in paragraph 5) with the Series B Stock (the Series B Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of the Series B Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock, the Corporation's $2.125 Cumulative Preferred Stock or the Series B Stock or the creation and issuance of other series of Preferred Stock, in each case ranking on a parity with or junior to the Series B Stock with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Series B Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 5 to effect such redemption. 4. Liquidation: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series B Stock shall have preference and priority over the Common Stock for payment out of the assets of the Corporation or proceeds thereof, whether from capital or surplus, of $25 per share (the "liquidation value") together with the amount of any dividends accrued and unpaid thereon, and after such payment the holders of Series B Stock shall be entitled to no other payments. If, in such case, the assets of the Corporation or proceeds thereof shall be insufficient to make the full liquidating payment of $25 per share and accrued and unpaid dividends on the Series B Stock and liquidating payments on any other outstanding series of Parity Stock (including accrued and unpaid dividends, if any), then such assets and proceeds shall be distributed among the holders of the Series B Stock and any other outstanding series of Parity Stock ratably in accordance with the respective amounts which would be payable on all series of Parity Stock (including accrued and unpaid dividends, if any) if all such liquidating amounts payable were paid in full. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation. 5. Redemption: Subject to the restriction set forth in the next paragraph, the Series B Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at the following optional redemption prices (but not less than $25 per share) during the 12 month period ending September 30 in the years indicated below, in each case plus accrued and unpaid dividends to the date of redemption: 1981 .. $28.13 1986 .. $27.34 1991 .. $26.56 1996 .. $25.78 1982 .. 27.97 1987 .. 27.19 1992 .. 26.41 1997 .. 25.63 1983 .. 27.81 1988 .. 27.03 1993 .. 26.25 1998 .. 25.47 1984 .. 27.66 1989 .. 26.88 1994 .. 26.09 1999 .. 25.31 1985 .. 27.50 1990 .. 26.72 1995 .. 25.94 2000 .. 25.16 and thereafter at $25.00 The Corporation, however, shall not have the right under this paragraph 5 to redeem any of the Series B Stock as part of a refunding operation prior to October 1, 1985 by the application of moneys borrowed or from proceeds from the sale of stock ranking prior to or on a parity with, as to dividends or the distribution of assets upon liquidation, the Series B Stock, if such moneys borrowed have an annual interest cost to the Corporation (calculated without any consideration of income tax effect), or such stock has a dividend cost to the Corporation (so calculated), less than the annual dividend rate of the Series B Stock. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the Series B Stock as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Series B Stock; and (ii) on a parity with the Series B Stock as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Series B Stock, if the holders of such class of stock and the Series B Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. At the option of the Corporation, shares of Series B Stock redeemed or otherwise acquired may be restored to the status of authorized but unissued shares of Preferred Stock. In the case of any redemption, the Corporation shall give notice of such redemption to the holders of Series B Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place of redemption (and, if less than the total outstanding shares to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Series B Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not more than 60 days and not less than 30 days previous to the date fixed for redemption. In the event such notice is not given to any stockholder such failure to give notice shall not affect the notice given to other stockholders. If less than the whole amount of outstanding Series B Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price), all dividends upon the Series B Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series B Stock as stockholders in the Corporation, except the right to receive the redemption price plus dividends accrued and unpaid to the date of redemption (without interest) upon surrender of the certificate representing the Series B Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Series B Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of 6 years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Series B Stock so called for redemption shall look only to the Corporation for payment of the redemption price. 6. Limitation on Merger and Sale of Assets and on Disposition of the Voting Stock of the Bank: So long as any shares of Series B Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of series B Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of the Series B Stock in exchange for the Series B Stock shares of preferred stock having at least the same relative rights and preferences as the Series B Stock (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 6, holders of all series of Parity Stock which are granted such voting rights (of which the Series B Stock is the second series) shall vote as a class, and each holder of Series B Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Series B Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 5 to effect such redemption. 7. Parity Stock: So long as any shares of Series B Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends were paid in full, and in any distribution of assets upon liquidation, ratably in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 8. For the Purposes Hereof: (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation and shares called for redemption pursuant to paragraph 5, funds for redemption of which shall have been deposited in trust pursuant to paragraph 5. (ii) The amount of dividends "accrued" on any share of Series B Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Series B Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the liquidation value of such share at the annual dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledge said instrument to be the corporate act of the Corporation and state under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on September 5, 1980. REPUBLIC NEW YORK CORPORATION By /s/ Walter H. Weiner Walter H. Weiner Attest: (President) /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the charter of the Corporation, the Board of Directors has duly divided and classified 1,500,000 shares of the Preferred Stock of the Corporation into a series designated Cumulative Preferred Stock, Floating Rate Series A, and has provided for the issuance of such series. SECOND: The terms of the Cumulative Preferred Stock, Floating Rate Series A, as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 1. Cumulative Preferred Stock Floating Rate Series A: 1,500,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as Cumulative Preferred Stock,Floating Rate Series A (hereinafter sometimes called the "Floating Rate Series A Stock"). The Floating Rate Series A Stock shall be of a stated value of $50 per share (the "stated value"). The term "Articles of Incorporation" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends: Dividend rates on the shares of Floating Rate Series A Stock shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including June 30, 1982, at a rate per annum of the stated value thereof equal to 14 1/2%, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which quarterly dividend periods shall commence on January 1, April 1, July 1 and October 1 in each year and shall end on and include the day next preceding the first day of the next quarterly dividend period, at a rate per annum of the stated value thereof equal to .75% above the Applicable Rate (as defined in paragraph 3) in respect of such quarterly dividend period; provided, however, that the dividend rate per annum on the shares of Floating Rate Series A Stock for any Quarterly Dividend Period shall in no event be less than 8% per annum or greater than 16 1/2% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board of Directors, on the first day of January, April, July and October of each year, commencing July 1, 1982. If in any Dividend Period dividends shall not have been paid or declared and set apart for payment on all outstanding shares of Floating Rate Series A Stock for such Dividend Period and for all preceding Dividend Periods from and after the first day from which dividends are cumulative at the respective rates per annum specified for such Dividend Periods in the second preceding sentence, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Floating Rate Series A Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Floating Rate Series A Stock with respect to the payment of dividends; provided, however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the resolutions providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding Floating Rate Series A Stock shall have been paid or declared and set apart for payment. 3. Definition of Applicable Rate, etc.: The "Applicable Rate" for any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason (i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be the higher of whichever two of such Rates can be so determined; (ii) either only the Treasury Bill Rate or only the Ten Year Constant Maturity Rate or only the Twenty Year Constant Maturity Rate can be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be whichever such Rate can be so determined; or (iii) neither the Treasury Bill Rate nor the Ten Year Constant Maturity Rate nor the Twenty Year Constant Maturity Rate can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as defined below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating Rate Series A Stock is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period) for all of the U.S. Treasury bills then having maturities of not less that 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. Except as provided below in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating rate Series A Stock is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields, (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. Except as provided below in this paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating Rate Series A Stock is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. The amount of dividends payable for each Quarterly Dividend Period shall be computed by annualizing the dividend rate for such Dividend Period and dividing by four. The amount of dividends payable for the Initial Dividend Period or any Dividend Period shorter than a full Quarterly Dividend Period shall be computed on the basis of 30-day months, a 360-day year and the actual number of days elapsed in such Dividend Period. The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of the Floating Rate Series A Stock. For purposes of this Section, the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). 4. Voting Rights: (i) The holders of the Floating Rate Series A Stock shall have the voting power and rights set forth and referred to in this paragraph 4 and in paragraph 7, and shall have no other voting power or rights except as otherwise from time to time required by law. (ii) Whenever dividends on the Floating Rate Series A Stock shall be unpaid as a whole or in part for six consecutive Dividend periods, then at the annual meeting of stockholders next following omission of the sixth successive quarterly dividend or any part thereof and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Floating Rate Series A Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Floating Rate Series A Stock, either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 4 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of holders of Floating Rate Series A Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 4 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the Floating Rate Series A Stock. At elections for such Directors, each holder of the Floating Rate Series A Stock shall be entitled to one vote for each share held. The holders of Floating Rate Series A Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders, next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 4 of the holders of Floating Rate Series A Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 4 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Floating Rate Series A Stock remain outstanding, the affirmative vote or consent of the holders of at least two-thirds of the shares of Floating Rate Series A Stock outstanding at the time given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined below in this paragraph 4) to the Floating Rate Series A Stock, or (b) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the Floating Rate Series A Stock unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on the Floating Rate Series A Stock and all outstanding shares of stock ranking on a parity (as that term is defined below in this paragraph 4) with the Floating Rate Series A Stock (the Floating Rate Series A Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of the Floating Rate Series A Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock, the Corporation's $2.125 Cumulative Preferred Stock or $3.125 Cumulative Preferred Stock or the Floating Rate Series A Stock or the creation and issuance of other series of Preferred Stock, in each case ranking on a parity with or junior to the Floating Rate Series A Stock with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Floating Rate Series A Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 6 to effect such redemption. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the Floating Rate Series A Stock as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority t the holders of Floating Rate Series A Stock; and (ii) on a parity with the Floating Rate Series A Stock as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Floating Rate Series A Stock, if the holders of such class of stock and the Floating Rate Series A stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. 5. Liquidation: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Floating Rate Series A Stock shall have preference and priority over the Common Stock for payment out of the assets of the Corporation or proceeds thereof, whether from capital or surplus, of $50 per share together with the amount of any dividends accrued and unpaid thereon, and after such payment the holders of Floating Rate Series A Stock shall be entitled to no other payments. If, in such case, the assets of the Corporation or proceeds thereof shall be insufficient to make the full liquidating payment of $50 per share and accrued and unpaid dividends on the Floating Rate Series A Stock and liquidating payments on any other outstanding series of Parity Stock (including accrued and unpaid dividends, if any), then such assets and proceeds shall be distributed among the holders of the Floating Rate Series A Stock and any other outstanding series of Parity Stock ratably in accordance with the respective amounts which would be payable on all series of Parity Stock (including accrued and unpaid dividends, if any) if all such liquidating amounts payable were paid in full. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation. 6. Redemption: The shares of Floating Rate Series A Stock may not be redeemed prior to May 1, 1987. From May 1, 1987 through and including April 30, 1992, the Floating Rate Series A Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at a redemption price equal to $51.50 per share plus accrued and unpaid dividends to the date of redemption. After April 30, 1992, the Floating Rate Series A Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at a redemption price equal to the stated value per share plus accrued and unpaid dividends to the date of redemption. At the option of the Corporation, shares of Floating Rate Series A Stock redeemed or otherwise acquired may be restored to the status of authorized but unissued shares of Preferred Stock. In the case of any redemption, the Corporation shall give notice of such redemption to the holders of Floating Rate Series A Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Floating Rate Series A Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not more than 60 days and not less than 30 days previous to the date fixed for redemption. In the event such notice is not given to any stockholder such failure to give notice shall not affect the notice given to other stockholders. If less than the whole amount of outstanding Floating Rate Series A Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price), all dividends upon the Floating Rate Series A Stock so called for redemption shall cease to accrue, and all rights of the holders of said Floating Rate Series A Stock as stockholders in the Corporation, except the right to receive the redemption price plus dividends accrued and unpaid to the date of redemption (without interest) upon surrender of the certificate representing the Floating Rate Series A Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Floating Rate Series A Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of 6 years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Floating Rate Series A Stock so called for redemption shall look only to the Corporation for payment of the redemption price. 7. Limitation on Merger and Sale of Assets and on Disposition of the Voting Stock of the Bank: So long as any shares of Floating Rate Series A Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of Floating Rate Series A Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of the Floating Rate Series A Stock in exchange for the Floating Rate Series A Stock shares of preferred stock having at least the same relative rights and preferences as the Floating Rate Series A Stock (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 7, holders of all series of Parity Stock which are granted such voting rights (of which the Floating Rate Series A Stock is the third series) shall vote as a class, and each holder of Floating Rate Series A Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Floating Rate Series A Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 6 to effect such redemption. 8. Parity Stock: So long as any shares of Floating Rate Series A Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends in respect of all such shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation, ratably in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 9. For the Purposes Hereof: (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation and shares called for redemption pursuant to paragraph 6, funds for redemption of which shall have been deposited in trust pursuant to paragraph 6. (ii) The amount of dividends "accrued" on any share of Floating Rate Series A Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Floating Rate Series A Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the stated value of such share at the dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on May 14, 1982. REPUBLIC NEW YORK CORPORATION By /s/ Walter H. Weiner Walter H. Weiner Attest: (President) /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the charter of the Corporation, the Board of Directors has duly divided and classified 1,000,000 shares of the Preferred Stock of the Corporation into a series designated Cumulative Preferred Stock, Floating Rate Series B, and has provided for the issuance of such series. SECOND: The terms of the Cumulative Preferred Stock, Floating Rate Series B, as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 1. Cumulative Preferred Stock Floating Rate Series B: 1,000,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as Cumulative Preferred Stock,Floating Rate Series B (hereinafter sometimes called the "Floating Rate Series B Stock"). The Floating Rate Series B Stock shall be of a stated value of $50 per share (the "stated value"). The term "Articles of Incorporation" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends: Dividend rates on the shares of Floating Rate Series B Stock shall be: (i) for the period (the "Initial Dividend Period") from the date of their original issue to and including July 1, 1984, at a rate per annum of the stated value thereof equal to 10.68%, and (ii) for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which quarterly dividend periods shall commence on January 1, April 1, July 1 and October 1 in each year and shall end on and include the day next preceding the first day of the next quarterly dividend period, at a rate per annum of the stated value thereof equal to 1.60% below the Applicable Rate (as defined in paragraph 3) in respect of such quarterly dividend period; provided, however, that the dividend rate per annum on the shares of Floating Rate Series B Stock for any Quarterly Dividend Period shall in no event be less than 6.50% per annum or greater than 12.50% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board of Directors, on the first day of January, April, July and October of each year, commencing July 1, 1984. If in any Dividend Period dividends shall not have been paid or declared and set apart for payment on all outstanding shares of Floating Rate Series B Stock for such Dividend Period and for all preceding Dividend Periods from and after the first day from which dividends are cumulative at the respective rates per annum specified for such Dividend Periods in the second preceding sentence, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Floating Rate Series B Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Floating Rate Series B Stock with respect to the payment of dividends; provided , however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the resolutions providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding Floating Rate Series B Stock shall have been paid or declared and set apart for payment. 3. Definition of Applicable Rate, etc.: The "Applicable Rate" for any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason (i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be the higher of whichever two of such Rates can be so determined; (ii) either only the Treasury Bill Rate or only the Ten Year Constant Maturity Rate or only the Twenty Year Constant Maturity Rate can be determined for any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period shall be whichever such Rate can be so determined; or (iii) neither the Treasury Bill Rate nor the Ten Year Constant Maturity Rate nor the Twenty Year Constant Maturity Rate can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as defined below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating Rate Series B Stock is being determined. In the event that the Federal Reserve board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period) for all of the U.S. Treasury bills then having maturities of not less that 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. Except as provided below in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating Rate Series B Stock is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year constant Maturity Rate for such dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. Except as provided below in this paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on the Floating Rate Series B Stock is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. The amount of dividends payable for each Quarterly Dividend Period shall be computed by annualizing the dividend rate for such Dividend Period and dividing by four. The amount of dividends payable for the Initial Dividend Period or any Dividend Period shorter than a full Quarterly Dividend Period shall be computed on the basis of 30-day months, a 360-day year and the actual number of days elapsed in such Dividend Period. The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of the Floating Rate Series B Stock. For purposes of this Section, the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). 4. Voting Rights: (i) The holders of the Floating Rate Series B Stock shall have the voting power and rights set forth and referred to in this paragraph 4 and in paragraph 7, and shall have no other voting power or rights except as otherwise from time to time required by law. (ii) Whenever dividends on the Floating Rate Series B Stock shall be unpaid as a whole or in part for six consecutive Dividend periods, then at the annual meeting of stockholders next following omission of the sixth successive quarterly dividend or any part thereof and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Floating Rate Series B Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Floating Rate Series B Stock, either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 4 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of holders of Floating Rate Series B Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 4 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the Floating Rate Series B Stock. At elections for such Directors, each holder of the Floating Rate Series B Stock shall be entitled to one vote for each share held. The holders of Floating Rate Series B Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders, next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 4 of the holders of Floating Rate Series B Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 4 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Floating Rate Series B Stock remain outstanding, the affirmative vote or consent of the holders of at least two-thirds of the shares of Floating Rate Series B Stock outstanding at the time given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined below in this paragraph 4) to the Floating Rate Series B Stock, or (b) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the Floating Rate Series B Stock unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on the Floating Rate Series B Stock and all outstanding shares of stock ranking on a parity (as that term is defined below in this paragraph 4) with the Floating Rate Series B Stock (the Floating Rate Series B Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of the Floating Rate Series B Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock, the Corporation's $2.125 Cumulative Preferred Stock or $3.125 Cumulative Preferred Stock or Cumulative Preferred Stock, Floating Rate Series A or the Floating Rate Series B Stock or the creation and issuance of other series of Preferred Stock, in each case ranking on a parity with or junior to the Floating Rate Series B Stock with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Floating Rate Series B Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 6 to effect such redemption. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the Floating Rate Series B Stock as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Floating Rate Series B Stock; and (ii) on a parity with the Floating Rate Series B Stock as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of the Floating Rate Series B Stock, if the holders of such class of stock and the Floating Rate Series B stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. 5. Liquidation: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Floating Rate Series B Stock shall have preference and priority over the Common Stock for payment out of the assets of the Corporation or proceeds thereof, whether from capital or surplus, of $50 per share together with the amount of any dividends accrued and unpaid thereon, and after such payment the holders of Floating Rate Series B Stock shall be entitled to no other payments. If, in such case, the assets of the Corporation or proceeds thereof shall be insufficient to make the full liquidating payment of $50 per share and accrued and unpaid dividends on the Floating Rate Series B Stock and liquidating payments on any other outstanding series of Parity Stock (including accrued and unpaid dividends, if any), then such assets and proceeds shall be distributed among the holders of the Floating Rate Series B Stock and any other outstanding series of Parity Stock ratably in accordance with the respective amounts which would be payable on all series of Parity Stock (including accrued and unpaid dividends, if any) if all such liquidating amounts payable were paid in full. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation. 6. Redemption: The shares of Floating Rate Series B Stock may not be redeemed prior to April 1, 1989. From April 1, 1989 through and including March 31, 1994, the Floating Rate Series B Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at a redemption price equal to $51.50 per share plus accrued and unpaid dividends to the date of redemption. After March 31, 1994, the Floating Rate Series B Stock may be redeemed, at the option of the Corporation, as a whole or in part, at any time or from time to time, at a redemption price equal to $51.50 per share plus accrued and unpaid dividends to the date of redemption. At the option of the Corporation, shares of Floating Rate Series B Stock redeemed or otherwise acquired may be restored to the status of authorized but unissued shares of Preferred Stock. In the case of any redemption, the Corporation shall give notice of such redemption to the holders of Floating Rate Series B Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Floating Rate Series B Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not more than 60 days and not less than 30 days previous to the date fixed for redemption. In the event such notice is not given to any stockholder such failure to give notice shall not affect the notice given to other stockholders. If less than the whole amount of outstanding Floating Rate Series B Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price), all dividends upon the Floating Rate Series B Stock so called for redemption shall cease to accrue, and all rights of the holders of said Floating Rate Series B Stock as stockholders in the Corporation, except the right to receive the redemption price plus dividends accrued and unpaid to the date of redemption (without interest) upon surrender of the certificate representing the Floating Rate Series B Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Floating Rate Series B Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of 6 years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Floating Rate Series B Stock so called for redemption shall look only to the Corporation for payment of the redemption price. 7. Limitation on Merger and Sale of Assets and on Disposition of the Voting Stock of the Bank: So long as any shares of Floating Rate Series B Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of Floating Rate Series B Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of the Floating Rate Series B Stock in exchange for the Floating Rate Series B Stock shares of preferred stock having at least the same relative rights and preferences as the Floating Rate Series B Stock (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 7, holders of all series of Parity Stock which are granted such voting rights (of which the Floating Rate Series B Stock is the fourth series) shall vote as a class, and each holder of Floating Rate Series B Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the Floating Rate Series B Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 6 to effect such redemption. 8. Parity Stock: So long as any shares of Floating Rate Series B Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends in respect of all such shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation, ratably in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 9. For the Purposes Hereof: (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation and shares called for redemption pursuant to paragraph 6, funds for redemption of which shall have been deposited in trust pursuant to paragraph 6. (ii) The amount of dividends "accrued" on any share of Floating Rate Series B Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Floating Rate Series B Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the stated value of such share at the dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on March 7, 1984. REPUBLIC NEW YORK CORPORATION By /s/ Jeffrey C. Keil Jeffrey C. Keil Attest: (President) /s/ Ernest Ginsberg Ernest Ginsberg (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the Charter of the Corporation, the Board of Directors has duly divided and classified 1,250 shares of the Preferred Stock of the Corporation into two series of designated Dutch Auction Rate Transferable SecuritiesTM Preferred Stock, Series A and B, and has provided for the issuance of each such series. SECOND: The terms of the Dutch Auction Rate Transferable SecuritiesTM Preferred Stock, Series A and B, as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 625 shares of Preferred Stock of the Corporation, without par value, shall constitute a series of Preferred Stock designated as "Dutch Auction Rate Transferable Securities Preferred Stock, Series A", hereinafter referred to as the "Series A DARTS". 625 shares of Preferred Stock of the Corporation, without par value, shall constitute a series of Preferred Stock designated as "Dutch Auction Rate T Securities Preferred Stock, Series B", hereinafter referred to as the "Series B DARTS". The Series A DARTS and the Series B DARTS are herein referred to collectively as the "DARTS". All shares of each series of DARTS shall be identical with each other in all respects. The DARTS shall be of a stated value of $100,000 per share (the "stated value"). 1. Definitions. Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural: (a) "60-day 'AA' Composite Commercial Paper Rate", on any date, means (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by Standard & Poor's Corporation ("S&P"), or the equivalent of such rating by S&P or another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business on the Business Day immediately preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the 60-day "AA" Composite Commercial Paper Rate, the 60-day "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. If the Board of Directors of the Corporation shall make the adjustment referred to in the third sentence of paragraph 2(b)(i), then (i) if the Dividend Period Days shall be fewer than 70 days, such rate shall be the interest equivalent of the 60-day rate on such commercial paper; (ii) if the Dividend Period Days shall be 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial paper; and (iii) if the Dividend Period Days shall be 85 or more days but fewer than 98 days, such rate shall be the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given day's maturity shall be equal to the quotient of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. If the rate obtained by the Trust Company is quoted on another basis, the Trust Company shall convert the quoted rate to its interest equivalent after consultation with the Corporation as to the method of such conversion. (b) "Applicable Rate" means the rate per annum at which dividends are payable on the shares of a particular series of DARTS for any Dividend Period. (c) "Auction" means each periodic operation of the Auction Procedures. (d) "Auction Procedures" means the procedures for conducting Auctions set forth in paragraph 6 below. (e) "Business Day" means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or other day on which banks in The City of New York are authorized by law to close. (f) "Code" means the Internal Revenue Code of 1954, as amended. (g) "Commercial Paper Dealers" means Salomon Brothers Inc, Merrill Lynch, Pierce, Fenner & Smith, Lehman Commercial Paper Incorporated and Bear, Stearns & Co. Inc., or, in lieu of any thereof, their respective affiliates or successors. (h) "Date of Original Issue" means the date on which the Corporation originally issues shares of Series A DARTS or Series B DARTS, as the case may be. (i) "Divided Payment Date" has the meaning set forth in paragraph 2(b)(i) below. (j) "Dividend Period" has the meaning set forth in paragraph 2(c)(i) below. (k) "Dividend Period Days" has the meaning set forth in paragraph 2(b)(i) below. (l) "Holder" means the holder of shares of the Corporation's Series A DARTS and Series B DARTS, as the case may be, as the same appears on the Stock Books of the Corporation. (m) "Initial Dividend Payment Date" has the meaning set forth in paragraph 2(b)(i) below. (n) "Initial Dividend Rate" has the meaning set forth in paragraph 2(c)(i) below. (o) "Initial Dividend Period" has the meaning set forth in paragraph 2(c)(i) below. (p) "Minimum Holding Period" has the meaning set forth in paragraph 2(b)(i) below. (q) "Notice of Redemption" has the meaning set forth in paragraph 4(c) below. (r) "Parity Stock" has the meaning set forth in Section 5(c)(ii) below. (s) "Stock Books" means the stock transfer books of the Corporation maintained by the Trust Company. (t) "Subsequent Dividend Period" has the meaning specified in paragraph 2(c)(i) below. (u) "Substitute Commercial Paper Dealer" means Goldman, Sachs & Co. and Morgan Stanley & Co., Incorporated, or, in lieu of any thereof, their respective affiliates or successors. (v) "Trust Company" means Manufacturers Hanover Trust Company unless and until another bank or trust company shall have been so appointed by a resolution of the Board of Directors of the Corporation. 2. Dividends. (a) The Holders shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available therefor, cumulative cash dividends at the Applicable Rate per annum, determined as set forth below, and no more, payable on the respective dates set forth below. (b) (i) Dividends on shares of DARTS, at the Applicable Rate per annum, shall accrue from the Date of Original Issue and shall be payable commencing as follows: Series A DARTS May 28, 1986 Series B DARTS June 3, 1986 and on each Tuesday that is the last day of successive 49-day periods thereafter; provided, however, that if any of such Tuesday, the Monday preceding such Tuesday or the Wednesday following such Tuesday is not a Business Day, then (i) the Dividend Payment Date will be the first Business Day after such Tuesday that is immediately followed by a Business Day and is preceded by a Business Day that is the preceding Monday or a day after such Monday, or (ii) if the Securities Depository shall make available to its participants and members in funds immediately available in The City of New York on Dividend Payment Dates, the amount due as dividends on such Dividend Payment Dates (and the Securities Depository shall have so advised the Trust Company), then the Dividend Payment Date will be the first Business Day on or after such Tuesday that is preceded by a Business Day that is the preceding Monday or a day after such Monday (each date of payment of dividends being herein referred to as a "Dividend Payment Date" and the first Dividend Payment Date for a particular series of DARTS being herein referred to as the "Initial Dividend Payment Date" for that series). Although any particular Dividend Payment Date may not occur on the originally scheduled Tuesday because of the above-mentioned provisos, the next succeeding Dividend Payment Date shall be, subject to such provisos, the seventh Tuesday following the originally designated Tuesday for the prior Dividend Period. Notwithstanding the foregoing, in the event of a change in law lengthening the minimum holding period (currently found in paragraph 246(c) of the Code) (the "Minimum Holding Period") required for taxpayers to be entitled to the dividends-received deduction on preferred stock held by non-affiliated corporations (currently found in paragraph 243 (a) of the Code), the Board of Directors of the Corporation or a duly designated Committee thereof shall adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of days (such number of days without giving effect to the provisos in the first sentence of this paragraph 2(b)(i) being hereinafter referred to as "Dividend Period Days") in Dividend Periods commencing after the date of such change in law to equal or exceed the then-current Minimum Holding Period; provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then-current Minimum Holding Period and shall be evenly divisible by seven, and the maximum number of Dividend Period Days in no event shall exceed 98 days. Upon any such change in the number of Dividend Period Days as a result of a change in law, the Corporation shall mail notice of such change by first-class mail, postage prepaid, to the Trust Company and to each Holder at such Holder's address as the same appears on the Stock Books of the Corporation. (ii) Each dividend shall be paid to the Holder of shares of DARTS as its name appears on the Stock Books of the Corporation at the opening of business on the Business Day next preceding the Dividend Payment Date thereof. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, in the manner specified above. The persons entitled to such dividend payments shall be the Holders whose names appear on the Stock Books of the Corporation on a date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation. (c) (i) The dividend rate (the "Initial Dividend Rate") on shares of DARTS during the period from and after the Date of Original Issue to the Initial Dividend Payment Date (the "Initial Dividend Period") shall be 4-7/8% per annum. Commencing on the Initial Dividend Payment Date, the dividend rate on shares of each series of DARTS for each subsequent dividend period (hereinafter referred to as a "Subsequent Dividend Period", the Initial Dividend Period or any Subsequent Dividend Period being hereinafter referred to as a "Dividend Period"), which Subsequent Dividend Period shall commence on the last day of the preceding dividend Period and shall end on the next Dividend Payment Date, shall be equal to the rate per annum that results from implementation of the Auction Procedures. (ii) The amount of dividends per share of a series of DARTS payable for any Dividend Period or part thereof shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such Dividend Period or part thereof (calculated by counting the first day thereof but excluding the last day thereof) such share was outstanding and the denominator of which shall be 360 and multiplying the amount so obtained by $100,000. (d) (i) Except as hereinafter provided, no dividends shall be declared or paid or set apart for payment on the shares of any series of DARTS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of DARTS of all series through the most recent Dividend Payment Date. Holders of shares of a series of DARTS shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the shares of that series of DARTS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the shares of DARTS that may be in arrears. (ii) If in any Dividend Period full cumulative dividends shall not have been paid or declared and set apart for payment on all outstanding shares of DARTS for such Dividend Period and for all preceding Dividend Periods, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the DARTS with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the DARTS with respect to the payment of dividends; provided, however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the Articles Supplementary providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding DARTS shall have been paid or declared and set apart for payment. (iii) Any dividend payment made on shares of any Series of DARTS shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of DARTS of that series. 3. Liquidation Rights. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Holders of the DARTS shall have preference and priority over the Common Stock for payment out of the assets of the Corporation or proceeds thereof, whether from capital or surplus, of $100,000 per share together with the amount of any dividends accrued and unpaid thereon, and after such payment the Holders of DARTS shall be entitled to no other payments. If, in such case, the assets of the Corporation or proceeds thereof shall be insufficient to make the full liquidating payment of $100,000 per share and accrued and unpaid dividends on the DARTS and liquidating payments on any other outstanding series of Parity Stock (including accrued and unpaid dividends, if any), then such assets and proceeds shall be distributed among the Holders of the DARTS and the holders of any other outstanding series of Parity Stock ratably in accordance with the respective amounts which would be payable on all series of Parity Stock (including accrued and unpaid dividends, if any) if all such liquidating amounts payable were paid in full. A consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation. 4. Redemption. The DARTS shall be redeemable by the Corporation as provided below: (a) (i) At its option, the Board of Directors of the Corporation or a duly designated Committee thereof may, out of funds legally available therefor, upon at least 30 days, but not more than 60 days, Notice of Redemption pursuant to clause (c) of this paragraph 4, redeem the shares of any series of DARTS or of all DARTS as a whole or from time to time in part on any Dividend Payment Date at a redemption price equal to (A) $103,000 per share if redeemed on or before the first anniversary of the Date of Original Issue; (B) $102,000 per share if redeemed thereafter and on or before the second anniversary of the Date of Original Issue; (C) $101,000 per share if redeemed thereafter and on or before the third anniversary of the Date of Original Issue; or (D) $100,000 per share if redeemed thereafter; plus, in each case, an amount equal to accrued and unpaid dividends on such shares (whether or not earned or declared) to the redemption date (ii) The shares of any series of DARTS may also be redeemed, at the option of the Board of Directors of the Corporation or a duly designated Committee thereof, as a whole but not in part, on any Dividend Payment Date, upon at least 30 days, but not more than 60 days, Notice of Redemption pursuant to clause (c) of this paragraph 4, at a redemption price of $100,000 per share, plus an amount equal to accrued and unpaid dividends (whether or not earned or declared) on such shares to the redemption date, if the Applicable Rate fixed for the Dividend Period ending on such Dividend Payment Date shall equal or exceed the 60-day "AA" Composite Commercial Paper Rate on the date of determination of such Applicable Rate. (b) Notwithstanding any other provision of this paragraph 4, shares of a particular series of DARTS may not be redeemed, other than as a whole, unless all accrued and unpaid dividends on all outstanding shares of the series shall have been paid or are being contemporaneously paid or set apart for payment. In the event that less than all the outstanding shares of a series of DARTS are to be redeemed, the shares to be redeemed shall be selected by lot or such other method as the Corporation shall deem fair and equitable. (c) Whenever shares of DARTS are to be redeemed, the Corporation shall mail a notice ("Notice of Redemption") by first-class mail, postage prepaid, to each Holder of record of shares of DARTS to be redeemed and to the Trust Company. A Notice of Redemption shall be addressed to the Holder at the address of the Holder appearing on the Stock Books of the Corporation maintained by the Trust Company. The Notice of Redemption shall also be published in the Wall Street Journal. The Notice of Redemption shall include a statement of (i) the redemption date, (ii) the redemption price, (iii) the number of shares of each series of DARTS to be redeemed, (iv) the place or places where shares of DARTS are to be surrendered for payment of the redemption price, (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi) the provision under which redemption is made. No defect in the Notice of Redemption or in the mailing or publication thereof shall affect the validity of the redemption proceedings, except as required by law. If Notice of Redemption shall have been given as aforesaid and the Corporation shall have deposited a sum sufficient to redeem the shares of DARTS as to which Notice of Redemption has been given with the Trust Company, with irrevocable instructions and authority to pay the redemption price to the Holders thereof, or if no such deposit is made, then upon such date fixed for redemption (unless the Corporation shall default in making payment of the redemption price), all rights of the Holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate, and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the Trust Company the interest, if any, on such moneys deposited with it and the Holders of any shares so redeemed shall have no claim to any such interest. In case the Holder of any shares so called for redemption shall not claim the redemption price for his shares within one year after the date of redemption, the Trust Company shall, upon demand, pay over to the Corporation such amount remaining on deposit and the Trust Company shall thereupon be relieved of all responsibility to the Holder of such shares and such Holder of the shares of DARTS so called for the redemption shall look only to the Corporation for the payment thereof. (d) Except in an Auction and except as set forth above with respect to redemptions, nothing contained in these Articles Supplementary shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of DARTS in privately negotiated transactions or in the over- the-counter market or otherwise; provided that the Corporation is current in the payment of dividends on all of the outstanding series of DARTS. (e) Shares of DARTS that have been redeemed, purchased or otherwise acquired by the Corporation are not subject to reissuance and shall be cancelled. 5. Voting Rights. (a) Holders of DARTS shall have no voting rights, either general or special except as expressly required by applicable law, the Charter and as specified in this paragraph 5. (b) Whenever dividends on any series of DARTS shall be unpaid as a whole or in part for six consecutive dividend quarters, then at the annual meeting of stockholders next following omission of the last successive quarterly dividend or any part thereof in such period and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the series of DARTS have been paid or declared and a sum sufficient for payment has been set aside, the Holders of the series of DARTS either alone or together with the Holders of one or more other series of DARTS or the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 5 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of Holders of DARTS of any series to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 5 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the series of DARTS. At elections for such Directors, each Holder of DARTS shall be entitled to 2,000 votes for each share held. The Holders of DARTS shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 5 of the Holders of DARTS and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 5 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated, and the Board of Directors shall be decreased by two Directors. (c) So long as any shares of DARTS remain outstanding, the affirmative vote of the Holders of at least two-thirds of the votes of any series of DARTS outstanding at the time given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined below in this paragraph 5) to such series of DARTS, or (ii) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with such series of DARTS unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on such series of DARTS and all outstanding shares of stock ranking on a parity (as that term is defined below in this paragraph 5) with such series of DARTS (such series of DARTS and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (iii) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of such series of DARTS or of the Holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock or Cumulative Preferred Stock, Floating Rate Series A or the Floating Rate Series B Stock or DARTS or the creation and issuance of other series of Preferred Stock including DARTS, in each case ranking on a parity with or junior to such series of DARTS with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply as to any series of DARTS if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of such series of DARTS shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 4 to effect such redemption. Any class or classes of stock of the Corporation shall be deemed to rank (A) prior to any series of DARTS as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the Holders of such series of DARTS; and (B) on a parity with any series of DARTS as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from those of any series of DARTS, if the holders of such class of stock and any series of DARTS shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. In connection with the exercise of the voting rights contained in this paragraph 5(c), each Holder of DARTS shall have 2,000 votes for each share of stock held. (d) So long as any shares of DARTS remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, by resolution adopted at a meeting at which the Holders of shares of DARTS (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of DARTS in exchange for the DARTS shares of preferred stock having at least the same relative rights and preferences as the DARTS (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 5(d), holders of all series of Parity Stock which are granted such voting rights shall vote as a class, and each Holder of DARTS shall have 2,000 votes for each share of stock held, and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the DARTS shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 4 to effect such redemption. 6. Auction Procedures. (a) Certain definitions. Capitalized terms not defined in this paragraph 6 shall have the respective meanings specified in paragraphs 1 through 5 above. As used in this paragraph 6, the following terms shall have the following meanings, unless the context otherwise requires: (i) "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of, or under common control with the Corporation. (ii) "Agent Member" shall mean the member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter. (iii) "Auction" shall mean the periodic operation of the procedures set forth in this paragraph 6. (iv) "Auction Date" shall mean the Business Day next preceding a Dividend Payment Date. (v) "Available DARTS" shall have the meaning specified in paragraph 6(d)(i) below. (vi) "Bid" shall have the meaning specified in paragraph 6(b)(i) below. (vii) "Bidder" shall have the meaning specified in paragraph 6(b)(i) below. (viii) "Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in this paragraph 6, that has been selected by the Corporation and has entered into a Broker- Dealer Agreement with the Trust Company that remains effective. (ix) "Broker-Dealer Agreement" shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this paragraph 6. (x) "DARTS" shall mean Series A and Series B DARTS being auctioned pursuant to this paragraph 6. (xi) "Existing Holder", when used with respect to shares of DARTS, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of DARTS in the records of the Trust Company. (xii) "Hold Order" shall have the meaning specified in paragraph 6(b)(i) below. (xiii) "Maximum Applicable Rate", on any Auction Date, shall mean the percentage of the 60-day "AA" Composite Commercial Paper Rate on such Auction Date, determined as set forth below based on the prevailing rating of shares of DARTS in effect at the close of business on such Auction Date: Prevailing Rating Percentage AA/aa or Above............................ 110% A/a....................................... 120% BBB/baa................................... 130% Below BBB/baa............................. 150% For purposes of this definition, the "prevailing rating" of shares of DARTS shall be (i) AA/aa or Above, if shares of DARTS have a rating of AA- or better by Standard & Poor's Corporation or its successor ("S&P") or aa3 or better by Moody's Investors Service, Inc., or its successor ("Moody's"), or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or Above, then A/a if the shares of DARTS have a rating of A- or better and lower than AA- by S&P or a3 or better and lower then aa3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa, if the shares of DARTS have a rating of BBB- or better and lower than A-by S&P or baa3 or better and lower than a3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The Company shall take all reasonable action necessary to enable S&P and Moody's to provide a rating for DARTS. If either S&P or Moody's shall not make such a rating available, or neither S&P nor Moody's shall make such a rating available, Salomon Brothers Inc, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Shearson Lehman Brothers Incorporated and Bear, Stearns & Co. Inc. and/or their successors shall select a nationally recognized securities rating agency or two nationally recognized securities rating agencies to act as substitute rating agency or substitute rating agencies, as the case may be. (xiv) "Order" shall have the meaning specified in paragraph 6(b)(i) below. (xv) "Outstanding" shall mean, as of any date, shares of DARTS theretofore issued by the Corporation except, without duplication, (A) any shares of DARTS theretofore cancelled or delivered to the Trust Company for cancellation, or redeemed by the Corporation or as to which a notice of redemption shall have been given by the Corporation, (B) any shares of DARTS as to which the Corporation or any Affiliate thereof shall be an Existing Holder and (C) any shares of DARTS represented by any certificate in lieu of whic certificate has been executed and delivered by the Corporation. (xvi) "Person" shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (xvii) "Potential Holder" shall mean any Person, including any Existing Holder, (A) who shall have executed a Purchaser's Letter and (B) who may be interested in acquiring shares of DARTS (or, in the case of an Existing Holder, additional shares of DARTS). (xviii) "Purchaser's Letter" shall mean a letter addressed to the Corporation, the Trust Company and a Broker- Dealer in which a Person agrees, among other things, to offer to purchase, purchase, offer to sell and/or sell shares of DARTS as set forth in this paragraph 6. (xix) "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of DARTS. (xx) "Sell Order" shall have the meaning specified in paragraph 6(b)(i) below. (xxi) "Submission Deadline" shall mean 12:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time. (xxii) "Submitted Bid" shall have the meaning specified in paragraph 6(d)(i) below. (xxiii) "Submitted Hold Order" shall have the meaning specified in paragraph 6(d)(i) below. (xxiv) "Submitted Order" shall have the meaning specified in paragraph 6(d)(i) below. (xxv) "Submitted Sell Order" shall have the meaning specified in paragraph 6(d)(i) below. (xxvi) "Sufficient Clearing Bids" shall have the meaning specified in paragraph 6(d)(i) below. (xxvii) "Winning Bid Rate" shall have the meaning specified in paragraph 6(d)(i) below. (b) Orders by Existing Holders and Potential Holders. (i) On or prior to each Auction Date: (A) each Existing Holder may submit to a Broker-Dealer information as to: (1) the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (2) the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or (3) the number of Outstanding shares, if any, of DARTS held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (B) each Broker-Dealer, using a list of Potential Holders that shall be maintained in good faith for the purpose of conducting a competitive Auction, shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding shares, if any, of DARTS which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker- Dealer of information referred to in clause (A) or (B) of this paragraph 6(b)(i) is hereinafter referred to as an "Order" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an Order containing the information referred to in clause (A)(1) of this paragraph 6(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 6(b)(i) is hereinafter referred to as a "Bid"; and an Order containing the information referred to in clause (A)(3) of this paragraph 6(b)(i) is hereinafter referred to as a "Sell Order." (ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (l) the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate specified in such Bid; or (2) such number or a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to the rate specified therein; or (3) a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(ii)(C) if such specified rate shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist. (B) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (1) the number of Outstanding shares of DARTS specified in such Sell Order; or (2) such number or a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(ii)(C) if Sufficient Clearing Bids do not exist. (C) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (1) the number of Outstanding shares of DARTS specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate specified in such Bid; or (2) such number or a lesser number of Outstanding shares of DARTS to be determined as set forth in paragraph 6(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to the rate specified therein. (c) Submission of Orders by Broker-Dealers to Trust Company. (i) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order: (A) the name of the Bidder placing such Order; (B) the aggregate number of Outstanding shares of DARTS that are the subject of such Order; (C) to the extent that such Bidder is an Existing Holder: (1) the number of Outstanding shares, if any, of DARTS subject to any Hold Order placed by such Existing Holder; (2) the number of Outstanding shares, if any, of DARTS subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and (3) the number of Outstanding shares, if any, of DARTS subject to any Sell Order placed by such Existing Holder. (D) to the extent such Bidder is a Potential Holder, the rate specified in such Potential Holder's Bid. (ii) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one-thousandth (.001) of 1%. (iii) If an Order or Orders covering all of the Outstanding shares of DARTS held by an Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of DARTS held by such Existing Holder and not subject to Orders submitted to the Trust Company. (iv) If one or more Orders covering in the aggregate more than the number of Outstanding shares of DARTS held by an Ex Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority: (A) any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Outstanding shares of DARTS held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of shares of DARTS subject to such Hold Orders exceeds the number of Outstanding shares of DARTS held by such Existing Holder, the number of shares of DARTS subject to such Hold Orders shall be reduced pro rata so that such Hold Orders shall cover the number of Outstanding shares of DARTS held by such Existing Holder; (B) (1) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A); (2) subject to clause (1) above, if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of DARTS subject to such Bids is greater than such excess, the number of Outstanding shares of DARTS subject to such Bids shall be reduced pro rata so that such Bids shall cover the number of Outstanding shares of DARTS equal to such excess; and (3) subject to clause (1) above, if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates and in any such event the number, if any, of such Outstanding shares subject to Bids not valid under this clause (B) shall be treated as the subject of a Bid by a Potential Holder; and (C) any Sell Order shall be considered valid up to and including the excess of the number of Outstanding shares of DARTS held by such Existing Holder over the number of Outstanding shares of DARTS subject to Hold Orders referred to in paragraph 6(c)(iv)(A) and Bids referred to in paragraph 6 (c)(iv)(B). (v) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and shares of DARTS therein specified (d) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (i) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as a "Submitted Order") and shall determine: (A) the excess of the total number of Outstanding shares of DARTS over the number of Outstanding shares of DARTS that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available DARTS"); (B) from the Submitted Orders whether: (1) the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Applicable Rate exceeds or is equal to the sum of: (2) (a) the number of Outstanding shares of DARTS that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Applicable Rate, and (b) the number of Outstanding shares of DARTS that are subject to Submitted Sell Orders (if such excess or such equality exists (other than because the number of Outstanding shares of DARTS in clauses (a) and (b) above are each zero because all the Outstanding shares of DARTS are the subject of Submitted Hold Orders), such Submitted Bids in clause (1) above being hereinafter referred to collectively as "Sufficient Clearing Bids"); and (C) if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (1) each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of DARTS that are the subject of such Submitted Bids, and (2) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to purchase the shares of DARTS that are the subject of such Submitted Bids, would result in the number of shares subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate being at least equal to the Available DARTS. (ii) Promptly after the Trust company has made the determinations pursuant to paragraph 6(d)(i), the Trust Company shall advise the Corporation of the Maximum Applicable Rate and the Minimum Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (A) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; (B) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of DARTS are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Applicable Rate; or (C) if all of the Outstanding shares of DARTS are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be 59% of the 60-day "AA" Composite Commercial Paper Rate on the date of the Auction. (e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to paragraph 6(d)(i), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below: (i) If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 6(e)(ii) and 6(e)(iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: (A) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Outstanding shares of DARTS that are the subject of such Submitted Bid; (B) the Submitted Bid of each of the Existing Holders specifying any rate that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid; (C) the Submitted Bid of each of the Potential Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted; (D) the Submitted Bid of each of the Existing Holders specifying a rate that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid, unless the number of Outstanding shares of DARTS subject to all such Submitted Bids shall be greater than the number of Outstanding shares of DARTS ("remaining shares") equal to the excess of the Available DARTS over the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B) and 6(e)(i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be required to sell Outstanding shares of DARTS, but only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid and (2) the number of shares of DARTS obtained by multiplying (x) the number of remaining shares by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and (E) the Submitted Bid of each of the Potential Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Outstanding shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(i)(B), 6(e)(i)(C) and 6(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding shares of DARTS subject to such Submitted Bids made by all such Potential Holders that specified rates equal to the Winning Bid Rate. (ii) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of DARTS are subject to Submitted Hold Orders), subject to the provisions of paragraphs 6(e)(iii) and 6(e)(iv), Submitted Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: (A) the Submitted bid of each Existing Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be rejected, thus entitling such Existing Holder to continue to hold the Outstanding shares of DARTS that are the subject of such Submitted Bid; (B) the Submitted Bid of each Potential Holder specifying any rate that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding shares of DARTS that are the subject of such Submitted Bid; and (C) the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Applicable Rate shall be accepted and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount equal to the difference between (1) the number of Outstanding shares of DARTS then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of shares of DARTS obtained by multiplying (x) the difference between the Available DARTS and the aggregate number of Outstanding shares of DARTS subject to Submitted Bids described in paragraphs 6(e)(ii)(A) and 6(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Outstanding shares of DARTS held by such Existing holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Outstanding shares of DARTS subject to all such Submitted Bids and Submitted Sell Orders. (iii) If, as a result of the procedures described in paragraph 6(e)(i), any Potential Holder would be entitled or required to purchase less than a whole share of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate shares of DARTS for purchase among Potential Holders so that only whole shares of DARTS are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of DARTS on such Auction Date. (iv) If, as a result of the procedures described in paragraph 6(e)(i) or 6(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of DARTS on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of shares of DARTS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of Outstanding shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of DARTS. (v) Based on the results of each Auction, the Trust Company shall determine the aggregate number of Outstanding shares of DARTS to be purchased and the aggregate number of Outstanding shares of DARTS to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders, and, with respect to each Broker-Dealer, to the extent that such aggregate number of Outstanding shares to be purchased and such aggregate number of Outstanding shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Outstanding shares of DARTS. (f) Miscellaneous. The Board of Directors may interpret the provisions of this paragraph 6 to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Existing Holders of DARTS. An Existing Holder (A) may sell, transfer or otherwise dispose of shares of DARTS only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 6 or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises the Trust Company of such transfer and (B) except as otherwise provided by law, shall have the ownership of the shares of DARTS held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Corporation nor any Affiliate shall submit an Order in any Auction. All of the outstanding DARTS shall be represented by a certificate registered in the name of the nominee of the Securities Depository. (g) Headings of Subdivisions. The headings of the various subdivisions of this paragraph 6 are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 7. Parity Stock. So long as any shares of DARTS shall remain outstanding, in case the stated dividends or amounts payable on liquidation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends in respect of all such shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation, ratably in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its Senior Vice President and its corporate seal to be hereunto affixed and attested by its Corporate Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on March 27, 1986. REPUBLIC NEW YORK CORPORATION By /s/ Thomas F. Robards Attest: Thomas F. Robards (Senior Vice President) /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Corporate Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the Charter of the Corporation, the Board of Directors has duly divided and classified 500 shares of the Preferred Stock of the Corporation into a series designated Money Market Cumulative PreferredTM Stock and has provided for the issuance of such series. SECOND: The terms of the Money Market Cumulative PreferredTM Stock as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: PART I 1. Designation and Number of Shares. (a) 500 shares of Preferred Stock of the Corporation, without par value, shall constitute a series of Preferred Stock designated as "Preferred Stock," hereinafter referred to as the "MMP." All shares of the MMP shall be identical with each other in all respects. The MMP shall be of a stated value of $100,000 per share (the "stated value"). (b) All shares of MMP redeemed or purchased by the Corporation shall be retired and cancelled and shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series, and may thereafter be issued, but not as shares of MMP. 2. Dividends. (a) The Holders (as defined in Section 7 of this Part I) shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation (as defined in Section 7 of this Part I), out of funds legally available therefor, cumulative cash dividends at the Applicable Rate (as defined in subparagraph (c)(i) of this Section 2) per annum, determined as set forth in subparagraph (c)(i) of this Section 2, and no more, payable on the respective dates set forth in subparagraph (b)(i) of this Section 2. (b) (i) Dividends on shares of MMP, at the Applicable Rate per annum, shall accrue from the Date of Original Issue (as defined in Section 7 of this Part I) and shall be payable commencing on Monday, September 14, 1987, and on each succeeding seventh Monday thereafter except that (1) if the Monday that otherwise would be the Dividend Payment Date is not a Business Day, or the Monday that otherwise would be the Dividend Payment Date is succeeded by a Tuesday that is not a Business Day, then the dividend Payment Date shall be the next succeeding Business Day that is immediately succeeded by a Business Day, provided that (2) if the Securities Depositary shall make available to its participants and members, in funds immediately available in the City of New York on Dividend Payment Dates, the amount due as dividends on such Dividend Payment Dates (and the Securities Depositary shall have so advised the Trust Company), and if the Monday that otherwise would be the Dividend Payment Date is not a Business Day, then the Dividend Payment Date shall be the next succeeding Business Day, and provided, further, that (3) if the determination of the otherwise applicable Dividend Payment Date in the manner hereinabove provided would result in the Dividend Period commencing on said otherwise applicable Dividend Payment Date having less than the number of days constituting the minimum holding period (currently found in Section 246(c) of the Code) required for taxpayers to be entitled to the dividends received deduction on preferred stock held by non-affiliated corporations (currently found in Section 243(a) of the Code), then the Board of directors or a committee thereof shall make such adjustment to the next succeeding Dividend Payment Date as shall be necessary to result in such Dividend Period having the minimum number of days constituting the minimum holding period. Although any particular Dividend Payment Date may not occur on the originally scheduled Monday because of the exceptions discussed above, the next succeeding Dividend Payment Date shall be, subject to such exceptions, the seventh Monday following the originally designated Monday that would have been the Dividend Payment Date for the prior Dividend Period. Notwithstanding the foregoing, in the event of a change in law lengthening the minimum holding period (currently found in Section 246(c) of the Code) required for taxpayers to be entitled to the dividends received deduction on preferred stock held by non-affiliated corporations (currently found in Section 243(a) of the Code), the Board may adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of days (such number of days, without giving effect to the exceptions referred to above, being hereinafter referred to as "Dividend Period Days") in Dividend Periods commencing after the date of such change in law to equal or exceed the then current minimum holding period; provided that the number of Dividend Period Days shall not exceed by more than nine days the length of such then current minimum holding period and in no event shall exceed 98 days and that dividends shall continue to be payable on Mondays, subject to the exceptions discussed above. Each dividend payment date determined as provided above is herein referred to as a "Dividend Payment Date" and the first Dividend Payment Date is herein referred to as the "Initial Dividend Payment Date." If the Board of Directors of the Corporation determines to adjust the number of Dividend Period Days in the Dividend Periods for the MMP, the Corporation will mail notice of such change to all holders of shares of MMP so affected. (ii) So long as no Payment Default (as defined in Section 7 of this Part I) shall have occurred, the Corporation shall pay to the Trust Company not later than 12:00 noon, New York City time, on the Business Day next preceding each Dividend Payment Date an aggregate amount of funds available on the next Business Day in The City of New York, equal to the dividends to be paid to all Holders on such Dividend Payment Date. All such moneys shall be held in trust for the payment of such dividends by the Trust Company for the benefit of the Holders specified in subparagraph (b)(iii) of this Section 2. (iii) Each dividend shall be paid to the Holders as their names appear on the records of the Corporation on the Business Day next preceding the Dividend Payment Date thereof; provided, however, that if a Payment Default shall have occurred, such dividend shall be paid to the Holders as their names appear on the records of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the records of the Corporation on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation. (c) (i) The dividend rate on shares of MMP during the period from and after the Date of Original Issue to and including the Initial Dividend Payment Date (the "Initial Dividend Period") shall be 4.625% per annum. Commencing on the Initial Dividend Payment Date, the dividend rate on shares of MMP for each subsequent dividend period (herein referred to as a "Subsequent Dividend Period" and collectively as "Subsequent Dividend Periods"; and the Initial Dividend Period or any Subsequent Dividend Period being herein referred to as a "Dividend Period" and collectively as "Dividend Periods") thereafter, which Subsequent Dividend Periods shall commence on the day that is the last day of the preceding Dividend Period and shall end on and include the next succeeding Dividend Payment Date, shall be equal to the rate per annum that results from implementation of the Auction Procedures (as defined in Section 7 of this Part I); provided, however, that if an Auction with respect to any Dividend Period is not held for any reason, the dividend rate on the shares of MMP for such Dividend Period will be the Maximum Rate on the Auction Date with respect to such Dividend Period. Notwithstanding the foregoing, if a Payment Default shall have occurred prior to the first day of such Subsequent Dividend Period, the dividend rate for such Subsequent Dividend Period shall be a rate per annum equal to 175% of the 60-day "AA" Composite Commercial Paper Rate (as defined in Section 7 of this Part I) (the rate per annum at which dividends are payable on shares of MMP for any Dividend Period being herein referred to as the "Applicable Rate"). (ii) The amount of dividends per share payable on shares of MMP for any Dividend Period shall be computed by multiplying the Applicable Rate for such Dividend Period by a fraction the numerator of which shall be the number of days in such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) and the denominator of which shall be 360 and applying the rate obtained against $100,000 per share of MMP. (d) So long as any shares of MMP are outstanding, the Corporation shall not (a) declare or pay or set apart for payment any dividend or other distribution (other than dividends or distributions payable in shares of stock of the Corporation ranking junior to the MMP as to dividends and upon liquidation) for any period upon any stock of the Corporation ranking on a parity with, or any stock of the Corporation ranking junior to, such MMP as to dividends or upon liquidation or (b) redeem, purchase or otherwise acquire for any consideration any stock of the Corporation ranking on a parity with, or any stock of the Corporation ranking junior to, such MMP as to dividends or upon liquidation, unless, in either case, all dividends payable to holders of shares of MMP and to holders of any other stock of the Corporation ranking on a parity therewith as to dividends for its current dividend period and all past dividend periods have been paid, are contemporaneously being paid or have been declared and a sum sufficient for the payment thereof set aside for such payment, except that notwithstanding clause (a) above the Corporation may pay dividends on the shares of MMP and shares of stock of the Corporation ranking on a parity therewith as to dividends ratably in accordance with the sums which would be payable on such shares if all dividends, including accumulations, if any, were declared and paid in full. Holders of shares of MMP shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the MMP. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the MMP which may be in arrears. 3. Redemption. (a)(i)(A) The shares of MMP may be redeemed, at the option of the Corporation, as a whole or from time to time in part on the second Business Day next preceding any Dividend Payment Date at a redemption price of: (i) $103,000 per share of MMP if redeemed during the twelve months ending on July 23, 1988; (ii) $102,000 per share of MMP if redeemed during the twelve months ending on July 23, 1989; (iii) $101,000 per share of MMP if redeemed during the twelve months ending on July 23, 1990; and (iv) $100,000 per share of MMP if redeemed thereafter plus, in each case, an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption. (B) The shares of MMP are also redeemable at the option of the Corporation, as a whole but not in part, on any Dividend Payment Date at $100,000 per share of MMP, plus accrued and unpaid dividends thereon (whether or not earned or declared) to the date of redemption if the Applicable Rate for the Dividend Period ending on such Dividend Payment Date equals or exceeds the 60-day "AA" Composite Commercial Paper Rate on the date of determination of such Applicable Rate. (ii) If fewer than all of the outstanding shares of MMP are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors of the Corporation, and such shares shall be redeemed by lot or pro rata from the Holders in proportion to the number of such shares held by such Holders as may be determined by the Board of Directors of the Corporation or by any other method as may be determined by the Board of Directors of the Corporation in its sole discretion to be equitable. (b) So long as no Payment Default shall have occurred, the Corporation shall pay the applicable Redemption-Deposit Amount (as defined in Section 7 of this Part I) to the Trust Company, in funds available on the next Business Day in The City of New York on the Business Day next preceding any redemption date for disbursement to Holders as appropriate. All such moneys shall be held in trust by the Trust Company for the benefit of Holders of shares so to be redeemed. (c) In the event the Corporation shall redeem shares of MMP, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each Holder of record of the shares to be redeemed, at such Holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of MMP to be redeemed and, if fewer than all the shares held by such Holder are to be redeemed, the number of such shares to be redeemed from such Holder; (iii) the redemption price, plus the amount of accrued and unpaid dividends thereon (whether or not earned or declared) to the redemption date; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price plus such accrued and unpaid dividends; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (d) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares so called for redemption, plus an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption) dividends on the shares of MMP so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the Holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price plus an amount equal to such accrued and unpaid dividends) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price plus an amount equal to such accrued and unpaid dividends. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (e) Any shares of MMP which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (f) Notwithstanding the foregoing provisions of this Section 3, if any dividends on MMP are in arrears, no shares of MMP shall be redeemed, and the Corporation shall not purchase or otherwise acquire any shares of MMP; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of MMP pursuant to a purchase or exchange offer made on the same terms to all holders of MMP and any other shares of stock of the Corporation ranking on a parity therewith as to dividends. 4. Conversion or Exchange. The holders of shares of MMP shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. 5. Liquidation Rights. (a) Upon the dissolution, voluntary or involuntary liquidation or winding up of the Corporation, the Holders of the shares of MMP shall be entitled to receive out of the assets of the Corporation, available for distribution to stockholders before any payment or distribution of assets shall be made on the Common Stock or on any other class of stock of the Corporation ranking junior to the MMP upon liquidation, the amount of $100,000 per share plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (b) For the purposes of this Section 5, a voluntary or involuntary liquidation, dissolution or winding up of the Corporation shall include neither the consolidation or merger of the Corporation with or into any other corporation, nor any sale, lease or conveyance of all or any part of the property or business of the Corporation. (c) After the payment to the holders of the shares of MMP of the full preferential amounts provided for in this Section 5, the Holders of MMP as such shall have no right or claim to any of the remaining assets of the Corporation. (d) In the event the assets of the Corporation available for distribution to the holders of shares of MMP upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5, no such distribution shall be made on account of any shares of stock of the Corporation ranking on a parity with the shares of MMP upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of MMP, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of MMP then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (a) of this Section 5 before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to MMP. 6. Voting Rights. (a) Holders of shares of MMP shall have no voting rights, either general or special except as expressly required by applicable law, the Charter and as specified in this Section 6. (b) Whenever dividends on any shares of MMP shall be unpaid as a whole or in part for not less than 540 consecutive days, then at the annual meeting of stockholders next following omission of the last successive quarterly dividend or any part thereof in such period and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the shares of MMP have been paid or declared and a sum sufficient for payment has been set aside, the Holders of the shares of MMP either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this Section 6 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of Holders of shares of MMP to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this Section 6 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the shares of MMP. At elections for such Directors, each Holder of shares of MMP shall be entitled to 2,000 votes for each share held. The Holders of shares of MMP shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this Section 6 of the Holders of shares of MMP and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this Section 6 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated, and the Board of Directors shall be decreased by two Directors. (c) So long as any shares of MMP remain outstanding, the affirmative vote of the Holders of at least two-thirds of the votes of the shares of MMP outstanding at the time given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined below in this Section 6) to such shares of MMP, or (ii) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the shares of MMP unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on such series of MMP and all outstanding shares of stock ranking on a parity (as that term is defined below in this Section 6) with such shares of MMP (such shares of MMP and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (iii) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of such shares of MMP or of the Holders thereof; provided, however, that any increase or decrease in the amount of authorized Preferred Stock or Cumulative Preferred Stock, the Floating Rate Series B Stock, the Series A and Series B Dutch Auction Rate Transferable SecuritiesTM Preferred Stock, the Remarketed Stock or the MMP or the creation and isuance of other series of Preferred Stock including MMP, in each case ranking on a parity with or junior to the shares of MMP with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the shares of MMP as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the shares of MMP; and (ii) on a parity with the shares of MMP as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from the shares of MMP, if the holders of such class of stock and the shares of MMP shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. In connection with the exercise of the voting rights contained in this Section 6(c), each Holder of shares of MMP shall have 2,000 votes for each share of stock held. (d) So long as any shares of MMP remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, by resolution adopted at a meeting at which the Holders of shares of MMP (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of MMP in exchange for the MMP shares of preferred stock having at least the same relative rights and preferences as the MMP (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this Section 6(d), holders of all series of Parity Stock which are granted such voting rights shall vote as a class, and each Holder of MMP shall have 2,000 votes for each share of stock held, and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the MMP shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with Section 3 to effect such redemption. 7. Definitions. As used in Parts I and II hereof, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: (a) "Applicable Rate" shall have the meaning specified in subparagraph (c)(i) of Section 2 of this Part I. (b) "Auction" shall mean each periodic implementation of the Auction Procedures. (c) "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Part II hereof. (d) Board of Directors of the Corporation" shall mean the Board of Directors of the Corporation or any duly authorized committee thereof except with respect to the declaration of dividends on the shares of MMP in which case the "Board of Directors" shall mean the Board of Directors only. (e) "Business Day" shall mean a day on which the New York Stock Exchange, Inc. is open for trading and which is neither a Saturday, Sunday nor any other day on which banks or trust companies in the City of New York, New York are authorized by law to close. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Commercial Paper Dealers" shall mean Goldman Sachs & Co., Shearson Lehman Commercial Paper Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc, or, in lieu of any thereof, their respective affiliates or successors provided that any such entity is a commercial paper dealer. (h) "Date of Original Issue" shall mean the date on which the Corporation originally issues shares of MMP. (i) "Divided Payment Date" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (j) "Dividend Period" and "Dividend Periods" shall have the respective meanings specified in subparagraph (c)(i) of Section 2 of this Part I. (k) "Dividend Period Days" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (l) "Holder" shall mean the registered holder of shares of MMP as the same appears on the stock books of the Corporation. (m) "Initial Dividend Payment Date" shall have the meaning specified in subparagraph (b)(i) of Section 2 of this Part I. (n) "Initial Dividend Period" shall have the meaning specified in subparagraph (c)(i) of Section 2 of this Part I. (o) "Moody's" shall mean Moody's Investors Service, Inc., a Delaware corporation and its successors. (p) "Payment Default" shall mean the first failure by the Corporation to pay to the Trust Company, not later than 12:00 noon, New York City time, (A) on the Business Day next preceding any Dividend Payment Date, in funds available on such Dividend Payment Date in the City of New York, New York, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of MMP or (B) on the Business Day next preceding any redemption date in funds available on such redemption date in the City of New York, New York, the redemption price to be paid on such redemption date, plus an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption, of any share of MMP after notice of redemption has been given pursuant to paragraph (c) of Section 3 of this Part I. (q) "Redemption Deposit Amount" shall mean the product of (i) the number of outstanding shares of MMP to be redeemed times (ii) an amount equal to the applicable redemption price, plus an amount equal to accrued and unpaid dividends (whether or not declared) to the date fixed for redemption. (r) "Reference Banks" shall mean the principal London offices of Bankers Trust Company, The Bank of Tokyo, Ltd., Barclays Bank PLC and National Westminster Bank PLC, or their respective successors. (s) "S&P" shall mean Standard and Poor's Corporation, a New York corporation and its successors. (t) "Subsequent Dividend Period" and "Subsequent Dividend Periods" shall have the respective meanings specified in subparagraph (c)(i) of Section 2 of this Part I. (u) "Substitute Commercial Paper Dealer" shall mean The First Boston Corporation or Morgan Stanley & Co. Incorporated, or their respective affiliates or successors, if such dealer or its affiliate or successor is a commercial paper dealer; provided that neither such dealer nor any of its affiliates or successors shall be a Commercial Paper Dealer. (v) "Substitute Reference Bank" shall mean the principal London offices of The Chase Manhattan Bank (National Association), Deutsche Bank Aktiengesellschaft, Morgan Guaranty Trust Company of New York or Swiss Bank Corporation, or their respective successors, or, if none of such Substitute Reference Banks are engaged in dealings in United States dollars in the London interbank market, then a bank or banks, selected by the Corporation, engaged in dealings in United States dollars in the London interbank market. (w) "Trust Company" shall mean the bank or trust company or other entity appointed as such by a resolution of the Board of Directors of the Corporation. PART II 1. Certain Definitions. Capitalized terms not defined in this Section 1 shall have the respective meanings specified in Part I hereof. As used in this Part II, the following terms shall have the following meanings, unless the context otherwise requires: (a) "'AA' Composite Commercial Paper Rate", on any date, shall mean (i) the interest equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S & P, or the equivalent of such rating by S&P or another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the immediately preceding Business Day prior to such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the interest equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Trust Company for the close of business on the immediately preceding Business Day prior to such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Corporation does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers, provided that, in the event the Corporation is unable to cause such quotations to be furnished to the Trust Company by such sources, the Corporation may cause the "AA" Composite Commercial Paper Rate to be furnished to the Trust Company by such alternative source or sources as the Corporation in good faith deems to be reliable. If the Board of Directors of the Corporation shall make the adjustment referred to in subparagraph (b)(i)(3) of Section 2 of Part I hereof, then (i) the number of Dividend Period Days after such adjustment shall be fewer than 70 days, such rate shall be the interest equivalent of the 60-day rate on such commercial paper, (ii) if the Dividend Period Days after such adjustment shall be 70 or more days but fewer than 85 days, such rate shall be based on the arithmetic average of the interest equivalent of the 60-day and 90-day rates on such commercial paper, or (iii) if the Dividend Period Days after such adjustment shall be 85 or more days but 98 or fewer days, such rate shall be based on the interest equivalent of the 90-day rate on such commercial paper. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given days' maturity shall be equal to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. (b) "'AA' Rate Multiple", on any Auction Date, shall mean the percentage determined as set forth below based on the prevailing rating of MMP in effect at the close of business on the Business Day immediately preceding such Auction Date: Prevailing Rating Percentage AA/aa or Above........ 110% A/a................... 120% BBB/baa............... 130% Below BBB/baa (includes no rating) 175% For purposes of this definition, the "prevailing rating" of MMP shall be (i) AA/aa or Above, if MMP has a rating of AA- or better by S&P or aa3 or better by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or Above, then A/a if MMP has a rating of A- or better and lower than AA- by S&P or a3 or better and lower then aa3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa if MMP has a rating of BBB- or better and lower than A- by S&P or baa3 or better and lower than a3 by Moody's or the equivalent of either or both of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The Corporation shall take all reasonable action necessary to enable S&P and Moody's to provide a rating for MMP. If either S&P or Moody's shall not make such a rating available, or neither S&P nor Moody's shall make such a rating available, Shearson Lehman Brothers Inc. and Salomon Brothers Inc or their successors shall select a nationally recognized statistical rating organization (as that term is used in the rules and regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or two nationally recognized statistical rating organizations to act as substitute rating agency or substitute rating agencies, as the case may be, and the Corporation shall take all reasonable action necessary to enable such rating agency or rating agencies to provide a rating or ratings for the MMP. (c) "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of or under common control with the Corporation. (d) "Agent Member" shall mean the member of, or participant in, the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Purchaser's Letter. (e) "Auction Date" shall mean the Business Day next preceding the first day of a Dividend Period. (f) "Available MMP" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. (g) "Bid" and "Bids" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (h) "Bidder" and "Bidders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (i) "Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in this Part II, that is a member of, or a participant in, the Securities Depository, has been selected by the Corporation and has entered into a Broker- Dealer Agreement with the Trust Company that remains effective. (j) "Broker-Dealer Agreement" shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this Part II. (k) "Existing Holder," when used with respect to shares of MMP, shall mean a Person who has signed a Purchaser's Letter and is listed as the beneficial owner of such shares of MMP in the records of the Trust Company. (l) "Hold Order" and "Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (m) "Maximum Rate," on any Auction Date, shall mean the product of the "AA" Composite Commercial Paper Rate times the "AA" Rate Multiple. (n) "Order" and "Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (o) "Outstanding" shall mean, as of any date, shares of MMP theretofore issued by the Corporation except, without duplication, (i) any shares of MMP theretofore cancelled or delivered to the Trust Company for cancellation or redeemed by the Corporation or as to which a notice of redemption shall have been given by the Corporation, (ii) any shares of MMP as to which the Corporation or any Affiliate thereof (other than a Broker-Dealer Affiliate) shall be an Existing Holder and (iii) any shares of MMP represented by any certificate in lieu of which a new certificate has been executed and delivered by the Corporation. (p) "Person" shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (q) "Potential Holder" shall mean any Person, including any Existing Holder, (i) who shall have executed a Purchaser's Letter and (ii) who may be interested in acquiring shares of MMP (or, in the case of an Existing Holder, additional shares of MMP). (r) "Purchaser's Letter" shall mean a letter, the form of which is attached hereto, addressed to the Corporation, the Trust Company, a Broker-Dealer and an Agent Member in which a Person agrees, among other things, to offer to purchase, to purchase, to offer to sell and/or to sell shares of MMP as set forth in this Part II. (s) "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of MMP. (t) "Sell Order" and "Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. (u) "Submission Deadline" shall mean 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time. (v) "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (w) "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (x) "Submitted Order" and "Submitted Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (y) "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. (z) "Sufficient Clearing Bids" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. (aa) "Winning Bid Rate" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. 2. Orders by Existing Holders and Potential Holders. (a) On or prior to the Submission Deadline on each Auction Date: (i) each Existing Holder may submit to a Broker-Dealer information as to: (A) the number of Outstanding shares, if any, of MMP held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Dividend Period; (B) the number of Outstanding shares, if any, of MMP which such Existing Holder desires to continue to hold if the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or (C) the number of Outstanding shares, if any, of MMP held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Dividend Period; and (ii) one or more Broker-Dealers, using lists of Potential Holders, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Holders, including Persons that are not Existing Holders, on such lists to determine the number of shares, if any, of MMP which each such Potential Holder offers to purchase if the Applicable Rate for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (b) (i) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of MMP specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate specified therein; (B) such number or a lesser number of Outstanding shares of MMP to be determined as set forth in clause (iv) of paragraph (a) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to the rate specified therein; or (C) a lesser number of Outstanding shares of MMP to be determined as set forth in clause (iii) of paragraph (b) of Section 5 of this Part II if the rate specified therein shall be higher than the Maximum Rate and Sufficient Clearing Bids do not exist. (ii) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of MMP specified in such Sell Order; or (B) such number or a lesser number of Outstanding shares of MMP as set forth in clause (iii) of paragraph (b) of Section 5 of this Part II if Sufficient Clearing Bids do not exist. (iii) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of MMP specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate specified therein; or (B) such number or a lesser number of Outstanding shares of MMP as set forth in clause (v) of paragraph (a) of Section 5 of this Part II if the Applicable Rate determined on such Auction Date shall be equal to the rate specified therein. 3. Submission of Orders by Broker-Dealers to Trust Company. (a) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and shall specify with respect to each Order: (i) the name of the Bidder placing such Order; (ii) the aggregate number of shares of MMP the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder: (A) the number of shares, if any, of MMP subject to any Hold Order placed by such Existing Holder; (B) the number of shares, if any, of MMP subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and (C) the number of shares, if any, of MMP subject to any Sell Order placed by such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder, the rate and number of shares specified in such Potential Holder's (b) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one-thousandth (.001) of 1%. (c) If an Order or Orders covering all of the Outstanding shares of MMP held by any Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of MMP held by such Existing Holder and not subject to Orders submitted to the Trust Company. (d) If any Existing Holder submits through a Broker- Dealer to the Trust Company one or more Orders covering in the aggregate more than the number of Outstanding shares of MMP held by an Existing Holder, such Orders shall be considered valid as follows and in the following order of priority: (i) all Hold Orders shall be considered valid, but only up to and including in the aggregate the number of Outstanding shares of MMP held by such Existing Holder and, solely for the purpose of allocating compensation among the Broker-Dealers submitting Hold Orders, if the number of shares of MMP subject to such Hold Orders exceeds the number of Outstanding shares of MMP held by such Existing Holder, the number of shares subject to each such Hold Order shall be reduced pro rata to cover the number of Outstanding shares of MMP held by such Existing Holder; (ii) (A) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of MMP held by such Existing Holder over the number of shares of MMP subject to any Hold Orders referred to in clause (i) above; (B) subject to subclause (A), if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of MMP subject to such Bids is greater than such excess, such Bids shall be considered valid up to and including the amount of such excess, and, solely for the purpose of allocating compensation among the Broker-Dealers submitting Bids with the same rate, the number of shares of MMP subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of MMP equal to such excess; (C) subject to subclause (A), if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates up to and including the amount of such excess; and (D) in any such event, the number, if any, of such Outstanding shares of MMP subject to Bids not valid under this clause (ii) shall be treated as the subject of a Bid by a Potential Holder at the rate therein specified; and (iii) all Sell Orders shall be considered valid up to and including the excess of the number of Outstanding shares of MMP held by such Existing Holder over the sum of the shares of MMP subject to valid Hold Orders referred to in clause (i) above and valid Bids by such Existing Holder referred to in clause (ii) above. (e) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and number of shares therein specified. 4. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all valid Orders submitted or deemed submitted to it by the Broker- Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine: (i) the excess of the total number of Outstanding shares of MMP over the number of Outstanding shares of MMP that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available MMP"); (ii) from the Submitted Orders whether: (A) the number of Outstanding shares of MMP that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Rate; exceeds or is equal to the sum of: (B) the number of Outstanding shares of MMP that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate; and (C) the number of Outstanding shares of MMP that are subject to Submitted Sell Orders (in the event of such excess or such equality (other than because the number of shares of MMP in subclauses (B) and (C) above is zero because all of the Outstanding shares of MMP are the subject of Submitted Hold Orders), such Submitted Bids in subclause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids"); and (iii) if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (A)(I) each Submitted Bid from Existing Holders specifying such lowest rate and (II) all other Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of MMP that are the subject of such Submitted Bids; and (B)(I) each Submitted Bid from Potential Holders specifying such lowest rate and (II) all other Submitted Bids from Potential Holders specifying lower rates were accepted, would result in such Existing Holders described in subclause (A) above continuing to hold an aggregate number of Outstanding shares of MMP which, when added to the number of Outstanding shares of MMP to be purchased by such Potential Holders described in subclause (B) above, would equal not less than the Available MMP. (b) Promptly after the Trust Company has made the determinations pursuant to paragraph (a) of this Section 4, the Trust Company shall advise the Corporation of the "AA" Composite Commercial Paper Rate and the Maximum Rate on the Auction Date and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (i) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; (ii) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of MMP are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Maximum Rate; or (iii) if all of the Outstanding shares of MMP are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to 59% of the "AA" Composite Commercial Paper Rate. 5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Existing Holders shall continue to hold the shares of MMP that are the subject of Submitted Hold Orders, and, based on the determinations made pursuant to paragraph (a) of Section 4 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust company shall take such other action as set forth below: (a) If Sufficient Clearing Bids have been made, all Submitted Sell Orders shall be accepted and, subject to the provisions of paragraph (d) and (e) of this Section 5, Submitted Bids shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) the Submitted Sell Orders of Existing Holders shall be accepted and Existing Holders' Submitted Bids specifying any rate that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the shares of MMP that are the subject of such Submitted Sell Orders or Submitted Bids; (ii) Existing Holders' Submitted Bids specifying any rate that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the shares of MMP that are the subject of such Submitted Bids; (iii) Potential Holders' Submitted Bids specifying any rate that is lower than the Winning Bid Rate shall be accepted; (iv) each Existing Holders' Submitted Bid specifying a rate that is equal to the Winning Bid Rate shall be rejected, thus entitling such Existing Holder to continue to hold the shares of MMP that are the subject of such Submitted Bid, unless the number of Outstanding shares of MMP subject to all such Submitted Bids shall be greater than the number of shares of MMP ("remaining shares") equal to the excess of the Available MMP over the number of shares of MMP subject to Submitted Bids described in clauses (ii) and (iii) of this paragraph (a), in which event such Submitted Bid of such Existing Holder shall be accepted in part, and such Existing Holder shall be required to sell shares of MMP subject to such Submitted Bid, but only in an amount equal to the difference between (A) the number of Outstanding shares of MMP then held by such Existing Holder subject to such Submitted Bid and (B) the number of shares of MMP obtained by multiplying the number of remaining shares by a fraction the numerator of which shall be the number of Outstanding shares of MMP held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of MMP subject to such submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and (v) each Potential Holder's Submitted Bid specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of shares of MMP obtained by multiplying the difference between the Available MMP and the number of shares of MMP subject to Submitted Bids described in clauses (ii), (iii) and (iv) of this paragraph (a) by a fraction the numerator of which shall be the number of Outstanding shares of MMP subject to such Submitted Bid of such Potential Holder and the denominator of which shall be the aggregate number of Outstanding shares of MMP subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate. (b) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of MMP are the subject of Submitted Hold Orders), subject to the provisions of paragraph (d) of this Section 5, Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (i) Existing Holders' Submitted Bids specifying any rate that is equal to or lower than the Maximum Rate shall be rejected, thus entitling such Existing Holders to continue to hold the shares of MMP that are the subject of such Submitted Bids; (ii) Potential Holders' Submitted Bids specifying any rate that is equal to or lower than the Maximum Rate shall be accepted; and (iii) each Existing Holder's Submitted Bid specifying any rate that is higher than the Maximum Rate and the Submitted Sell Order of each Existing Holder shall be accepted, but in both cases only in an amount equal to the difference between (A) the number of Outstanding shares of MMP then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (B) the number of shares of MMP obtained by multiplying the difference between the Available MMP and the aggregate number of shares of MMP subject to Submitted Bids described in clauses (i) and (ii) of this paragraph (b) by a fraction the numerator of which shall be the number of Outstanding shares of MMP held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of MMP subject to all such Submitted Bids and Submitted Sell Orders. (c) If all of the Outstanding shares of MMP are the subject of Submitted Hold Orders, all Submitted Bids shall be rejected. (d) If, as a result of the procedures described in paragraph (a) or (b) of this Section 5, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of MMP on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of shares of MMP to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that the number of shares purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of MMP. (e) If, as a result of the procedures described in paragraph (a) of this Section 5, any Potential Holder would be entitled or required to purchase less than a whole share of MMP on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate shares for purchase among Potential Holders so that only whole shares of MMP are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares of MMP on such Auction Date. (f) Based on the results of each Auction, the Trust Company shall determine the aggregate number of shares of MMP to be purchased and the aggregate number of shares of MMP to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-Dealer, to the extent that such aggregate number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Broker-Dealer or Broker- Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, shares of MMP. 6. Miscellaneous. (a) The Board of Directors of the Corporation may interpret the provisions of this Part II to resolve any inconsistency or ambiguity which may arise or be revealed in connection with the Auction Procedures provided for herein, and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors of the Corporation may, in appropriate circumstances, authorize the filing of Articles of Amendment or a Certificate of Correction. (b) As long as no Payment Default shall have occurred, (i) an Existing Holder may sell, transfer or otherwise dispose of shares of MMP only pursuant to a Bid or Sell Order in accordance with the procedures described in this Part II or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions, such Existing Holder, its Broker- Dealer or its Agent Member advises the Trust Company of such transfer, and (ii) such Existing Holder shall have the ownership of the shares of MMP held by it maintained in book entry form by the Securities Depository for the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. (c) Neither the Corporation nor any affiliate thereof may submit an Order in any Auction except as set forth in the next sentence. Any Broker-Dealer that is an affiliate of the Corporation may submit Orders in Auctions but only if such Orders are not for its own account, except that if such affiliated Broker- Dealer holds shares of MMP for its own account, it must submit a Sell Order in the next Auction with respect to such shares. (d) Commencing with the first day of the first Dividend Period for which the Applicable Rate is determined by the Default Rate, as set forth in subparagraph (c)(i) of Section 2 of Part I hereof, the Corporation or an Affiliate thereof, at the option of the Corporation, may perform any of the functions to be performed by the Trust Company set forth herein. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on July 17, 1987. REPUBLIC NEW YORK CORPORATION By /s/ Jeffrey C. Keil Attest: Jeffrey C. Keil (President) /s/ William Rosenblum William Rosenblum (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the Charter of the Corporation, the Board of Directors has duly divided and classified 1,000 shares of the Preferred Stock of the Corporation as Republic New York Corporation Remarketed Preferred Stock, and has provided for the issuance of such shares. SECOND: The terms of the Republic New York Corporation Remarketed Preferred Stock as set by the Board of Directors are as follows: 1,000 shares of Preferred Stock of the Corporation, without par value, shall constitute a series of Preferred Stock designated as Republic New York Corporation Remarketed Preferred Stock, hereinafter referred to as the "RP"TM [TM Trademark of Merrill Lynch & Co., Inc]. At all times, other than during the Initial Dividend Period, all shares of RP within each Dividend Period shall be identical with each other in all respects. The RP shall have no par value with a liquidation preference of $100,000 per share, plus an amount equal to accrued and unpaid dividends. PART I 1. Definitions. Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural: "'AA' Composite Commercial Paper Rate", on any date, means (i) the Interest Equivalent of the 5-day (in the case of a 7-day Dividend Period) or 60-day (in the case of a 49-day Dividend Period) rate, as the case may be, on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S & P or "Aa" by Moody's, or the equivalent of such rating by another rating agency, as such rate is made available by the Federal Reserve Bank of New York on a discount basis or otherwise for the first Business Day before such date; or (ii) if the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the Interest Equivalent of the 5-day or 60-day rate, as the case may be, on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealer to the Remarketing Agent for the close of business on the first Business Day before such date. If the Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotations or quotation furnished by any Substitute Commercial Paper Dealers or Dealer selected by the Corporation to provide such rates or rate not being supplied by the Commercial Paper Dealer. However, in respect of any Dividend Period of 98 Dividend Period Days or less (i) if the number of Dividend Period Days shall be 8 or more but less than 20, such rate shall be the Interest Equivalent of the 15-day rate on such commercial paper, (ii) if the number of Dividend Period Days shall be 20 or more but less than 49, such rate shall be the Interest Equivalent of the 30-day rate on such commercial paper, (iii) if the number of Dividend Period Days shall be 49 or more but less than 70, such rate shall be the Interest Equivalent of the 60-day rate on such commercial paper, (iv) if the number of Dividend Period Days shall be 70 or more but less than 85, such rate shall be the arithmetic average of the Interest Equivalent of the 60-day and 90-day rates on such commercial paper and (v) if the number of Dividend Period Days shall be 85 or more but less than 99, such rate shall be the Interest Equivalent of the 90-day rate on such commercial paper. "Agent Member" means a designated member of the Securities Depository which will maintain records for the Beneficial Owners of shares of RP that have identified such Agent Member in their Purchaser's Letters and which will be authorized and instructed to disclose information to the Remarketing Agent and the Paying Agent with respect to such Beneficial Owners. "Applicable Dividend Rate" means, with respect to any share of RP for the applicable Initial Dividend Period, the applicable initial dividend rate, and for any subsequent Dividend Period for such share the dividend rate, as determined by the Remarketing Agent, that will be in effect for such share for any subsequent Dividend Period. In certain circumstances, the Applicable Dividend Rate may be the applicable Maximum Dividend Rate or the Penalty Rate. "Authorized Newspaper" means a newspaper of general circulation in the English language generally published on Business Days in The City of New York. "Beneficial Owner" shall mean a person who has signed a Purchaser's Letter and who is listed as the beneficial owner of shares of RP in the records of the Paying Agent provided that, as such term is used in paragraph 3 of this Part I, "Beneficial Owner" shall mean, in respect of each share of RP, the registered holder of such share as its name appears on the stock transfer books of the Corporation at any time the Applicable Dividend Rate for such share shall be the Penalty Rate. "Business Day" means a day on which the New York Stock Exchange is open for trading, and is not a day on which banks in The city of New York are authorized by law to close. "Cede" means Cede & Co., the nominee of DTC in whose name the shares of RP will be initially registered. "Code" means the Internal Revenue Code of 1986, as amended. "Commercial Paper Dealer" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, or in lieu thereof its affiliates or successors. "Common Stock" means the common stock of the Corporation, $5.00 par value. "Corporation" means Republic New York Corporation, a Maryland corporation, that is the issuer of the shares of RP. "Date of Original Issue" means the date on which the Corporation originally issues the shares of RP. "Dividend Payment Date" means (i) with respect to any Optional Dividend Period of more than 91 but fewer than 365 days, the 92nd day thereof, the 183rd day thereof, if any, the 274th day thereof, if any, and the day next succeeding the last day thereof; (ii) with respect to any Optional Dividend Period of 365 days or more, the second Wednesday of each January, April, July and October and the day next succeeding the last day thereof; and (iii) with respect to any other Dividend Period, the day next succeeding the last day thereof; provided, however, that if any such date would not be a Business Day, the Dividend Payment Date shall be the Business Day next succeeding such date, except for the purpose of determining the length of a Dividend Period. "Dividend Period" means with respect to each share of RP, the Initial Dividend Period for such share and thereafter any period commencing on the Dividend Payment Date (which, if the Applicable Dividend Rate shall not be the Penalty Rate, shall be the Settlement Date) for such share and ending on the day next preceding the next succeeding such Dividend Payment Date for such share, which day falls in the calendar week in which the last Dividend Period Day in respect of such period falls (unless otherwise required by any adjustment of the remarketing schedule by the Remarketing Agent as provided herein), provided that if in respect of such Dividend Period, the Board of Directors of the Corporation adjusts the number of Dividend Period Days in the event of a change in the Minimum Holding Period, such day will be adjusted accordingly. "Dividend Period Days" means in respect of any particular Dividend Period applicable to a share of RP, such number of consecutive calendar days commencing on and including the first day of such period as is specified herein and ending with and including the day next preceding the first day of the next succeeding Dividend Period applicable to such share of RP. "Dividend Reset Date" means the Business Day following the Tender Date and the Business Day next preceding a Settlement Date (normally a Wednesday). "Dividends-Received Deduction" means the deduction allowed to corporate holders of preferred stock with respect to dividends received on such stock by Section 243 of the Code, or any successor to Section 243 of the Code. "DTC" means The Depository Trust Company. "Holder" shall mean, with respect to any share of RP, the person whose name appears on the stock transfer books of the Corporation as the registered holder of such share. "Initial Dividend Period" means the period commencing on and including the Date of Original Issue and ending on September 16, 1987 for 500 shares of RP and October 14, 1987 for the remaining 500 shares of RP. "Interest Equivalent" means the equivalent yield on a 360- day basis of a discount basis security to an interest bearing security. "Maximum Dividend Rate" means with respect to any 7-day or 49-day Dividend Period, the percentage set forth in the table below (the "Applicable Percentage") of the "AA" Composite Commercial Paper Rate applicable to such Dividend Period at the Dividend Reset Date. "Maximum Dividend Rate" means with respect to any Optional Dividend Period at any Dividend Reset Date (i) in the case of an Optional Dividend Period of more than 98 Dividend Period Days, the Maximum Dividend Rate (which may be a fixed rate or a variable rate determined from time to time by formula or other means) determined by the Board of Directors of the Corporation in respect of such period, as provided herein, and (ii) in the case of an Optional Dividend Period of 98 days or less, the Applicable Percentage of the applicable "AA" Composite Commercial Paper Rate. The Remarketing Agent shall round each applicable Maximum Dividend Rate to the nearest one-thousandth (0.001) of one percent per annum, with any such number ending in five ten-thousandths of one percent being rounded upwards to the nearest one-thousandth (0.001) of one percent. The Remarketing Agent shall not round the applicable "AA" Composite Commercial Paper Rate as part of its calculation of the applicable Maximum Dividend Rate. The Applicable Percentage varies with the higher of the credit rating or ratings assigned by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) to the shares of RP on each Dividend Reset Date, as follows: Credit Ratings Applicable Moody's S&P Percentage "aa3" or higher AA- or higher 110% "a3" to "a1" A- to A+ 120% "baa3" to "baa1" BBB- to BBB+ 130% Below "baa3" Below BBB- 175% "Minimum Holding Period" means 46 days or such other minimum holding period required for corporate taxpayers to be entitled to the Dividends-Received Deduction as provided in Section 246(c) of the Code or any successor thereto. "Moody's" means Moody's Investors Service. "Notice of Redemption" means the notice of a redemption relating to a redemption in part, given to the Paying Agent, the Securities Depository (and any other registered holder) and the Remarketing Agent by the Corporation by telephone and confirmed in writing, not later than 3:00 p.m., New York City time, on the Settlement Date (or, if the Applicable Dividend Rate for any shares of RP shall be the Penalty Rate, the later of the Dividend Payment Date or the seventh day) prior to the earliest date on which any such redemption shall occur; and the notice of a redemption relating to a redemption in whole given to the Paying Agent, the Securities Depository (and any other registered holder) and the Remarketing Agent by the Corporation by telephone and in writing, not later than 3:00 p.m., New York City time, on the Tender Date (or, if the Applicable Dividend Rate for any share of RP shall be the Penalty Rate, the later of the Dividend Payment Date or the seventh day) prior to the earliest date on which any such redemption shall occur. "Optional Dividend Period" means any Dividend Period in respect of which the Board of Directors of the Corporation designates the number of Dividend Period Days and, if such number is greater than 98, determines the Maximum Dividend Rate, and at least seven days prior to the day such Dividend Period is to commence, provides written notice of such designation and, if applicable, such Maximum Dividend Rate to the Remarketing Agent, the Paying Agent and the Securities Depository. "Paying Agent" means Manufacturers Hanover Trust Company or any successor company or entity, which has entered into a Paying Agent Agreement with the Corporation to act, among other things, as the transfer agent, registrar, dividend and redemption price disbursing agent, settlement agent and agent for certain notifications for the Corporation in connection with the shares of RP in accordance with such agreement. "Paying Agent Agreement" means an agreement to be entered into between the Corporation and the Paying Agent. "Penalty Rate" means 175% of the applicable "AA" Composite Commercial Rate. "Purchase Agreement" means the agreement between the Corporation and the Underwriter pursuant to which the Underwriter has agreed to purchase all the shares of RP from the Corporation. "Purchaser's Letter" means a letter substantially in the form of Exhibit A hereto which is required to be executed by each purchaser of shares of RP or such other form as may be acceptable to the Paying Agent. "Remarketing" means each periodic operation of the process for remarketing as described in Part II of these Articles Supplementary. "Remarketing Agent" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any successor company or entity which has entered into an agreement with the Corporation to follow the remarketing procedures for the purposes of determining the Applicable Dividend Rate or Rates. "RP" means Remarketed Preferred Stock of the Corporation. "S&P" means Standard & Poor's Corporation. "Securities Depository" means DTC or any successor securities depository selected by the Corporation that agrees to follow the procedures required to be followed by such securities depository in connection with the shares of RP. "Service" means the Internal Revenue Service. "Settlement Date" means the first Business Day after a Dividend Reset Date applicable to a share of RP (normally a Thursday). "Substitute Commercial Paper Dealers" means Salomon Brothers Inc and Goldman, Sachs & Co. or, in lieu of either thereof, their respective affiliates or successors. "Substitute Rating Agency" and "Substitute Rating Agencies" shall mean a nationally recognized securities rating agency or two nationally recognized securities rating agencies selected by the Corporation to act as the substitute rating agency or substitute rating agencies, as the case may be, to determine the credit ratings of the shares of RP. "Tender and Dividend Reset" means the process pursuant to which shares of RP may be tendered in a Remarketing or held and become subject to the new Applicable Dividend Rate or Rates determined by the Remarketing Agent in the Remarketing. "Tender Date" means the Business Day preceding the Dividend Reset Date (normally a Tuesday). "Underwriter" means Merrill Lynch, Pierce, Fenner & Smith Incorporated. "7-day Dividend Period" means a Dividend Period designated as such by a holder of shares of RP in respect of which the number of Dividend Period Days is seven. "49-day Dividend Period" means (i) an Initial Dividend Period, (ii) a Dividend Period designated as such by a holder of shares of RP or (iii) the Dividend Period applicable to shares of RP with respect to which the Applicable Dividend Rate is the Penalty Rate, and, in all such cases, generally containing forty- nine days. 2. Fractional Shares. No fractional shares of RP shall be issued. 3. Dividends. (a) The Holders as of 12:00 noon, New York City time on the Business Day preceding the applicable Dividend Payment Date shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of funds legally available therefor, cumulative cash dividends, at the Applicable Dividend Rate per annum. (b) Dividends on shares of RP shall accrue from the Date of Original Issue and will be payable when, as and if declared by the Board of Directors on each Dividend Payment Date applicable to each such share of RP. (c) Each declared dividend shall be payable to the Holder or Holders of such shares on the applicable Dividend Payment Date with respect to such shares of RP. Dividends in arrears for any past Dividend Payment Date may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder or Holders of such shares on a date not exceeding five Business Days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation. Any dividend payment made on shares of RP shall first be credited against the dividends accrued and unpaid with respect to the earliest Dividend Payment Date on which dividends were not paid. (d) If full cumulative dividends are not paid on the shares of RP, all dividends declared on the shares of RP shall be paid pro rata to the Holders of outstanding shares of RP. Holders of shares of RP shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, on the shares of RP. Except as provided in paragraph 3(h) of this Part I, holders of shares of RP shall not be entitled to any interest, or sum of money in lieu of interest, on any dividend payment or payments on the shares of RP which may be in arrears. (e) The Applicable Dividend Rate for the Initial Dividend Period shall be 4.65 percent per annum for 500 shares of RP and 4.75 percent per annum for the remaining 500 shares of RP. Except as otherwise provided herein, the Applicable Dividend Rate on shares of RP for each subsequent Dividend Period shall be equal to the rate or rates per annum that result from implementation of the remarketing procedures described in Part II of these Articles Supplementary. If no Applicable Dividend Rate shall have been set on a Dividend Reset Date in a Remarketing for a 7-day Dividend Period, a 49-day Dividend Period or any Optional Dividend Period or Periods or any or all of the foregoing for any reason (other than because there is no Remarketing Agent or because the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement), then, unless the Applicable Dividend Rate is the Penalty Rate pursuant to paragraph 3(h) of this Part I, the Remarketing Agent, in its sole discretion will, after taking into account market conditions as reflected in the prevailing yields on fixed and variable rate taxable and tax- exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, determine the Applicable Dividend Rate or Rates, as the case may be, that would be initial dividend rates in an offering on such Dividend Reset Date, assuming a comparable dividend period, issuer and security. If there is no Remarketing Agent or the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement, then, unless the Applicable Dividend Rate is the Penalty Rate pursuant to paragraph 3(h) of this Part I of these Articles Supplementary, the Applicable Dividend Rate for each such subsequent Dividend Period for which no Remarketing takes place because of the foregoing shall be the Maximum Dividend Rate for a 7-day Dividend Period and the next succeeding Dividend Period shall be a 7-day Dividend Period. (f) The amount of dividends per share of RP payable on each Dividend Payment Date shall be computed by the Corporation by multiplying the Applicable Dividend Rate in effect with respect to dividends payable on such share on such Dividend Payment Date by a fraction the numerator of which shall be the number of days such share was outstanding from and including the Date of Original Issue or preceding Dividend Payment Date, as the case may be, to and including the last day of such Dividend Period, and the denominator of which shall be 360, and then multiplying the rate obtained by $100,000 per share of RP. In accordance with the remarketing procedures set forth in Part II of these Articles Supplementary, there may exist at any given time a number of Dividend Payment Dates for all outstanding shares of RP and dividends on any share shall be payable only on a Dividend Payment Date applicable to such share of RP. (g) No later than by 12:00 noon, New York City time on any Dividend Payment Date, the Corporation shall deposit in same- day funds, with the Paying Agent the full amount of any dividend (whether or not earned or declared) payable on such Dividend Payment Date on any share of RP. (h) In the event of any failure by the Corporation to (i) declare, prior to 12:00 noon New York City time on any Dividend Payment Date, for payment on or within three Business Days after such Dividend Payment Date to the persons who held shares of RP as of 12:00 noon, New York City time on the Business Day preceding such Dividend Payment Date, the full amount of any dividend on any share of RP on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Paying Agent by 12:00 noon, New York City time, (A) on or within three Business Days after any Dividend Payment Date the full amount of any dividend (whether or not earned or declared) payable on such Dividend Payment Date or (B) on or within three Business Days after any redemption date, the redemption price to be paid on such redemption date of any share of RP plus an amount equal to dividends thereon (whether or not earned or declared) accrued to and unpaid through such redemption date after a Notice of Redemption has been given pursuant to paragraph 4(d) or 4(j) of this Part I of these Articles Supplementary, then the Applicable Dividend Rate for each Dividend Period in respect of each share of RP commencing on or after the Dividend Payment Date first referred to in this sentence shall be equal to the Penalty Rate (provided that any share of RP for which an Optional Dividend Period of more than 98 Dividend Period Days would otherwise be in effect for the Dividend Period commencing on the Dividend Payment Date first referred to in this sentence shall, instead, have a 7-day Dividend Period), and each Dividend Period for each share of RP commencing thereafter shall be a 49-day Dividend Period. Any amount of such dividend (if the Corporation has declared prior to 12:00 noon New York City time on any Dividend Payment Date, for payment on or within three Business Days after such Dividend Payment Date to the persons entitled to receive such dividends at the opening of business on such Dividend Payment Date, the full amount of all dividends due on all shares of RP on such Dividend Payment Date) or redemption price not paid when due but paid within three Business Days after such due date shall incur a late charge to be paid therewith and calculated for such period of non-payment at the Penalty Rate applied to the amount of such non-payment. (i) So long as any shares of RP are outstanding, the Corporation shall not (a) declare or pay or set apart for payment any dividend or other distribution (other than dividends or distributions payable in shares of stock of the Corporation ranking junior to the RP as to dividends and upon liquidation) for any period upon any stock of the Corporation ranking on a parity with, or any stock of the Corporation ranking junior to, such RP as to dividends or upon liquidation or (b) redeem, purchase or otherwise acquire for any consideration any stock of the Corporation ranking on a parity with, or any stock of the Corporation ranking junior to, such RP as to dividends or upon liquidation, unless, in either case, all dividends payable to holders of shares of RP and holders of any other stock of the Corporation ranking on a parity therewith as to dividends for its current dividend period and all past dividend periods have been paid, are contemporaneously being paid or have been declared and a sum sufficient for the payment thereof set aside for such payment, except that notwithstanding clause (a) above the Corporation may pay dividends on the shares of RP and shares of stock of the Corporation ranking on a parity therewith as to dividends ratably in accordance with the sums which would be payable on such shares if all dividends, including accumulations, if any, were declared and paid in full. Holders of shares of RP shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the RP. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the RP which may be in arrears. (j) As long as no Applicable Dividend Rate applicable to any outstanding share of RP shall be the Penalty Rate, at the end of the Initial Dividend Period and at the end of each subsequent Dividend Period applicable to each share of RP thereafter, (i) the Beneficial Owner of each share of RP who is not tendering such share of RP can elect either a 7-day Dividend Period, a 49-day Dividend Period or any available Optional Dividend Period, except that in the event that (x) such Beneficial Owner elects an available Optional Dividend Period of more than 98 days and (y) the Remarketing Agent is unable to remarket on the Dividend Reset Date following such Tender Date all shares of RP tendered to it at a price of $100,000 per share, the Dividend Period in respect of such share will be a 7-day Dividend Period and the Applicable Dividend Rate shall be the Maximum Dividend Rate for a 7-day Dividend Period; (ii) the Beneficial Owner of each share of RP who fails to tender or to make such election at the end of a Dividend Period other than an Initial Dividend Period shall continue to hold such share at the Applicable Dividend Rate for a Dividend Period of the same type as the prior Dividend Period of such share except as aforesaid in respect of an Optional Dividend Period of more than 98 days and except if the prior Dividend Period was an Initial Dividend Period then the Beneficial Owner shall continue to hold such shares for a 49-Day Dividend Period; (iii) the Beneficial Owner of each share of RP which is tendered but not sold in a Remarketing shall hold such share at the applicable Maximum Dividend Rate for a 7-day Dividend Period; and (iv) the Beneficial Owner of each share of RP purchased in a Remarketing shall hold such share for a Dividend Period of the type elected by the purchaser of such share in such Remarketing at the Applicable Dividend Rate, except that under circumstances specified in (i) above with respect to a Dividend Period of more than 98 days no purchaser shall be permitted to acquire shares having such an Optional Dividend Period. (k) In the event of a change in law altering the Minimum Holding Period, the Board of Directors of the Corporation may adjust the period of time between Dividend Payment Dates so as to adjust uniformly the number of Dividend Period Days in any 49-day Dividend Period, Optional Dividend Period or Dividend Period for which the Applicable Dividend Rate for any outstanding share of RP shall be the Penalty Rate commencing after the date of such change in law to equal or exceed the then current Minimum Holding Period; provided that the number of Dividend Period Days for any Dividend Period so adjusted shall not exceed 98 and shall be evenly divisible by seven. Upon any such adjustment in the number of Dividend Period Days, the Corporation will notify the Remarketing Agent and the Paying Agent, and the Paying Agent will in turn notify the Beneficial Owners of such adjustment, provided that, if the Dividend Period whose length is being adjusted hereby is a Dividend Period for which the Applicable Dividend Rate is the Penalty Rate, the Corporation will notify the Holders of shares of RP directly of such adjustment. (l) Unless the Applicable Dividend Rate applicable to any outstanding share of RP shall be the Penalty Rate, the Board of Directors of the Corporation may at any time and from time to time designate one or more Optional Dividend Periods with such number of Dividend Period Days in respect thereof as the Board of Directors of the Corporation shall determine; provided that, in respect of any Optional Dividend Period of more than 98 Dividend Period Days, the Board of Directors of the Corporation shall also determine a Maximum Dividend Rate, which may be a fixed rate or a variable rate determined from time to time by formula or other means, in respect of such period. Once so designated, no Optional Dividend Period may be rescinded, and once so determined, no Maximum Dividend Rate may be changed. After designation of any type of Optional Dividend Period by the Board of Directors of the Corporation shall have become effective, an Optional Dividend Period of such type shall commence on each Settlement Date. Any designation of any type of Optional Dividend Period shall be effective after seven days' written notice thereof and, if applicable, of the Maximum Dividend Rate so determined in respect thereof shall have been given to the Remarketing Agent, the Paying Agent and the Securities Depository. The Corporation also shall publish notice promptly of any such designation and Maximum Dividend Rate, if applicable, at least once in an Authorized Newspaper, but the failure so to publish shall not affect the validity or effectiveness of any such designation or determination. 4. Redemption. Shares of RP shall be redeemable by the Corporation as provided below. (a) The Corporation at its option may redeem shares of RP, in whole or in part, on the next succeeding scheduled Dividend Payment Dates applicable to the shares of RP called for redemption, out of funds legally available therefor, at a redemption price per share equal to $100,000 plus an amount equal to dividends thereon (whether or not earned or declared) accrued to and unpaid on the date fixed for redemption. Shares of RP for which the Corporation shall have given Notice of Redemption shall not be considered in subsequent Remarketings and shares of RP the owners of which shall have been given notice of redemption as set forth below shall not be subject to transfer outside of a Remarketing. (b) Subject to paragraph 4(c) of this Part I of these Articles Supplementary, if fewer than all the outstanding shares of RP are to be redeemed pursuant to this paragraph 4 of these Articles Supplementary, the number of shares of RP to be so redeemed shall be determined (and, if the Applicable Dividend Rate for any outstanding shares of RP shall be the Penalty Rate, the shares to be redeemed shall be selected pro rata among types of Dividend Periods (except as hereinafter described) and by lot among shares of the same type of Dividend Period) by the Corporation, and the Corporation shall give a Notice of Redemption; provided that no share of RP shall be redeemed on any Dividend Payment Date from any Optional Dividend Period containing at least as many Dividend Period Days as the then Minimum Holding Period at the time such Optional Dividend Period was selected if a redemption at such time would have the effect that a Holder who purchased such share in the preceding Remarketing therefor would not satisfy the Minimum Holding Period with respect thereto solely by reason of such redemption. So long as the Applicable Dividend Rate for all outstanding shares of RP shall not be the Penalty Rate, the Paying Agent will first determine the number of shares to be redeemed pro rata from each current Dividend Period, but with such adjustments as the Paying Agent shall make in its sole discretion to allow for redemption of whole shares of RP only. The Paying Agent shall give to the Securities Depository and the Remarketing Agent a redemption notice, which notice shall include the aggregate number of shares of RP to be redeemed and the number of shares of RP to be redeemed for each Dividend Period. The Securities Depository will then determine by lot on a Dividend Period basis the number of shares of RP to be redeemed from the account of each Agent Member (which may include an Agent Member holding shares for its own account, including the Remarketing Agent) and will notify the Paying Agent and the Remarketing Agent of such determination by 10:00 a.m., New York City time, on the second Business Day following the date on which the Securities Depository receives the notice referred to in the immediately preceding sentence. Upon receipt of such notice from the Securities Depository, the Paying Agent will in turn determine by lot the number of shares of RP from each Dividend Period to be redeemed from the accounts of the Beneficial Owners whose Agent Members have been selected. The Paying Agent may determine that shares of RP will be redeemed from the accounts of some Beneficial Owners without shares of RP being redeemed from the accounts of other Beneficial Owners and shall give prompt notice of such determination to the Remarketing Agent. (c) Notwithstanding Paragraph 4(b) of this Part I of these Articles Supplementary, if fewer than all the outstanding shares of RP are to be redeemed pursuant to this paragraph 4 of these Articles Supplementary and the Applicable Dividend Rate applicable to any outstanding share of RP shall be the Penalty Rate, the number of shares of RP to be redeemed shall be determined by the Corporation and the shares to be redeemed shall be selected pro rata from among types of Dividend Period (provided that no share of RP shall be redeemed on any Dividend Payment Date from any Optional Dividend Period containing at least as many Dividend Period Days as the then Minimum Holding Period at the time such Optional Dividend Period was selected if a redemption at such time would have the effect that a Beneficial Owner who purchased such share in the preceding Remarketing therefor would not satisfy the Minimum Holding Period with respect thereto solely by reason of such redemption) and by lot from among shares of the same type of Dividend Period by the Corporation. The Corporation shall give a Notice of Redemption which shall include the aggregate number of shares to be redeemed and the specific shares selected to be redeemed. (d) Any Notice of Redemption with respect to a redemption in whole or in part, pursuant to this paragraph 4 shall be given by the Corporation to the Paying Agent, the Securities Depository (and any other registered holder of shares of RP) and the Remarketing Agent. In the case of a partial redemption, the Remarketing Agent will, at the Corporation's expense, use reasonable efforts to provide telephonic notice to each Beneficial Owner of shares of RP called for redemption not later than the close of business on the Business Day on which the Remarketing Agent receives notice from the Paying Agent of its determination of the shares to be redeemed (as described above) (or if the Applicable Dividend Rate for all shares of RP shall be the Penalty Rate, the Paying Agent shall give such telephonic notice not later than the close of business on the Business Day immediately following the day on which the Paying Agent receives Notice of Redemption from the Corporation). In the case of a redemption in whole, the Remarketing Agent (or the Paying Agent, if the Applicable Dividend Rate with respect to any outstanding share of RP shall be the Penalty Rate) will, at the Corporation's expense, use its reasonable efforts to provide telephonic notice to each Beneficial Owner, the Paying Agent and the Securities Depository not later than the close of business on the Business Day immediately following the day on which the Remarketing Agent receives a Notice of Redemption from the Corporation. In any such case, such telephonic notice shall be confirmed promptly in writing not later than the close of business on the third Business Day preceding the redemption date by notice sent by the Remarketing Agent (or the Paying Agent, if the Applicable Dividend Rate with respect to any outstanding share of RP shall be the Penalty Rate) to each Beneficial Owner, the Paying Agent and the Securities Depository of shares of RP called for redemption. Every Notice of Redemption or other redemption notice shall state: (i) the redemption date; (ii) the number of shares of RP to be redeemed; (iii) the redemption price; and (iv) that dividends on the shares of RP to be redeemed will cease to accrue on such redemption date. In addition, notice of redemption given to Beneficial Owners shall state the CUSIP number of the shares of RP to be redeemed and the manner in which owners of such shares may obtain payment of the redemption price. No defect in the Notice of Redemption or other redemption notice or in the transmittal or the mailing thereof shall affect the validity of the redemption proceedings, except as required by applicable law. The Remarketing Agent (or the Paying Agent, if the Applicable Dividend Rate with respect to any outstanding share of RP shall be the Penalty Rate), within two Business Days of the date of the Notice of Redemption, will use its reasonable efforts to cause the publication of a redemption notice in an Authorized Newspaper. The Corporation shall pay the expenses incurred in providing the notices required by this paragraph 4(d). (e) On any redemption date, the Corporation shall deposit, irrevocably in trust, in same-day funds, with the Paying Agent, by 12:00 noon New York City time, the price to be paid on such redemption date of any share of RP plus an amount equal to dividends thereon (whether or not earned or declared) accrued to and unpaid through such redemption date. (f) In connection with any redemption, upon the date of deposit of the funds necessary for such redemption with the Paying Agent and the giving of notice of redemption to the Beneficial Owners of shares of RP so called for redemption, unless the Corporation shall default in making payment of such redemption price, all rights of the Holders of shares of RP so called for redemption by requisite notice shall cease and terminate, except the right of the Holders thereof to receive the redemption price thereof, inclusive of an amount equal to dividends (whether or not earned or declared) accrued to and unpaid through the redemption date but without any interest, and such shares shall no longer be deemed outstanding for any purposes. The Corporation shall be entitled to receive, promptly after the date fixed for redemption, any cash held by the Paying Agent in excess of the aggregate redemption price of the shares of RP called for redemption on such date. Any funds so deposited with the Paying Agent which are unclaimed at the end of ninety days from such redemption date shall, to the extent permitted by law, be repaid to the Corporation, after which time the Holders of shares of RP so called for redemption shall look only to the Corporation for payment thereof. The Corporation shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. (g) To the extent that any redemption for which Notice of Redemption has been given is not made by reason of the absence of legally available funds, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem shares of RP shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Corporation shall have failed, for any reason whatsoever, to deposit funds with the Paying Agent pursuant to paragraph 4(e) with respect to any shares for which such Notice of Redemption has been given. Notwithstanding the fact that the Corporation may not have redeemed shares of RP for which Notice of Redemption has been given, dividends may be declared and paid on shares of RP and shall include those shares of RP for which Notice of Redemption has been given. (h) Notwithstanding the foregoing, (i) no share of RP may be redeemed unless the full amount of cumulative dividends to the date fixed for redemption for each such share of RP called for redemption shall have been declared, and (ii) no share of RP may be redeemed unless all outstanding shares of RP are simultaneously redeemed, nor may any shares of RP be purchased or otherwise acquired by the Corporation except in accordance with a purchase offer made by the Corporation for all outstanding shares of RP, unless in each such instance dividends on all outstanding shares of RP to the end of the Dividend Period immediately preceding such transaction (and, if such transaction is on a Dividend Payment Date, for the Dividend Period ending on such Dividend Payment Date) shall have been paid or declared and sufficient funds for the payment thereof shall have been deposited with the Paying Agent. (i) Except as set forth in this paragraph 4 with respect to redemptions and subject to paragraph 4(h), nothing contained herein shall limit any legal right of the Corporation or any affiliate to purchase or otherwise acquire any shares of RP at any price. Any shares of RP which have been redeemed, purchased or otherwise acquired by the Corporation or any affiliate shall not be reissued and the Corporation shall effect a retirement of such shares; in no event shall such shares have any voting rights. (j) Notwithstanding any of the foregoing provisions of this paragraph 4, the Remarketing Agent may, in its sole discretion, after consultation with the Corporation, modify the procedures set forth above with respect to notification of redemption provided any such modification does not adversely affect the Holders of the shares of RP. 5. Liquidation. (a) Upon a liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders shall be entitled, whether from capital or surplus, before any assets of the Corporation shall be distributed among or paid over to holders of Common Stock or any other class or series of stock of the Corporation junior to the RP as to liquidation payments, to be paid in the amount of $100,000 per share of RP, plus an amount equal to all accrued and unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. After any such payment, the Holders shall not be entitled to any further participation in any distribution of assets of the Corporation. (b) If upon any such liquidation, dissolution or winding up of the Corporation the assets of the Corporation shall be insufficient to make such full payments to the Holders and the holders of any preferred stock ranking as to liquidation, dissolution or winding up, on a parity with the RP, then such assets shall be distributed among the Holders ratably in accordance with the respective amounts which would be payable on such shares of RP or any other such preferred stock if all amounts thereon were paid in full. (c) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation nor the merger or consolidation of any other corporation into or with the Corporation nor a reorganization of the Corporation, shall be deemed to be a dissolution, liquidation or winding up of the Corporation. 6. Voting Rights. (a) Holders of shares of RP shall have no voting rights, either general or special except as expressly required by applicable law, the Charter and as specified in this paragraph 6. (b) Whenever dividends on any shares of RP shall be in arrears for such number of Dividend Periods which shall in the aggregate contain not less than 540 days, then at the next annual meeting of stockholders and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the shares of RP have been paid or declared and a sum sufficient for payment has been set aside, the Holders of the shares of RP either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 6 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders aforesaid, be increased by two Directors. The rights of Holders of shares of RP of any series to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 6 shall continue in effect until cumulative dividends have been paid in full or declared and set apart for payment on the shares of RP. At elections for such Directors, each Holder of shares of RP shall be entitled to 2,000 votes for each share held. The Holders of shares of RP shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 6 of the Holders of shares of RP and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this Paragraph 6 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated, and the Board of Directors shall be decreased by two Directors. (c) So long as any shares of RP remain outstanding, the affirmative vote of the Holders of at least two-thirds of the votes of the shares of RP outstanding at the time given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as that term is below in this paragraph 6) to such shares of RP, or (ii) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the shares of RP unless the Articles Supplementary or other provisions of the charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation are not paid in full on such shares of RP and all outstanding shares of stock ranking on a parity (as that term is defined below in this paragraph 6) with s RP (such shares of RP and all such other stock being herein called "Parity Stock"), the shares of all Par Stock shall share ratably in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full, and on any distribution of assets upon liquidation ratably in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, (iii) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the charter of the Corporation including these Articles Supplementary which would materially and adversely affect any right, preference, privilege or voting power of such shares of RP or of the Holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock or Cumulative Preferred Stock, Floating Rate Series B Stock, the Series A and Series B Dutch Auction Rate Transferable SecuritiesTM Preferred Stock, the MMP or the RP or the creation and issuance of other series of Preferred Stock including RP, in each case ranking on a parity with or junior to the shares of RP with respect to the payment of dividends and the distribution of assets upon liquidation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply as to any shares of RP if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of RP shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with Part I, paragraph 4 to effect such redemption. Any class or classes of stock of the Corporation shall be deemed to rank (i) prior to the shares of RP as to dividends or as to distribution of assets if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the Holders of the shares of RP; and (ii) on a parity with the shares of RP as to dividends or as to distribution of assets, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share thereof be different from the shares of RP, if the holders of such class of stock and the shares of RP shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority one over the other. In connection with the exercise of the voting rights contained in this paragraph 6(c), each Holder of the shares of RP shall have 2,000 votes for each share of stock held. (d) So long as any shares of RP remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, by resolution adopted at a meeting at which the Holders of shares of RP (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (i) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (ii) issues to the holders of RP in exchange for the RP shares of preferred stock having at least the same relative rights and preferences as the RP (the "Exchanged Stock"), (iii) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 6(d), holders of all series of Parity Stock which are granted such voting rights shall vote as a class, and each Holder of RP shall have 2,000 votes for each share of stock held, and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of the RP shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with Part I, paragraph 4 to effect such redemption. 7. Exclusion of Other Rights. Unless otherwise required by law, shares of RP shall not have any rights, including preemptive rights, or references other than those specifically set forth herein or as provided by applicable law. 8. Notice. All notices or communications unless otherwise specified in the Bylaws of the Corporation or these Articles Supplementary shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date such notice is mailed. PART II REMARKETING PROCEDURES 1. Remarketing Schedule. A Remarketing with respect to shares of RP subject to Tender and Dividend Reset for each Dividend Period after the Initial Dividend Period shall be held over a three-day (in each case a "normal remarketing day") period consisting of the Tender Date (normally a Tuesday), the Dividend Reset Date (normally a Wednesday) and the Settlement Date (normally a Thursday) except that (i) if Tuesday is not a Business Day, Monday shall be the Tender Date, Wednesday shall be the Dividend Reset Date and Thursday shall be the Settlement Date; (ii) if Wednesday is not a Business Day, Monday shall be the Tender Date, Tuesday shall be the Dividend Reset Date and Thursday shall be the Settlement Date; (iii) if Thursday is not a Business Day, the preceding Friday shall be the Tender Date, the next following Monday shall be the Dividend Reset Date and the Tuesday following such Monday shall be the Settlement Date; and (iv) if Friday is not a Business Day, Monday shall be the Tender Date, Tuesday shall be the Dividend Reset Date and Wednesday shall be the Settlement Date. If there are fewer than four Business Days in any seven- day period which commences on a Tender Date such that none of the foregoing clauses can be given effect such that Beneficial Owners of RP whose shares have been sold in a Remarketing will receive same-day funds for the purchase price thereof the day following the Settlement Date (because the Tender Date, the Dividend Reset Date or the Settlement Date would fall on a day which is not a Business Day), the Remarketing Agent shall in its sole discretion adjust the remarketing schedule as appropriate to complete such Remarketing. Although any particular Tender Date, Dividend Reset Date and Settlement Date may not occur on the originally scheduled normal remarketing day because of the exceptions stated above, the next succeeding Tender Date, Dividend Reset Date and Settlement Date shall be, subject to the above listed exceptions, the originally designated normal remarketing day. 2. Procedure for Tendering. (a) A share of RP is subject to Tender and Dividend Reset only at the end of the current Dividend Period applicable to such share and may be tendered in a Remarketing only on the Tender Date immediately prior to the end of such Dividend Period. By 12:00 noon, New York City time, on the Tender Date, the Remarketing Agent shall, after canvassing the market and considering prevailing market conditions at the time for shares of RP and similar securities, provide Beneficial Owners, by telephone, telex, or otherwise, non-binding indications of Applicable Dividend Rates for the next succeeding 7-day Dividend Period, 49-day Dividend Period and any Optional Dividend Period or Periods. The actual Applicable Dividend Rates for such Dividend Periods may be greater or less than the rates indicated in such non-binding indications (but not greater than the applicable Maximum Dividend Rate). By 1:00 p.m., New York City time, on such Tender Date, each Beneficial Owner of shares of RP subject to Tender and Dividend Reset must notify the Remarketing Agent of its desire, on a share-by-share basis, to either tender such share of RP at a price of $100,000 per share or to continue to hold such share of RP and elect a 7-day Dividend Period, a 49-day Dividend Period or an Optional Dividend Period, if any, at the new Applicable Dividend Rate for the selected Dividend Period. Any such notice shall be irrevocable, which irrevocability may not be waived by the Remarketing Agent except that prior to 4:00 p.m., New York City time, on the Dividend Reset Date, the Remarketing Agent may, in its sole discretion (i) at the request of a Tendering Beneficial Owner waive any such Beneficial Owner's tender and thereby enable such Beneficial Owner to continue to hold the share or shares in question for a 7-day, 49-day or available Optional Dividend Period as agreed to by the Beneficial Owner and the Remarketing Agent so long as such tendering Beneficial Owner has indicated that it would accept the new Applicable Dividend Rate determined in the current Remarketing for such Dividend Period and (ii) at the request of a Beneficial Owner that has elected to hold its shares of RP, waive such Beneficial Owner's election, but only with respect to the type of the Dividend Period selected. (b) The right of each Beneficial Owner to tender shares of RP is limited to the extent that (i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the Remarketing Agreement, (ii) shares tendered have not been called for redemption, and (iii) the Remarketing Agent is able to find a purchaser or purchasers on a share-by-share basis for tendered shares of RP at an Applicable Dividend Rate for the applicable Dividend Period or Periods that is not in excess of the applicable Maximum Dividend Rate or Rates. (c) Any share of RP which is not tendered by the Beneficial Owner thereof for any reason (other than because there is no Remarketing Agent or because the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement) according to the Remarketing provisions provided for in this Part II and with respect to which no notice to hold pursuant to paragraph 2(a) of this Part II has been given will automatically accrue dividends at the new Applicable Dividend Rate for a Dividend Period of the same type as the prior Dividend Period for such share, except a 49-Day Dividend Period shall apply if the prior Dividend Period was the Initial Dividend Period and will be subject to Tender and Dividend Reset at the end of such new Dividend Period. However, in the event that such prior Dividend Period was an Optional Dividend Period of more than 98 days and if the Remarketing Agent is unable to remarket on the applicable Dividend Reset Date all shares of RP tendered to it in the relevant Remarketing at a price of $100,000 per share, then such new Dividend Period for such holder's shares shall be a 7-day Dividend Period and such new Applicable Dividend Rate will be the applicable Maximum Dividend Rate for a 7-day Dividend Period. 3. Determination of Applicable Dividend Rate. (a) Between 1:00 p.m., New York City time, on the Tender Date and 4:00 p.m., New York City time, on the Dividend Reset Date, the Remarketing Agent will determine (i) the allocation of tendered shares of RP among a 7-day Dividend Period, a 49-day Dividend Period and any available Optional Dividend Period (except as provided in paragraph 4(a) of this Part II), and (ii) the Applicable Dividend Rates to the nearest one-thousandth (0.001) of one percent per annum for the next 7-day Dividend Period, 49-day Dividend Period and available Optional Dividend Period, if any, respectively. The Applicable Dividend Rate for each such Dividend Period will be the dividend rate which the Remarketing Agent determines, in its sole judgment, to be the lowest rate, giving effect to such allocation, that would enable it to remarket on behalf of the Beneficial Owners thereof all shares of RP tendered to it at a price of $100,000 per share. (b) If no Applicable Dividend Rate shall have been set in any Remarketing for a 7-day Dividend Period or 49-day Dividend Period, or any Optional Dividend Period or for any or all such periods, for any reason (other than because there is no Remarketing Agent or because the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement) the Remarketing Agent, in its sole discretion, will, after taking into account market conditions as reflected in the prevailing yields on fixed and variable rate taxable and tax exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, determine the Applicable Dividend Rate or Rates for such Dividend Period or Periods which would be an initial dividend rate fixed in an offering on such Dividend Reset Date, assuming a comparable dividend period, issuer and security. If there is no Remarketing Agent or if the Remarketing Agent is not required to conduct a Remarketing pursuant to the Remarketing Agreement, the Applicable Dividend Rate for each subsequent Dividend Period for which no Remarketing takes place because of the foregoing will be the applicable Maximum Dividend Rate for a 7- day Dividend Period and the next succeeding Dividend Period will be a 7-day Dividend Period. (c) In determining such Applicable Dividend Rate or Rates, and making such allocation, the Remarketing Agent will, after taking into account market conditions as reflected in the prevailing yields on fixed and variable rate taxable and tax- exempt debt securities and the prevailing dividend yields on fixed and variable rate preferred stocks in providing non-binding indications of the Applicable Dividend Rates to Beneficial Owners and potential purchasers of shares of RP (i) consider the number of shares of RP tendered and the number of shares of RP potential purchasers are willing to purchase and (ii) contact directly by telephone or otherwise and ascertain from current and potential Beneficial Owners of shares of RP the dividend rates at which they would be willing to hold shares of RP. (d) The Applicable Dividend Rates, as well as the allocation of tendered shares of RP, shall be determined by the Remarketing Agent in its sole discretion (except as otherwise provided in these Articles Supplementary with respect to Applicable Dividend Rates that shall be the Penalty Rate and Maximum Dividend Rates) and shall be conclusive and binding on Beneficial Owners. (e) As a condition precedent to purchasing shares of RP, in any Remarketing or outside of any Remarketing, each purchaser of shares of RP shall sign and deliver, as provided therein, a copy of a Purchaser's Letter; the sufficiency of such Purchaser's Letter shall be determined by the Remarketing Agent, in its sole discretion. (f) The Applicable Dividend Rate for any Dividend Period shall not be more than the applicable Maximum Dividend Rate. 4. Allocation of Shares; Failure to Remarket at $100,000 Per Share. (a) If the Remarketing Agent is unable to remarket by 4:00 p.m., New York City time, on a Dividend Reset Date all shares of RP tendered to it in a Remarketing at a price of $100,000 per share, (i) each Beneficial Owner that tendered shares of RP for sale shall sell a number of shares of RP on a pro rata basis, to the extent practicable, or by lot, as determined by the Remarketing Agent in its sole discretion based on the number of orders to purchase shares of RP in such Remarketing; (ii) the next Dividend Period for all tendered but unsold shares and for all other shares the Beneficial Owners of which shall have elected or been deemed to have elected to hold such shares for a Dividend Period of more than 98 days shall be a 7-day Dividend Period; and (iii) the Applicable Dividend Rates for the next 7-day Dividend Period (including the 7-day Dividend Period referred to in the preceding clause (ii)), next 49-day Dividend Period and, if applicable, next Optional Dividend Period or Periods of 98 days or fewer will be the applicable Maximum Dividend Rate for such Dividend Period. (b) If the allocation procedures described above would result in the sale of a faction of a share of RP, the Remarketing Agent shall, in its sole discretion, round up or down the number of shares of RP on such Dividend Reset Date so that each share sold by a Beneficial Owner shall be a whole share of RP and the total number of shares sold equals the total number of shares bought on such Dividend Reset Date. 5. Notification of Results; Settlement. (a) By approximately 4:30 p.m., New York City time, on each Dividend Reset Date, by telephone, telex or otherwise, the Remarketing Agent will advise (i) each Beneficial Owner (or the Agent Member thereof who in turn will advise such Beneficial Owner) of shares of RP that submitted a notice of intent to tender shares of RP in the related Remarketing whether such tender was accepted in whole or in part and to give instructions to its Agent Member to deliver those shares of RP for which the tender was accepted, by book entry against payment therefor to the Paying Agent through the Securities Depository, by 8:30 a.m., New York City time on the related Settlement Date and (ii) each purchaser (or the Agent Member thereof who in turn will advise such purchaser) purchasing shares of RP as a result of the related Remarketing, to give instructions to its Agent Member to pay the purchase price to the Remarketing Agent, against delivery of such shares, by book entry through the Securities Depository, by 8:30 a.m., New York City time on the related Settlement Date. The Paying Agent may return any shares of RP delivered to the Paying Agent after 8:30 a.m. New York City time on the Settlement Date for redelivery to the extent practicable on the same or on the following day. The Paying Agent shall deliver to the Remarketing Agent against receipt of payment, through the Securities Depository, all shares of RP received by the Paying Agent as provided herein. (b) The Remarketing Agent also will (i) advise each purchaser (or its Agent Member) that is to purchase shares of RP as a result of the Remarketing of the amount that it will be required, by 8:30 a.m., New York City time, on the Settlement Date, to pay against delivery by book entry of the shares of RP to be purchased, (ii) advise each Beneficial Owner (or its Agent Member) that is to sell shares of RP as a result of the Remarketing of the number of shares of RP that it will be required to deliver by 8:30 a.m., New York City time, on the Settlement Date by book entry against payment therefor, (iii) advise, upon request to the Remarketing Agent, each existing Beneficial Owner of shares of RP who will continue to hold shares of RP and each purchaser of shares of RP of the Applicable Dividend Rates for the next Dividend Periods, (iv) advise each existing Beneficial Owner (or its Agent Member) who has elected to hold shares and has elected to change the type of the Dividend Period with respect to such shares, to deliver by 8:30 a.m., New York City time, on the Settlement Date by book entry such shares "free" to the Paying Agent through the Securities Depository to effectuate such change, (v) if the Remarketing Agent is unable to remarket by 4:00 p.m., New York City time, on a Dividend Reset Date all shares of RP tendered to it in a Remarketing at a price of $100,000 per share, advise the Beneficial Owners of all tendered but unsold shares and the Beneficial Owners which shall have elected, or been deemed to have elected, to hold shares for an Optional Dividend Period of more than 98 days, to deliver such shares by 8:30 a.m., New York City time, on the Settlement Date, by book entry "free" to the Paying Agent through the Securities Depository to effectuate a conversion to a 7-day Dividend Period, and (vi) advise the Paying Agent, by 4:30 p.m., New York City time, on each Dividend Reset Date, of the Applicable Dividend Rate or Rates determined in the related Remarketing, of the number of shares of RP to which such Applicable Dividend Rate or Rates apply, of the shares of RP sold and purchased in such Remarketing and of the selling and purchasing Beneficial Owners and the Beneficial Owners who have elected to change the length of the Dividend Period with respect to their shares of RP and of the number of shares affected thereby. (c) In accordance with the Securities Depository's normal procedures, on the Settlement Date, the transactions described above will be executed through the Securities Depository, as authorized in accordance with paragraph 5(b) of this Part II, and the accounts of the respective Agent Members at the Securities Depository will be debited and credited and shares delivered by book entry as necessary to effect the purchases and sales of shares of RP or the change in length of Dividend Period as determined in the Remarketing. Purchasers of shares of RP will make payment through their Agent Members in New York Clearing House funds to the Securities Depository against delivery through their Agent Members. The Securities Depository will make payment in accordance with its normal procedures, which now provide for payment in New York Clearing House funds, provided that if the procedures of the Securities Depository shall be changed to provide for payment in same-day funds, then purchasers will make payment in same-day funds. (d) If any Beneficial Owner selling shares of RP in a Remarketing fails to deliver such shares, the Agent Member of such selling Beneficial Owner and of any other person that was to have purchased shares of RP in such Remarketing may deliver to any such other person a number of whole shares of RP that is less than the number of shares that otherwise was to be purchased by such person. In such event, the number of shares of RP to be so delivered shall be determined by such Agent Member who shall give the Remarketing Agent and the Paying Agent notice of such number. Delivery of such lesser number of shares of RP shall constitute good delivery. (e) The Remarketing Agent, Paying Agent and Securities Depository will each use their reasonable commercial efforts to meet the timing requirements set forth in paragraphs (a) and (b) above; provided however, that in the event that there is a delay in the occurrence of any delivery or other event connected with a Remarketing, the Remarketing Agent, Paying Agent and Securities Depository will each use their reasonable commercial efforts to accommodate such delay in furtherance of the Remarketing. (f) Notwithstanding any of the foregoing provisions of this paragraph 5, the Remarketing Agent may, in its sole discretion, after consultation with the Corporation, modify the procedures set forth above with respect to settlement, provided any such modification does not adversely affect the Holders of RP or the Corporation; provided further that any such modification shall not increase the obligations of the Paying Agent without the prior consent of the Paying Agent. 6. Purchase of Shares of RP by Remarketing Agent. The Remarketing Agent may purchase for its own account shares of RP in a Remarketing, provided that it purchases all shares of RP not sold in a Remarketing to other purchasers and that the Applicable Dividend Rate or Rates set with respect to such shares in the Remarketing are no higher than the Applicable Dividend Rate or Rates that would have been set if the Remarketing Agent had not purchased such shares. Notwithstanding the foregoing, the Remarketing Agent is not obligated to purchase any shares of RP that would otherwise remain unsold in a Remarketing. If the Remarketing Agent owns any shares of RP immediately prior to a Remarketing and if all other shares tendered for sale by other Beneficial Owners of shares of RP have been sold in such Remarketing, then the Remarketing Agent may sell such number of its shares in such Remarketing as there are outstanding orders to purchase. Neither the Corporation nor the Remarketing Agent is obligated in any case to provide funds to make payment to a Beneficial Owner upon such Beneficial Owner's tender of its shares of RP for Remarketing. 7. Applicable Dividend Rate as the Penalty Rate. If the Applicable Dividend Rate with respect to any share of RP shall be the Penalty Rate, paragraphs 1, 2, 3, 4, 5 and 6 of this Part II shall no longer be applicable to any of the shares of RP and the shares of RP shall not be subject to Tender and Dividend Reset. 8. Transfers. So long as the Applicable Dividend Rate applicable to any share of RP is not the Penalty Rate, shares of RP may be sold, transferred or otherwise disposed of, either in a Remarketing or otherwise, only to a person that has delivered a signed copy of a Purchaser's Letter addressed to the Corporation, the Remarketing Agent, the Paying Agent and the Agent Member and to be delivered as provided in such Purchaser's Letter, provided that, in the case of all transfers other than pursuant to Remarketings, as a condition to such transfer, the Agent Member of the transferee and of the transferor advise the Paying Agent and the Remarketing Agent of such transfer. 9. Miscellaneous. The Board of Directors of the Corporation may interpret or adjust the provisions of these Articles Supplementary to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Beneficial Owners of shares of RP and if such inconsistency or ambiguity reflects an incorrect provision hereof the Board of Directors may authorize the filing of a Certificate of Correction. 10. Securities Depository; Stock Certificates. (a) The Depository Trust Company will initially act as Securities Depository for the Agent Members with respect to shares of RP. In accordance with applicable law, on the Date of Original Issue an appropriate number of certificates for all of the shares of RP will be registered in the name of Cede, as nominee of the Securities Depository. Such certificates will bear a legend to the effect that such certificates are issued subject to the provisions contained in these Articles Supplementary and each Purchaser's Letter. The Corporation will also issue stop-transfer instructions to the Paying Agent for the shares of RP. Except as provided in paragraphs (b) and (c) below, Cede will be the Holder, and no Beneficial Owner shall receive certificates representing its ownership interest in such shares. (b) If DTC shall cease acting as Securities Depository, the Paying Agent and the Corporation shall, at the Corporation's option, either (i) arrange for another securities depository to maintain custody of the certificates evidencing the shares of RP or (ii) cause the Corporation to issue one or more new certificates registered in the names of the Beneficial Owners or their nominees. (c) If the Applicable Dividend Rate applicable to all shares of RP shall be the Penalty Rate, the Corporation shall issue one or more new certificates with respect to such shares (without the legend referred to in paragraph 10(a) of this Part II) registered in the names of the Beneficial Owners or their nominees and shall rescind the stop-transfer instruction referred to in paragraph 10(a) of this Part II with respect to such shares. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on July 28, 1987. REPUBLIC NEW YORK CORPORATION By /s/ Jeffrey C. Keil Jeffrey C. Keil (President) Attest: /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Secretary) Exhibit A TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN DELIVER COPIES ON YOUR BEHALF TO THE RESPECTIVE TRUST COMPANY MASTER PURCHASER'S LETTER Relating to Securities Involving Rate Settings Through Auctions or Remarketings THE COMPANY THE REMARKETING AGENT THE TRUST COMPANY A BROKER-DEALER AN AGENT MEMBER OTHER PERSONS Dear Sirs: 1. This letter is designed to apply to publicly or privately offered debt or equity securities ("Securities") of any issuer ("Company") which are described in any final prospectus or other offering materials relating to such Securities as the same may be amended or supplemented (collectively, with respect to the particular Securities concerned, the "Prospectus") and which involve periodic rate settings through auctions ("Auctions") or remarketing procedures ("Remarketings"). This letter shall be for the benefit of any Company and of any trust company, auction agent, paying agent, (collectively, "trust company"), remarketing agent, broker-dealer, agent member, securities depository or other interested person in connection with any Securities and related Auctions or Remarketings (it being understood that such persons may be required to execute specified agreements and nothing herein shall alter such requirements). The terminology used herein is intended to be general in its application and not to exclude any Securities in respect of which (in the Prospectus or otherwise) alternative terminology is used. 2. We may from time to time offer to purchase, purchase, offer to sell and/or sell Securities of any Company as described in the letter shall apply to all such purchases, sales and offers and to Securities owned by us. We understand that the dividend/interest rate on Securities may be based from time to time on the results of Auctions or Remarketings as set forth in the Prospectus. 3. We agree that any bid or sell order placed by us in an Auction or a Remarketing shall constitute an irrevocable offer (except as otherwise described in the Prospectus) by us to purchase or sell the Securities subject to such bid or sell order, or such lesser amount of Securities as we shall be required to sell or purchase as a result of such Auction or Remarketing, at the applicable price, all as set forth in the Prospectus, and that if we fail to place a bid or sell order with respect to Securities owned by us with a broker-dealer on any Auction or Remarketing date, or a broker-dealer to which we communicate a bid or sell order fails to submit such bid or sell order to the trust company or remarketing agent concerned, we shall be deemed to have placed a hold order with respect to such Securities as described in the Prospectus. We authorize any broker-dealer that submits a bid or sell order as our agent in Auctions or Remarketings to execute contracts for the sale of Securities covered by such bid or sell order. We recognize that the payment by such broker-dealer for Securities purchased on our behalf shall not relieve us of any liability to such broker-dealer for payment for such Securities. 4. We understand that in a Remarketing, the dividend or interest rate or rates on the Securities and the allocation of Securities tendered for sale between dividend or interest periods of different lengths will be based from time to time on the determinations of one or more remarketing agents, and we agree to be conclusively bound by such determinations. We further agree to the payment of different dividend or interest rates to different holders of Securities depending on the length of the dividend or interest period elected by such holders. We agree that any notice given by us to a remarketing agent (or to a broker-dealer for transmission to a remarketing agent) of our desire to tender Securities in a Remarketing shall constitute an irrevocable (except to the limited extend set forth in the Prospectus) offer by us to sell the Securities specified in such notice, or such lesser number of Securities as we shall be required to sell as a result of such Remarketing, in accordance with the terms set forth in the Prospectus, and we authorize the remarketing agent to sell, transfer or otherwise dispose of such Securities as set forth in the Prospectus. 5. We agree that, during the applicable period as described in the Prospectus, dispositions of Securities can be made only in the denominations set forth in the Prospectus and we will sell, transfer or otherwise dispose of any Securities held by us from time to time only pursuant to a bid or sell order placed in an Auction, in a Remarketing, to or through a broker-dealer or, when permitted in the Prospectus, to a person that has signed and delivered to the applicable trust company or a remarketing agent a letter substantially in the form of this letter (or other applicable purchaser's letter), provided that in the case of all transfers other than pursuant to Auctions or Remarketings we or our broker-dealer or our agent member shall advise such trust company or a remarketing agent of such transfer. We understand that a restrictive legend will be placed on certificates representing the Securities and stop-transfer instructions will be issued to the transfer agent and/or registrar, all as set forth in the Prospectus. 6. We agree that, during the applicable period as described in the Prospectus, ownership of Securities shall be represented by one or more global certificates registered in the name of the applicable securities depository or its nominee, that we will not be entitled to receive any certificate representing the Securities and that our ownership of any Securities will be maintained in book entry form by the securities depository for the account of our agent member, which in turn will maintain records of our beneficial ownership. We authorize and instruct our agent member to disclose to the applicable trust company or remarketing agent such information concerning our beneficial ownership of Securities as such trust company or remarketing agent shall request. 7. We acknowledge that partial deliveries of Securities purchased in Auctions or Remarketings may be made to us and such deliveries shall constitute good delivery as set forth in the Prospectus. 8. This letter is not a commitment by us to purchase any Securities. 9. This letter supersedes any prior-dated version of this master purchaser's letter, and supplements any prior- or post- dated purchaser's letter specific to particular Securities, and this letter may only be revoked by a signed writing delivered to the original recipients hereof. 10. The descriptions of Auction or Remarketing procedures set forth in each applicable Prospectus are incorporated by reference herein and in case of any conflict between this letter, any purchaser's letter specific to particular Securities and any such description, such description shall control. 11. Any xerographic or other copy of this letter shall be deemed of equal effect as a signed original. 12. Our agent member of the Depository Trust Company currently is . 13. Our personnel authorized to place orders with broker- dealers for the purpose set forth in the Prospectus in Auctions or Remarketings currently is/are , telephone number ( ) . 14. Our taxpayer identification number is . 15. In the case of each offer to purchase, purchase, offer to sell or sale by us of Securities not registered under the Securities Act of 1933, as amended (the "Act"), we represent and agree as follows: A. We understand and expressly acknowledge that the Securities have not been and will not be registered under the Act and, accordingly, that the Securities may not be reoffered, resold or otherwise pledged, hypothecated or transferred unless an applicable exemption from the registration requirements of the Act is available. B. We hereby confirm that any purchase of Securities made by us will be for our own account, or for the account of one or more parties for which we are acting as trustee or agent with complete investment discretion and with authority to bind such parties, and not with a view to any public resale or distribution thereof. We and each other party for which we are acting which will acquire Securities will be "accredited investors" within the meaning of Regulation D under the Act with respect to the Securities to be purchased by us or such party, as the case may be, will have previously invested in similar types of instruments and will be able and prepared to bear the economic risk of investing in and holding such Securities. C. We acknowledge that prior to purchasing any Securities we shall have received a Prospectus (or private placement memorandum) with respect thereto and acknowledge that we will have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase Securities. D. We recognize that the Company and broker-dealers will rely upon the truth and accuracy of the foregoing investment representations and agreements, and we agree that each of our purchases of Securities now or in the future shall be deemed to constitute our concurrence in all of the foregoing which shall be binding on us and each party for which we are acting as set forth in Subparagraph B above. Dated: Mailing Address of Purchaser (Name of Purchaser) By: Printed Name: Title: REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the Charter of the Corporation, the Board of Directors has authorized the classification of up to 4,000,000 of the 15,000,000 shares of Preferred Stock (the "Preferred Stock") which the Corporation now has authority to issue into a series designated $3.375 Cumulative Convertible Preferred Stock and has provided for the issuance of such series. SECOND: The number of shares and terms of the $3.375 Cumulative Convertible Preferred Stock as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 1. $3.375 Cumulative Convertible Preferred Stock. 4,000,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as $3.375 Cumulative Convertible Preferred Stock (hereinafter sometimes called the "Convertible Preferred Stock"). The Convertible Preferred Stock is issuable in whole shares only. The Convertible Preferred Stock shall be of a stated value of $50 per share (the "Stated Value"). The term "Charter" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends. The holders of the Convertible Preferred Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the purpose, cash dividends at the rate of $3.375 per share per annum, and no more, payable quarterly on the first day of January, April, July and October of each year, with the first such dividend being payable July 1, 1991 (each a "dividend payment date"). Such dividends shall be payable from, and shall be cumulative from, the date of original issue of each share. Dividends will be payable, in arrears, to holders of record as they appear on the stock transfer records of the Corporation on such record dates, not more than 60 days nor less than 10 days preceding the payment dates thereof, as shall be fixed by the Board of Directors. The amount of dividends payable per share for each full dividend period shall be computed by dividing by four the $3.375 annual rate. The amount of dividends payable for the initial dividend period or any period shorter than a full dividend period shall be calculated on the basis of a 360-day year of twelve 30-day months. If in any quarterly dividend period (being the period between such dividend payment dates or, in the case of the first such period, from the date of original issue to July 1, 1991) dividends at the rate of $3.375 per share per annum shall not have been paid or declared and set apart for payment on all outstanding shares of Convertible Preferred Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation or shares of any other capital stock of the Corporation ranking junior to the Convertible Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Convertible Preferred Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Convertible Preferred Stock with respect to the payment of dividends, except by conversion into or exchange for capital stock of the Corporation ranking junior to the Convertible Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation; provided, however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the resolutions providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding Convertible Preferred Stock shall have been paid or declared and set apart for payment. 3. Conversion. (i) Subject to and upon compliance with the provisions of this paragraph 3, each holder of Convertible Preferred Stock shall have the right, at his option, at any time, to convert any or all of the shares of Convertible Preferred Stock held by such holder into the number of fully paid and nonassessable shares of Common Stock (calculated as to each conversion, for the purpose of determining the amount of any cash payments provided for under subparagraph (iii) of this paragraph 3, to the nearest 1/100 of a share of Common Stock, with 1/200 of a share of Common Stock being rounded upward) obtained by dividing the Stated Value of a share of Convertible Preferred Stock by the Conversion Price (as defined below) and multiplying such resulting number by the number of shares of Convertible Preferred Stock to be converted, and by surrendering such shares of Convertible Preferred Stock so to be converted, such surrender to be made in the manner provided in subparagraph (ii) of this paragraph 3; provided, however, that the right to convert shares called for redemption pursuant to paragraph 6 shall terminate at the close of business on the date fixed for such redemption unless the Corporation shall default in making payment of the amount payable upon such redemption. The term "Common Stock" shall mean the Common Stock, par value $5.00, of the Corporation as the same exists at the date of these Articles Supplementary or as such stock may be constituted from time to time, except that for the purpose of subparagraph (v) of this paragraph 3, the term "Common Stock" shall also mean and include stock of the Corporation of any class, whether now or hereafter authorized, which shall have the right to participate in the distribution of either earnings or assets of the Corporation without limit as to amount or percentage. The term "Conversion Price" shall mean $72.50, as adjusted in accordance with the provisions of this paragraph 3. (ii) In order to exercise the conversion privilege, the holder of each share of Convertible Preferred Stock to be converted shall surrender the certificate representing such share at the office of the conversion agent for the Convertible Preferred Stock in the Borough of Manhattan, The City of New York, appointed for such purpose by the Corporation, which shall initially be the transfer agent for the Common Stock, with the Notice of Election to Convert on the back of said certificate completed and signed. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Convertible Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder or his duly authorized attorney, and by an amount sufficient to pay any transfer or similar tax. The holders of shares of Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares (except that holders of shares called for redemption on a redemption date between such record date and the dividend payment date shall not be entitled to receive such dividend on such dividend payment date) on the corresponding dividend payment date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date. However, shares of Convertible Preferred Stock surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding dividend payment date (except shares called for redemption on a redemption date during such period) must be accompanied by payment of an amount equal to the dividend payable on such shares on such dividend payment date. A holder of shares of Convertible Preferred Stock on a dividend payment record date who (or whose transferee) tenders any of such shares for conversion into shares of Common Stock on a dividend payment date will receive the dividend payable by the Corporation on such shares of Convertible Preferred Stock on such date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of Convertible Preferred Stock for conversion. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion. As promptly as practicable after the surrender of the certificates for shares of Convertible Preferred Stock as aforesaid, the Corporation shall issue and shall deliver at the office of the conversion agent to such holder, or on his written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph 3, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in subparagraph (iii) of this paragraph 3. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Convertible Preferred Stock shall have been surrendered, with the Notice of Election to Convert on the back of said certificates completed and signed (and, if applicable, payment of an amount equal to the dividend payable on such shares shall have been made), to the Corporation as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on such date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such shares shall have been surrendered and such notice (and, if applicable, payment) received by the Corporation. All shares of Common Stock delivered upon conversion of the Convertible Preferred Stock will upon delivery be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights. (iii) In connection with the conversion of any shares of Convertible Preferred Stock, no fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of the Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion of a share of Convertible Preferred Stock or a fraction thereof, the Corporation shall pay to the holder of such share of Convertible Preferred Stock or fraction thereof an amount in cash (computed to the nearest cent, with one-half cent being rounded upward) equal to the reported last sales price (as defined in subparagraph (iv)(e) of this paragraph 3) of the Common Stock on the Trading Day (as defined in subparagraph (iv)(e) of this paragraph 3) next preceding the day of conversion multiplied by the fraction of a share of Common Stock represented by such fractional interest. If more than one share of Convertible Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate Stated Value of the shares of Convertible Preferred Stock so surrendered. (iv) The Conversion Price shall be adjusted from time to time as follows: (a) In case the Corporation shall (x) pay a dividend or make a distribution on the Common Stock in shares of Common Stock, (y) subdivide the outstanding Common Stock into a greater number of shares or (z) combine the outstanding Common Stock into a smaller number of shares, the Conversion Price shall be adjusted so that the holder of any share of Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock of the Corporation which he would have owned or have been entitled to receive after the happening of any of the events described above had such share of Convertible Preferred Stock been converted immediately prior to the record date in the case of a dividend or the effective date in the case of subdivision or combination. An adjustment made pursuant to this subparagraph (a) shall become effective immediately after the record date in the case of a dividend, except as provided in subparagraph (h) below, and shall become effective immediately after the effective date in the case of a subdivision or combination. (b) In case the Corporation shall issue rights or warrants to all holders of the Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share of Common Stock (as defined for purposes of this subparagraph (b) in subparagraph (e) below), at the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock receivable upon exercise of such rights or warrants. Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately, except as provided in subparagraph (h) below, after such record date. In determining whether any rights or warrants entitle the holders of the Convertible Preferred Stock to subscribe for or purchase shares of Common Stock at less than such current market price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received by the Corporation for such rights or warrants plus the exercise price thereof, the value of such consideration or exercise price, as the case may be, if other than cash, to be determined by the Board. (c) In case the Corporation shall distribute to all holders of Common Stock any shares of capital stock of the Corporation (other than Common Stock) or evidences of its indebtedness or assets (excluding cash dividends or distributions paid from retained earnings of the Corporation) or rights or warrants to subscribe for or purchase any of its securities (excluding those rights or warrants referred to in subparagraph (b) above) (any of the foregoing being hereinafter in this subparagraph (c) called the "Securities"), then, in each such case, unless the Corporation elects to reserve such Securities for distribution to the holders of the Convertible Preferred Stock upon the conversion of the shares of Convertible Preferred Stock so that any such holder converting shares of Convertible Preferred Stock will receive upon such conversion, in addition to the shares of the Common Stock to which such holder is entitled, the amount and kind of such Securities which such holder would have received if such holder had, immediately prior to the record date for the distribution of the Securities, converted its shares of Convertible Preferred Stock into Common Stock, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction the numerator of which shall be the current market price per share (as defined for purposes of this subparagraph (c) in subparagraph (e) below) of the Common Stock on the record date mentioned above less the then fair market value (as determined by the Board, whose determination shall, if made in good faith, be conclusive) of the portion of the Securities so distributed applicable to one share of Common Stock, and the denominator of which shall be the current market price per share (as defined in subparagraph (e) below) of the Common Stock; provided, however, that in the event the then fair market value (as so determined) of the portion of the Securities so distributed applicable to one share of Common Stock is equal to or greater than the current market price per share (as defined in subparagraph (e) below) of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of Convertible Preferred Stock shall have the right to receive the amount and kind of Securities such holder would have received had he converted each such share of Convertible Preferred Stock immediately prior to the record date for the distribution of the Securities. Such adjustment shall become effective immediately, except as provided in subparagraph (h) below, after the record date for the determination of stockholders entitled to receive such distribution. (d) If, pursuant to subparagraph (b) or (c) above, the number of shares of Common Stock into which a share of Convertible Preferred Stock is convertible shall have been adjusted because the Corporation has declared a dividend, or made a distribution, on the outstanding shares of Common Stock in the form of any right or warrant to purchase securities of the Corporation, or the Corporation has issued any such right or warrant, then, upon the expiration of any such unexercised right or unexercised warrant, the Conversion Price shall forthwith be adjusted to equal the Conversion Price that would have applied had such right or warrant never been declared, distributed or issued. (e) For the purpose of any computation under subparagraph (b) above, the current market price per share of Common Stock on any date shall be deemed to be the average of the reported last sales prices for the thirty consecutive Trading Days (as defined below) commencing forty-five Trading Days before the date in question. For the purpose of any computation under subparagraph (c) above, the current market price per share of Common Stock on any date shall be deemed to be the average of the reported last sales prices for the ten consecutive Trading Days before the date in question. The reported last sales price for each day (whether for purposes of subparagraph (b) or subparagraph (c)) shall be the reported last sales price, regular way, or, in case no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if the Common Stock is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for the Common Stock on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board or a committee thereof or, if no such quotations are available, the fair market value of the Common Stock as determined by a New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board or a committee thereof. As used herein, the term "Trading Day" with respect to Common Stock means (x) if the Common Stock is listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which the New York Stock Exchange or such other national securities exchange is open for business or (y) if the Common Stock is quoted on the National Market System of the NASDAQ, a day on which trades may be made on such National Market System or (z) otherwise, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (f) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this subsection (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and provided further that adjustment shall be required and made in accordance with the provisions of this paragraph 3 (other than this subparagraph (f)) not later than such time as may be required in order to preserve the tax free nature of a distribution to the holders of Common Stock. All calculations under this paragraph 3 shall be made to the nearest cent or to the nearest 1/100 of a share, as the case may be, with one-half cent and 1/200 of a share, respectively, being rounded upward. Anything in this subparagraph (iv) to the contrary notwithstanding, the Corporation shall be entitled to make such reductions in the Conversion Price, in addition to those required by this subparagraph (iv), as it in its discretion shall determine to be advisable in order that any stock dividend, subdivision of shares, distribution of rights or warrants to purchase stock or securities, or distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable. (g) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with any conversion agent an officers' certificate, signed by the Chairman, the President, any Vice-Chairman or any Executive Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation, setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Convertible Preferred Stock at his last address as shown on the stock books of the Corporation. (h) In any case in which this subparagraph (iv) provides that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (y) issuing to the holder of any share of Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (z) paying to such holder any amount in cash in lieu of any fractional share of Common Stock pursuant to subparagraph (iii) of this paragraph 3. (v) If: (a) the Corporation shall declare a dividend (or any other distribution) on the Common Stock (other than in cash out of retained earnings); or (b) the Corporation shall authorize the granting to the holders of Common Stock of rights or warrants to subscribe for or purchase any shares of any class of capital stock of the Corporation or any other rights or warrants; or (c) there shall be any reclassification or change of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value, or from par value to no par value, or from no par value to par value), or any consolidation, merger, or statutory share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required or any sale or transfer of all or substantially all the assets of the Corporation as an entirety; or (d) there shall be a voluntary or involuntary liquidation, dissolution or winding up of the Corporation; then the Corporation shall cause to be filed with the conversion agent, and shall cause to be mailed to the holders of shares of the Convertible Preferred Stock at their addresses as shown on the stock transfer records of the Corporation, at least 15 days prior to the applicable date hereinafter specified, a notice stating (y) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (z) the date on which such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, statutory share exchange, sale, transfer, liquidation, dissolution or winding up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in subparagraph (viii) of this paragraph 3 or in subparagraph (v)(a), (v)(b), (v)(c) or (v)(d) of this paragraph 3. (vi) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock, for the purpose of effecting conversions of the Convertible Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Convertible Preferred Stock not theretofore converted. For purposes of this subparagraph (vi), the number of shares of Common Stock which shall be deliverable upon the conversion of all outstanding shares of Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. Before taking any action which would cause any adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of the Convertible Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion of the Convertible Preferred Stock prior to such delivery upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery. Prior to the delivery of any securities which the Corporation shall be obligated to deliver upon conversion of the Convertible Preferred Stock, the Corporation will endeavor to comply with all Federal and State laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority. (vii) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of the Convertible Preferred Stock pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the Convertible Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (viii) Notwithstanding any other provision herein to the contrary, if any of the following events occur, namely (x) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision of combination of the Common Stock), (y) any consolidation, merger or combination of the Corporation with or into another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock or (z) any sale or conveyance of the properties and assets of the Corporation as, or substantially as, an entirety to any other entity as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then appropriate provision shall be made so that the holder of each share of Convertible Preferred Stock then outstanding shall have the right to convert such share into the kind and amount of the shares of stock and other securities or property or assets (including cash) that would have been receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such share of Convertible Preferred Stock immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance. The adjustments described in this subparagraph (viii) shall be subject to further adjustments as appropriate that shall be as nearly equivalent as may be practicable to the relevant adjustments provided for in this paragraph 3. If, in the case of any such consolidation, merger, combination, sale or conveyance, the stock or other securities and property receivable thereupon by a holder of shares of Common Stock includes shares of stock, securities or other property or assets (including cash) of an entity other than the successor or acquiring entity, as the case may be, in such consolidation, merger, combination, sale or conveyance, then the Corporation shall enter into an agreement with such other entity for the benefit of the holders of Convertible Preferred Stock that shall contain such provisions to protect the interests of such holders as the Board shall reasonably consider necessary by reason of the foregoing. (ix) Upon any conversion or redemption of shares of Convertible Preferred Stock, the shares of Convertible Preferred Stock so converted or redeemed shall have the status of authorized and unissued shares of Preferred Stock, and the number of shares of Preferred Stock which the Corporation shall have authority to issue shall not be decreased by the conversion or redemption of shares of Convertible Preferred Stock. 4. Voting Rights. (i) Holders of the Convertible Preferred Stock shall have no voting rights, either general or special, except as expressly required by applicable law, the Charter and as specified in this paragraph 4. (ii) Whenever, at any time or times, dividends payable on the shares of Convertible Preferred Stock shall be in arrears for six consecutive calendar quarters, then at the next annual meeting of stockholders and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Convertible Preferred Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Convertible Preferred Stock, either alone or together with the holders of one or more other cumulative series of the Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two additional members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 4 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders or at any meeting called for the election of Directors aforesaid, be increased by two Directors. The rights of the holders of the Convertible Preferred Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 4 shall continue in effect until cumulative dividends have been paid in full or declared and a sum sufficient has been set apart for payment on the Convertible Preferred Stock. At elections for such Directors, each holder of Convertible Preferred Stock shall be entitled to one vote for each share of Convertible Preferred Stock held of record on the record date established for the meeting. The holders of Convertible Preferred Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 4 of the holders of Convertible Preferred Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 4 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Convertible Preferred Stock remain outstanding, the affirmative vote of the holders of at least two-thirds of the shares of Convertible Preferred Stock outstanding at the time given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class of series of stock (including any class or series of Preferred Stock) ranking prior (as that term is defined in paragraph 5) to the Convertible Preferred Stock, or (b) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity with the Convertible Preferred Stock unless the Articles Supplementary or other provisions of the Charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full on the Convertible Preferred Stock and all outstanding shares of stock ranking on a parity (as that term is defined in paragraph 5) with the Convertible Preferred Stock (the Convertible Preferred Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably (x) in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full and (y) on any distribution of assets upon liquidation, dissolution or winding up of the Corporation in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Charter of the Corporation, including these Articles Supplementary, which would materially and adversely affect any right, preference, privilege or voting power of the Convertible Preferred Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock or the Corporation's Cumulative Floating Rate Series B Preferred Stock, the Series A and Series B Dutch Auction Rate Transferable Securities Preferred Stock, the Money Market Cumulative Preferred Stock, the Remarketed Preferred Stock or the Convertible Preferred Stock or any other capital stock of the Corporation, or the creation and issuance of other series of Preferred Stock including convertible Preferred Stock or any other capital stock of the Corporation, in each case ranking on a parity with or junior to the Convertible Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. (iv) So long as any shares of Convertible Preferred Stock remain outstanding and notwithstanding any provision of the Charter of the Corporation requiring a greater percentage, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, by resolution duly adopted at a meeting at which a quorum was present and acting and at which the holders of Convertible Preferred Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (a) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (b) issues to the holders of the Convertible Preferred Stock in exchange for the Convertible Preferred Stock shares of preferred stock having at least the same relative rights and preferences as the Convertible Preferred Stock (the "Exchanged Stock"), (c) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation, and (d) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 4(iv), holders of all series of Parity Stock which are granted such voting rights shall vote as a class, and each holder of Convertible Preferred Stock shall have one vote for each share of stock held, and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply as to any shares of Convertible Preferred Stock if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Convertible Preferred Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 6 to effect such redemption. 5. Rank. For the purposes of these Articles Supplementary, any class or classes of stock of the Corporation shall be deemed to rank: (a) prior to the Convertible Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Convertible Preferred Stock; (b) on a parity with the Convertible Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether or not the dividend rates, dividend payment dates, or redemption or liquidation preference per share thereof be different from those of the Convertible Preferred Stock, if the holders of such class of stock and the Convertible Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation preference, without preference or priority one over the other; and (c) junior to shares of the Convertible Preferred Stock, either as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, or both, if such class shall be Common Stock or if the holders of the Convertible Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up of the Corporation, as the case may be, in preference or priority to the holders of stock of such class or classes. The Convertible Preferred Stock shall rank prior, as to dividends and upon liquidation, dissolution or winding up, to the Common Stock and on a parity with the Corporation's Cumulative Floating Rate Series B Preferred Stock, the Series A and Series B Dutch Auction Rate Transferable Securities Preferred Stock, the Money Market Cumulative Preferred Stock and the Remarketed Preferred Stock. 6. Optional Redemption. The shares of the Convertible Preferred Stock may be redeemed at the option of the Corporation, as a whole, or from time to time in part, at any time, upon not less than 30 nor more than 60 days' prior notice mailed to the holders of the shares to be redeemed at their addresses as shown on the stock books of the Corporation; provided, however, that shares of the Convertible Preferred Stock shall not be redeemable prior to May 15, 1995. Subject to the foregoing, shares of the Convertible Preferred Stock are redeemable at the following redemption prices per share if redeemed during the 12-month period beginning May 15, in the year indicated: Year Price Year Price 1995 $52.0250 1998 $51.0125 1996 51.6875 1999 50.6750 1997 51.3500 2000 50.3375 and $50 if redeemed on or after May 15, 2001, in each case together with an amount equal to all dividends (whether or not earned or declared) accrued and accumulated and unpaid to, but excluding, the date fixed for redemption. If full cumulative dividends on the Convertible Preferred Stock have not been paid, the Convertible Preferred Stock may not be redeemed in part and the Corporation may not purchase or acquire any shares of the Convertible Preferred Stock otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of the Convertible Preferred Stock. If fewer than all the outstanding shares of Convertible Preferred Stock are to be redeemed, the Corporation will select those to be redeemed by lot or a substantially equivalent method. If a notice of redemption has been given pursuant to this paragraph 6 and if, on or before the date fixed for redemption, the funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares of Convertible Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares have not been surrendered for cancellation, on the redemption date dividends shall cease to accrue on the shares to be redeemed, and at the close of business on the redemption date the holders of such shares shall cease to be stockholders with respect to such shares and shall have no interest in or claims against the Corporation by virtue thereof and shall have no voting or other rights with respect to such shares, except the right to receive the moneys payable upon surrender (and endorsement, if required by the Corporation) of their certificates, and the shares evidenced thereby shall no longer be outstanding. Notwithstanding the foregoing, if notice of redemption has been given pursuant to this paragraph 6 and any holder of shares of Convertible Preferred Stock shall, prior to the close of business on the redemption date, give written notice to the Corporation pursuant to paragraph 3 of the conversion of any or all of the shares to be redeemed held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation), then the conversion of such shares to be redeemed shall become effective as provided in paragraph 3. Subject to applicable escheat laws, any moneys so set aside by the Corporation and unclaimed at the end of ninety days from the redemption date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of the amounts payable upon such redemption. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time. Any funds which have been deposited by the Corporation, or on its behalf, with a paying agent or segregated and held in trust by the Corporation for the redemption of shares converted into Common Stock on or prior to the date fixed for such redemption shall (subject to any right of the holder of such shares to receive the dividend payable thereon as provided in paragraph 3) immediately upon such conversion be returned to the Corporation or, if then held in trust by the Corporation, shall be discharged from such trust. 7. Liquidation. (i) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Convertible Preferred Stock shall be entitled, whether from capital or surplus, before any assets of the Corporation shall be distributed among or paid over to holders of Common Stock or any other class or series of stock of the Corporation junior to the Convertible Preferred Stock as to liquidation preference, to be paid the amount of $50 per share (the "liquidation preference") of the Convertible Preferred Stock, plus an amount equal to all accrued and unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. The holders of the Convertible Preferred Stock will not be entitled to receive the liquidation preference until the liquidation preference of any other class of stock of the Corporation ranking senior to the Convertible Preferred Stock as to rights upon liquidation, dissolution or winding up shall have been paid (or a sum set aside therefor sufficient to provide for payment) in full. After any such liquidation preference payment, the holders of the Convertible Preferred Stock shall not be entitled to any further participation in any distribution of assets of the Corporation. (ii) If upon any such liquidation, dissolution or winding up of the Corporation the assets of the Corporation shall be insufficient to make such full payments to the holders of the Convertible Preferred Stock and the holders of any Preferred Stock ranking as to liquidation, dissolution or winding up on a parity with the Convertible Preferred Stock, then such assets shall be distributed among the holders of the Convertible Preferred Stock ratably in accordance with the respective amounts which would be payable on such shares of Convertible Preferred Stock or any other such Preferred Stock if all amounts thereon were paid in full. (iii) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation nor the merger or consolidation of any other corporation into or with the Corporation nor a reorganization of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation. 8. Parity Stock. So long as any shares of Convertible Preferred Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably (x) in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends were paid in full and (y) in any distribution of assets upon liquidation, dissolution or winding up of the Corporation, in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 9. Certain Definitions. (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares reacquired by the Corporation. (ii) The amount of dividends "accrued" on any share of Convertible Preferred Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend payment date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Convertible Preferred Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the liquidation preference of such share at the annual dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made, calculated in accordance with the provisions of paragraph 2. 10. Exclusion of Other Rights. Unless otherwise required by law, shares of the Convertible Preferred Stock shall not have any rights, including preemptive rights, or preferences other than those specifically set forth herein, in the Charter or as provided by applicable law. 11. Notice. All notices or communications unless otherwise specified in the Bylaws of the Corporation or these Articles Supplementary shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date such notice is mailed. 12. Interpretation or Adjustment By Board of Directors. The Board of Directors of the Corporation may, consistent with Maryland law, interpret or adjust the provisions of these Articles Supplementary to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of beneficial owners of the Convertible Preferred Stock and if such inconsistency or ambiguity reflects any typographical error, error in transcription or other error the Board of Directors may authorize the filing of a Certificate of Correction. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledge said instrument to be the corporate act of the Corporation and state under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on May 14, 1991. REPUBLIC NEW YORK CORPORATION By: /s/ Dov C. Schlein Dov C. Schlein (Vice Chairman) Attest: /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Secretary) REPUBLIC NEW YORK CORPORATION ARTICLES SUPPLEMENTARY REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal Maryland office in the City of Baltimore, State of Maryland (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article FIFTH of the Charter of the Corporation, the Board of Directors has authorized the classification of 4,000,000 of the 15,000,000 shares of Preferred Stock (the "Preferred Stock") which the Corporation now has authority to issue into a series designated $1.9375 Cumulative Preferred Stock and has provided for the issuance of such series. SECOND: The number of shares and terms of the $1.9375 Cumulative Preferred Stock as set by the Finance Committee of the Board of Directors pursuant to authority duly delegated by the Board of Directors are as follows: 1. $1.9375 Cumulative Preferred Stock. 4,000,000 shares of Preferred Stock of the Corporation, without par value, are hereby constituted as the original number of shares of a series of Preferred Stock designated as $1.9375 Cumulative Preferred Stock (hereinafter sometimes called the "Cumulative Preferred Stock"). The Cumulative Preferred Stock is issuable in whole shares only. The Cumulative Preferred Stock shall be of a stated value of $25 per share (the "Stated Value"). The term "Charter" when used herein shall include all articles or certificates filed pursuant to law with respect to any series of the Preferred Stock. 2. Dividends. The holders of the Cumulative Preferred Stock shall be entitled to receive, but only when and as declared by the Board of Directors out of funds legally available for the purpose, cash dividends at the rate of $1.9375 per share per annum, and no more, payable quarterly on the first day of January, April, July and October of each year, with the first such dividend being payable July 1, 1992 (each a "dividend payment date"). Such dividends shall be payable from, and shall be cumulative from, the date of original issue of each share. Dividends will be payable, in arrears, to holders of record as they appear on the stock transfer records of the Corporation on such record dates, not more than 60 days nor less than 10 days preceding the payment dates thereof, as shall be fixed by the Board of Directors. The amount of dividends payable per share for each full dividend period shall be computed by dividing by four the $1.9375 annual rate. The amount of dividends payable for the initial dividend period or any period shorter than a full dividend period shall be calculated on the basis of a 360-day year of twelve 30-day months. If in any quarterly dividend period (being the period between such dividend payment dates or, in the case of the first such period, from the date of original issue to July 1, 1992) dividends at the rate of $1.9375 per share per annum shall not have been paid or declared and set apart for payment on all outstanding shares of Cumulative Preferred Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before (i) any dividends or other distributions (excluding dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Corporation or shares of any other capital stock of the Corporation ranking junior to the Cumulative Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation) shall be declared and paid or set apart for payment on the Common Stock or on any other capital stock of the Corporation ranking junior to the Cumulative Preferred Stock with respect to the payment of dividends, or (ii) the Corporation shall purchase, redeem or otherwise acquire any shares of Preferred Stock or any shares of capital stock of the Corporation ranking on a parity with or junior to the Cumulative Preferred Stock with respect to the payment of dividends, except by conversion into or exchange for capital stock of the Corporation ranking junior to the Cumulative Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation; provided, however, that any moneys set aside in trust as a sinking fund payment for any series of Preferred Stock pursuant to the resolutions providing for the issue of shares of such series may thereafter be applied to the purchase or redemption of Preferred Stock of such series whether or not at the time of such application full cumulative dividends upon the outstanding Cumulative Preferred Stock shall have been paid or declared and set apart for payment. 3. Voting Rights. (i) Holders of the Cumulative Preferred Stock shall have no voting rights, either general or special, except as expressly required by applicable law, the Charter and as specified in this paragraph 3. (ii) Whenever, at any time or times, dividends payable on the shares of Cumulative Preferred Stock shall be in arrears for six consecutive calendar quarters, then at the next annual meeting of stockholders and at any annual meeting thereafter and at any meeting called for the election of Directors, until all dividends accumulated on the Cumulative Preferred Stock have been paid or declared and a sum sufficient for payment has been set aside, the holders of the Cumulative Preferred Stock, either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights, voting as a class, shall be entitled, to the exclusion of the holders of one or more other series or classes of stock having general voting rights, to vote for and elect two additional members of the Board of Directors of the Corporation, and the holders of Common Stock together with the holders of any series or class or classes of stock of the Corporation having general voting rights and not then entitled to elect two members of the Board of Directors pursuant to this paragraph 3 to the exclusion of the holders of all series then so entitled, shall be entitled to vote and elect the balance of the Board of Directors. In such case the Board of Directors of the Corporation shall, as of the date of the annual meeting of stockholders or at any meeting called for the election of Directors aforesaid, be increased by two Directors. The rights of the holders of the Cumulative Preferred Stock to participate (either alone or together with the holders of one or more other cumulative series of Preferred Stock at the time outstanding which are granted such voting rights) in the exclusive election of two members of the Board of Directors of the Corporation pursuant to this paragraph 3 shall continue in effect until cumulative dividends have been paid in full or declared and a sum sufficient has been set apart for payment on the Cumulative Preferred Stock. At elections for such Directors, each holder of Cumulative Preferred Stock shall be entitled to one-half vote for each share of Cumulative Preferred Stock held of record on the record date established for the meeting. The holders of Cumulative Preferred Stock shall have no right to cumulate such shares in voting for the election of Directors. At the annual meeting of stockholders next following the termination (by reason of the payment of all accumulated and defaulted dividends on such stock or provision for the payment thereof by declaration and setting apart thereof) of the exclusive voting power pursuant to this paragraph 3 of the holders of Cumulative Preferred Stock and the holders of all other cumulative series which shall have been entitled to vote for and elect such two members of the Board of Directors of the Corporation, the terms of office of all persons who may have been elected Directors of the Corporation by vote of such holders shall terminate and the two vacancies created pursuant to this paragraph 3 to accommodate the exclusive right of election conferred hereunder shall thereupon be eliminated and the Board of Directors shall be decreased by two Directors. (iii) So long as any shares of Cumulative Preferred Stock remain outstanding, the affirmative vote of the holders of at least two-thirds of the shares of Cumulative Preferred Stock outstanding at the time given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) ranking prior (as set forth in paragraph 4(a)) to the Cumulative Preferred Stock, or (b) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock (including any class or series of Preferred Stock) which ranks on a parity (as set forth in paragraph 4(b)) with the Cumulative Preferred Stock unless the Articles Supplementary or other provisions of the Charter creating or authorizing such class or series shall provide that if in any case the stated dividends or amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full on the Cumulative Preferred Stock and all outstanding shares of stock ranking on a parity with the Cumulative Preferred Stock (the Cumulative Preferred Stock and all such other stock being herein called "Parity Stock"), the shares of all Parity Stock shall share ratably (x) in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable on all Parity Stock if all dividends in respect of all shares of Parity Stock were paid in full and (y) on any distribution of assets upon liquidation, dissolution or winding up of the Corporation in accordance with the sums which would be payable in respect of all shares of Parity Stock if all sums payable were discharged in full, or (c) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Charter of the Corporation, including these Articles Supplementary, which would materially and adversely affect any right, preference, privilege or voting power of the Cumulative Preferred Stock or of the holders thereof; provided, however, that any increase in the amount of authorized Preferred Stock or the Corporation's Cumulative Floating Rate Series B Preferred Stock, the Series A and Series B Dutch Auction Rate Transferable Securities Preferred Stock, the Money Market Cumulative Preferred Stock, the Remarketed Preferred Stock, the $3.375 Cumulative Convertible Preferred Stock or the Cumulative Preferred Stock or any other capital stock of the Corporation, or the creation and issuance of other series of Preferred Stock including convertible Preferred Stock or any other capital stock of the Corporation, in each case ranking on a parity with or junior to the Cumulative Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation, shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting powers. (iv) So long as any shares of Cumulative Preferred Stock remain outstanding and not withstanding any provision of the Charter of the Corporation requiring a greater percentage, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the votes of all Parity Stock entitled to vote outstanding at the time, given in person or by proxy, by resolution duly adopted at a meeting at which a quorum was present and acting and at which the holders of Cumulative Preferred Stock (alone or together with the holders of one or more other series of Parity Stock at the time outstanding and entitled to vote) vote separately as a class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or permit Republic National Bank of New York (the "Bank") or any other subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose of any shares of voting stock of the Bank, or securities convertible into or options, warrants or rights to acquire voting stock of the Bank, unless after giving effect to any such transaction the Bank remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or of a Qualified Successor Company (as hereinafter defined); (b) merge or consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is the Corporation or a Qualified Successor Company; or (c) permit the Bank to merge, consolidate with, or convey substantially all of its assets to any person or corporation unless the entity surviving such merger or consolidation or the transferee of such assets is a Controlled Subsidiary of the Corporation or of a Qualified Successor Company, except in any of the foregoing cases as required to comply with applicable law, including, without limitation, any court or regulatory order. The term "Qualified Successor Company" shall mean a corporation (or other similar organization or entity whether organized under or pursuant to the laws of the United States or any state thereof or of another jurisdiction) which (a) is or is required to be a registered bank holding company under the United States Bank Holding Company Act of 1956, as amended, or any successor legislation, (b) issues to the holders of the Cumulative Preferred Stock in exchange for the Cumulative Preferred Stock shares of preferred stock having at least the same relative rights and preferences as the Cumulative Preferred Stock (the "Exchanged Stock"), (c) immediately after such transaction has not outstanding or authorized any class of stock or equity securities ranking prior to the Exchanged Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation, and (d) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one or more other banking corporations which, collectively, immediately after such transaction hold substantially all of the assets and liabilities which the Bank held immediately prior to such transaction (which may be in addition to other assets and liabilities acquired in such transaction). "Controlled Subsidiary" shall mean any corporation at least 80% of the outstanding shares of voting stock of which shall at the time be owned directly or indirectly by the Corporation or a Qualified Successor Company. In connection with the exercise of the voting rights contained in this paragraph 4(iv), holders of all series of Parity Stock which are granted such voting rights shall vote as a class, and each holder of Cumulative Preferred Stock shall have one-half vote for each share of stock held, and each other series shall have such number of votes, if any, for each share of stock held as may be granted them. The foregoing voting provisions shall not apply as to any shares of Cumulative Preferred Stock if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Cumulative Preferred Stock shall have been redeemed or sufficient funds shall have been deposited in trust in accordance with paragraph 5 to effect such redemption. 4. Rank. For the purposes of these Articles Supplementary, any class or classes of stock of the Corporation shall be deemed to rank: (a) prior to the Cumulative Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation if the holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of the Cumulative Preferred Stock; (b) on a parity with the Cumulative Preferred Stock as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether or not the dividend rates, dividend payment dates, or redemption or liquidation preference per share thereof be different from those of the Cumulative Preferred Stock, if the holders of such class of stock and the Cumulative Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or liquidation preference, without preference or priority one over the other; and (c) junior to shares of the Cumulative Preferred Stock, either as to dividends or as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, or both, if such class shall be Common Stock or if the holders of the Cumulative Preferred Stock shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up of the Corporation, as the case may be, in preference or priority to the holders of stock of such class or classes. The Cumulative Preferred Stock shall rank prior, as to dividends and upon liquidation, dissolution or winding up, to the Common Stock and on a parity with the Corporation's Cumulative Floating Rate Series B Preferred Stock, the Series A and Series B Dutch Auction Rate Transferable Securities Preferred Stock, the Money Market Cumulative Preferred Stock, the Remarketed Preferred Stock and the $3.375 Cumulative Convertible Preferred Stock. 5. Optional Redemption. The shares of the Cumulative Preferred Stock may be redeemed at the option of the Corporation, as a whole, or from time to time in part, at any time, upon not less than 30 nor more than 60 days' prior notice mailed to the holders of the shares to be redeemed at their addresses as shown on the stock books of the Corporation; provided, however, that shares of the Cumulative Preferred Stock shall not be redeemable prior to February 27, 1997. Subject to the foregoing, shares of the Cumulative Preferred Stock are redeemable at the following redemption price of $25 if redeemed on or after February 27, 1997, together with an amount equal to all dividends (whether or not earned or declared) accrued and accumulated and unpaid to, but excluding, the date fixed for redemption. If full cumulative dividends on the Cumulative Preferred Stock have not been paid, the Cumulative Preferred Stock may not be redeemed in part and the Corporation may not purchase or acquire any shares of the Cumulative Preferred Stock otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of the Cumulative Preferred Stock. If fewer than all the outstanding shares of Cumulative Preferred Stock are to be redeemed, the Corporation will select those to be redeemed by lot or a substantially equivalent method. If a notice of redemption has been given pursuant to this paragraph 5 and if, on or before the date fixed for redemption, the funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro-rata benefit of the holders of the shares of Cumulative Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares have not been surrendered for cancellation, on the redemption date dividends shall cease to accrue on the shares to be redeemed, and at the close of business on the redemption date the holders of such shares shall cease to be stockholders with respect to such shares and shall have no interest in or claims against the Corporation by virtue thereof and shall have no voting or other rights with respect to such shares, except the right to receive the moneys payable upon surrender (and endorsement, if required by the Corporation) of their certificates, and the shares evidenced thereby shall no longer be outstanding. Subject to applicable escheat laws, any moneys so set aside by the Corporation and unclaimed at the end of ninety days from the redemption date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of the amounts payable upon such redemption. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time. 6. Liquidation. (i) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Cumulative Preferred Stock shall be entitled, whether from capital or surplus, before any assets of the Corporation shall be distributed among or paid over to holders of Common Stock or any other class or series of stock of the Corporation junior to the Cumulative Preferred Stock as to liquidation preference, to be paid the amount of $25 per share (the "liquidation preference") of the Cumulative Preferred Stock, plus an amount equal to all accrued and unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. The holders of the Cumulative Preferred Stock will not be entitled to receive the liquidation preference until the liquidation preference of any other class of stock of the Corporation ranking senior to the Cumulative Preferred Stock as to rights upon liquidation, dissolution or winding up shall have been paid (or a sum set aside therefor sufficient to provide for payment) in full. After any such liquidation preference payment, the holders of the Cumulative Preferred Stock shall not be entitled to any further participation in any distribution of assets of the Corporation. (ii) If upon any such liquidation, dissolution or winding up of the Corporation the assets of the Corporation shall be insufficient to make such full payments to the holders of the Cumulative Preferred Stock and the holders of any Preferred Stock ranking as to liquidation, dissolution or winding up on a parity with the Cumulative Preferred Stock, then such assets shall be distributed among the holders of the Cumulative Preferred Stock ratably in accordance with the respective amounts which would be payable on such shares of Cumulative Preferred Stock or any other such Preferred Stock if all amounts thereon were paid in full. (iii) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation nor the merger or consolidation of any other corporation into or with the Corporation nor a reorganization of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation. 7. Parity Stock. So long as any shares of Cumulative Preferred Stock shall remain outstanding, in case the stated dividends or amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full with respect to all outstanding shares of Parity Stock, all such shares shall share ratably (x) in the payment of dividends, including accumulations (if any) in accordance with the sums which would be payable in respect of all outstanding shares of Parity Stock if all dividends were paid in full and (y) in any distribution of assets upon liquidation, dissolution or winding up of the Corporation, in accordance with the sums which would be payable in respect of all outstanding Parity Stock if all sums payable were discharged in full. 8. Certain Definitions. (i) The term "outstanding", when used in reference to shares of stock, shall mean issued shares, excluding shares reacquired by the Corporation. (ii) The amount of dividends "accrued" on any share of Cumulative Preferred Stock as at any quarterly dividend payment date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding such quarterly dividend payment date, whether or not earned or declared; and the amount of dividends "accrued" on any share of Cumulative Preferred Stock as at any date other than a quarterly dividend payment date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the end of the day preceding the last preceding quarterly dividend payment date, whether or not earned or declared, plus an amount equivalent to dividends on the liquidation preference of such share at the annual dividend rate fixed for such share for the period after the end of the day preceding such last preceding quarterly dividend payment date to and including the date as of which the calculation is made, calculated in accordance with the provisions of paragraph 2. 9. Exclusion of Other Rights. Unless otherwise required by law, shares of the Cumulative Preferred Stock shall not have any rights, including preemptive rights, or preferences other than those specifically set forth herein, in the Charter or as provided by applicable law. 10. Notice. All notices or communications unless otherwise specified in the Bylaws of the Corporation or these Articles Supplementary shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date such notice is mailed. 11. Interpretation or Adjustment By Board of Directors. The Board of Directors of the Corporation may, consistent with Maryland law, interpret or adjust the provisions of these Articles Supplementary to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of beneficial owners of the Cumulative Preferred Stock and if such inconsistency or ambiguity reflects any typographical error, error in transcription or other error the Board of Directors may authorize the filing of a Certificate of Correction. IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledge said instrument to be the corporate act of the Corporation and state under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on February 24, 1992. REPUBLIC NEW YORK CORPORATION By: /s/ Jeffrey C. Keil Jeffrey C. Keil (President) Attest: /s/ William F. Rosenblum, Jr. William F. Rosenblum, Jr. (Secretary) EX-10.B 3 WHW. AMENDED AND RESTATED DEFERRAL AGREEMENT Exhibit 10(b) AMENDED AND RESTATED DEFERRAL AGREEMENT Amended and Restated Deferral Agreement (this "Deferral Agreement") made this 31st day of December, 1993 by and between Republic New York Corporation, a corporation organized under the laws of Maryland, (the "Company"), with its principal office at 452 Fifth Avenue, New York, New York 10018, and Walter H. Weiner (the "Employee"), residing at 876 Park Avenue, New York, New York 10021. The Employee is presently employed by the Company as an executive officer. The Employee and the Company desire to make certain changes to the investment, accounting and distribution provisions of the Deferral Agreement dated December , 1991 (the "Prior Deferral Agreement"), pursuant to which the Employee is permitted to defer the payment of certain compensation in connection with his employment. In consideration of the premises and the mutual covenants hereinafter contained, the Prior Deferral Agreement is hereby amended and restated to read in its entirety as follows: Article I. Deferred Compensation 1. The Company agrees to defer the payment of certain compensation earned by the Employee during each calendar year, and such deferred compensation shall be paid to the Employee as hereinafter provided. The amount of compensation to be deferred in respect of any year shall be that portion or all of the Employee's annual salary and/or cash bonus earned for such year as the Employee elects to defer by written notice given to the Company prior to the first day of such year. 2. The Company shall create and credit to a special account on its books (hereinafter referred to as an "Account") the amount of deferred compensation specified in paragraph l of this Article I. The Company shall keep separate Accounts for deferred compensation in respect of particular years to the extent necessary to account for differing elections and designations hereunder regarding investments, benefit distributions and beneficiaries for such years. If a portion or all of the Employee's annual salary for a year is deferred under paragraph 1, one-twelfth of such deferred amount shall be credited to the appropriate Account on the last day of each month during such year. If a portion or all of the Employee's bonus for a year is deferred under paragraph 1, such deferred amount shall be credited to the appropriate Account on the last day of the month in which the Employee would have received the bonus in cash had he not elected the deferral under paragraph 1. 3. The balance in each Account shall be deemed for purposes of this Agreement to be invested and reinvested in U.S. Treasury Bills, Notes and Bonds, in deposit accounts and certificates of deposit in U.S. and non-U.S. banking institutions (whether denominated in U.S. or foreign currency), in such publicly traded stocks, bonds, debt obligations, mutual funds and other investment securities, and in such commodities, including precious metals, as are generally available through New York City brokerage firms, and in such bonds and other debt obligations (whether denominated in U.S. or foreign currency) issued by governments other than the U.S. or corporations located outside of the U.S. as are generally available to the public, in each case as the Employee, in his sole discretion, shall direct from time to time, not more frequently than monthly, by written notice given to the Company at least five business days prior to the first day of any month. With the consent of the Company, the Employee may, by giving written notice to the Company, authorize an investment manager to make the directions specified in the preceding sentence. Any investment or change of investment shall be deemed made on the first business day of the month following the Company's receipt of the Employee's or the investment manager's, as the case may be, written notice of investment direction or on such other day mutually agreed to by the Employee and the Company. Any such investment direction shall remain in effect until affirmatively changed by a subsequent investment direction given in the same manner, provided that the proceeds of any investment which matures during any month shall be deemed to be reinvested in a Republic National Bank of New York money market account for the balance of the month or such other money market account as the Company may determine and thereafter until a new investment direction is made with respect to such proceeds. Notwithstanding the foregoing, the balance in any Account for any year may not be allocated to more than five separate investments and no such deemed investment shall, in the Company's reasonable judgment, impose upon the Company administrative burdens or financial costs which are inappropriate in view of all of the circumstances. If no applicable investment direction is given on or before the date on which an amount is credited to an Account, such amount shall be initially invested in a Republic National Bank of New York money market account or such other money market account as the Company may reasonably determine. The Company, in its discretion and on such terms as it decides, may waive, increase the maximum permitted frequency of or reduce the period of any notice required under this paragraph, and may waive the limitation on the number of separate investments which the Employee or investment manager may direct with respect to any Account. 4. Notwithstanding the foregoing, the Company is not required to actually make the investments pursuant to paragraph 3 of this Article I. If the Company makes any of such investments (including the transfer of funds to a selected investment manager for discretionary investment and reinvestment by such investment manager), title to and beneficial ownership of such investments shall at all times remain with the Company, and the Employee and his designated beneficiary or beneficiaries shall not have any property interest whatsoever in such investments. 5. At the end of every month, each Account shall be increased or decreased by (a) in the case of each investment actually made by the Company with respect to such Account, the net amount of all income, gain or loss earned or sustained, whether realized or unrealized, with respect to such investment, and (b) in the case of each deemed investment with respect to such Account, the net amount of all income, gain or loss which would have been earned or sustained, whether realized or unrealized, had the balance in the Account in fact been invested and reinvested in such investment. Each Account shall also be charged with all payments or other distributions with respect to such Account and with all fees and expenses (including brokerage fees) with respect to such Account, in the case of investments actually made, at the rates actually paid and, in the case of investments deemed to have been made, at the rates which would have been paid had the investments actually been made. Article II. Distributions l. Except as otherwise provided in paragraph 4 of this Article II, the balance in each Account shall be paid to the Employee in one of the two following methods at the election of the Employee: (a) a lump-sum payment to be paid at such time as is designated by the Employee or (b) annual installment payments over such period of years as may be designated by the Employee. The Employee's election and designation referred to in the previous sentence with respect to an Account shall be made by a written notice to the Company at the time of his deferral election for the year or years to which the Account relates. The Employee may make different elections and designations with respect to the deferred compensation of each year, with any such different elections and designations accounted for through the creation of separate Accounts as contemplated by paragraph 2 of Article I. 2. All payments to be made pursuant to paragraph 1 of this Article II with respect to each Account shall be made in cash, and in furtherance thereof, all investments actually made with respect to such Account shall be sold by the Company at such time or times as the Company may determine to effect such payment; provided, that (a) in the case of an installment payment, unless the Employee provides the Company with written notice to the contrary at least 15 days prior to the date any such payment is due, the Company may select the investments to be sold or deemed sold to provide the cash necessary for such payment, and (b) to the extent investments have actually been made by the Company with respect to such Account, the Employee may elect to receive payment in kind in lieu of cash by providing written notice of such election to the Company at least 15 days prior to the date of such payment. 3. For purposes of determining the amount of a payment referred to in paragraph 1 of this Article II with respect to an Account, (a) the balance in such Account shall be adjusted by the Company in the manner provided in paragraph 5 of Article I not more than five trading days preceding such payment, (b) the amount of such payment shall be reduced by the amount of any expenses actually incurred or deemed to have been incurred in connection with the sale or deemed sale of investments required to make such payment ("selling expenses"), and (c) if the installment method is elected with respect to any year, the amount of each installment shall be equal to the balance in the appropriate Account as of the date of payment (as adjusted pursuant to clause (a) of this sentence), divided by the number of annual installments remaining, including the installment then being paid, and then reduced by the amount of any applicable selling expenses. 4. Notwithstanding any other provision in this Deferral Agreement to the contrary, if the Company reasonably determines that its deduction for federal income tax purposes with respect to any payment (or portion thereof) to be made pursuant to paragraph 1 of this Article II may be disallowed pursuant to section 162(m) of the Internal Revenue Code of 1986, as amended to date, the Company may, by giving written notice to the Employee, defer such payment (or portion thereof) until the Company's first taxable year with respect to which the Company reasonably determines that the deductibility of such payment (or portion thereof) would not be disallowed by such section 162(m). Such notice shall briefly state the basis for the Company's determination that the payment (or portion thereof) may not be deductible. If, in the case of any year for which the Company determines to defer any payment pursuant to this paragraph 4, the Employee would otherwise have received payments from more than one Account, the Company shall disclose the same in such notice and shall grant the Employee the option to select from the Account or Accounts from which payments will be so deferred; provided, that, if the Company does not receive written instruction from the Employee regarding the selection of Accounts within 30 days after the Company gives such notice to the Employee, the Company shall have the right, in its sole discretion to make such selection. Article III. Hardship The Company may, in its sole discretion, distribute all or a portion of the balances in the Accounts to the Employee upon a demonstration by the Employee of an immediate and heavy financial need. The amount of any distribution made pursuant to this Article III shall be limited to the amount necessary to satisfy such financial need. Article IV. Death In the event of the Employee's death prior to the payment of all of the balances in the Accounts, unless the Employee otherwise elects with the consent of the Company, the Company shall pay all remaining balances in the Accounts at such time, not later than 60 days following the Employee's death, in one lump-sum to such beneficiary or beneficiaries designated by the Employee in a writing filed by the Employee with the Company, or in the absence of such a beneficiary designation, to the Employee's estate. Article V. Prior Deferral Arrangements With respect to any deferred compensation to which the Employee is entitled from the Company under a bonus or incentive plan (other than a qualified retirement plan pursuant to Section 401(a) of the Internal Revenue Code), agreement or grant in existence on the date on which the prior Deferral Agreement was executed (collectively, the "Previous Deferral Arrangements"), the Employee may elect, subject to the consent of the Company, to credit all or a portion of such deferred compensation (subject to any term of such Previous Deferral Arrangements relating to retroactive decreases or adjustments) to a separate Account (the "Previous Deferral Arrangements Account") subject to the provisions of this Deferral Agreement. Commencing with the effective date of any such election, all income, gain or loss earned or sustained with respect to any deferred compensation so credited shall be determined in accordance with the term of this Deferral Agreement and not the Previous Deferral Arrangement from which such deferred compensation has been credited. The Cash Portion defined in the Restricted Stock Election Plan of Republic New York Corporation and Subsidiaries shall be considered deferred compensation to which the Employee is entitled from the Company under a Previous Deferral Arrangement. There shall be only one Previous Deferral Arrangements Account. Unless the Employee otherwise elects with the consent of the Company, the balance in the Previous Deferral Arrangements Account shall be paid to the Employee in the manner provided for under the previous Deferral Arrangements. The Company shall keep such bookkeeping subaccounts of the Previous Deferral Arrangements Account as is necessary to comply with the continuing applicable provisions of Previous Deferral Arrangements. Article VI. Miscellaneous l. Benefits provided in this Deferral Agreement will not be subject to garnishment, attachment, or assignment, or any other legal process by creditors of the Employee or any person or persons designated as beneficiaries of this Deferral Agreement or any other payee of the benefits provided herein, except as specifically provided herein. 2. This Deferral Agreement creates no rights in the Employee to continue in the employment of the Company for any length of time, nor does it create any rights in the Employee or his beneficiaries nor any obligations on the part of the Company, other than those specifically provided herein. 3. This Deferral Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee, his heirs, executors, administrators and legal representatives. 4. The waiver by any party of any term of this Deferral Agreement on any occasion shall not be deemed to be a further or continuing waiver of any such term. 5. Written notices which the Employee must provide to the Company under this Deferral Agreement (including, but not limited to, deferral elections, investment directions, benefit distribution elections and beneficiary designations) shall be addressed to the Company at: Republic New York Corporation, 452 Fifth Avenue, New York, New York 10018, Attention:______________. 6. This Deferral Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without giving effect to principles governing choice of law. 7. This Deferral Agreement may be terminated or amended only by a writing signed by both of the parties hereto. IN WITNESS WHEREOF, this Deferral Agreement has been duly executed by the Company and by the Employee on the day and year first above written. Witness: REPUBLIC NEW YORK CORPORATION /s/ Maria L. Cherichella By: /s/ Hillel Davis ________________________ __________________________ Witness: /s/ Oswaldo S. Costa /s/ Walter H. Weiner ________________________ _____________________________ EX-10.C 4 FORM OF AMENDED AND RESTATED DEFERRAL AGREEMENT Exhibit 10(c) AMENDED AND RESTATED DEFERRAL AGREEMENT Amended and Restated Deferral Agreement (this "Deferral Agreement") made this ___ day of ______, 199_ by and between Republic New York Corporation, a corporation organized under the laws of Maryland, (the "Company"), with its principal office at 452 Fifth Avenue, New York, New York 10018, and ________________ (the "Employee"), residing at __________________________________. The Employee is presently employed by the Company as an executive officer. The Employee and the Company desire to make certain changes to the investment, accounting and distribution provisions of the Deferral Agreement dated _______________ (the "Prior Deferral Agreement"), pursuant to which the Employee is permitted to defer the payment of certain compensation in connection with his employment. In consideration of the premises and the mutual covenants hereinafter contained, the Prior Deferral Agreement is hereby amended and restated to read in its entirety as follows: Article I. Deferred Compensation l. The Company agrees to defer the payment of certain compensation earned by the Employee during each calendar year, and such deferred compensation shall be paid to the Employee as hereinafter provided. The amount of compensation to be deferred in respect of any year shall be that portion or all of the Employee's annual salary and/or cash bonus earned for such year as the Employee elects to defer by written notice given to the Company prior to the first day of such year; provided, however, that in the case of a cash bonus to be paid in a year following the year to which such cash bonus relates, such election may be made prior to the last day of the year to which such cash bonus relates. All amounts previously deferred under the Prior Deferral Agreement shall be governed by the terms of this Deferral Agreement. 2. The Company shall create and credit to a special account on its books (hereinafter referred to as an "Account") the amount of deferred compensation specified in paragraph 1 of this Article I. The Company shall keep separate Accounts for deferred compensation in respect of particular years to the extent necessary to account for differing elections and designations hereunder regarding investments, benefit distributions and beneficiaries for such years. If a portion or all of the Employee's annual salary for a year is deferred under paragraph 1, one-twelfth of such deferred amount shall be credited to the appropriate Account on the last day of each month during such year. If a portion or all of the Employee's bonus for a year is deferred under paragraph 1, such deferred amount shall be credited to the appropriate Account on the last day of the month in which the Employee would have received the bonus in cash had he not elected the deferral under paragraph 1. 3. The balance in each Account shall be deemed for purposes of this Deferral Agreement to be invested and reinvested in such securities, investments and instruments as are eligible for investments by a bank holding company in accordance with section 4 of the Bank Holding Company Act of 1956, as amended, and regulation Y of the Board of Governors of the Federal Reserve System promulgated thereunder as the Employee, in his sole discretion, shall direct from time to time, not more frequently than monthly, by written notice given to the Company at least five business days prior to the first day of any month. With the consent of the Company, the Employee may, by giving written notice to the Company, authorize an investment manager to make the directions specified in the preceding sentence. Any investment direction or change of investment direction shall be deemed made on the first business day of the month following the Company's receipt of the Employee's or the investment manager's, as the case may be, written notice of investment direction or on such other day mutually agreed to by the Employee and the Company. Any such investment direction shall remain in effect until affirmatively changed by a subsequent investment direction given in the same manner, provided that the proceeds of any investment which matures during any month shall be deemed to be reinvested in a Republic National Bank of New York money market account for the balance of the month or such other money market account as the Company may determine and thereafter until a new investment direction is made with respect to such proceeds. Notwithstanding the foregoing, the balance in any Account for any year may not be allocated to more than five separate investments and no such deemed investment shall, in the Company's reasonable judgment, impose upon the Company administrative burdens or financial costs which are inappropriate in view of all of the circumstances. If no applicable investment direction is given on or before the date on which an amount is credited to an Account, such amount shall be initially invested in a Republic National Bank of New York money market account or such other money market account as the Company may reasonably determine. The Company, in its discretion and on such terms as it decides, may waive, increase the maximum permitted frequency of or reduce the period of any notice required under this paragraph, and waive the limitation on the number of separate investments which the Employee or investment manager may direct with respect to any Account. 4. Notwithstanding the foregoing, the Company is not required to actually make the investments pursuant to paragraph 3 of this Article I. If the Company makes any of such investments (including the transfer of funds to a selected investment manager for discretionary investment and reinvestment in such investments by such investment manager), title to and beneficial ownership of such investments shall at all times remain with the Company, and the Employee and his designated beneficiary or beneficiaries shall not have any property interest whatsoever in such investments. 5. At the end of every month, each Account shall be increased or decreased by (a) in the case of each investment actually made by the Company with respect to such Account, the net amount of all income, gain or loss earned or sustained, whether realized or unrealized, with respect to such investment, and (b) in the case of each deemed investment with respect to such Account, the net amount of all income, gain or loss which would have been earned or sustained, whether realized or unrealized, had the balance in the Account in fact been invested and reinvested in such investment. Each Account shall also be charged with all payments or other distributions with respect to such Account and with all fees and expenses (including brokerage fees) with respect to such Account, in the case of investments actually made, at the rates actually paid and, in the case of investments deemed to have been made, at the rates which would have been paid had the investments actually been made. Article II. Benefit Distributions l. Except as otherwise provided in paragraph 4 of this Article II, the balance in each Account shall be paid to the Employee in one of the two following methods at the election of the Employee: (a) a lump-sum payment to be paid at such time as is designated by the Employee or (b) annual installment payments over such period of years as may be designated by the Employee. The Employee's election and designation referred to in the previous sentence with respect to an Account shall be made by a written notice to the Company at the time of his deferral election for the year or years to which the Account relates. The Employee may make different elections and designations with respect to the deferred compensation of each year, with any such different elections and designations accounted for through the creation of separate Accounts as contemplated by paragraph 2 of Article I. 2. All payments to be made pursuant to paragraph 1 of this Article II with respect to each Account shall be made in cash, and in furtherance thereof, all investments actually made with respect to such Account shall be sold by the Company at such time or times as the Company may determine to effect such payment; provided, that (a) in the case of an installment payment, unless the Employee provides the Company with written notice to the contrary at least 15 days prior to the date any such payment is due, the Company may select the investments to be sold or deemed sold to provide the cash necessary for such payment, and (b) to the extent investments have actually been made by the Company with respect to such Account, the Employee may elect, subject to the Company's approval, to receive payment in kind in lieu of cash by providing written notice of such election to the Company at least 15 days prior to the date of such payment. 3. For purposes of determining the amount of a payment referred to in paragraph 1 of this Article II with respect to an Account, (a) the balance in such Account shall be adjusted by the Company in the manner provided in paragraph 5 of Article I not more than five trading days preceding such payment, (b) the amount of such payment shall be reduced by the amount of any expenses actually incurred or deemed to have been incurred in connection with the sale or deemed sale of investments required to make such payment ("selling expenses"), and (c) if the installment method is elected with respect to any year, the amount of each installment shall be equal to the balance in the appropriate Account as of the date of payment (as adjusted pursuant to clause (a) of this sentence), divided by the number of annual installments remaining, including the installment then being paid, and then reduced by the amount of any applicable selling expenses. 4. Notwithstanding any other provision in this Deferral Agreement to the contrary, if the Company reasonably determines that its deduction for federal income tax purposes with respect to any payment (or portion thereof) to be made pursuant to paragraph 1 of this Article II may be disallowed pursuant to section 162(m) of the Internal Revenue Code of 1986, as amended to date, the Company may, by giving written notice to the Employee, defer such payment (or portion thereof) until the Company's first taxable year with respect to which the Company reasonably determines that the deductibility of such payment (or portion thereof) would not be disallowed by such section 162(m). Such notice shall briefly state the basis for the Company's determination that the payment (or portion thereof) may not be deductible. If, in the case of any year for which the Company determines to defer any payment pursuant to this paragraph 4, the Employee would otherwise have received payments from more than one Account, the Company shall disclose the same in such notice and shall grant the Employee the option to select from the Account or Accounts from which payments will be so deferred; provided, that, if the Company does not receive written instruction from the Employee regarding the selection of Accounts within 30 days after the Company gives such notice to the Employee, the Company shall have the right, in its sole discretion to make such selection. Article III. Hardship The Company may, in its sole discretion, distribute all or a portion of the balances in the Accounts to the Employee upon a demonstration by the Employee of an immediate and heavy financial need. The amount of any distribution made pursuant to this Article III shall be limited to the amount necessary to satisfy such financial need. Article IV. Death In the event of the Employee's death prior to the payment of all of the balances in the Accounts, unless the Employee otherwise elects with the consent of the Company, the Company shall pay all remaining balances in the Accounts at such time, not later than 60 days following the Employee's death, in one lump-sum to such beneficiary or beneficiaries designated by the Employee in a writing filed by the Employee with the Company, or in the absence of such a beneficiary designation, to the Employee's estate. Article V. Miscellaneous 1. Benefits provided in this Deferral Agreement will not be subject to garnishment, attachment, or assignment, or any other legal process by creditors of the Employee or any person or persons designated as beneficiaries of this Deferral Agreement or any other payee of the benefits provided herein, except as specifically provided herein. 2. The Employee and his beneficiaries shall have the status of unsecured creditors of the Company and this Deferral Agreement constitutes a mere promise by the Company to make benefit payments as required by Article II, III and IV. 3. This Deferral Agreement creates no rights in the Employee to continue in the employment of the Company for any length of time, nor does it create any rights in the Employee or his beneficiaries nor any obligations on the part of the Company, other than those specifically provided herein. 4. This Deferral Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee, his heirs, executors, administrators and legal representatives. 5. The waiver by any party of any term of this Deferral Agreement on any occasion shall not be deemed to be a further or continuing waiver of any such term. 6. Written notices which the Employee must provide to the Company under this Deferral Agreement (including, but not limited to, deferral elections, investment directions, benefit distribution elections and beneficiary designations) shall be addressed to the Company at: Republic New York Corporation, 452 Fifth Avenue, New York, New York 10018, Attention: ____________. 7. This Deferral Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without giving effect to principles governing choice of law. 8. This Deferral Agreement may be terminated or amended only by a writing signed by both of the parties hereto. IN WITNESS WHEREOF, this Deferral Agreement has been duly executed by the Company and by the Employee on the day and year first above written. Witness: REPUBLIC NEW YORK CORPORATION ___________________________ By:__________________________ Witness: ___________________________ _____________________________ EX-10.D 5 FORM OF DEFERRAL AGREEMENT Exhibit 10(d) DEFERRAL AGREEMENT Deferral Agreement (this "Deferral Agreement") made this ___ day of ________, 199 by and between Republic New York Corporation, a corporation organized under the laws of Maryland, (the "Company"), with its principal office at 452 Fifth Avenue, New York, New York 10018, and _________________________________ (the "Employee"), residing at ___________________________________ The Employee is presently an executive officer of the Company and is active in the management of the affairs of the Company and its subsidiaries. The Employee and the Company desire to make provisions to permit the Employee to defer the payment of certain compensation in connection with that employment on the terms hereinafter provided. In consideration of the premises and the mutual covenants hereinafter contained, the parties hereto hereby agree as follows: Article I. Deferred Compensation l. The Company agrees to defer the payment of certain compensation earned by the Employee during each calendar year, and such deferred compensation shall be paid to the Employee as hereinafter provided. The amount of compensation to be deferred in respect of any year shall be that portion or all of the Employee's annual salary and/or cash bonus earned for such year as the Employee elects to defer by written notice given to the Company. Such written notice shall be given, with respect to annual salary, prior to the first day of the year to which such salary relates and, with respect to a cash bonus, prior to the last day of the year to which such cash bonus relates. 2. The Company shall create and credit to a special account on its books (hereinafter referred to as an "Account") the amount of deferred compensation specified in paragraph 1 of this Article I. The Company shall keep separate Accounts for deferred compensation in respect of particular years to the extent necessary to account for differing elections and designations hereunder regarding investments, benefit distributions and beneficiaries for such years. If a portion or all of the Employee's annual salary for a year is deferred under paragraph 1, one-twelfth of such deferred amount shall be credited to the appropriate Account on the last day of each month during such year. If a portion or all of the Employee's bonus for a year is deferred under paragraph 1, such deferred amount shall be credited to the appropriate Account on the last day of the month in which the Employee would have received the bonus in cash had he not elected the deferral under paragraph 1. 3. The balance in each Account shall be deemed for purposes of this Agreement to be invested and reinvested in such securities, investments and instruments as are eligible for investments by a bank holding company in accordance with section 4 of the Bank Holding Company Act of 1956, as amended, and regulation Y of the Board of Governors of the Federal Reserve System promulgated thereunder as the Employee, in his sole discretion, shall direct from time to time, not more frequently than monthly, by written notice given to the Company at least five business days prior to the first day of any month. With the consent of the Company, the Employee may, by giving written notice to the Company, authorize an investment manager to make the directions specified in the preceding sentence. Any investment direction or change of investment direction shall be deemed made on the first business day of the month following the Company's receipt of the Employee's or the investment manager's, as the case may be, written notice of investment direction or on such other day mutually agreed to by the Employee and the Company. Any such investment direction shall remain in effect until affirmatively changed by a subsequent investment direction given in the same manner, provided that the proceeds of any investment which matures during any month shall be deemed to be reinvested in a Republic National Bank of New York money market account for the balance of the month or such other money market account as the Company may determine and thereafter until a new investment direction is made with respect to such proceeds. Notwithstanding the foregoing, the balance in any Account for any year may not be allocated to more than five separate investments and no such deemed investment shall, in the Company's reasonable judgment, impose upon the Company administrative burdens or financial costs which are inappropriate in view of all of the circumstances. If no applicable investment direction is given on or before the date on which an amount is credited to an Account, such amount shall be initially invested in a Republic National Bank of New York money market account or such other money market account as the Company may reasonably determine. The Company, in its discretion and on such terms as it decides, may waive, increase the maximum permitted frequency of or reduce the period of any notice required under this paragraph, and waive the limitation on the number of separate investments which the Employee or investment manager may direct with respect to any Account. 4. Notwithstanding the foregoing, the Company is not required to actually make the investments pursuant to paragraph 3 of this Article I. If the Company makes any of such investments (including the transfer of funds to a selected investment manager for discretionary investment and reinvestment in such investments by such investment manager), title to and beneficial ownership of such investments shall at all times remain with the Company, and the Employee and his designated beneficiary or beneficiaries shall not have any property interest whatsoever in such investments. 5. At the end of every month, each Account shall be increased or decreased by (a) in the case of each investment actually made by the Company with respect to such Account, the net amount of all income, gain or loss earned or sustained, whether realized or unrealized, with respect to such investment, and (b) in the case of each deemed investment with respect to such Account, the net amount of all income, gain or loss which would have been earned or sustained, whether realized or unrealized, had the balance in the Account in fact been invested and reinvested in such investment. Each Account shall also be charged with all payments or other distributions with respect to such Account and with all fees and expenses (including brokerage fees) with respect to such Account, in the case of investments actually made, at the rates actually paid and, in the case of investments deemed to have been made, at the rates which would have been paid had the investments actually been made. Article II. Benefit Distributions l. Except as otherwise provided in paragraph 4 of this Article II, the balance in each Account shall be paid to the Employee in one of the two following methods at the election of the Employee: (a) a lump-sum payment to be paid at such time as is designated by the Employee or (b) annual installment payments over such period of years as may be designated by the Employee. The Employee's election and designation referred to in the previous sentence with respect to an Account shall be made by a written notice to the Company at the time of his deferral election for the year or years to which the Account relates. The Employee may make different elections and designations with respect to the deferred compensation of each year, with any such different elections and designations accounted for through the creation of separate Accounts as contemplated by paragraph 2 of Article I. 2. All payments to be made pursuant to paragraph 1 of this Article II with respect to each Account shall be made in cash, and in furtherance thereof, all investments actually made with respect to such Account shall be sold by the Company at such time or times as the Company may determine to effect such payment; provided, that (a) in the case of an installment payment, unless the Employee provides the Company with written notice to the contrary at least 15 days prior to the date any such payment is due, the Company may select the investments to be sold or deemed sold to provide the cash necessary for such payment, and (b) to the extent investments have actually been made by the Company with respect to such Account, the Employee may elect, subject to the Company's approval, to receive payment in kind in lieu of cash by providing written notice of such election to the Company at least 15 days prior to the date of such payment. 3. For purposes of determining the amount of a payment referred to in paragraph 1 of this Article II with respect to an Account, (a) the balance in such Account shall be adjusted by the Company in the manner provided in paragraph 5 of Article I not more than five trading days preceding such payment, (b) the amount of such payment shall be reduced by the amount of any expenses actually incurred or deemed to have been incurred in connection with the sale or deemed sale of investments required to make such payment ("selling expenses"), and (c) if the installment method is elected with respect to any year, the amount of each installment shall be equal to the balance in the appropriate Account as of the date of payment (as adjusted pursuant to clause (a) of this sentence), divided by the number of annual installments remaining, including the installment then being paid, and then reduced by the amount of any applicable selling expenses. 4. Notwithstanding any other provision in this Deferral Agreement to the contrary, if the Company reasonably determines that its deduction for federal income tax purposes with respect to any payment (or portion thereof) to be made pursuant to paragraph 1 of this Article II may be disallowed pursuant to section 162(m) of the Internal Revenue Code of 1986, as amended to date, the Company may, by giving written notice to the Employee, defer such payment (or portion thereof) until the Company's first taxable year with respect to which the Company reasonably determines that the deductibility of such payment (or portion thereof) would not be disallowed by such section 162(m). Such notice shall briefly state the basis for the Company's determination that the payment (or portion thereof) may not be deductible. If, in the case of any year for which the Company determines to defer any payment pursuant to this paragraph 4, the Employee would otherwise have received payments from more than one Account, the Company shall disclose the same in such notice and shall grant the Employee the option to select from the Account or Accounts from which payments will be so deferred; provided, that, if the Company does not receive written instruction from the Employee regarding the selection of Accounts within 30 days after the Company gives such notice to the Employee, the Company shall have the right, in its sole discretion to make such selection. Article III. Hardship The Company may, in its sole discretion, distribute all or a portion of the balances in the Accounts to the Employee upon a demonstration by the Employee of an immediate and heavy financial need. The amount of any distribution made pursuant to this Article III shall be limited to the amount necessary to satisfy such financial need. Article IV. Death In the event of the Employee's death prior to the payment of all of the balances in the Accounts, unless the Employee otherwise elects with the consent of the Company, the Company shall pay all remaining balances in the Accounts at such time, not later than 60 days following the Employee's death, in one lump-sum to such beneficiary or beneficiaries designated by the Employee in a writing filed by the Employee with the Company, or in the absence of such a beneficiary designation, to the Employee's estate. Article V. Miscellaneous l. Benefits provided in this Deferral Agreement will not be subject to garnishment, attachment, or assignment, or any other legal process by creditors of the Employee or any person or persons designated as beneficiaries of this Deferral Agreement or any other payee of the benefits provided herein, except as specifically provided herein. 2. This Deferral Agreement creates no rights in the Employee to continue in the employment of the Company for any length of time, nor does it create any rights in the Employee or his beneficiaries nor any obligations on the part of the Company, other than those specifically provided herein. 3. This Deferral Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee, his heirs, executors, administrators and legal representatives. 4. The waiver by any party of any term of this Deferral Agreement on any occasion shall not be deemed to be a further or continuing waiver of any such term. 5. Written notices which the Employee must provide to the Company under this Deferral Agreement (including, but not limited to, deferral elections, investment directions, benefit distribution elections and beneficiary designations) shall be addressed to the Company at: Republic New York Corporation, 452 Fifth Avenue, New York, New York 10018, Attention: __________________. 6. This Deferral Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without giving effect to principles governing choice of law. 7. This Deferral Agreement may be terminated or amended only by a writing signed by both of the parties hereto. IN WITNESS WHEREOF, this Deferral Agreement has been duly executed by the Company and by the Employee on the day and year first above written. Witness: REPUBLIC NEW YORK CORPORATION _____________________ By: ________________________ Witness: _____________________ ____________________________ EX-11 6 COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK EXHIBIT 11 REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK (In thousands except per share amounts)
Year Ended December 31, ------------------------------------------------------ 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Primary: Earnings: Net income....................... $301,205 $258,883 $227,360 $201,220 $ 23,997 Less preferred stock dividends... 28,415 28,386 22,733 21,043 22,774 -------- -------- -------- -------- -------- Net income applicable to common stock................... $272,790 $230,497 $204,627 $180,177 $ 1,223 ======== ======== ======== ======== ======== Shares: Average number of common shares outstanding.................... 52,466 52,204 51,852 49,726 45,223 -------- -------- -------- -------- -------- Per share of common stock: Net income....................... $ 5.20 $ 4.42 $ 3.95 $ 3.62 $ .03 ======== ======== ======== ======== ======== Fully Diluted: Earnings: Net income applicable to common stock................... $272,790 $230,497 $204,627 $180,177 $ 1,223 Add dividends applicable to convertible preferred stock.... 11,643 11,643 7,277 --- --- -------- -------- -------- -------- -------- Net income applicable to common stock as adjusted...... $284,433 $242,140 $211,904 $180,177 $ 1,223 ======== ======== ======== ======== ======== Shares: Average number of common shares outstanding................... 52,466 52,204 51,852 49,726 45,223 Add shares assumed issued upon exercise of stock options..... 286 247 181 --- --- Add shares assumed issued upon conversion of preferred stock. 3,569 3,569 2,259 --- --- -------- -------- -------- -------- -------- Average number of common shares outstanding as adjusted....... 56,321 56,020 54,292 49,726 45,223 ======== ======== ======== ======== ======== Per share of common stock: Net income ...................... $ 5.05 $ 4.32 $ 3.90 $ 3.62 $ .03 ======== ======== ======== ======== ========
EX-12 7 CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES EXHIBIT 12 CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES -- CONSOLIDATED
Year Ended December 31, ---------------------------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- (Dollars in thousands) Excluding Interest on Deposits Fixed Charges: Interest on long-term debt and short-term borrowings............... $ 467,841 $ 513,322 $ 476,672 $ 586,627 $ 455,019 One-third of rent expense............. 10,859 10,252 6,581 8,241 5,973 ---------- ---------- ---------- ---------- ---------- Total fixed charges............... $ 478,700 $ 523,574 $ 483,253 $ 594,868 $ 460,992 ========== ========== ========== ========== ========== Earnings: Income before income taxes............ $ 451,358 $ 347,269 $ 287,746 $ 223,325 $ 56,050 Fixed charges......................... 478,700 523,574 483,253 594,868 460,992 ---------- ---------- ---------- ---------- ---------- Total earnings.................... $ 930,058 $ 870,843 $ 770,999 $ 818,193 $ 517,042 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges ex- cluding interest on deposits.......... 1.94x 1.66x 1.60x 1.38x 1.12x ========== ========== ========== ========== ========== Including Interest on Deposits Fixed Charges: Interest on long-term debt, short-term borrowings and deposits.. $1,157,075 $1,318,228 $1,682,661 $2,044,227 $1,990,612 One-third of rent expense............. 10,859 10,252 6,581 8,241 5,973 ---------- ---------- ---------- ---------- ---------- Total fixed charges.............. $1,167,934 $1,328,480 $1,689,242 $2,052,468 $1,996,585 ========== ========== ========== ========== ========== Earnings: Income before income taxes............ $ 451,358 $ 347,269 $ 287,746 $ 223,325 $ 56,050 Fixed charges......................... 1,167,934 1,328,480 1,689,242 2,052,468 1,996,585 ---------- ---------- ---------- ---------- ---------- Total earnings................... $1,619,292 $1,675,749 $1,976,988 $2,275,793 $2,052,635 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges in- cluding interest on deposits.......... 1.39x 1.26x 1.17x 1.11x 1.03x ========== ========== ========== ========== ==========
EX-13 8 1993 ANNUAL REPORT TO THE EXTENT INCORPORATED BY REFERENCE 1 Republic New York Corporation INTRODUCTION TO MANAGEMENT'S DISCUSSION AND ANALYSIS The following summary of Management's Discussion and Analysis highlights the principal activities during 1993 of Republic New York Corporation (the "Corporation"). The Corporation reported net income for the year 1993 that was the highest in its history. Net income was a record $301.2 million in 1993 compared to $258.9 million and $227.4 million in 1992 and 1991, respectively. Fully diluted earnings per share increased to $5.05 in 1993, or 16.9%, above the $4.32 earned in 1992. The Corporation's risk-based capital ratios, which include the risk-weighted assets and capital of Safra Republic Holdings S.A. ("Safra Republic"), were 15.16% for Tier 1 capital and 26.20% for total capital at December 31, 1993. These ratios substantially exceed the regulatory minimums in effect for bank holding companies of 4% for Tier 1 capital and 8% for total capital. Total average interest-earning assets were $32.6 billion in 1993, with approximately 55% invested in securities of the United States Government and its agencies and interest-bearing deposits with banks. Average loans in domestic offices of $6.4 billion represented approximately 20% of average interest-earning assets in 1993, relatively unchanged from 1992. Average loans in foreign offices of $2.5 billion continued to represent less than 10% of total average interest-earning assets in 1993. Non-accrual loans were $94.9 million at year end 1993, or 1.00% of total loans outstanding. At December 31, 1993, the allowance for possible loan losses was $311.9 million, or 3.28% of loans outstanding and 329% of non-performing loans. Income from trading activities rose to $228.2 million in 1993, a 66% increase over the $137.5 million in 1992. In the first quarter of 1993, the Corporation established a derivative products group to engage in interest rate and currency swaps and other derivative products with operations in New York and London. This group's revenue of $48.8 million was primarily responsible for the strong increase in trading account profits and commissions from $12.3 million in 1992 to $78.7 million in 1993. Earnings from Safra Republic, the Corporation's 48.8% owned European-based international private banking group, were $59.5 million in 1993, an increase of 31.5% over 1992. The Corporation's returns on average total assets and average common stockholders' equity, based on net income applicable to common stock, were .73% and 15.08%, respectively in 1993. On December 31, 1993, the Corporation completed the acquisition of Mase Westpac Limited ("Mase"), a gold bullion bank based in London with total assets of approximately $1.4 billion. Mase is an authorized United Kingdom bank with operations in New York, Sydney and Hong Kong and will operate under the name of Republic Mase Bank Limited. Mase is one of the five members of the London gold fixing. On January 10, 1994, Republic New York Securities Corporation, our broker-dealer subsidiary, received approval to underwrite and deal in all forms of debt and equity securities. 28 2 Republic New York Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The following table presents condensed consolidated statements of income for the Corporation for each of the years in the three-year period ended December 31, 1993. These statements differ from the Corporation's consolidated financial statements presented elsewhere in this Report in that net interest income is presented on a fully-taxable equivalent basis. The tax equivalent adjustment, related to certain tax exempt instruments, permits all interest income and net interest income to be analyzed on a comparable basis. The rate used for this adjustment, which is reflected throughout this section, is 44% in 1993 and 42% in prior years.
Increase (Decrease) Increase (Decrease) ------------------- ------------------- (Dollars in thousands) 1993 Amount % 1992 Amount % 1991 ================================================================================================================ Interest income $1,964,406 $(106,629) (5.1) $2,071,035 $(224,920) (9.8) $2,295,955 Interest expense 1,157,075 (161,153) (12.2) 1,318,228 (364,433) (21.7) 1,682,661 - ----------------------------------------------------- ----------------------- --------- Net interest income 807,331 54,524 7.2 752,807 139,513 22.7 613,294 Provision for loan losses 85,000 (35,000) (29.2) 120,000 58,000 93.5 62,000 - ----------------------------------------------------- ----------------------- --------- Net interest income after provision for loan losses 722,331 89,524 14.1 632,807 81,513 14.8 551,294 Other operating income 395,472 93,225 30.8 302,247 30,814 11.4 271,433 Other operating expenses 634,965 79,623 14.3 555,342 52,409 10.4 502,933 - ----------------------------------------------------- ----------------------- --------- Income before income taxes 482,838 103,126 27.2 379,712 59,918 18.7 319,794 - ----------------------------------------------------- ----------------------- --------- Income taxes 150,153 61,767 69.9 88,386 28,000 46.4 60,386 Tax equivalent adjustment 31,480 (963) (3.0) 32,443 395 1.2 32,048 - ----------------------------------------------------- ----------------------- --------- Total applicable income taxes 181,633 60,804 50.3 120,829 28,395 30.7 92,434 - ----------------------------------------------------- ----------------------- --------- Net income $ 301,205 $42,322 16.3 $ 258,883 $ 31,523 13.9 $ 227,360 ================================================================================================================ Net income applicable to common stock $ 272,790 $42,293 18.3 $ 230,497 $ 25,870 12.6 $ 204,627 ================================================================================================================
[NET INTEREST INCOME BAR GRAPH - SEE EDGAR APPENDIX] NET INTEREST INCOME Net interest income increased $54.5 million, or 7%, to $807.3 million in 1993, compared to $752.8 million in 1992. Average interest-earning assets rose to $32.6 billion, or 9% above the $30.0 billion in 1992. The increase in average interest-earning assets was primarily in investment securities of U.S. Government agencies and trading account assets. During 1993, the Corporation continued to invest in U.S. Government agency mortgage-backed securities, which represented 29% of average interest-earning assets in 1993, compared to 24% in 1992. Total average interest-bearing funds in 1993 included a $2.1 billion increase in interest-bearing deposits in foreign offices. The net interest rate differential was 2.48% in 1993 and 2.51% in 1992. The primary factors that affected the rate differential in 1993 were the Corporation's actions to fix the rates on a portion of its liabilities that extend into 1994 and 1995, the addition of higher levels of matched maturity deposits and assets at narrower spreads and the declining yields obtained on reinvestment of scheduled and unscheduled principal payments on mortgage loans and mortgage-backed securities. The Corporation manages its sensitivity to interest rates by entering into off-balance sheet contracts, including interest rate and currency swaps and interest rate caps and floors. These contracts hedge specifically identified assets or liabilities with the corresponding revenues or expenses reflected in the yield of the related on-balance sheet assets or liabilities. During 1993, the Corporation took steps to lengthen the maturity of its liabilities through transactions in the cash and derivatives markets. At year end 1993, the gross notional amount of contracts used in asset and liability management was approximately $8.7 billion. At December 31, 1993, the net effect of these hedging transactions was to decrease the net interest rate differential by 18 basis points. 29 3 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) [NET INTEREST RATE DIFFERENTIAL BAR GRAPH -- SEE EDGAR APPENDIX] [LOAN LOSS RECOVERIES BAR GRAPH -- SEE EDGAR APPENDIX] Net interest income increased $139.5 million, or 23%, to $752.8 million in 1992, compared to $613.3 million in 1991. Average interest-earning assets rose to $30.0 billion, or 11% above the $27.0 billion in 1991. The major increase in average interest-earning assets was primarily in investment securities of U.S. Government agencies, partially offset by declines in interest-bearing deposits with banks and loans in domestic and foreign offices. Total average interest-bearing funds included increases in short-term borrowings and long-term debt while deposits declined. The net interest rate differential increased to 2.51% in 1992 from 2.27% in 1991 as rates paid on purchased funds continued to decline faster than rates earned on interest-earning assets. During 1992, investments in U.S. Government agency mortgage-backed securities represented 24% of average interest-earning assets, compared to 15% in 1991. This portfolio was funded with shorter term liabilities at a lower cost which contributed to the improvement in the net interest rate spread. The "Selected Financial Data" section of this Report contains information on the Corporation's average asset and liability structure and rates earned and paid in each of the years in the five-year period ended December 31, 1993. The following table presents changes in the levels of interest income and interest expense attributable to changes in volume or rate. Changes not solely due to volume or rate were allocated to volume.
Increase (Decrease) -------------------------------------------------------------------------------------- 1993 vs. 1992 1992 vs. 1991 ------------------------------------------- --------------------------------------- Average Average Average Average (In thousands) Volume Rate Total Volume Rate Total ============================================================================================================================== Interest income from: Interest-bearing deposits with banks $ (13,838) $ (75,590) $ (89,428) $ (37,151) $(168,596) $(205,747) Taxable securities 130,819 (91,408) 39,411 288,142 (118,450) 169,692 Securities exempt from federal income taxes 20,231 (18,812) 1,419 8,207 (4,638) 3,569 Trading account assets 26,988 4,551 31,539 16,727 (79) 16,648 Federal funds sold and securities purchased under resale agreement 1,556 (4,693) (3,137) 7,418 (19,017) (11,599) Loans, net of unearned income: Domestic offices 8,783 (54,879) (46,096) (50,400) (73,213) (123,613) Foreign offices 2,819 (43,156) (40,337) (23,343) (50,527) (73,870) - ------------------------------------------------------------------------------------------------------------------------------ Total interest on loans 11,602 (98,035) (86,433) (73,743) (123,740) (197,483) - ------------------------------------------------------------------------------------------------------------------------------ Total interest income 177,358 (283,987) (106,629) 209,600 (434,520) (224,920) - ------------------------------------------------------------------------------------------------------------------------------ Interest expense on: Consumer and other time deposits 3,766 (80,658) (76,892) 11,023 (162,393) (151,370) Certificates of deposit (6,391) (6,338) (12,729) (21,139) (31,898) (53,037) Deposits in foreign offices 83,135 (109,186) (26,051) (29,323) (167,353) (196,676) Short-term borrowings (5,557) (30,923) (36,480) 61,108 (84,869) (23,761) Total long-term debt 28,750 (37,751) (9,001) 106,530 (46,119) 60,411 - ------------------------------------------------------------------------------------------------------------------------------ Total interest expense 103,703 (264,856) (161,153) 128,199 (492,632) (364,433) - ------------------------------------------------------------------------------------------------------------------------------ Change in net interest income $ 73,655 $ (19,131) $ 54,524 $ 81,401 $ 58,112 $ 139,513 ==============================================================================================================================
PROVISION FOR LOAN LOSSES The Corporation determines its provision for loan losses based on factors such as past loan loss experience, the composition of the loan portfolio and other contracts which create potential credit exposure and prevailing worldwide economic conditions. The provision for loan losses was $85 million in 1993, down $35 million from the $120 million in 1992. The total provision was $62 million in 1991. Net charge-offs were $13.3 million in 1993, compared to $105.8 million in 1992. The allowance for possible loan losses was $311.9 million at year end 1993, or 3.28% of loans outstanding, net of unearned income, an increase of $70.9 million from the $241.0 million at year end 1992. The allowance was $227.5 million at year end 1991. 30 4 The lower levels of the provision and net charge-offs in 1993 reflects the gradual economic improvement in domestic markets during the year. In 1992, economic difficulties were experienced by a limited number of domestic commercial businesses and a limited number of international loans. While the impact of economic conditions on future operations cannot be predicted, the Corporation believes that its provisions and charge-offs before recoveries in the future should be lower than the levels of 1993. OTHER OPERATING INCOME The following table presents the principal categories of other operating income and the increase (decrease) for each of the years in the three year period ended December 31, 1993.
Increase (Decrease) Increase (Decrease) ------------------- ------------------- (Dollars in thousands) 1993 Amount % 1992 Amount % 1991 ================================================================================================================================== Trading income: Income from precious metals $ 37,910 $15,273 67.5 $ 22,637 $(16,812) (42.6) $ 39,449 Foreign exchange trading income 111,572 9,001 8.8 102,571 21,220 26.1 81,351 Trading account profits and commissions 78,742 66,423 * 12,319 (10,125) (45.1) 22,444 - ------------------------------------------------------------------- ------------------------ --------- Total trading income 228,224 90,697 65.9 137,527 (5,717) (4.0) 143,244 Investment securities gains, net 1,295 (9,937) (88.5) 11,232 6,968 163.4 4,264 Net gain (loss) on loans sold or held for sale (843) (17,932) (104.9) 17,089 14,058 * 3,031 Commission income 50,956 13,364 35.6 37,592 2,964 8.6 34,628 Equity in earnings of affiliate 59,463 14,243 31.5 45,220 4,137 10.1 41,083 Other income 56,377 2,790 5.2 53,587 8,404 18.6 45,183 - ------------------------------------------------------------------- ------------------------ --------- Total other operating income $395,472 $93,225 30.8 $302,247 $ 30,814 11.4 $271,433 ==================================================================================================================================
*Exceeds 200% Income from precious metals is derived from the Corporation's activities as a dealer in gold and silver bullion and coins sold to commercial and industrial users and investors and its trading and arbitrage activities in the precious metals markets. The improvement in the level of income from precious metals to $37.9 million in 1993 reverses the trend of recent years and is attributable to increased price volatility and volume in the precious metals markets. In each of the last three years, arbitrage activity, as opposed to trading, contributed a substantial portion of income from precious metals. Effective December 31, 1993, Republic National Bank of New York completed the purchase of Mase Westpac Limited ("Mase"), an authorized United Kingdom gold bullion bank with operations in London, New York, Sydney and Hong Kong. Mase engages in global wholesale trading in precious metals and in production and inventory financing. Mase is one of the five members of the London Gold Fixing. Mase will operate as Republic Mase Bank Limited. Included in the Corporation's statement of condition at December 31, 1993, are Mase's assets of approximately $1.4 billion. The acquisition of Mase had no effect on the Corporation's results of operations for 1993. Foreign exchange trading income is derived from trading and arbitrage activities in foreign currencies, transactions that service the needs of the Corporation's customers, including other banks and corporations, and dealings in foreign currency banknotes, principally in New York, London, Hong Kong, Singapore and Tokyo. The increase in foreign exchange trading income in 1993, to a record level of $111.6 million, resulted from expanded global foreign exchange operations and growth in the global demand for banknotes. The substantial increase in foreign exchange trading income in 1992 over the prior year resulted from opportunities created by turbulence in European currency markets in the third quarter of such year. While this turbulence also occurred in foreign exchange markets in 1993, resulting in higher levels of income, it did not approach the levels of 1992. 31 5 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) In the fourth quarter of 1993, the Corporation acquired Citibank's World Banknote Services business which ships U.S. dollars to and from financial institutions in nearly 40 countries. The Corporation will offer continued worldwide, point-to-point banknote services to the institutional customers of Citibank's World Banknote Services business and also will become the preferred global provider for the sale and purchase of U.S. and foreign banknotes to all Citibank branches and subsidiaries in 93 countries. Trading account profits and commissions are generated by trading derivative products, dealing in international debt securities and trading in obligations of emerging market countries. In January 1993, the Corporation established a derivative products group, comprised of an experienced staff with operations in New York and London, to act as principal in trading interest rate and currency swaps and options on these products as well as products related to the performance of various indices. The group's activities, which resulted in revenues of $48.8 million, are principally responsible for the substantial increase in trading account profits and commissions in 1993 over the prior year. The Corporation expanded its derivative products capabilities to Hong Kong in the fourth quarter of 1993. Additional information related to derivative products is contained elsewhere in this section and in Notes 15 and 16 of "Notes to Consolidated Financial Statements". Trading account profits and commissions income also includes the results of dealing in fixed and variable rate debt securities denominated in all major currencies with large financial institutions, including investment banks, multinational organizations and high net worth individuals, as well as dealing in other financial market instruments such as forward rate agreements, principally through the Corporation's London Eurobond trading subsidiary. A specialized group to trade obligations of emerging market countries, including loans, Eurobonds and other fixed income products, also contributed to trading account profits and commissions in 1993. The fluctuation between 1992 and 1991 was due principally to the levels of business conducted by the London subsidiary. The Corporation realized net investment securities gains of $1.3 million in 1993, $11.2 million in 1992 and $4.3 million in 1991. In 1992, maturities, calls and mandatory redemptions and sales made as a result of changes in the credit worthiness of the obligor, contributed to the higher amounts reported for that year. The proceeds from securities sold are reinvested in other high quality interest-earning assets. Net losses on loans sold or held for sale, principally debt obligations of restructuring countries, were $.8 million in 1993, compared to net gains of $17.1 million in 1992 and $3.0 million in 1991. The net gains in 1992 were attributable primarily to the sale of foreign currency denominated Argentine loans which had been designated as held for sale due to the inability to exchange these obligations for foreign currency denominated bonds. In 1991, the net gains recorded were principally due to sales of debt obligations of restructuring countries. Commission income amounted to $51.0 million in 1993. Fees earned from newly established full-service brokerage and investment management activities contributed to a significant portion of the increase in commission income between 1993 and 1992. Fees for the issuance of letters of credit and the creation of acceptances are also included in commission income. These fees generate the largest portion of this income, but with the addition of revenues generated during 1993 by newly established activities, such fees represent a smaller percentage of total commission income than in prior years. While the amount of fees from letters of credit and acceptances increased in 1992, such fees represented approximately 50% of total commission income compared to 60% in 1991. This decline was due to the higher level of commissions earned from other fee-based services and products, including domestic banknote shipments. Equity in earnings of affiliate representing the Corporation's share of the earnings of Safra Republic Holdings S.A. ("Safra Republic"), a European international private banking group 48.8% owned by the Corporation, was $59.5 million in 1993, compared to $45.2 million in 1992 and $41.1 million in 1991. 32 6 The following table presents summary information for Safra Republic for each of the last three years.
(In thousands except per share data) 1993 1992 1991 ============================================================================================================ At December 31: Total assets $11,299,349 $10,351,859 $9,066,960 Interest-bearing deposits with banks 3,660,414 3,759,581 3,276,098 Loans, net of unearned income 1,128,746 1,101,451 1,328,848 Allowance for possible loan losses 102,204 52,376 13,805 Non-performing loans 23,190 48,777 15,342 Total deposits 7,344,562 6,897,172 6,945,948 Shareholders' equity 1,280,755 1,131,747 1,099,544 For the year: Net interest income $ 221,188 $ 189,268 $ 149,786 Provision for loan losses 80,987 62,325 18,991 Other operating income 114,400 84,776 58,072 Other operating expenses 124,887 116,635 102,142 Net income 121,595 92,466 84,475 Earnings per common share 6.87 5.22 4.75 Average common shares outstanding 17,703 17,709 17,799 ============================================================================================================
For additional information on Safra Republic and its relationship with the Corporation see Note 7 of the "Notes to Consolidated Financial Statements." Other income in 1993 was $56.4 million, after deducting a $4.0 million loss on the early extinguishment of $234 million principal amount of long-term debt. Excluding the effect of the debt extinguishment, other income increased 13% over the $53.6 million in 1992. This income includes service charges on deposit accounts, trust department income, other income from factoring activities and fees for precious metals storage. The level of this income in 1992 included penalty fees charged on the prepayment of commercial mortgages and the receipt of a one-time fee of $3.2 million related to a lease termination payment. OTHER OPERATING EXPENSES The following table presents the principal categories of other operating expenses for each of the years in the three year period ended December 31, 1993.
Increase (Decrease) Increase (Decrease) ------------------- ------------------- (Dollars in thousands) 1993 Amount % 1992 Amount % 1991 ================================================================================================================================== Salaries and employee benefits $347,507 $53,376 18.1 $294,131 $30,456 11.6 $263,675 Occupancy, net 48,161 2,860 6.3 45,301 7,253 19.1 38,048 Other expenses 239,297 23,387 10.8 215,910 14,700 7.3 201,210 - ------------------------------------------------------------------- ----------------------- -------- Total other operating expenses $634,965 $79,623 14.3 $555,342 $52,409 10.4 $502,933 ==================================================================================================================================
Total operating expenses increased $79.6 million in 1993 to $635.0 million, from $555.3 million in 1992. Of this increase, approximately $50 million is associated with investments in new businesses, including full service brokerage, derivative products, investment management and retail branch expansion in the New York metropolitan area, Florida and California, as well as growth in consumer lending, primarily residential mortgages and credit card operations. Total operating expenses increased $52.4 million in 1992 to $555.3 million from $502.9 million in 1991. Of this increase, $20.0 million was associated with investments in new businesses, including securities brokerage and investment management, bank trust services and bank franchise expansion, including the acquisitions of American Savings Bank branches and SafraBank (Florida). Also contributing to the increase were expenses related to domestic residential mortgage origination and servicing capabilities, increased staff for control, compliance and credit review functions and a one-time $10.0 million charge related to the settlement of litigation. Salaries and employee benefits were $347.5 million in 1993, $294.1 million in 1992 and $263.7 million in 1991. Year-to-year, these expenses increased 18% in 1993 and 12% in 1992. The 1993 increase in staff expense was attributable to additions to staff in the trading and investment management areas and to higher levels of incentive-based compensation resulting primarily from increased revenues earned in trading areas. 33 7 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Approximately one-third of the 1992 salaries and employee benefits increase of $30.5 million was attributable to investments in new businesses and franchise expansion. Performance-related compensation and general increases in salaries and benefits also contributed to the increases in 1992. Occupancy costs were $48.2 million in 1993, compared to $45.3 million in 1992 and $42.0 million in 1991 before deduction of the one-time recognition of rental income of $4.0 million. The increase in 1993 was primarily due to the additional costs of occupying newly-acquired retail branches, as well as general increases to operate existing premises. The costs of occupying additional American Savings Bank branches contributed to the 1992 increase. All other expenses were $239.3 million in 1993, $215.9 million in 1992 and $201.2 million in 1991. All other expenses include premiums for deposit insurance paid to the Federal Deposit Insurance Corporation. This expense represented approximately 10% of all other expenses in 1993 and 11% in 1992. Due to a stabilization in the level of insured deposits, this expense increased only nominally in 1993. For the period covering the first six months of 1994, there will be no change in the rate paid by the Corporation's subsidiary banks for deposit insurance. Costs applicable to other real estate owned declined to $2.1 million in 1993, primarily from gains on sales of premises owned and a declining level of assets classified as other real estate. These costs were $7.7 million in 1992 and $8.0 million in 1991. Included in 1992 were the costs related to a new accounting interpretation that required selling expenses to be provided on other real estate owned for properties carried at the lower of cost or fair value on an individual basis. Those selling expenses were partially reduced by gains from the sale of properties during the year. Communication and equipment expenses represent a substantial portion of other expenses and amounted to $61.2 million, $54.7 million and $50.3 million in 1993, 1992 and 1991, respectively. Also, professional fees, consisting of consulting, legal and audit fees, rose to $31.9 million in 1993, from $23.1 million in 1992 and $27.0 million in 1991, which included $3.7 million incurred in connection with possible acquisitions and new product development. In June 1993, SFAS No. 116, "Accounting for Contributions Received and Contributions Made", was issued. SFAS No. 116 is effective for fiscal years beginning after December 15, 1995 and will require that unconditional promises to make contributions be recognized on an accrual basis. The Corporation is reviewing the impact of adopting this SFAS on its results of operations. [NET INCOME APPLICABLE TO COMMON STOCK BAR GRAPH -- SEE EDGAR APPENDIX] TOTAL APPLICABLE INCOME TAXES Total applicable income taxes, which include the taxable equivalent adjustment, increased $60.8 million to $181.6 million in 1993, after increasing $28.4 million between 1992 and 1991. The ratio of total applicable income taxes to income before taxes was 38% in 1993 and 32% in 1992. The 1993 effective income tax rate increase, when compared to 1992, is a result of the higher level of income subject to income taxes, the adoption of SFAS No. 109, "Accounting for Income Taxes", on January 1, 1993, and the retroactive effect to January 1, 1993 of applying a higher U.S. statutory rate in accordance with the Omnibus Budget Reconciliation Act of 1993. It is anticipated that the effective tax rate in the future will approximate the rate in 1993. In 1992 and 1991, this ratio was less than the effective statutory rates because of the effect in income taxes of tax benefits of $9.6 and $ 11.4 million related primarily to loan sales and charge-offs in instances in which the loan's book basis was different from the tax basis. NET INCOME APPLICABLE TO COMMON STOCK Net income applicable to common stock was a record $272.8 million in 1993, compared to $230.5 million in 1992 and $204.6 million in 1991. On a fully diluted basis, earnings per common share were $5.05 in 1993, $4.32 in 1992 and $3.90 in 1991. Dividends declared on the Corporation's issues of preferred stock and the average annual rates paid were as follows: $28.4 million or 5.11% in 1993; $28.4 million or 5.25% in 1992 and $22.7 million or 5.64% in 1991. 34 8 LIABILITY AND ASSET MANAGEMENT In general, the Corporation's assets are selected to match both the maturity and interest rate sensitivity of the Corporation's liabilities. Thus, the structure of the Corporation's liabilities determines the structure of its assets. This management policy has two important implications. First, liquidity requirements can be met more readily because a large proportion of assets mature when liabilities mature. Second, the impact of changes in the levels of interest rates on the Corporation is reduced because both assets and liabilities have approximately the same interest rate sensitivity. From time to time, the Corporation's management may decide to deliberately mismatch liabilities and assets in a strategic gap position as a means of managing net interest income. Interest rate sensitivity gaps occur when interest-bearing liabilities and interest-earning assets differ in repricing dates and anticipated maturities. Such decisions reflect management's views on the direction of interest rates and general market conditions. The gap position is established with marketable securities of high credit quality in liquid markets and is carefully monitored by management. The table below illustrates the Corporation's interest rate sensitivity gap position at December 31, 1993. The interest rate sensitivity gap, which is the difference between interest-earning assets and liabilities is presented by repricing period, based upon maturity or first repricing opportunity, along with a cumulative interest rate sensitivity gap. Factors considered are the contractual terms of the underlying obligations, including off-balance sheet items such as interest rate swaps and caps, as well as management's estimates of prepayment patterns of mortgage-backed securities and interest sensitivity of core deposits. It is important to note that the table indicates a position at a specific point in time, and may not be reflective of positions during the year or in subsequent periods. Major changes in position can be, and are, made promptly as market outlooks change. In addition, significant variations in interest rate sensitivity may exist within the repricing periods presented in which the Corporation has interest rate positions.
Repricing Period at December 31, 1993 ------------------------------------------------------------------------------------ After three After six After one Within months months year but After three but within but within within five (In millions) months six months one year five years years ==================================================================================================================================== ASSET/(LIABILITY) Interest rate sensitivity gap $(2,431) $ 919 $ 487 $ (906) $1,931 - ------------------------------------------------------------------------------------------------------------------------------------ ASSET/(LIABILITY) Cumulative interest rate sensitivity gap $(2,431) $(1,512) $(1,025) $(1,931) $ - - ------------------------------------------------------------------------------------------------------------------------------------
Diversification is another principle employed in the management of liabilities and assets. The Corporation is active in international banking and, in managing this activity, diversifies risks among many countries and counterparties throughout the world. Liabilities, which are mostly interest-bearing deposits and other purchased funds, are obtained from both domestic and international sources. These sources of funds represent a wide range of depositors, mostly individuals, and various types of deposits. The Corporation also raises funds from institutional and individual investors with a variety of marketable instruments. The diversification of the Corporation's funding sources provides stability of the funding base. [AVERAGE DEPOSITS BAR GRAPH -- SEE EDGAR APPENDIX] LIABILITY MANAGEMENT DEPOSITS The Corporation's primary liability products are interest-bearing deposits provided to customers in three basic franchises. The International Private Banking Group establishes relationships with high net worth individuals on a worldwide basis who value safety for their funds. The retail franchise comprises the New York City metropolitan area, Florida and California branch systems of Republic National Bank of New York (the "Bank"), Republic Bank for Savings ("RBS") and Republic Bank California N.A. In addition to its New York City branches RBS also operates a retail franchise in south central Florida with ten branches. These depositors invest in a diverse mix of retail time and savings deposits of both short-term and long-term maturities. The institutional franchise represents deposits from pension funds, 35 9 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) money market funds and corporate cash accounts. The Corporation has been successful in selling long-term deposits to institutional and corporate investors, thereby generating a source of long-term funds. In the fourth quarter of 1993, Republic National Bank of New York (Canada) acquired Bank Leumi (Canada) with assets of $100 million. This transaction provides the Corporation with an entry into the Toronto market with a new branch and expands its Montreal operations from two branches to three. In the third quarter of 1993, the Corporation increased its presence in the California market with the acquisition of SafraCorp California and its wholly owned subsidiary SafraBank (California). This bank now operates as Republic Bank California, N.A., an independent banking subsidiary, with three banking offices in Los Angeles County that will focus on domestic private banking and mortgage banking. The Corporation recently established a specialized domestic private banking group. This group will seek to establish banking, trust and investment management relationships with high net worth individuals. The following table sets forth the Corporation's deposit structure at December 31, in each of the last three years.
(In thousands) 1993 1992 1991 ========================================================================================================== DOMESTIC OFFICES: Noninterest-bearing deposits: Individuals, partnerships and corporations $ 1,188,773 $ 993,244 $ 771,773 Foreign governments and official institutions 912 1,996 1,135 U.S. Government and states and political subdivisions 21,540 8,583 16,000 Banks 86,030 107,749 59,593 Certified and official checks 130,263 124,879 104,820 - ---------------------------------------------------------------------------------------------------------- Total noninterest-bearing deposits 1,427,518 1,236,451 953,321 - ---------------------------------------------------------------------------------------------------------- Interest-bearing deposits: Savings and NOW accounts 2,823,010 2,687,431 1,967,415 Money market accounts 2,192,113 2,228,807 2,151,891 Deposit notes 50,000 50,000 150,000 Individuals, partnerships and corporations 3,653,047 4,190,729 4,618,023 U.S. Government and states.and political subdivisions - 5,562 81,919 Banks 6,627 2,175 2,532 - ---------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 8,724,797 9,164,704 8,971,780 - ---------------------------------------------------------------------------------------------------------- Total deposits in domestic offices 10,152,315 10,401,155 9,925,101 - ---------------------------------------------------------------------------------------------------------- FOREIGN OFFICES: Noninterest-bearing deposits 135,251 79,262 95,446 - ---------------------------------------------------------------------------------------------------------- Interest-bearing deposits: Time deposits of individuals, partnerships and corporations 6,157,472 7,548,411 6,753,773 Banks located in foreign countries 6,142,823 2,661,277 3,221,938 Foreign governments and official institutions 117,063 120,701 386,644 Demand deposits 96,326 291,381 - - ---------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 12,513,684 10,621,770 10,362,355 - ---------------------------------------------------------------------------------------------------------- Total deposits in foreign offices 12,648,935 10,701,032 10,457,801 - ---------------------------------------------------------------------------------------------------------- Total deposits $22,801,250 $21,102,187 $20,382,902 ==========================================================================================================
The following table presents the maturity distribution, at December 31, 1993, of certificates of deposit, deposit notes and other time deposits of $100,000 or more included in interest-bearing deposits in domestic offices in the table above.
Certificates of Deposit and Deposit Notes Other Time Deposits ----------------------- ------------------- (Dollars in thousands) Amount % Amount % =========================================================================================================== Due in 90 days and less $488,277 65 $1,005,409 92 Due in 91-180 days 69,630 9 31,461 3 Due in 181-360 days 18,402 3 14,203 1 Due in over 360 days 171,403 23 42,011 4 - -------------------------------------------------------------------------------- ----------------- TOTAL $747,712 100 $1,093,084 100 ===========================================================================================================
36 10 FOREIGN DEPOSITS The Corporation's International Private Banking Group, headquartered in New York City, generates a substantial portion of foreign deposits by establishing relationships with clients throughout the world. Deposits from foreign sources are cross-border deposits placed by over 24,000 individuals and foreign banks, in both domestic and foreign branch offices and foreign banking subsidiaries. They are a stable source of funding for the Corporation. Total average deposits in foreign offices were $10.8 billion in 1993, $8.6 billion in 1992 and $9.2 billion in 1991. These deposits increased to 51% of total average deposits in 1993, compared to 46% in 1992 and 47% in 1991. During 1993, the Corporation relied more on foreign office deposits as a source of funds than in 1992. The following table distributes, by type, the Corporation's foreign deposits at December 31 in each of the last three years. The majority of the deposits in each category at the indicated dates were in amounts in excess of $100,000.
(In thousands) 1993 1992 1991 ========================================================================================================== Foreign deposits: Time deposits of individuals, partnerships and corporations $ 6,755,821 $ 8,344,276 $ 7,855,509 Banks and other financial institutions 6,281,266 2,751,181 3,278,950 Foreign governments and official institutions 118,387 122,257 388,003 Other deposits 170,230 362,302 89,028 - ---------------------------------------------------------------------------------------------------------- Total foreign deposits $13,325,704 $11,580,016 $11,611,490 ==========================================================================================================
SHORT-TERM BORROWINGS The Corporation's principal short-term funding sources are federal funds purchased and securities sold under repurchase agreements, issuing commercial paper and local borrowings in overseas operations. The Bank, from time to time, also issues short-term securities in public offerings. Average short-term borrowings of $5.4 billion in 1993 were little changed from the $5.5 billion in 1992. Average short-term borrowings in 1992 reflected an increase of $1.4 billion over 1991, primarily from the effect of the issuance in a public offering in January, 1992 of $1.5 billion principal amount of 4.50% Notes that were repaid on January 6, 1993. The Corporation's commercial paper is rated A-1+, F-1+ and P-1 by Standard & Poor's Corporation, Fitch Investors Service and Moody's Investor Service, respectively. Commercial paper proceeds are used principally to finance the current operations of Republic Factors Corp. and Republic New York Securities Corporation. The Corporation has $125 million of lines of credit to provide support for its commercial paper program, under which it is authorized to issue up to $1.0 billion. The following table is a summary of short-term borrowings for each of the last three years. Other borrowings reflect rates paid for local borrowing in certain overseas locations.
(Dollars in thousands) 1993 1992 1991 ================================================================================================================== Federal funds purchased and securities sold under repurchase agreements: Average interest rate: At year end 2.94% 3.25% 5.18% For the year 3.03% 3.12% 5.85% Average amount outstanding during the year $3,403,240 $2,558,208 $2,988,412 Maximum amount outstanding at any month end 5,315,974 6,610,534 5,487,018 Amount outstanding at year end 999,149 2,266,004 829,379 Commercial paper: Average interest rate: At year end 3.29% 3.40% 5.11% For the year 3.32% 3.90% 6.43% Average amount outstanding during the year $ 606,088 $ 562,634 $ 600,030 Maximum amount outstanding at any month end 897,672 741,329 724,203 Amount outstanding at year end 881,741 720,308 524,047 Other borrowings: Average interest rate: At year end 4.35% 4.80% 9.97% For the year 5.44% 5.52% 9.09% Average amount outstanding during the year $1,371,131 $2,401,171 $ 491,790 Maximum amount outstanding at any month end 2,394,549 2,897,957 672,423 Amount outstanding at year end 2,394,549 2,752,510 449,318 ==================================================================================================================
37 11 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) ASSET MANAGEMENT The management of the Corporation's assets is based on three principal criteria: creditworthiness, diversification and structural characteristics, including maturity and interest rate sensitivity. A significant portion of its interest-earning assets are invested in U.S. Government agency securities, including mortgage-backed securities. International banking activities also comprise a substantial portion of the Corporation's business and involve factors other than the normal credit risk associated with domestic lending. In determining the creditworthiness of international borrowers, the economic, political and social conditions that affect the ability to repay obligations must be taken into account. Through country and political analysis and diversification of activities across a wide geographic distribution and within exposure limits set on a country-by-country basis, the Corporation reduces the unique risks of extending international credit. The Corporation endeavors to reflect risk in its pricing policy. The Corporation's domestic lending business includes the $2.9 billion RBS loan portfolio with a concentration in single and multifamily residential real estate loans and, to a lesser extent, commercial real estate and consumer loans. The following table sets forth the Corporation's interest-earning assets by category at December 31, in each of the last three years. Additional details related to maturity distribution, interest rate sensitivity and creditworthiness are discussed in this section.
(In thousands) 1993 1992 1991 ================================================================================================================== Interest-bearing deposits with banks $ 5,346,647 $10,562,885 $ 8,776,578 Total investment securities 14,949,793 12,331,471 9,666,692 Trading account assets 1,182,093 702,479 268,950 Federal funds sold and securities purchased under resale agreements 2,322,465 1,505,274 10,546 Loans: Real estate 3,310,585 3,711,428 3,730,939 Government and official institutions 429,232 341,320 453,639 Broker loans 1,411,302 307,018 250,000 Banks and other financial institutions 75,800 303,523 298,021 Commercial and other 4,376,464 3,492,890 4,048,074 - ------------------------------------------------------------------------------------------------------------------ Total loans 9,603,383 8,156,179 8,780,673 Less unearned income (94,825) (148,722) (211,715) - ------------------------------------------------------------------------------------------------------------------ Loans, net of unearned income 9,508,558 8,007,457 8,568,958 - ------------------------------------------------------------------------------------------------------------------ Interest earning assets $33,309,556 $33,109,566 $27,291,724 ==================================================================================================================
[AVERAGE INTEREST-EARNING ASSETS BAR GRAPH -- SEE EDGAR APPENDIX] INTEREST-BEARING DEPOSITS WITH BANKS Interest-bearing deposits with banks are placed with major international and domestic banking organizations on a short-term basis, thereby insuring liquidity while reducing credit risk. As a percentage of average interest-earning assets, investments in interest-bearing deposits with banks declined to approximately 23% in 1993, compared to 26% in 1992 and 30% in 1991. During this period, as interest rates declined, the Corporation decided to invest a greater proportion of funds in higher yielding U.S. Government agency securities. The following tables provide information on the composition and maturity distribution of the Corporation's interest-bearing deposits with banks at December 31, 1993.
Maturity (Dollars in millions) Composition % (Dollars in millions) Distribution % =================================================== ==================================================== United States financial institutions $ 703.1 13 Due within one month $3,076.9 58 Branches and agencies of foreign banks located in the United States 863.6 16 Due after one but within six months 1,679.6 31 Foreign government banks and official institutions 522.7 10 Due after six but within twelve months 548.3 10 Banks located in the United Kingdom 287.4 5 Other foreign banks 2,969.8 56 Due after one year 41.8 1 - --------------------------------------------------- ---------------------------------------------------- $5,346.6 100 $5,346.6 100 =================================================== ====================================================
38 12 INVESTMENT PORTFOLIO On December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". This change in accounting policy required that securities designated as available for sale be carried at fair value with the results of any unrealized gains or losses reflected in stockholders' equity, net of taxes. In connection with this policy, management reviewed the composition of the investment portfolio and designated all municipal securities, certain fixed-rate mortgage-backed and non-marketable equity securities as held to maturity. These securities are being carried at amortized cost. All other securities amounting to approximately $12.3 billion were designated as available for sale and marked to their estimated market values. Prior to the adoption of SFAS No. 115, securities available for sale were carried at the lower of cost or market value in the aggregate, with adjustments to the carrying value recorded as investment securities losses. At year end 1993, the total investment securities portfolio was $14.9 billion, or 45% of interest earning assets, up from $12.3 billion, or 37%, in 1992. The principal component of the investment portfolio is obligations of U.S. Government agencies, substantially all of which are mortgage-backed securities. These securities amounted to $10.7 billion at year end 1993 and $8.3 billion at year end 1992, or approximately 70% of total investment securities. The $2.4 billion increase in this investment during 1993 was funded with shorter term liabilities at lower rates that provided favorable spreads. The following table presents the composition of the book/carrying value of the Corporation's total investment securities portfolio at December 31, in each of the last three years.
(In thousands) 1993 1992 1991 ================================================================================================================== U.S. Government obligations $ 425,352 $ 726,997 $ 90,844 Obligations of U.S. Government agencies 10,713,977 8,327,119 5,800,871 Obligations of states and political subdivisions 584,302 543,005 540,506 Other investment securities 3,226,162 2,734,350 3,234,471 - ------------------------------------------------------------------------------------------------------------------ $14,949,793 $12,331,471 $9,666,692 ==================================================================================================================
The following tables present, by maturity distribution, the book value/amortized cost and estimated market value of the Corporation's portfolio of securities held to maturity and available for sale at December 31, 1993. The Corporation has identified certain interest rate swaps as hedges against market risks of the available for sale portfolio. The market value of those swaps is included in the mark-to-market calculation of the portfolio for SFAS No. 115 purposes. The weighted average yields on these instruments are presented based on scheduled maturity. Based on current market conditions, mortgage backed securities included in U.S. Government agencies held to maturity and available for sale have estimated average lives of approximately 8 years and 7 years, respectively. Yields on obligations of states and political subdivisions and investments in certain preferred stock issues are adjusted to a fully-taxable equivalent basis using a rate of 44%.
Held to Maturity --------------------------------------- Estimated Weighted Book Market Average (Dollars in thousands) Value Value Yield ================================================================================================================== Obligations of U.S. Government agencies: Mortgage-backed securities $1,357,279 $1,389,619 6.96% Obligations of states and political subdivisions: Due within 1 year 1,975 1,823 13.38% Due after 1 year but within 5 years 12,791 13,802 14.90 Due after 5 years but within 10 years 112,779 128,593 13.22 Due after 10 years 456,757 503,867 10.16 - --------------------------------------------------------------------------------------------------- Total 584,302 648,085 - --------------------------------------------------------------------------------------------------- Other investment securities: Due after 10 years* 51,266 51,101 6.04% - --------------------------------------------------------------------------------------------------- Total held to maturity $1,992,847 $2,088,805 ===================================================================================================
*Includes securities with no stated maturity. 39 13 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Available for Sale ---------------------------------------- Book/ Weighted Amortized Market Average (Dollars in thousands) Cost Value Yield ================================================================================================================== U.S. Government obligations: Due within 1 year $ 362,564 $ 363,604 4.24% Due after 10 years 55,611 61,748 7.43 - --------------------------------------------------------------------------------------------------- Total 418,175 425,352 - --------------------------------------------------------------------------------------------------- Obligations of U.S. Government agencies: Due after 1 year but within 5 years 55,142 55,143 7.48% Due after 5 years but within 10 years 385 425 11.10 Mortgage-backed securities 9,041,378 9,344,409 7.37 Interest rate swaps -- (43,279) - --------------------------------------------------------------------------------------------------- Total 9,096,905 9,356,698 - --------------------------------------------------------------------------------------------------- Other investment securities: Due within 1 year 814,410 818,117 5.27% Due after 1 year but within 5 year 988,754 1,030,087 7.88 Due after 5 years but within 10 years 282,950 314,741 12.66 Due after 10 years 961,831 1,042,443 7.94 Interest rate swaps -- (30,492) - --------------------------------------------------------------------------------------------------- Total 3,047,945 3,174,896 - --------------------------------------------------------------------------------------------------- Total available for sale $12,563,025 $12,956,946 ===================================================================================================
[AVERAGE INTEREST-EARNING ASSETS BAR GRAPH -- SEE EDGAR APPENDIX] The following table presents the book value/amortized cost and estimated market value of the Corporation's other investment securities by type at December 31, 1993.
Available for Sale Held to Maturity ----------------------- -------------------- Book/ Estimated Amortized Market Book Market (In thousands) Cost Value Value Value ================================================================================================================================= Bonds, debentures and other securities of: Foreign banks $ 612,888 $ 647,393 $ -- $ -- Foreign governments and government agencies 1,005,534 1,076,173 -- -- Foreign companies 576,041 598,420 1,666 1,666 Domestic companies 269,057 284,992 2,783 2,783 U.S. financial organizations 584,425 598,410 46,817 46,652 Interest rate swaps -- (30,492) -- -- - --------------------------------------------------------------------------------------------------------------------------------- $3,047,945 $3,174,896 $ 51,266 $ 51,101 =================================================================================================================================
TRADING ACCOUNT ASSETS Trading account assets include securities of the U.S. Government, foreign governments, restructuring countries and corporations recorded at market value with the resultant gains or losses recorded as trading account profits and commissions. Trading account assets also include loans to borrowers in restructuring countries which are marked to market, with the resultant gains or losses included in gain or loss on loans sold or held for sale. At year end 1993, trading account assets included approximately $18.2 million of restructuring countries' obligations carried at their estimated market value. PRECIOUS METALS In considering where to invest funds from deposits and other liabilities maturing within one year, precious metals arbitrage frequently offers an attractive investment alternative for the Corporation. The Corporation trades gold and silver bullion, both for immediate delivery and for delivery in the future and also buys and sells options on precious metals. The Corporation is a dealer in gold and silver bullion and coins that are sold to commercial and industrial users and investors. In this activity, the Corpora- 40 14 tion also receives or delivers gold on consignment and maintains its own inventory. The Corporation generally hedges its inventory against price fluctuations. At December 31, 1993 and 1992, approximately $24.8 million and $14.9 million, respectively, of the Corporation's inventory in precious metals was unhedged. The Corporation expanded its precious metals capabilities with the acquisition of Mase. Mase engages in global wholesale trading in gold, silver, platinum and palladium, including spot, forward and options dealing, and providing financial services in gold loans to central banks, international financial institutions and institutional investors; it also offers production and inventory financing to mining companies, industrial manufacturers and end-users. LOAN PORTFOLIO Average loans in domestic offices showed a modest increase in 1993, after a decline of $.6 billion in 1992. Average loans in foreign offices in 1993 remained stable after the modest decline of $.3 billion in 1992 from 1991. As a percentage of average loans outstanding, domestic office loans represented approximately 70% of the total loan portfolio in each of the last two years. At year end 1993, the domestic loan portfolio consisted of $1.3 billion of one-four family residential mortgages and $1.9 billion of commercial real estate loans. The following tables present loan portfolio information related to maturity distribution and interest rate sensitivity, based on scheduled repayments. These tables exclude consumer loans and residential mortgage loans totaling $1.4 billion at December 31, 1993.
Due After One Due in One Year Through Due After (In thousands) Year Or Less Five Years Five Years Total ================================================================================================================================= Domestic: Commercial and other $1,819,634 $180,624 $183,241 $2,183,499 Real estate - commercial 426,726 715,847 711,804 1,854,377 Banks and other financial institutions 7,384 --- --- 7,384 Broker loans 678,490 --- --- 678,490 - --------------------------------------------------------------------------------------------------------------------------------- Total domestic loans 2,932,234 896,471 895,045 4,723,750 - --------------------------------------------------------------------------------------------------------------------------------- Foreign: Commercial and other 1,818,575 262,666 34,166 2,115,407 Real estate - commercial 43,410 47,446 65 90,921 Banks and other financial institutions 50,331 11,939 6,146 68,416 Foreign governments and government agencies 317,512 96,524 15,196 429,232 Broker loans 724,120 8,692 --- 732,812 - --------------------------------------------------------------------------------------------------------------------------------- Total foreign loans 2,953,948 427,267 55,573 3,436,788 - --------------------------------------------------------------------------------------------------------------------------------- Total loans $5,886,182 $1,323,738 $950,618 $8,160,538 =================================================================================================================================
At December 31, 1993, 72% of the loan portfolio presented above was due in one year or less compared to 63% in 1992. Of the total loan portfolio due in one year or less, 50% were domestic loans and 50% were foreign loans. The following table is an analysis, at December 31, 1993, of loans due after one year which have fixed interest rates and those with interest rates that vary directly in relation to the Corporation's reference rate, an international money market rate or some other similar variable base rate. Loans with variable rates amounting to $1.1 billion are due after one year.
(In thousands) Fixed Rate Variable Rate Total ================================================================================================================================= Loans due after one year: Domestic loans $1,008,700 $ 782,816 $1,791,516 Foreign loans 170,137 312,703 482,840 - --------------------------------------------------------------------------------------------------------------------------------- $1,178,837 $1,095,519 $2,274,356 =================================================================================================================================
41 15 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) ALLOWANCE FOR POSSIBLE LOAN LOSSES [ALLOWANCE FOR POSSIBLE LOAN LOSSES BAR GRAPH -- SEE EDGAR APPENDIX] The allowance for possible loan losses increased $70.9 million to $311.9 million at year end 1993, representing 3.28% of loans outstanding, net of unearned income, compared to $241.0 million, or 3.01%, at year end 1992. In 1993, the Corporation's provision for loan losses was $85.0 million and net loan charge-offs, excluding restructuring country debt, were $34.5 million. The Corporation had $21.2 million of net recoveries related to restructuring country debt in 1993, primarily related to the sale of Argentine Interest Bonds received in connection with its debt restructuring. In 1992, the Corporation's provision, for loan losses was $120.0 million and net loan charge-offs were $105.8 million. Net charge-offs of restructuring country debt of $6.6 million included recoveries of $11.7 million related to Brazil and Argentine obligors. The charge-offs of restructuring country debt was primarily related to eastern European countries. During 1992, economic difficulties were experienced by a limited number of domestic commercial businesses and a limited number of international loans which resulted in increased charge-offs and an increased provision for loan losses. In May 1993, SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", was issued and is effective for fiscal years beginning after December 15, 1994. This SFAS prescribes the recognition criteria and measurement methods for certain impaired loans and loans modified in troubled debt restructurings. Under the SFAS, impairment would be measured based on management's estimate of the discounted value of expected future cash flows at a loan's effective interest rate or an existing market price or the fair value of collateral. The amount of impairment would be recorded as a charge to earnings. The Corporation is currently reviewing the impact of adopting this SFAS, which, based on the current level of non-performing loans, should not have a material impact on the Corporation's results of operations. The following table presents data related to the Corporation's allowance for possible loan losses for each of the years in the five-year period ended December 31, 1993.
(Dollars in thousands) 1993 1992 1991 1990 1989 ================================================================================================================================= Balance at beginning of year $241,020 $227,454 $236,634 $287,501 $180,446 Charge-offs: Domestic: Commercial and industrial 11,947 51,956 65,363 42,548 11,227 Installment loans to individuals 1,757 2,396 3,028 1,987 2,091 Secured by real estate 32,466 36,022 6,310 7,066 -- Foreign 12,731 20,257 6,603 2,127 2,644 Losses on sale, swap and charge-off of restructuring countries' debt 9,729 18,477 4,304 63,939 90,908 - --------------------------------------------------------------------------------------------------------------------------------- Total charge-offs 68,630 129,108 85,608 117,667 106,870 - --------------------------------------------------------------------------------------------------------------------------------- Recoveries: Domestic: Commercial and industrial 15,281 9,498 8,505 1,329 722 Installment loans to individuals 661 680 690 812 1,176 Secured by real estate 2,731 289 38 254 -- Foreign* 36,693 12,849 5,761 3,251 3,800 - --------------------------------------------------------------------------------------------------------------------------------- Total recoveries 55,366 23,316 14,994 5,646 5,698 - --------------------------------------------------------------------------------------------------------------------------------- Net charge-offs (13,264) (105,792) (70,614) (112,021) (101,172) Provision charged to operating expense 85,000 120,000 62,000 40,000 209,000 Allowance of acquired companies 297 764 -- 21,887 -- Translation adjustment (1,198) (1,406) (566) (733) (773) - --------------------------------------------------------------------------------------------------------------------------------- Balance at end of year $311,855 $241,020 $227,454 $236,634 $287,501 =================================================================================================================================
*Primarily restructuring country debt in 1993, 1992 and 1991. 42 16 The following table presents loan data and ratios related to the allowance for possible loan losses and charge-offs for each of the years in the five-year period ended December 31, 1993.
(Dollars in millions) 1993 1992 1991 1990 1989 =================================================================================================================================== LOANS Loans outstanding, net of unearned income, at end of year $9,509 $8,007 $8,569 $9,005 $6,580 Average loans outstanding, net of unearned income, during the year $8,891 $8,732 $9,623 $10,603 $8,367 RATIOS Allowance for possible loan losses to loans outstanding, net of unearned income, at end of year 3.28% 3.01% 2.65% 2.63% 4.37% Net charge-offs to average loans outstanding, net of unearned income, during the year: Including restructuring countries' charge-offs .15% 1.21% .73% 1.06% 1.21% Excluding restructuring countries' charge-offs .39% 1.14% .73% .45% .12% Net charge-off coverage(1) Including restructuring countries' charge-offs 40.44x 4.42x 4.95x 2.35x 2.62x Excluding restructuring countries' charge-offs 15.55x 4.71x 5.01x 5.48x 25.82x ====================================================================================================================================
(1) Calculated by dividing net charge-offs into income before income taxes plus the provision for loan losses. The following table presents information related to the Corporation's non-accrual loans (90 days past due) and other non-performing assets at December 31, in each of the last five years.
(In thousands) 1993 1992 1991 1990 1989 ==================================================================================================================================== Non-accrual loans: Domestic $ 48,084 $ 49,929 $ 68,571 $113,492 $ 19,448 Foreign-restructuring countries 33,853 42,123 42,836 33,776 66,558 Foreign -- other 12,956 38,276 18,054 1,588 2,157 - ------------------------------------------------------------------------------------------------------------------------------------ Total non-accrual loans 94,893 130,328 129,461 148,856 88,163 - ------------------------------------------------------------------------------------------------------------------------------------ Other non-performing assets: Other real estate owned 23,338 55,551 41,401 7,661 1,342 Other non-accrual assets --- 4,572 3,125 7,904 5,860 - ------------------------------------------------------------------------------------------------------------------------------------ Total other non-performing assets 23,338 60,123 44,526 15,565 7,202 - ------------------------------------------------------------------------------------------------------------------------------------ Total non-accrual loans and other non-performing assets $118,231 $190,451 $173,987 $164,421 $95,365 ====================================================================================================================================
The above table excludes domestic restructured performing loans amounting to $63.0 million, $58.5 million and $27.0 million in 1993, 1992 and 1991, respectively. Foreign loans to obligors in restructuring countries in the above table, principally Brazil and Argentina, have market values in excess of their carrying value at December 31, 1993. Total non-performing assets declined to $118.2 million at December 31, 1993, from $190.5 million at year end 1992, principally due to the reductions in other foreign non-performing loans and other real estate owned. At year end 1993 other non-accrual assets, which consisted of securities classified as available for sale that have been marked to market with the adoption of SFAS No. 115, were excluded from the classification of non-performing assets. CROSS-BORDER OUTSTANDINGS The following tables present information related to the Corporation's cross-border net outstandings denominated in dollars or other non-local currencies, including the excess of local currency outstandings over local currency liabilities. Outstandings are classified by type of borrower, based on ultimate risk, and are defined as loans, acceptances, interest-bearing deposits with banks, investment securities and accrued interest receivable, after deducting cash collateral. Countries where such outstandings exceeded 43 17 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) 1.0% of consolidated total assets of $39.5 billion, $37.1 billion and $31.2 billion at December 31, 1993, 1992 and 1991, respectively, were as follows:
Commercial Total Banks and Other Government and and ---------------------------- (In millions) Financial Institutions Official Institutions Industrial(1) 1993 1992 1991 ==================================================================================================================================== France $ 744 $ 901 $ 622 $ 2,267 $ 3,309 $ 2,113 Japan 1,661 --- 144 1,805 2,711 4,667 Canada 618 96 216 930 1,941 1,266 Belgium/Luxembourg 248 --- 632 880 913 934 Netherlands 600 --- 41 641 1,129 674 United Kingdom 398 1 239 638 1,370 1,271 Germany 597 --- 26 623 1,059 691 - ------------------------------------------------------------------------------------------------------------------------------------ $4,866 $ 998 $1,920 $ 7,784 $12,432 $11,616 ====================================================================================================================================
(1) Includes excess of local currency outstandings over local currency liabilities. At December 31, 1992 and 1991, the only other countries with cross-border net outstandings exceeding 1.0% of consolidated total assets which are excluded from the table above were Italy with $506 million in 1992 and $957 million in 1991, Taiwan with $416 million in 1992 and Spain with $399 million in 1991. At December 31, in each of the last three years, countries with cross-border net outstandings representing between .75% and 1.0% of consolidated total assets were: Spain with $326 million and Taiwan with $384 million in 1993, Spain with $358 million in 1992 and Taiwan with $238 million in 1991. At December 31, 1993, medium and long-term outstandings to restructuring countries were 1.46% of total assets, with no individual country's outstandings representing more than 0.42% of total assets at such date. The following table presents the distribution of the Corporation's total cross-border net outstandings at December 31, in each of the last two years, based on the annual gross national product per capita of the borrower's or guarantor's country of residence. Classifications of countries are derived, for each year, from data available from the International Bank for Reconstruction and Development.
1993 1992 --------------------- -------------------- (Dollars in millions) AMOUNT % Amount % ====================================================================================================================== High Income: OECD countries $ 9,320 80.7 $13,932 89.6 Non-OECD countries 854 7.4 710 4.6 Middle Income: Upper 919 8.0 620 4.0 Lower 432 3.7 265 1.7 Low Income 21 .2 17 .1 - ---------------------------------------------------------------------------------------------------------------------- Total $11,546 100.0 $15,544 100.0 ======================================================================================================================
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS As a result of the Corporation's strategy of providing financial services to meet the changing needs of its various customer franchises, the level of activity and revenues related to off-balance sheet activities is higher in 1993 than in 1992. Revenue increases occurred in foreign exchange and precious metals activities in which the Corporation has been active for several years, as well as in derivative products where a new trading activity was established in 1993. See "Other Operating Income" in Management's Discussion and Analysis. It is expected that client demand for these products will continue to grow and will result in increases in related revenues in 1994. 44 18 Derivative instruments are contracts whose value is derived from the value of an underlying financial instrument or physical commodity, or an index thereon. Derivative instruments do not generally involve exchange of principal amounts but may involve the payment of a fee or premium. The Corporation is an international dealer in such instruments including futures, forwards, swaps and options related to interest rates, foreign exchange rates, equity indices and commodity prices in contracts denominated in U.S. dollars and other currencies. The Corporation focuses especially on the structuring of customized transactions to meet client needs. Counterparties with the Corporation are generally financial institutions, including banks, central banks, other government agencies both foreign and domestic, insurance companies, and investment managers. The Corporation accounts for its dealer activities in derivative instruments on a mark to market basis. Derivative transactions executed as part of the Corporation's asset-liability management are accounted for on an accrual basis in the interest income or expense of the related asset or liability. For further discussion of accounting for derivatives see Note 1G. of "Notes to Consolidated Financial Statements." The market risk of derivatives arises principally from the potential for changes in the prices of underlying securities, commodities or indices, or the volatility of such prices. The Corporation routinely reduces or eliminates exposure to market risks by entering into hedging transactions. In order to control risk, limits for all elements of market risk impacting value are established, monitored and reviewed regularly. The credit risk of derivatives arises from the potential for a counterparty to default on its contractual obligations. The Corporation attempts to limit credit risk by dealing with investment grade counterparties and obtaining collateral where appropriate. It is the Corporation's policy to use netting agreements where obtainable. Global credit limits, which cover total exposure across all products, including derivative products, are established for each counterparty. These limits are monitored and reviewed regularly. The notional amounts of derivatives outstanding is not indicative of the potential for gain or loss on such transactions. The notional amounts shown in the table in Note 16 of "Notes to Consolidated Financial Statements" reflect all contracts, both with and without credit exposure. Credit exposure exists whenever a contract has a positive market value. At December 31, 1993, gross credit exposure associated with derivative contracts was $1.520 billion. Credit related financial instruments include commitments to extend credit, standby letters of credit and guarantees. These commitments have fixed expiration dates and require the payment of a fee, that is recorded as commission income over the life of the commitment period. The Corporation issues such instruments in the normal course of business to financial and commercial counterparties. Credit risk associated with credit related financial instruments is limited to the contractual amounts of these instruments. Global credit limits which cover total exposure across all products, including these types of commitments, are established for each counterparty. These limits are monitored and reviewed regularly. Additional information related to these instruments is contained in Note 16 of "Notes to Consolidated Financial Statements." 45 19 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) RISK MANAGEMENT Many risks arise in the ordinary conduct of banking business. The Corporation manages several types of risks, principally credit and market risks, in the interest of reducing uncertainty as to the level of future earnings and as to the book value of the Corporation. Credit risk arises whenever the Corporation owns a commitment of another party that has a positive value. Market risk arises from the Corporation's trading activities and asset-liability management. The Corporation seeks to control these risks by diversifying its exposures and activities over many instruments, markets, clients and geographic regions and by limiting risk positions. In 1993, the Corporation established the Risk Assessment Committee of the Board of Directors and a Risk Assessment and Control Department, that reports directly to the Board Committee. It is the task of this department to enhance existing effective methods and processes for defining, measuring, monitoring and limiting risk within the Corporation. The processes and procedures by which the Corporation manages its risk profile continually evolves as the Corporation's business activities change in response to market and product developments. The Corporation routinely reviews its procedures in order to ensure that they are comprehensive with respect to all major risks, and that a consistent approach is followed throughout the organization. To enhance the control environment for the Corporation's activities and assist in decision making, significant investments have been made in the training of personnel and in the development of information technology. Proprietary trading and analytical systems have been developed for the Corporation's existing and future business. This control environment is subject to periodic review by regulators, internal auditors and independent outside auditors. CREDIT RISK The Credit Review Committee establishes policies and procedures to define, quantify, and monitor the credit risks, including settlement risk, arising from the Corporation's diverse activities. Global limits are established to control these risks and it is the responsibility of each operating unit to conduct its business activity within pre-established limits. Overages with respect to customer credit, currency or transaction exposure must be approved by senior management. The Credit Review Department provides an independent evaluation of the loan portfolio and assures ongoing credit quality by reviewing individual credits and concentrations with a focus on operating units where risk is at a higher level, and monitoring of corrective action where necessary. Additionally, the Credit Review Department evaluates documentation, adherence to laws and regulations, and to Bank policy as stated in the Corporation's Credit Policy Manual. The Credit Review Department also prepares monthly and quarterly portfolio review summaries for executive management and the Board of Directors. On a quarterly basis the adequacy of the Corporation's allowance for loan losses on both a consolidated and stand-alone entity basis is assessed using historical loss analysis and a variety of other measurement techniques. MARKET RISK To manage market risk the Corporation establishes limits for interest rate, foreign currency, and other market exposures. An important tool in monitoring exposures and establishing limits for substantially all of our products is the estimation of the potential loss of current and future earnings on existing positions under a range of assumptions within the markets being measured. The Management Asset and Liability Committee provides a forum for reviewing the Corporation's liquidity profile and the market risk in its asset and liability management and trading positions. The Management Asset and Liability Committee regularly reviews the Corporation's market exposures and analyzes the effects of actual or projected changes in rates, prices or market liquidity on the value of these positions. Such committee also reviews the Corporation's liquidity profile by monitoring the differences in maturities between assets and liabilities and by analyzing the future level of funds required based on various assumptions, including its ability to liquidate investment and trading positions and its ability to access the markets. 46 20 CAPITAL RESOURCES AND LIQUIDITY CAPITAL FINANCING POLICY The Corporation's policy is to obtain capital externally when opportunities arise, if the cost of such capital is reasonable and the form is appropriate for the Corporation's needs and overall capital structure. In keeping with this policy, capital has been obtained externally on several occasions although, at such times, the Corporation, relative to other major bank holding companies, was considered to be well capitalized. The Corporation conducts its business through its subsidiaries. Thus, the Corporation frequently provides capital and financing to these subsidiaries to support their operations and to permit expansion. In formulating its dividend policy, the Corporation's Board of Directors considers historical financial results, future prospects and anticipated needs for capital. The current policy, which is reviewed annually, is to pay out approximately 25% to 30% of the prior year's earnings. This policy is intended to provide stockholders with increasing dividend income while allowing the Corporation to maintain its desired internal capital generation rate. Future dividends are dependent upon the Corporation's financial results, capital requirements and economic conditions in general. CAPITAL TRANSACTIONS In May 1993, in anticipation of future opportunities in the capital markets, the Corporation filed a shelf registration statement to offer publicly, separately or together, in one or more series, from time to time, debt securities, warrants on debt securities, currency warrants, stock-index warrants, other warrants, preferred stock, depositary shares representing preferred stock and preferred or common stock warrants up to an aggregate, of initial offering prices of $1.0 billion. On October 21, 1993, the Corporation sold, in a public offering, $250 million principal amount of 5 7/8% Subordinated Notes due 2008 under the above shelf registration statement. The Notes are not redeemable prior to maturity and are direct unsecured general obligations of the Corporation, subordinated to all of its present and future Senior Indebtedness. The net proceeds received by the Corporation from the sale of the Notes were used to redeem, prior to maturity, all of its outstanding issues of Floating Rate Notes due 2004 and Floating Rate Subordinated Notes due 2009 and 2010 in the aggregate principal amount of $224.8 million. [EARNINGS AND DIVIDENDS PER COMMON SHARE BAR GRAPH -- SEE EDGAR APPENDIX] The Corporation was active in the capital markets during 1992, obtaining capital with varying characteristics in public offerings. The Corporation publicly sold, 4,000,000 shares of $1.9375 Cumulative Preferred Stock (the "Preferred Stock"), which is a dividend yield of 7 3/4% on the stated value of $25 per share. The Preferred Stock may be redeemed at the option of the Corporation with the proceeds from an equal or higher ranked capital security, in whole or in part, at any time or from time to time, on or after February 27, 1997 at $25 per share, plus accrued dividends to the redemption date. For the purpose of risk-based capital requirements of bank regulatory authorities, the Preferred Stock qualifies as Tier 1 capital. The net proceeds of $96.7 million were used for general corporate purposes. These shares were issued under an existing shelf registration statement which provides for public offerings of up to an additional 6 million shares of preferred stock without par value, with a maximum aggregate offering price of $150 million. During 1992, an aggregate of $750 million of subordinated notes were issued in several public offerings. All of these notes are subordinated obligations of the Corporation and are not redeemable prior to maturity. The proceeds from these offerings were used for general corporate purposes. The Corporation measures how effectively it utilizes capital by two widely used performance ratios (based on net income applicable to common stock), return on average total assets and return on average common stockholders' equity. In 1993, return on average total assets was .73% and return on average common stockholders' equity was 15.08% compared to .68% and 14.18%, respectively, in 1992. In 1991, average total assets returned .66% and average common stockholders' equity returned 14.20%. 47 21 RISK-BASED CAPITAL/LEVERAGE GUIDELINES The Board of Governors of the Federal Reserve System (the "Federal Reserve Board") has established guidelines that mandate risk-based capital requirements for bank holding companies. The guidelines require a minimum ratio of capital to risk-weighted assets (including certain off-balance-sheet activities, such as standby letters of credit and derivative instruments) of 8.0%. At least half of the total capital ratio is to be composed of common equity, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1" or "core capital"). The remainder may consist of limited amounts of subordinated debt, the balance of cumulative preferred stock and the allowance for loan losses ("Tier 2 capital"). A final rule that became effective in 1993 requires the deduction of intangible assets recorded prior to February 19, 1992, purchased mortgage servicing rights and purchased credit card relationships subject to certain minimums. As a supplement to its risk-based capital ratios, the Federal Reserve Board established a minimum leverage ratio of 3.0% (Tier 1 capital to average total assets, with Tier 1 capital being determined for this purpose in a manner consistent with the risk-based capital guidelines). Each of the Corporation's banking subsidiaries complies with all applicable regulatory capital requirements. The Financial Accounting Standards Board Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts", was issued in March 1992 and must be implemented beginning in 1994. This interpretation permits the netting of unrealized gains and losses on certain off-balance sheet financial instruments only when a legally enforceable netting agreement with a counterparty exists. The Corporation currently follows the industry practice of netting unrealized gains and losses without netting arrangements in force. At December 31, 1993, the adoption of this accounting practice would have increased the total assets and liabilities of the Corporation by approximately $1.0 billion. The Corporation's leverage ratio and its risk-based capital ratios include the assets and capital of Safra Republic on a consolidated basis in accordance with the requirements of the Federal Reserve Board specifically applied to the Corporation. The Corporation's core capital was $2.7 billion and total qualifying capital was $4.7 billion at year end 1993, compared to $2.6 billion and $4.5 billion in 1992. At December 31, 1993, the Corporation's ratios of core capital and total qualifying capital to risk-weighted assets were 15.16% and 26.20%, respectively, compared to 16.56% and 28.66% in 1992. The Corporation's leverage ratio was 5.61% at year end 1993 compared to 5.64% at year end 1992. These ratios substantially exceed the minimums in effect for bank holding companies. Tier 1 capital excludes the effect of the Corporation's year end 1993 adoption of SFAS No. 115. Under this SFAS at December 31, 1993, $263 million of net unrealized gains, after tax effect, on securities available for sale are included as a component of stockholders' equity. The following table presents the components of the Corporation's risk-based capital at December 31, in each of the last three years.
(In thousands) 1993 1992 1991 ================================================================================================================== Tier 1: Common stockholders' equity $1,928,047* $1,707,004 $1,540,670 Preferred stock 306,425 306,425 206,925 Equity of Safra Republic** 609,384 578,432 564,800 Other net-goodwill, minority interest and intangible assets (98,252) (8,930) (217) Less: 50% of investment in unconsolidated subsidiaries (2,926) (2,739) (2,536) - ------------------------------------------------------------------------------------------------------------------ Total tier 1 2,742,678 2,580,192 2,309,642 - ------------------------------------------------------------------------------------------------------------------ Tier 2: Qualifying preferred stock and perpetual capital notes 400,000 400,000 400,000 Qualifying long-term debt 1,372,802 1,291,466 1,156,089 Allowance for possible loan losses 228,531 195,974 196,190 Less: 50% of investment in unconsolidated subsidiaries (2,925) (2,738) (2,535) - ------------------------------------------------------------------------------------------------------------------ Total tier 2 1,998,408 1,884,702 1,749,744 - ------------------------------------------------------------------------------------------------------------------ Total risk-based capital $4,741,086 $4,464,894 $4,059,386 ==================================================================================================================
* Excluding the net unrealized gain on securities available for sale, net of taxes of $262.8 million. ** Excluding the Corporation's investment in Safra Republic, after elimination of the net unrealized gain on securities available for sale, net of taxes, of $581.4 million in 1993, $553.3 million in 1992 and $534.7 million in 1991. 48 22 LIQUIDITY Of primary importance to depositors, creditors and regulators is the ability of the Corporation to have sufficient funds readily available to repay maturing liabilities. In order to insure funds are available at all times, the Corporation devotes substantial resources to projecting the amount of funds which will be required on a daily basis and maintains relationships with a diversity of sources so that funds are available on a global basis. Through its worldwide network, the Corporation obtains funds from a large and varied customer base that provides a stable source of domestic demand and consumer deposits and foreign office deposits. Other sources provide short-term borrowings, including the sale of commercial paper, as well as long-term liabilities in the form of notes and debentures. Liquidity requirements can also be met through the disposition of short-term assets that are generally matched to the maturity of liabilities. Liquid assets include cash and due from banks, interest-bearing deposits with banks, federal funds sold and securities purchased under resale agreements, trading account assets and precious metals. Average total liquid assets equaled approximately one-third of average total assets in 1993 and 1992. SECURITY MARKET INFORMATION The Common Stock of the Corporation is listed on the New York Stock Exchange (ticker symbol RNB) and the London Stock Exchange. At December 31, 1993, there were 2,713 stockholders of record of the outstanding Common Stock of the Corporation. The following table presents the range of high and low sale prices reported on the New York Stock Exchange Composite Tape and cash dividends declared for each quarter during the past two years.
1993 1992 ------------------------------------------- --------------------------------------------- FOURTH THIRD SECOND FIRST Fourth Third Second First QTR. QTR. QTR. QTR. Qtr. Qtr. Qtr. Qtr. ============================================================================================================================ Common stock sale price: High $53 3/8 $53 3/4 $52 3/4 53 3/8 $47 1/2 $44 $44 3/4 $48 1/4 Low 44 7/8 50 3/4 46 1/4 44 3/8 42 1/4 40 1/4 38 39 3/8 Cash dividends declared .27 .27 .27 .27 .25 .25 .25 .25 ============================================================================================================================
The dividend rate on Common Stock has been increased annually since such payments began in 1975. The table below shows the annual dividend rate and dividend payout ratio, Common Stock dividends declared divided by net income applicable to common stock, in each of the last five years adjusted for a three-for-two stock split in 1991. [BOOK VALUE PER COMMON SHARE AT YEAR END BAR GRAPH -- SEE EDGAR APPENDIX]
1993 1992 1991 1990 1989 ================================================================================================== Dividends declared per common share $1.08 $1.00 $.95 $.88 $.85 Dividend payout ratio 20.80% 22.67% 24.10% 24.56% * ==================================================================================================
*Not meaningful The quarterly dividend rate on Common Stock has been increased to $.33 per share commencing with the dividend to be paid April 1, 1994. 49 23 Republic New York Corporation CONSOLIDATED STATEMENTS OF CONDITION
December 31, ----------------------------------- (Dollars in thousands) 1993 1992 ============================================================================================================ ASSETS Cash and due from banks $ 636,633 $ 490,711 Interest-bearing deposits with banks (note 17) 5,346,647 10,562,885 Precious metals 1,110,434 412,105 Securities held to maturity (approximate market value of $2,088,805 in 1993 and $12,363,729 in 1992) 1,992,847 12,011,358 Securities available for sale (approximate market value of $12,956,946 in 1993 and $320,970 in 1992) 12,956,946 320,113 - ------------------------------------------------------------------------------------------------------------ Total investment securities (note 3) 14,949,793 12,331,471 Trading account assets 1,182,093 702,479 Federal funds sold and securities purchased under resale agreements 2,322,465 1,505,274 Loans (net of unearned income of $94,825 in 1993 and $148,722 in 1992) (notes 4, 5 and 17) 9,508,558 8,007,457 Allowance for possible loan losses (note 5) (311,855) (241,020) - ------------------------------------------------------------------------------------------------------------ Loans (net) 9,196,703 7,766,437 Customers' liability on acceptances 1,134,294 1,611,531 Premises and equipment (note 6) 399,626 385,557 Accounts receivable and accrued interest 2,117,879 571,648 Investment in affiliate (note 7) 625,333 553,315 Other assets 471,572 252,975 - ------------------------------------------------------------------------------------------------------------ Total assets $39,493,472 $37,146,388 ============================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Noninterest-bearing deposits: In domestic offices $ 1,427,518 $ 1,236,451 In foreign offices 135,251 79,262 Interest-bearing deposits: In domestic offices 8,724,797 9,164,704 In foreign offices 12,513,684 10,621,770 - ------------------------------------------------------------------------------------------------------------ Total deposits (note 17) 22,801,250 21,102,187 Short-term borrowings (note 8) 4,275,439 5,738,822 Acceptances outstanding 1,137,636 1,616,964 Accounts payable and accrued expenses 2,873,903 1,096,163 Due to factored clients 614,549 559,211 Other liabilities 188,658 136,191 Long-term debt (notes 9 and 17) 2,582,875 2,502,497 Subordinated long-term debt and perpetual capital notes (note 9) 2,271,940 2,130,924 Commitments and contingent liabilities (note 14) -- Stockholders' equity (notes 10 and 12): Cumulative preferred stock, no par value 8,131,000 shares outstanding 556,425 556,425 Common stock, $5 par value 150,000,000 shares authorized; 52,703,271 shares outstanding in 1993 and 52,190,243 in 1992 263,516 260,951 Surplus 459,713 447,691 Retained earnings 1,204,818 998,362 Net unrealized gain on securities available for sale, net of taxes 262,750 -- - ------------------------------------------------------------------------------------------------------------ Total stockholders' equity 2,747,222 2,263,429 - ------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $39,493,472 $37,146,388 ============================================================================================================
See accompanying notes to consolidated financial statements. 50 24 Republic New York Corporation CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data) 1993 1992 1991 ================================================================================================================ INTEREST INCOME: Interest and fees on loans $ 635,484 $ 721,909 $ 919,342 Interest on deposits with banks 295,871 385,299 591,046 Interest and dividends on investment securities: Taxable 847,022 807,611 637,919 Exempt from federal income taxes 65,759 63,385 60,261 Interest on trading account assets 54,467 22,928 6,280 Interest on federal funds sold and securities purchased under resale agreements 34,323 37,460 49,059 - ---------------------------------------------------------------------------------------------------------------- Total interest income 1,932,926 2,038,592 2,263,907 - ---------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE: Interest on deposits 689,234 804,906 1,205,989 Interest on short-term borrowings 197,769 234,249 258,010 Interest on long-term debt 270,072 279,073 218,662 - ---------------------------------------------------------------------------------------------------------------- Total interest expense 1,157,075 1,318,228 1,682,661 - ---------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 775,851 720,364 581,246 Provision for loan losses (note 5) 85,000 120,000 62,000 - ---------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 690,851 600,364 519,246 - ---------------------------------------------------------------------------------------------------------------- OTHER OPERATING INCOME: Income from precious metals 37,910 22,637 39,449 Foreign exchange trading income 111,572 102,571 81,351 Trading account profits and commissions 78,742 12,319 22,444 Investment securities gains, net 1,295 11,232 4,264 Net gain (loss) on loans sold or held for sale (843) 17,089 3,031 Commission income 50,956 37,592 34,628 Equity in earnings of affiliate (note 7) 59,463 45,220 41,083 Other income 56,377 53,587 45,183 - ---------------------------------------------------------------------------------------------------------------- Total other operating income 395,472 302,247 271,433 - ---------------------------------------------------------------------------------------------------------------- OTHER OPERATING EXPENSES: Salaries 203,759 180,318 166,107 Employee benefits (note 12) 143,748 113,813 97,568 Occupancy, net (notes 6 and 14) 48,161 45,301 38,048 Other expenses 239,297 215,910 201,210 - ---------------------------------------------------------------------------------------------------------------- Total other operating expenses 634,965 555,342 502,933 - ---------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 451,358 347,269 287,746 Income taxes (note 11) 150,153 88,386 60,386 - ---------------------------------------------------------------------------------------------------------------- NET INCOME $ 301,205 $ 258,883 $ 227,360 ================================================================================================================ NET INCOME APPLICABLE TO COMMON STOCK $ 272,790 $ 230,497 $ 204,627 ================================================================================================================ Net income per common share: Primary $5.20 $4.42 $3.95 Fully diluted 5.05 4.32 3.90 Average common shares outstanding: Primary 52,466 52,204 51,852 Fully diluted 56,321 56,020 54,292 ================================================================================================================
See accompanying notes to consolidated financial statements. 51 25 Republic New York Corporation CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands) 1993 1992 1991 ============================================================================================================== CUMULATIVE PREFERRED STOCK: Balance at beginning of year $ 556,425 $ 456,925 $ 309,425 Issuance of 4,000,000 shares of $1.9375 cumulative preferred stock in 1992 and 3,450,000 shares of $3.375 cumulative convertible preferred stock in 1991 -- 100,000 172,500 Repurchase of 10,000 shares of floating rate series B preferred stock in 1992 and 250 shares of remarketed preferred stock in 1991 -- (500) (25,000) - -------------------------------------------------------------------------------------------------------------- Balance at end of year $ 556,425 $ 556,425 $ 456,925 ============================================================================================================== COMMON STOCK: Balance at beginning of year $ 260,951 $ 260,227 $ 172,027 Stock dividend of 17,351,213 shares pursuant to a three- for-two stock split -- -- 86,756 Net issuance under stock option, restricted stock and restricted stock election plans of 513,028 shares in 1993, 353,957 shares in 1992 and 359,731 shares in 1991 2,565 1,770 1,799 Retirement of 209,083 common shares in 1992 and 71,045 common shares in 1991 -- (1,046) (355) - -------------------------------------------------------------------------------------------------------------- Balance at end of year $ 263,516 $ 260,951 $ 260,227 ============================================================================================================== SURPLUS: Balance at beginning of year $ 447,691 $ 448,303 $ 531,156 Cost of issuing preferred stock -- (3,340) (3,825) Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 513,028 shares in 1993, 353,957 shares in 1992 and 359,731 shares in 1991 12,247 11,013 10,785 Treasury stock transactions of affiliate (225) 441 (8) Transfer to common stock on declaration of stock dividend -- -- (86,756) Retirement of 209,083 common shares in 1992 and 71,045 common shares in 1991 -- (8,726) (3,049) - -------------------------------------------------------------------------------------------------------------- Balance at end of year $ 459,713 $ 447,691 $ 448,303 ============================================================================================================== RETAINED EARNINGS: Balance at beginning of year $ 998,362 $ 832,140 $ 670,342 Net income 301,205 258,883 227,360 Foreign currency translation, net of taxes (9,588) (21,014) (2,755) Dividends declared on common stock (56,746) (52,256) (49,324) Dividends declared on issues of preferred stock (28,415) (28,386) (22,733) Allowance for unrealized loss on marketable equity securities -- 8,995 9,250 - -------------------------------------------------------------------------------------------------------------- Balance at end of year $1,204,818 $ 998,362 $ 832,140 ============================================================================================================== NET UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET OF TAXES: Balance at beginning of year $ -- $ -- $ -- Unrealized gains 437,845 -- -- Income tax expense (175,095) -- -- - -------------------------------------------------------------------------------------------------------------- Balance at end of year $ 262,750 $ -- $ -- ============================================================================================================== TOTAL STOCKHOLDERS' EQUITY: Balance at beginning of year $2,263,429 $1,997,595 $1,682,950 Net changes during year 483,793 265,834 314,645 - -------------------------------------------------------------------------------------------------------------- Balance at end of year $2,747,222 $2,263,429 $1,997,595 ==============================================================================================================
See accompanying notes to consolidated financial statements. 52 26 Republic New York Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) 1993 1992 1991 ================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 301,205 $ 258,883 $ 227,360 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization, net 48,337 30,829 14,187 Provision for loan losses 85,000 120,000 62,000 Gain on sales of investment securities, net (1,295) (11,232) (4,264) Net (gain) loss on loans sold or held for sale 843 (17,089) (3,031) Equity in earnings of affiliate (59,463) (45,220) (41,083) Net increase in trading account assets (479,614) (433,529) (170,802) Net (increase) decrease in accounts receivable and accrued interest (1,494,586) (46,121) 45,773 Net increase in accounts payable and accrued expenses 1,390,159 244,611 42,504 Other, net (272,253) (89,232) (22,635) - ------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by operating activities (481,667) 11,900 150,009 - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in interest-bearing deposits with banks 5,948,015 (1,786,307) (1,647,404) Net (increase) decrease in precious metals (386,014) (133,796) 180,587 Net (increase) decrease in federal funds sold and securities purchased under resale agreements (817,191) (1,494,728) 1,071,173 Net (increase) decrease in short-term investments (289,355) (150,128) 309,402 Purchases of securities available for sale (665,347) (323,013) Proceeds from sales of securities available for sale 346,909 -- -- Purchases of securities held to maturity (3,740,678) (5,066,901) (3,059,390) Proceeds from sales of securities held to maturity 89,150 609,538 361,685 Proceeds from maturities of securities held to maturity 2,828,748 2,042,597 1,405,030 Net (increase) decrease in loans (1,983,538) 109,710 187,995 Payment for purchase of Mase Westpac Limited, net of cash received (144,596) -- -- Investment in affiliate 19,477 17,312 17,312 - ------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by investing activities 1,205,580 (6,175,716) (1,173,610) - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 893,418 719,253 396,196 Net increase (decrease) in short-term borrowings (1,663,448) 3,936,078 (160,274) Net increase (decrease) in due to factored clients 55,338 65,567 (5,810) Proceeds from issuance of long-term debt 654,470 1,504,600 957,509 Repayment of long-term debt (580,071) (712,781) (786,820) Proceeds from issuance of subordinated long-term debt 250,000 750,000 550,000 Repayment of subordinated long-term debt (108,750) (20,000) (15,000) Net proceeds from issuance of cumulative preferred stock -- 96,660 168,675 Repurchase of cumulative preferred stock -- (500) (25,000) Cash dividends paid (83,945) (78,952) (68,236) Other, net 3,783 (10,257) 11,846 - ------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities (579,205) 6,249,668 1,023,086 Effect of exchange rate changes on cash and due from banks. 1,214 (7,167) (12,358) - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and due from banks 145,922 78,685 (12,873) Cash and due from banks at beginning of year 490,711 412,026 424,899 - ------------------------------------------------------------------------------------------------------------------ Cash and due from banks at end of year $ 636,633 $ 490,711 $ 412,026 ================================================================================================================== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $1,210,546 $1,265,460 $1,666,700 Income taxes 157,252 55,376 21,070 Transfers from securities held to maturity to securities available for sale 12,318,395 -- -- ==================================================================================================================
See accompanying notes to consolidated financial statements 53 27 Republic National Bank of New York CONSOLIDATED STATEMENTS OF CONDITION
December 31, ------------------------- (Dollars in thousands) 1993 1992 ======================================================================================================== ASSETS Cash and due from banks $ 591,112 $ 433,264 Interest-bearing deposits with banks 5,174,561 10,346,583 Precious metals 1,102,664 412,105 Securities held to maturity (approximate market value of $965,293 in 1993, and $9,768,369 in 1992) 902,903 9,529,834 Securities available for sale (approximate market value of $9,857,210 in 1993 and $320,970 in 1992) 9,857,210 320,113 - -------------------------------------------------------------------------------------------------------- Total investment securities 10,760,113 9,849,947 Trading account assets 1,138,760 637,597 Federal funds sold and securities purchased under resale agreements 2,743,692 1,355,274 Loans (net of unearned income of $45,249 in 1993 and $60,195 in 1992) 5,425,719 3,959,358 Allowance for possible loan losses (233,124) (175,990) - -------------------------------------------------------------------------------------------------------- Loans (net) 5,192,595 3,783,368 Customers' liability on acceptances 1,134,294 1,611,531 Premises and equipment 300,246 298,451 Accounts receivable and accrued interest 634,213 444,104 Investment in affiliate (note 7) 625,333 553,315 Other assets 328,455 148,493 - -------------------------------------------------------------------------------------------------------- Total assets $29,726,038 $29,874,032 ======================================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Noninterest-bearing deposits: In domestic offices $ 1,069,325 $ 962,600 In foreign offices 146,431 80,262 Interest-bearing deposits: In domestic offices 4,255,497 4,276,544 In foreign offices 13,694,638 12,480,779 - -------------------------------------------------------------------------------------------------------- Total deposits 19,165,891 17,800,185 Short-term borrowings 2,870,290 4,897,401 Acceptances outstanding 1,137,636 1,616,964 Accounts payable and accrued expenses 1,321,915 968,560 Other liabilities 152,648 100,672 Long-term debt 2,257,847 2,002,497 Subordinated long-term debt, primarily with parent 580,940 581,174 Stockholder's equity (note 18): Common stock, $100 par value 4,800,000 shares authorized; 3,550,000 shares outstanding 355,000 355,000 Surplus 1,160,436 1,160,661 Retained earnings 511,851 390,918 Net unrealized gain on securities available for sale, net of taxes 211,584 -- - -------------------------------------------------------------------------------------------------------- Total stockholder's equity 2,238,871 1,906,579 - -------------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity $29,726,038 $29,874,032 ========================================================================================================
See accompanying notes to consolidated financial statements. 54 28 Republic New York Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Republic New York Corporation and its subsidiaries (the "Corporation") reflect banking industry practices and conform to generally accepted accounting principles. A summary of the significant accounting policies followed by the Corporation in the preparation of the accompanying consolidated financial statements is set forth below. A. Basis of Consolidation. The consolidated financial statements include the accounts of the Corporation and its subsidiaries, principally Republic National Bank of New York (the "Bank"), Republic Bank for Savings ("RBS"), formerly The Manhattan Savings Bank, Republic New York Securities Corporation and Republic Factors Corp. Investments in affiliates which are less than majority-owned but more than 20% owned are accounted for by the equity method. Significant intercompany transactions are eliminated in consolidation. B. Foreign Operations. Foreign currency assets and liabilities are translated into their U.S. dollar equivalents based on rates of exchange generally prevailing at year end. Revenue and expense accounts are generally translated at average exchange rates for the year. Net translation gains or losses on foreign currency financial statements of operations whose functional currency is the U.S. dollar, including those financial statements of operations in highly inflationary economies, are included in other income or other expenses together with net gains or losses from related hedges. Net translation gains or losses on foreign currency financial statements of operations whose functional currency is not the U.S. dollar are a component of retained earnings, net of related hedging results, after tax effect. Foreign currency amounts of foreign currency denominated assets and liabilities are generally sold/purchased under fixed forward contracts at prices which differ from cost. Such differences, which are considered part of the interest yields, are reflected in net interest income ratably over the life of the contracts. C. Statement of Cash Flows. For purposes of the Statement of Cash Flows the Corporation defines cash and cash equivalents as the Statement of Condition caption cash and due from banks. D. Investment Securities. Effective December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This SFAS requires, among other things, that securities designated as available for sale be revalued at each period end with the unrealized gain or loss, net of tax effect, recorded as an element of stockholders' equity. The designation of a security as held to maturity or available for sale is made at the time of acquisition. The held to maturity classification includes debt securities that the Corporation has the positive intent and ability to hold to maturity which are carried at amortized cost. The available for sale classification includes debt and equity securities which are carried at fair value. Unrealized gains or losses on securities available for sale and derivative instruments used to hedge these securities are included as a separate component of stockholders' equity, net of tax effect. Gains or losses on sales of securities are recognized by the specific identification method and are recorded in investment securities gains, net. Prior to December 31, 1993, debt securities available for sale were carried at the lower of cost or market value in the aggregate with adjustments to the carrying value recorded as investment securities losses, net. Marketable equity securities were carried at the lower of cost or market value in the aggregate. The aggregate unrealized losses on marketable equity securities were included in a valuation allowance account and shown as a reduction of retained earnings. E. Trading Account Assets. Trading account securities are held to benefit from short-term changes in market prices. Trading account securities and liabilities incurred in short-sale transactions are carried at market. Such liabilities are included in short-term borrowings. Gains and losses on trading account activities, including market value adjustments, are reported as trading account profits and commissions. Trading account loans are marked to market with the resultant gains or (losses) included in net gain (loss) on loans sold or held for sale. F. Loans. Loans are carried at their principal amount outstanding, net of unearned income. Unearned income on discounted loans is accreted monthly into interest income. Non-accrual loans are those loans (other than consumer installment and residential mortgage loans) on which the accrual of interest ceases when principal or interest payments are past due 90 days or more. When a loan is placed on a non-accrual basis all accrued interest receivable is reversed and charged 55 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) against current interest income. Thereafter, interest income on non-accrual loans is recorded only when received in cash. A loan may be placed on a non-accrual status prior to the 90 day period if, in management's opinion, conditions warrant. Residential mortgage loans are placed on non-accrual status when the mortgagor is in bankruptcy or foreclosure proceedings are instituted. Any accrued interest receivable remains in interest income as an obligation of the borrower. The Corporation charges off any consumer installment loan which is past due 90 days or more. G. Derivative Products. The Corporation's use of derivatives includes futures, forwards, swaps, caps, floors, and options in the interest rate, foreign exchange, equity, and precious metals commodity markets. The Corporation uses these instruments for trading and to assist in its asset and liability management. Derivatives that are used for trading or to hedge other trading instruments are carried on a mark to market basis with resultant gains and losses included in trading account profits and commissions, foreign exchange trading income and income from precious metals. Unrealized gains and losses and option premium values are recorded on the balance sheet in other assets or other liabilities. In valuing such contracts, the Corporation considers potential credit costs, future servicing costs, future capital costs and transaction hedging costs which are recognized over the life of the contracts. Foreign exchange trading positions are revalued monthly by pricing spot foreign exchange and forward contracts for foreign exchange at prevailing market rates. The Corporation's precious metals activities include arbitrage, purchases and sales of precious metals for forward delivery, options on precious metals and precious metals loans. Precious metals, outstanding open positions in contracts for forward delivery, option contracts and precious metals loans are revalued monthly at prevailing market rates. Precious metals interest arbitrage balances are recorded at cost, with the difference of the fixed forward contract price over cost accreted into income from precious metals ratably over the life of the contract. Additionally, the Bank is a licensed depository for the storage of gold and silver bullion and coins traded on various commodity exchanges. Fees derived from such storage are included in other income. The Corporation substantially hedges its total investments in precious metals by forward sales. The unhedged portion of these investments was $24,820,000 and $14,877,000 at December 31, 1993 and 1992, respectively. The Corporation enters into interest rate and foreign currency swap and option transactions as part of its asset and liability exposure management. The notional amount of these contracts are recorded as off-balance sheet transactions. The net settlements on such transactions are accrued as an adjustment to interest income or expense over the lives of the agreements. Gains or losses on terminated derivative product contracts used as hedges of non-trading assets or liabilities are deferred over the life of the original hedge. H. Allowance for Possible Loan Losses. The allowance for possible loan losses is increased by provisions charged to operating expense and decreased by charge-offs, net of recoveries. The provision for loan losses is based on the Corporation's past loan loss experience and other factors which, in management's judgment, deserve current recognition in estimating possible loan losses. Such other factors considered by management include the composition of the loan portfolio and worldwide economic conditions. I. Income Taxes. The Corporation files a consolidated Federal income tax return. The Corporation adopted on a prospective basis SFAS No. 109, "Accounting for Income Taxes", effective January 1, 1993. The cumulative effect of that change in the method of accounting for income taxes was not material. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of changes in tax rates is recognized in income in the period the change occurs. The earnings of the Corporation's foreign subsidiaries were not subject to U.S. income taxes for taxable years beginning prior to 1987, except to the extent that they were remitted as dividends. The undistributed earnings prior to 1987 of the Corporation's foreign subsidiaries are expected to be reinvested indefinitely in the subsidiaries' operations; accordingly, no taxes have been provided on such undistributed earnings. 56 30 J. Earnings Per Common Share. Primary earnings per common share are computed by dividing net income, less preferred stock dividend requirements, by the average number of common shares outstanding during each of the years. Fully diluted earnings per share are based on the average number of common shares outstanding adjusted for the assumed conversion of outstanding convertible preferred stock from the date of issuance and the additional shares assumed to be issued under stock option plans, if dilutive. Net income applicable to common stock is adjusted by adding back the dividends on the convertible preferred stock. K. Reclassification. Certain amounts from prior years have been reclassified to conform with 1993 classifications. 2. ACQUISITION OF MASE WESTPAC LIMITED On December 31, 1993, the Corporation completed the acquisition of Mase Westpac Limited, ("Mase") by its wholly owned subsidiary, Republic National Bank of New York. The transaction was accounted for as a purchase and, as such, the assets and liabilities of Mase were recorded at their estimated fair values. The excess of cost over the net assets acquired, goodwill, amounted to approximately $55 million and will be amortized to expense on a straight-line basis over a period of 15 years. Mase's assets of approximately $1.4 billion are included in the Corporation's statement of condition at December 31, 1993. Mase had no effect on the Corporation's results of operations for 1993. 3. INVESTMENT SECURITIES On December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The following table presents information related to the Corporation's portfolio of securities held to maturity and available for sale at respective year ends.
1993 --------------------------------------------------------- Gross Unrealized Estimated Book ------------------------ Market (In thousands) Value Gains (Losses) Value ========================================================================================================================= Securities held to maturity: U.S. Government and federal agency obligations $ 1,357,279 $ 35,309 $ (2,969) $ 1,389,619 Obligations of U.S. states and political subdivisions 584,302 64,161 (378) 648,085 Other 51,266 -- (165) 51,101 - ------------------------------------------------------------------------------------------------------------------------- $ 1,992,847 $ 99,470 $ (3,512) $ 2,088,805 =========================================================================================================================
1993 --------------------------------------------------------- Gross Unrealized Book/ Amortized ------------------------ Market (In thousands) Cost Gains (Losses) Value ========================================================================================================================= Securities available for sale: U.S. Government and federal agency obligations $ 9,515,080 $316,706 $ (6,457) $ 9,825,329 Other bonds, debentures and redeemable preferred stocks 2,922,793 184,732 (30,724) 3,076,801 Equity securities 125,152 3,537 (102) 128,587 Interest rate swaps --- --- (73,771) (73,771) - ------------------------------------------------------------------------------------------------------------------------- $12,563,025 $504,975 $(111,054) $12,956,946 =========================================================================================================================
1992 --------------------------------------------------------- Gross Unrealized Estimated Book ------------------------ Market (In thousands) Value Gains (Losses) Value ========================================================================================================================= Securities held to maturity: U.S. Government and federal agency obligations $ 8,750,958 $299,402 $(10,378) $ 9,039,982 Obligations of U.S. states and political subdivisions 543,005 53,430 (567) 595,868 Other bonds, debentures and redeemable preferred stocks 2,515,890 67,130 (57,897) 2,525,123 Equity securities 201,505 3,994 (2,743) 202,756 - ------------------------------------------------------------------------------------------------------------------------- $12,011,358 $423,956 $(71,585) $12,363,729 =========================================================================================================================
57 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1992 ---------------------------------------------------- Gross Unrealized Estimated Book ---------------------- Market (In thousands) Value Gains (Losses) Value ========================================================================================================================= Securities available for sale: U.S. Government and federal agency obligations $303,158 $857 $ -- $304,015 Other bonds, foreign 16,955 -- -- 16,955 - ------------------------------------------------------------------------------------------------------------------------- $320,113 $857 $ -- $320,970 =========================================================================================================================
The following table presents information for investments in securities held to maturity and securities available for sale at December 31, 1993, based on scheduled maturities. Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call privileges of the issuer.
Held To Maturity Available For Sale ----------------------- ----------------------------- Book Estimated Amortized Book/Market (In thousands) Value Market Value Cost Value =========================================================================================================================== Due in one year or less $ 1,975 $ 1,823 $ 1,176,974 $ 1,181,721 Due after one year through five years 12,791 13,802 1,043,896 1,085,230 Due after five years through ten years 112,779 128,593 283,335 315,166 Due after ten years 508,023 554,968 1,017,442 1,104,191 Mortgage-backed securities 1,357,279 1,389,619 9,041,378 9,344,409 Interest rate swaps -- -- -- (73,771) - ------------------------------------------------------------------------------------------------------------------------- $1,992,847 $2,088,805 $12,563,025 $12,956,946 =========================================================================================================================
The following table presents the components of net investment securities gains for each of the last two years:
(In thousands) 1993 1992 ========================================================================================================================= Gross gains on: Sales of securities $ 5,646 $ 28,577 Maturities, calls and mandatory redemptions 8,124 3,196 Gross losses on: Sales of securities (11,042) (18,284) Maturities, calls and mandatory redemptions (1,433) (2,257) - ------------------------------------------------------------------------------------------------------------------------- $ 1,295 $ 11,232 =========================================================================================================================
Investment securities having a book value of approximately $2.1 billion at December 31, 1993, were pledged to secure public deposits, short-term borrowings and for other purposes required or permitted by law. 4. LOANS The following table sets forth the composition of the Corporation's loan portfolio at respective year ends.
(In thousands) 1993 1992 ========================================================================================================================= Domestic: Real estate - residential mortgage $1,310,718 $1,454,416 Real estate - commercial 1,854,377 2,107,112 Banks and other financial institutions 7,384 14,841 Broker loans 678,490 307,018 Commercial and industrial 2,152,691 1,859,595 Individuals 90,218 51,305 All other 16,915 59,852 Foreign 3,492,590 2,302,040 - ------------------------------------------------------------------------------------------------------------------------- 9,603,383 8,156,179 Less unearned income (94,825) (148,722) - ------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income $9,508,558 $8,007,457 =========================================================================================================================
58 32 5. ALLOWANCE FOR POSSIBLE LOAN LOSSES The Corporation's allowance for possible loan losses is determined by management based on previous loan loss experience, prevailing and anticipated economic conditions and the composition of the loan portfolio, all of which are continuously reviewed. The allowance is viewed by management to be an adequate, single, unallocated reserve, available for potential loan losses. To comply with regulatory reporting requirements, management has allocated the allowance for possible loan losses between domestic and foreign components. By such allocation, management does not intend to imply that future charge-offs will necessarily follow the same pattern or that any portion of such allowance is restricted in any way. Changes in the Corporation's allowance for possible loan losses applicable to domestic and foreign operations for each of the years in the three-year period ended December 31, 1993 were as follows:
1993 1992 1991 ---------------------------- ---------------------------- ----------------------------- (In thousands) Domestic Foreign Total Domestic Foreign Total Domestic Foreign Total =================================================================================================================================== Balance, Jan. 1 $161,699 $ 79,321 $241,020 $100,842 $126,612 $227,454 $ 41,310 $195,324 $236,634 Provision 55,000 30,000 85,000 140,000 (20,000) 120,000 125,000 (63,000) 62,000 - ----------------------------------------------------------------------------------------------------------------------------------- 216,699 109,321 326,020 240,842 106,612 347,454 166,310 132,324 298,634 - ----------------------------------------------------------------------------------------------------------------------------------- Charge-offs (46,170) (12,731) (58,901) (90,374) (20,257) (110,631) (74,701) (6,603) (81,304) Losses on sale, swap and net (charge-offs) recoveries of restructuring countries debt --- 21,238 21,238 --- (6,642) (6,642) --- (789) (789) Recoveries 18,673 5,726 24,399 10,467 1,014 11,481 9,233 2,246 11,479 - ----------------------------------------------------------------------------------------------------------------------------------- Net (charge-offs) recoveries (27,497) 14,233 (13,264) (79,907) (25,885) (105,792) (65,468) (5,146) (70,614) Allowance of acquired companies 297 --- 297 764 --- 764 --- --- --- Translation adjustment --- (1,198) (1,198) --- (1,406) (1,406) --- (566) (566) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31 $189,499 $122,356 $311,855 $161,699 $79,321 $241,020 $100,842 $126,612 $227,454 ===================================================================================================================================
The following table shows the book balances of the Corporation's non-accrual and restructured loans (excluding consumer installment loans) at respective year ends.
(In thousands) 1993 1992 1991 =================================================================================================================================== Domestic $ 48,084 $ 49,929 $ 68,571 Foreign restructuring countries 33,853 42,123 42,836 Foreign - other 12,956 38,276 18,054 - ----------------------------------------------------------------------------------------------------------------------------------- Non-accrual loans 94,893 130,328 129,461 Restructured loans 63,008 58,458 26,991 - ----------------------------------------------------------------------------------------------------------------------------------- Total $157,901 $188,786 $156,452 ===================================================================================================================================
The following table presents the effect of non-accrual and restructured loans on interest income for each of the years in the three-year period ended December 31, 1993.
(In thousands) 1993 1992 1991 =================================================================================================================================== Gross amount of interest that would have been earned at original contract rates: Domestic $11,321 $ 4,810 $ 7,557 Foreign 6,685 8,863 4,832 - ----------------------------------------------------------------------------------------------------------------------------------- $18,006 $13,673 $12,389 =================================================================================================================================== Actual amount recorded as interest income: Domestic $ 7,368 $ 1,672 $ 2,495 Foreign 1,654 2,226 1,283 - ----------------------------------------------------------------------------------------------------------------------------------- $ 9,022 $ 3,898 $ 3,778 =================================================================================================================================== Foregone interest income: Domestic $ 3,953 $ 3,138 $ 5,062 Foreign 5,031 6,637 3,549 - ----------------------------------------------------------------------------------------------------------------------------------- $ 8,984 $ 9,775 $ 8,611 ===================================================================================================================================
59 33 NOTES TO CONSOLIDATED FINANCIAL STATEMONTS (continued) 6. PREMISES AND EQUIPMENT A summary of the Corporation's premises and equipment at respective year ends follows.
(In thousands) 1993 1992 ==================================================================================================================== Premises $434,264 $423,892 Equipment 127,268 110,534 - -------------------------------------------------------------------------------------------------------------------- 561,532 534,426 Less accumulated depreciation and amortization (161,906) (148,869) - -------------------------------------------------------------------------------------------------------------------- $399,626 $385,557 ====================================================================================================================
Other operating expenses included depreciation and amortization of $32,491,000 in 1993, $27,579,000 in 1992 and $24,844,000 in 1991. The estimated useful lives are 10 to 50 years for premises and 3 to 10 years for equipment. 7. INVESTMENT IN AFFILIATE In 1988, the Corporation established Safra Republic Holdings S.A. ("Safra Republic"), a Luxembourg holding company, to which the Bank contributed its European banking subsidiaries in Switzerland, Luxembourg, France, Guernsey and Gibraltar. The Corporation, Saban S.A. (see Note 17), a Panamanian holding company wholly owned by Mr. Edmond J. Safra, and international investors own approximately 48.8%, 20.7% and 30.5%, respectively, of the outstanding common shares of Safra Republic. The following table presents summary financial data for Safra Republic at December 31, 1993 and 1992 and for each of the years then ended.
(In thousands) 1993 1992 ==================================================================================================================== Total assets $11,299,349 $10,351,859 Total deposits 7,344,562 6,897,172 Shareholders' equity 1,280,755 1,131,747 Operating revenue 789,490 802,486 Net income 121,595 92,466 ====================================================================================================================
8. SHORT-TERM BORROWINGS The following table presents the Corporation's short-term borrowings at respective year ends.
(In thousands) 1993 1992 ==================================================================================================================== Federal funds purchased and securities sold under repurchase agreement $ 999,149 $2,266,004 Commercial paper 881,741 720,308 Other borrowings 2,394,549 2,752,510 - -------------------------------------------------------------------------------------------------------------------- $4,275,439 $5,738,822 ====================================================================================================================
Federal funds purchased generally mature one business day following the sale date. Securities sold under repurchase agreements and commercial paper generally mature within 30 days and 90 days, respectively, from the related dates of sale. Other borrowings generally mature within twelve months. The Corporation has $125 million of lines of credit to support its commercial paper program, for which it has authority to issue up to $1 billion, which was increased from $750 million at year end 1992. 60 34 9. LONG-TERM DEBT The following tables present a summary of long-term debt and subordinated long-term debt and perpetual capital notes at respective year ends.
Long-Term Debt: (In thousands) 1993 1992 ====================================================================================================== Republic New York Corporation: 8 3/8 Notes due May 1, 1996 $100,000 $100,000 Floating Rate Notes due March 2004 -- 50,000 8 3/8% Debentures due February 15, 2007 100,000 100,000 - ------------------------------------------------------------------------------------------------------ 200,000 250,000 Republic National Bank of New York: 4% SFr. Notes 1988-1993 -- 95,481 Floating Rate Notes due March 21, 1994 (3.5625%) 100,000 100,000 5.20% Notes due January 17, 1995 250,000 250,000 5 3/4% Notes due February 1, 1995 500,000 500,000 6.40% Notes due April 15, 1995 200,000 200,000 4.90% Notes due July 27, 1995 100,000 100,000 New Zealand Dollar Floating Rate Notes due August 4, 1995 (8.95%) 54,600 540,600 4 3/4% Notes due October 15, 1995 191,000 200,000 9% Notes 1988 Series 1 due February 24, 1998 -- 100,000 Other long-term debt 18,885 19,744 - ------------------------------------------------------------------------------------------------------ 1,414,485 1,619,825 Collateralized repurchase agreements: Republic National Bank of New York 843,362 382,672 Republic Bank for Savings 125,028 250,000 - ------------------------------------------------------------------------------------------------------ Total collateralized repurchase agreements 968,390 632,672 - ------------------------------------------------------------------------------------------------------ $2,582,875 $2,502,497 ======================================================================================================
The rates in effect at December 31, 1993 for floating rate issues are shown in parentheses. The Floating Rate Notes due 2004 were redeemed by the Corporation, at its option, on November 30, 1993 at a redemption price equal to par. The Corporation also repurchased $9.0 million principal amount of the 4 3/4% Notes due 1995. The New Zealand Dollar Floating Rate Notes were sold in a public offering and are not redeemable prior to maturity. The applicable interest rate is determined semi-annually by reference to the relevant rate of certain six-month instruments. Under certain conditions, holders of the Notes may elect to convert irrevocably to a fixed interest rate. The Bank entered into an interest rate and currency exchange agreement that converted the Bank's payment obligations on such Notes into U.S. dollars. All other outstanding notes of the Bank were issued under an authorization by its Board of Directors which allows for an aggregate of up to $7 billion of such obligations to be outstanding at any time. All such outstanding notes of the Bank are unsecured debt obligations and are not subject to redemption prior to maturity except for the 9% Notes 1988 Series 1, which were redeemed at the option of the Bank at par on February 24, 1993. The quarterly interest rate on the $100 million Floating Rate Notes due March 1994 is determined by reference to certain money market rates subject to a maximum of 6.25%. In connection with the early extinguishment of the Floating Rate Notes due 2004 and the 4 3/4 Notes due 1995, the Corporation recorded a loss amounting to $589,000. Collateralized repurchase agreements consist of securities repurchase agreements with initial maturities exceeding one year. All of the outstanding long-term notes and debentures of the Corporation are direct unsecured obligations and are not subordinated in right of payment to any other unsecured indebtedness of the Corporation. The Corporation and the Bank are obligated with respect to the above long-term debt to make aggregate principal payments in each of the next five years as follows: $558,153,000 in 1994, $1,388,236,000 in 1995, $187,628,000 in 1996, $50,974,000 in 1997 and $974,000 in 1998. 61 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ===============================================================================
Subordinated Long-Term Debt and Perpetual Capital Notes: (In thousands) ========================================================================================================= Republic New York Corporation: 1993 1992 9 1/2% Subordinated Notes due July 1, 2000 $ 100,000 $ 100,000 9 3/4% Subordinated Notes due December 1, 2000 100,000 100,000 7 7/8% Subordinated Notes due 2001 100,000 100,000 8.25% Subordinated Notes due 2001 150,000 150,000 8 7/8% Subordinated Notes due 2001 100,000 100,000 7 3/4% Subordinated Notes due May 15, 2002 150,000 150,000 7 1/4% Subordinated Notes due July 15, 2002 250,000 250,000 Floating Rate Subordinated Notes due August 2002 (5.00%) 100,000 100,000 Floating Rate Subordinated Notes due October 2002 (5.00%) 150,000 150,000 Subordinated Floating Rate Yield Curve Notes due 2002 (3.65%) 100,000 100,000 5 7/8% Subordinated Notes due 2008 250,000 -- 9.70% Subordinated Notes due February 1, 2009 150,000 150,000 Floating Rate Subordinated Notes due December 2009 -- 108,750 Floating Rate Subordinated Notes due July 2010 (5.25%)* 66,000 66,000 9 1/2% Subordinated Debentures due April 15, 2014 150,000 150,000 9 1/8% Subordinated Notes due 2021 100,000 100,000 9.30% Subordinated Notes due 2021 100,000 100,000 Perpetual Capital Notes (3.8125%)* 150,000 150,000 - --------------------------------------------------------------------------------------------------------- Republic National Bank of New York: 2,266,000 2,124,750 Other subordinated long-term debt 5,940 6,174 - --------------------------------------------------------------------------------------------------------- $2,271,940 $2,130,924 =========================================================================================================
*These notes are redeemable prior to maturity. The rates in effect at December 31, 1993 for floating rate issues are shown in parentheses. The Corporation's outstanding issues of subordinated notes and debentures are all direct unsecured obligations of the Corporation. Interest rates on subordinated floating rate note issues are determined quarterly or semi-annually by formulas based on certain money market rates and are subject to minimum rates of 5% per annum for the Floating Rate Notes due 2002 and 5 1/4% per annum for the Floating Rate Notes due 2010. The Corporation redeemed all of the outstanding Floating Rate Subordinated Notes due 2009 on December 22, 1993 and on January 22, 1994, redeemed all of the outstanding Floating Rate Subordinated Notes due 2010. In connection with. the early extinguishment of these instruments, the Corporation recorded a loss amounting to $3,450,000. On May 7, 1993, a shelf registration statement became effective pursuant to which the Corporation may issue, from time to time in public offerings, debt securities, warrants on debt securities, currency warrants, stock-index warrants, other warrants, preferred stock, depositary shares representing preferred stock, preferred stock warrants or common stock warrants. Such securities may be offered separately or together, in one or more series, up to an aggregate of initial public offering prices of $ 1.0 billion. At December 3l, 1993 an aggregate of $250 million principal amount of outstanding debt securities had been issued pursuant to such registration statement. On October 21, 1993, the Corporation sold, in a public offering, $250 million principal amount of 5 7/8% Subordinated Notes due 2008 under the above shelf registration statement. The Notes are not redeemable prior to maturity. The Notes are direct unsecured general obligations of the Corporation and are subordinated to all present and future Senior Indebtedness of the Corporation. The net proceeds received by the Corporation from the sale of the Notes were used to redeem, in the aggregate principal amount of $225 million, its outstanding issues of Floating Rate Notes due 2004 and Floating Rate Subordinated Notes due 2009 and 2010. 62 36 An existing shelf registration statement authorizes the Corporation to issue, from time to time, in a public offering, debt securities and warrants to purchase debt securities in an aggregate principal amount of up to $750 million. At December 31, 1993, an aggregate of $600 million principal amount of outstanding debt securities had been issued under such registration statement. The Corporation's $150 million principal amount of Putable Capital Notes (the "PCNs") are a component of total qualifying capital under applicable risk-based capital rules. The principal amount of each PCN will be payable as follows: (1) at the option of the holder on the put date in each year commencing in 2012, PCNs may be exchanged for securities that constitute permanent primary capital securities (the "capital securities") for regulatory purposes, (2) at the option of the Corporation on 90 days prior notice, the PCNs may be either (i) redeemed on the specified redemption date, in whole, for cash and at par, but only with the proceeds of a substantially concurrent sale of capital securities issued for the purpose of such redemption or (ii) exchanged, in whole, for capital securities having a market value equal to the principal amount of the PCNS, and, in each case, the payment of accrued interest in cash or (3) in the event that the sum of the Corporation's consolidated retained earnings and surplus accounts becomes less than zero, the PCNs will automatically be exchanged, in whole, for capital securities having a market value equal to the principal amount of the PCNs and the payment of accrued interest in cash. The PCNs are unsecured and subordinated in right of payment to all Senior Indebtedness of the Corporation. The interest rate for each six-month interest period is determined by a formula based on certain money market rates. The Corporation and the Bank are obligated with respect to the above subordinated long-term debt to make principal payments of $66,000,000 in 1994. 10. PREFERRED STOCK The Corporation's authorized preferred stock was increased to 20 million shares from 15 million shares in 1993. The following table presents information related to the Corporation's issues of preferred stock outstanding at respective year ends.
Dividend Shares Rate at Amount Outstanding December 31, Outstanding ----------- ------------ ----------------------- (Dollars in thousands) 1993 1993 1993 1992 =============================================================================================================================== $1.9375 Cumulative Preferred Stock ($25 stated value) 4,000,000 7.75% $100,000 $100,000 $3.375 Cumulative Convertible Preferred Stock ($50 stated value) 3,450,000 6.75% 172,500 172,500 Cumulative Floating Rate Series B ($50 stated value) 678,500 6.50% 33,925 33,925 Dutch Auction Rate Transferable Securities Preferred Stock ("DARTS(TM)") Series A ($100,000 stated value) 625 2.94% 62,500 62,500 Series B ($100,000 stated value) 625 2.92% 62,500 62,500 Remarketed Preferred ("RP") ($100,000 per share liquidation preference) 750 2.75%-3.00% 75,000 75,000 Money Market Cumulative Preferred ("MMP") ($100,000 per share liquidation preference) 500 2.99% 50,000 50,000 - ------------------------------------------------------------------------------------------------------------------------------- 8,131,000 $556,425 $556,425 ===============================================================================================================================
For the purpose of regulatory risk-based capital requirements, the Cumulative Preferred Stock, the Cumulative Convertible Preferred Stock and the Cumulative Floating Rate Series B all qualify as Tier 1 capital. 63 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The shares of $1.9375 Cumulative Preferred Stock with a stated value of $25 per share may be redeemed on or after February 27, 1997, at the option of the Corporation, in whole or in part, at $25 per share, plus, in all cases, accrued and unpaid dividends to the redemption date. The shares of the $3.375 Cumulative Convertible Preferred Stock, stated value of $50 per share are convertible at the option of the holder into shares of the Corporation's Common Stock at A conversion price of $48.33 per share. The Convertible Preferred Stock may be redeemed at the option of the Corporation, in whole or in part, at any time, on or after May 15, 1995, at $52.025 per share through May 14, 1996 and thereafter at prices which decline annually to May 15, 2001, to the stated value of $50 per share plus, in all cases, accrued and unpaid dividends. Dividend rates for each dividend period are set pursuant to an auction procedure for the DARTS(TM) and the MMP, by a remarketing through the remarketing agent for the RP and quarterly for the Floating Rate Series B shares by reference to a formula based on certain money market rates. The maximum applicable dividend rate on the shares of DARTS(TM) RP and MMP range from 110% to 175% of the 60-day "AA" composite commercial paper rate. The applicable dividend rate on the Floating Rate Series B shares can be no less than 6.50% nor more than 12.50% per annum. The Corporation, at its option, may redeem the outstanding Cumulative Floating Rate Series B shares at $51.50 per share through March 31, 1994 and thereafter at its stated value, plus, in all cases, accrued and unpaid dividends. During 1992, the Corporation repurchased 10,000 shares in an open market transaction at a price of $49.88 per share. DARTS(TM) of each series are redeemable in whole or in part, at the option of the Corporation, at $100,000 per share plus accrued and unpaid dividends to the redemption date. DARTS(TM) are also redeemable, at the option of the Corporation, on any dividend payment date for such series, in whole but not in part, at a redemption price of $100,000 per share plus the payment of accrued and unpaid dividends, if the applicable rate for such series fixed with respect to the dividend period for such series ending on such dividend payment date equals or exceeds the 60-day "AA" composite commercial paper rate on the date of determination of such applicable rate. The shares of RP are redeemable, in whole or in part, at the option of the Corporation, at a redemption price of $100,000 per share plus the payment of accrued and unpaid dividends to the date fixed for redemption. The shares of MMP are redeemable, in whole or in part, at the option of the Corporation, at a redemption price of $100,000 per share plus the payment of accrued and unpaid dividends to the redemption date. The shares of MMP are also redeemable, at the option of the Corporation, on any dividend payment date, in whole but not in part, at a redemption price of $100,000 per share plus accrued and unpaid dividends, if the applicable rate fixed for the dividend period ending on the day preceeding such dividend payment date equals or exceeds the 60-day "AA" composite commercial paper rate on the date determination of such applicable rate. 11. INCOME TAXES As described in Note 1, the Corporation adopted SFAS No. 109 on January 1, 1993. The Corporation had previously used SFAS No. 96 to account for income taxes. The cumulative effect of this change in accounting, determined as of January 1, 1993, was immaterial to the consolidated financial statements. Prior years financial statements have not been restated to apply the provisions of SFAS No. 109. Total income tax expense for the year ended December 31, 1993 was allocated as follows:
(In thousand) 1993 ============================================================================= Income from operations $150,153 Stockholders' equity: Net unrealized gain on securities available for sale, net of taxes 175,095 Foreign currency translation, net (8,653) - ----------------------------------------------------------------------------- $316,595 =============================================================================
64 38 The components of the Corporation's consolidated income tax expense, from operations were as follows:
(In thousands) 1993 1992 1991 ================================================================================================================== Current Tax Expense: Federal $129,856 $58,524 $13,186 Foreign 27,980 13,524 11,287 State and other 34,085 17,848 6,480 - ------------------------------------------------------------------------------------------------------------------ 191,921 89,896 30,953 - ------------------------------------------------------------------------------------------------------------------ Deferred Tax Expense (Benefit): Federal (29,312) 2,790 29,433 State and other (12,456) (4,300) -- - ------------------------------------------------------------------------------------------------------------------ (41,768) (1,510) 29,433 - ------------------------------------------------------------------------------------------------------------------ $150,153 $88,386 $60,386 ==================================================================================================================
The principal sources of deferred income taxes attributable to income from operations in 1992 and 1991 and the effects of each on the amount of taxes were as follows:
(In thousands) 1992 1991 ================================================================================================================== Unrealized net gains on trading activities $ (5,728) $ 7,061 Provision for loan lossess (20,279) (4,035) Interest and discount income 1,316 (1,297) Employee benefits 888 (2,173) Depreciation 1,735 1,513 Non-accrued interest 1,610 (1,156) Domestic tax on overseas earnings, net of foreign tax credits 19,792 22,612 Net operating loss carryover -- 5,963 Other - net (844) 945 - ------------------------------------------------------------------------------------------------------------------ $ (1,510) $29,433 ==================================================================================================================
Income tax expense amounted to $150,153,000 for 1993, $88,386,000 for 1992 and $60,386,000 for 1991, representing effective tax rates of 33.3%, 25.5% and 21.0%, respectively. Total tax expense differs from the amounts computed by applying the statutory U.S. Federal income tax rate because of the following:
% of Pretax Income ---------------------------------- 1993 1992 1991 ================================================================================================================== Federal tax expense at statutory rates 35.0% 34.0% 34.0% State and local income tax, net of federal tax benefit 2.6 2.6 1.5 Interest and dividend income exempt from federal tax (4.4) (5.6) (6.4) Deferred tax benefits recognized -- (1.4) (2.5) Exempt income through acquisition of subsidiary -- (4.0) (6.4) Other - net .1 (.1) .8 - ------------------------------------------------------------------------------------------------------------------ Income tax expense as reported 33.3% 25.5% 21.0% ==================================================================================================================
The tax effects of temporary differences that gave rise to a significant portion of the deferred tax assets and deferred tax liabilities at December 31, 1993 are presented below.
(In thousands) 1993 ================================================================================================================== Deferred tax assets: Provision for loan losses $ 127,752 Interest and discount income 16,349 Exempt income from subsidiary acquisition 37,074 Other 10,006 - ------------------------------------------------------------------------------------------------------------------ 191,181 - ------------------------------------------------------------------------------------------------------------------ Deferred tax liabilities: Depreciation 44,884 Unrealized profits on trading account assets and securities available for sale 178,615 Domestic tax on overseas income 58,047 - ------------------------------------------------------------------------------------------------------------------ 281,546 - ------------------------------------------------------------------------------------------------------------------ Net deferred tax liability $ 90,365 ==================================================================================================================
65 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) There was no valuation adjustment at January 1, 1993 and December 31, 1993, respectively. The Corporation has not recognized a deferred tax liability of approximately $100.0 million for undistributed earnings of foreign subsidiaries for taxable years beginning prior to 1987 because the Corporation does not expect those unremitted earnings to reverse and become taxable to the Corporation in the foreseeable future. As of December 31, 1993 the undistributed earnings of these foreign subsidiaries were approximately $365.1 million. Cumulative foreign tax credits of approximately $28.5 million at December 31, 1993 are available for utilization by the Corporation against U.S. income taxes that would arise upon a dividend distribution by its foreign subsidiaries. The following table distributes the Corporation's Income before income taxes between its domestic and foreign offices for each of the last three years.
(In thousands) 1993 1992 1991 =========================================================================================================================== Foreign $ 230,523 $ 125,697 $ 107,498 Domestic 220,835 221,572 180,248 - --------------------------------------------------------------------------------------------------------------------------- $ 451,358 $ 347,269 $ 287,746 ===========================================================================================================================
12. BENEFITS RETIREMENT PLAN The Bank's retirement plan (the "U.S. Plan") covers substantially all U.S. employees of the Bank, RBS, and the Corporation and their subsidiaries. Benefits are based on years of service and the employee's compensation during the highest consecutive five years of the last ten years of employment. The Corporation's funding policy is to contribute annual,ly an amount necessary to satisfy the Employee Retirement Income Security Act (ERISA) funding standards. The following table sets forth the U.S. Plan's funded status and amounts recognized in the Corporation's Statement of Condition at respective year ends.
(In thousands) 1993 1992 =========================================================================================================================== Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $(91,834) in 1993 and $(67,834) in 1992 $(100,307) $ (73,564) =========================================================================================================================== Plan assets at fair value, primarily mutual funds and the balance in listed stocks and bonds $151,105 $ 141,942 Projected benefit obligation for service rendered to date (132,695) (103,501) - --------------------------------------------------------------------------------------------------------------------------- Excess of plan assets over projected benefit obligation 18,410 38,441 Unrecognized net (gain) from past experience different from that assumed and effects of changes in assumptions (3,760) (15,490) Prior service cost not yet recognized in net periodic pension cost 4,371 2,018 Unrecognized net asset being recognized over 16 years (8,047) (9,053) - --------------------------------------------------------------------------------------------------------------------------- Prepaid pension expense included in other assets $ 10,974 $ 15,916 ===========================================================================================================================
Net pension expense in each of the last three years consisted of the following:
(In thousands) 1993 1992 1991 =========================================================================================================================== Service cost-benefits earned during the period $ 5,754 $ 4,423 $ 4,013 Interest cost on projected benefit obligation 8,825 8,266 7,618 Actual return on plan assets (14,105) (12,293) (23,399) Net amortization and deferral 4,469 980 12,713 - --------------------------------------------------------------------------------------------------------------------------- Net periodic pension expense $ 4,943 $ 1,376 $ 945 ===========================================================================================================================
66 40 The following table presents the economic assumptions used to calculate the projected benefit obligation and pension expense in each of the last three years.
1993 1992 1991 ==================================================================================================================== Discount rate 7.0% 8 1/2% 8 1/2 Rate of compensation increase 5.0 6 1/2 6 1/2 Expected long-term rate of return on plan assets 7.0 8 3/4 8 3/4 ====================================================================================================================
In addition to the above funded U.S. Plan, the Corporation established an unfunded benefit maintenance plan and a supplemental pension plan for certain employees, executive officers and directors of a certain banking subsidiary. The expense related to these plans amounted to $1,982,000 in 1993, $2,088,000 in 1992 and $1,040,000 in 1991. Retirement benefits in foreign locations generally are covered by local plans based on length of service, compensation levels and, where applicable, employee contributions, with the funding of these plans based on local legal requirements. The aggregate pension expense for such plans was approximately $3,700,000 in 1993, $3,600,000 in 1992 and $3,300,000 in 1991. The Corporation provides postretirement life insurance benefits to its current employees and provides certain retired employees with health care and life insurance benefits. The Corporation's plan for its postretirement obligation is unfunded. The following tables set forth information related to the Corporation's postretirement benefit obligation at respective year ends.
(In thousands) 1993 1992 ========================================================================================== Accumulated postretirement benefit obligation: Retirees including covered dependents and beneficiaries $(26,979) $(27,846) Fully eligible actives (934) (898) Other actives (581) (508) - ------------------------------------------------------------------------------------------ (28,494) (29,252) Unrecognized net gain (2,445) -- Unrecognized transition obligation being recognized over 20 years 17,181 18,134 - ------------------------------------------------------------------------------------------ Postretirement benefit obligation included in other liabilities $(13,758) $(11,118) ==========================================================================================
A discount rate of 7% and a 7% compensation increase were used to measure the accumulated postretirement benefit obligation in 1993. The rates used in 1992 were 8 1/2% and 7%, respectively. The effect of raising health care gross eligible charges by 1% will increase the aggregate of service cost and interest cost by approximately $240,000, and the accumulated postretirement benefit obligation by approximately $2.8 million. The health care trend rate used to measure the expected costs of benefits for 1994 is projected to be 13.0% for those under age 65 and 10.3% for those 65 and older. The rates for those under age 65 and for those 65 and older are assumed to decrease by 1% and .6% per year, respectively, until they reach 6% and stabilize at that rate. Net postretirement benefit expense for 1993 and 1992 was as follows:
(In thousands) 1993 1992 ========================================================================================= Service cost $ 92 $ 104 Interest cost on accumulated postretirement benefit obligation 1,910 2,345 Amortization of transitional accumulated postretirement benefit obligation 953 953 - ----------------------------------------------------------------------------------------- Net periodic expense $2,955 $3,402 =========================================================================================
67 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) In November 1992, SFAS No. 112, "Employers' Accounting for Postemployment Benefits" was issued. SFAS No. 112, effective for fiscal years beginning after December 15, 1993, requires recognizing an obligation for the estimated cost of postemployment benefits. Postemployment is defined as the period after employment but before retirement if certain conditions are met. Postemployment benefits include, but are not limited to, salary continuation, severance benefits, job training and counseling and health care and life insurance coverage. The impact of adopting SFAS No. 112 will not have a material effect on the Corporation's result of operations. EXECUTIVE COMPENSATION The Corporation has a Restricted Stock Plan (the "Plan") for selected employees of the Corporation and its subsidiaries. The Plan, as amended in 1993, provided that an aggregate of 4,150,000 shares, as adjusted for a stock split, of Restricted Stock were available to be awarded, subject to further adjustments, during the period ending on December 31, 1995, when the Plan will terminate unless extended by the Board of Directors with stockholder approval. During 1993, 1992 and 1991, the Corporation issued, net of cancellations, 470,783; 309,186, and 258,064 shares of Common Stock, respectively, with an approximate market value as of the date of issue of $23,709,000, $13,540,000 and $16,477,000, respectively. Such market value is amortized as an expense over the period for which such shares are restricted. The Corporation's Restricted Stock Election Plan allows certain officers who have earned deferred compensation to elect to receive payment in the form of Restricted Stock of the Corporation. An aggregate of 375,000 shares of Restricted Stock may be issued during the term of such plan which expires on December 31, 1997, as amended. During 1993, 1992, and 1991, 568 shares, 672 shares and 642 shares, respectively, of the Corporation's Common Stock were issued in lieu of cash dividends pursuant to such plan, with approximate market values as of the dates of issue of $28,000, $28,000 and $35,000, respectively. The Corporation has an incentive stock option plan and a non-qualified stock option plan for officers and other key employees of the Corporation and its subsidiaries. There remains reserved for issuance pursuant to the stock option plans 412,283 shares of Common Stock for the incentive stock option plan and 361,343 shares of Common Stock for the non-qualified stock option plan. Both plans are substantially identical, except that the incentive stock option plan has certain limitations or requirements in order that the holders of such options can receive certain beneficial tax treatment in the disposition of shares acquired on the exercise of an option. Options may be granted under the plans at any time prior to July, 1995, but they cannot exceed ten years in duration. Exercise prices under the incentive stock option plan must be equal to the fair market value of the common stock on the date of grant; exercise prices under the non-qualified stock option plan are determined by a Committee of the Board of Directors. Options become exercisable at the times and in the amounts determined by such Committee in connection with awarding grants. At the discretion of the Compensation and Benefits Committee of the Board of Directors, option grants may be accompanied by stock appreciation rights ("SARs"). The SARs entitle the holder of the related option to surrender the option and receive a payment equal to an amount by which the fair market value, at the time of exercise, of the shares of Common Stock subject to the option exceeds the exercise price. On the exercise of an option, an employee may elect to make payment either in cash, by delivering previously owned shares of the Corporation's Common Stock, or any combination thereof. SARs are exercisable in lieu of acquiring shares of Common Stock. Compensation expense, if any, resulting from the difference between the fair market value of the Common Stock on the date of grant and the current market value of the Common Stock will be accrued over the vesting period adjusted for subsequent forfeitures and exercises. The shares of the Plan and the stock option plans that may be awarded or issued have been adjusted to reflect the three-for-two Common Stock split distributed October 21, 1991. 68 42 The following is a summary of options transactions in each of the last three years.
Option Price Options Per Share ============================================================================================ Balance, December 31, 1990 796,498 $23.61 - $33.20 Granted 7,875 23.61 - 40.79 Exercised (151,537) 23.61 - 32.92 Cancelled (9,750) - -------------------------------------------------------------------------------------------- Balance, December 31, 1991 643,086 $23.61 - $40.79 Granted 12,000 39.38 Exercised (42,599) 23.61 - 32.92 Cancelled (9,750) - -------------------------------------------------------------------------------------------- Balance, December 31, 1992 602,737 $23.61 - $40.79 Granted 4,500 50.13 Exercised (43,100) 23.61 - 32.50 Cancelled -- - -------------------------------------------------------------------------------------------- Balance, December 31, 1993 564,137 $23.61 - $50.13 ============================================================================================
At December 31, 1993, options for 468,887 shares were exercisable at prices of $23.61 to $32.50 per share. 13. GEOGRAPHIC DISTRIBUTION OF REVENUE, EARNINGS AND ASSETS The following geographic analysis of total assets, total operating revenue, income (loss) before income taxes and net income (loss) is based on the location of the customer. Charges and credits for funds employed or supplied by domestic and international operations are based on the average internal cost of funds. Inasmuch as the Corporation conducts a significant portion of its international activities from its domestic offices, certain other items of revenue and expense, including the provision for loan losses and applicable income taxes, have been subjectively allocated, and, therefore, the data presented may not be meaningful. Based on the above, the following table summarizes the results of the Corporation's international and domestic operations by geographic area for each of the years in the three-year period ended December 31, 1993.
Total Total Operating Income (Loss) Before Net Income (In millions) Assets Revenue Income Taxes (Loss) ========================================================================================================= United Kingdom 1993 $ 1,271.6 $ 156.3 $ 40.8 $ 27.2 1992 1,861.8 153.5 27.2 20.3 1991 1,695.3 185.0 26.6 20.4 - --------------------------------------------------------------------------------------------------------- Europe 1993 $ 3,407.5 $ 232.5 $ 15.8 $ 10.6 1992 4,674.9 260.4 1.7 1.3 1991 4,885.6 337.6 (10.9) (11.7) - --------------------------------------------------------------------------------------------------------- Canada 1993 $ 1,043.5 $ 64.0 $ 1.9 $ 1.3 1992 1,530.4 65.9 6.1 4.6 1991 1,114.4 87.7 1.4 .9 - --------------------------------------------------------------------------------------------------------- Far East 1993 $ 3,555.4 $ 181.7 $ 23.0 $ 15.4 1992 3,830.0 221.0 24.8 18.5 1991 4,269.8 306.9 10.6 4.9 - --------------------------------------------------------------------------------------------------------- Caribbean money center 1993 $ 3,104.0 $ 157.1 $ 38.7 $ 25.8 locations, Central 1992 3,078.9 163.8 46.1 34.3 and South America 1991 2,417.5 191.7 70.2 57.6 - --------------------------------------------------------------------------------------------------------- Middle East and 1993 $ 204.2 $ 6.0 $ (.7) $ (.5) Africa 1992 178.4 8.3 (.7) (.6) 1991 219.0 6.5 (5.5) (4.6) - --------------------------------------------------------------------------------------------------------- United States 1993 $26,907.3 $1,530.8 $331.9 $221.4 1992 21,992.0 1,467.9 242.1 180.5 1991 16,619.2 1,419.9 195.3 159.9 - --------------------------------------------------------------------------------------------------------- Total 1993 $39,493.5 $2,328.4 $451.4 $301.2 1992 37,146.4 2,340.8 347.3 258.9 1991 31,220.8 2,535.3 287.7 227.4 =========================================================================================================
69 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. COMMITMENTS AND CONTINGENT LIABILITIES In the ordinary course of its business, the Corporation is a defendant in various legal proceedings. Management, after reviewing with counsel all such actions and proceedings pending against the Corporation, considers that the aggregate liability or loss, if any, resulting from them would not have a material adverse effect on the consolidated financial position of the Corporation. The Corporation is obligated under noncancellable leases that expire at various times through 2014. The minimum rental commitments on noncancellable leases for premises are $19,369,000 in 1994, $16,944,000 in 1995, $15,891,000 in 1996, $14,773,000 in 1997, $13,547,000 in 1998, and an aggregate of $75,023,000 thereafter until the expiration of the leases. The minimum rental commitments have not been reduced by aggregate minimum sublease rentals of $11,946,000. Actual net rental expense in 1993, 1992 and 1991, aggregated $23,613,000, $20,491,000, and $19,743,000, respectively. The subsidiary banks of the Corporation are required to maintain reserves with the Federal Reserve Bank against certain balances. The average reserves maintained totaled $92,000,000 during 1993. 15. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosures About Fair Value of Financial Instruments", requires the Corporation to disclose, in addition to the carrying value of certain financial instruments, both assets and liabilities recorded on and off the statement of condition for which it is practicable to estimate fair value. The SFAS defines a financial instrument as cash, evidence of an ownership 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. Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists. The SFAS requires deposit liabilities with no stated maturity to be reported at their carrying value and does not allow for the recognition of the inherent funding value of these instruments. Additionally, the values of franchises or of other business units and entities of the Corporation, which are not financial instruments as defined, are not disclosed. The Corporation believes that significant value exists in this type of deposit and in its franchises and individual business units. The following summary presents the methodologies and assumptions used to estimate the fair value of the Corporation's financial instruments presented below. The Corporation operates as a going concnern and, except for its investment securities portfolio, trading account assets and its off-balance sheet trading instruments, no active market exists for its financial instruments. Much of the information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. The subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts which will actually be realized or paid upon settlement or maturity of the various financial instruments could be significantly different. The Corporation has a significant portion of its assets and liabilities in financial instruments that have remaining maturities of under six months. These short-term financial instruments, except for those financial instruments for which an active market exists, are valued without regard to maturity and are considered to have fair values equivalent to their carrying value. 70 44 FINANCIAL ASSETS Interest-bearing deposits with banks amounting to $4.7 billion in 1993 and $10.1 billion in 1992 mature within six months and are considered to have a fair value equivalent to their carrying value. The fair value of interest-bearing deposits with banks maturing in more than six months is estimated using a discounted cash flow model based on current market rates for comparable instruments with similar maturities. The fair value of investment securities and trading account assets is based on quoted market prices or dealer quotes. Performing residential mortgages and consumer installment loans, which have similar characteristics, have been valued on a pooled basis by using market prices for securities backed by loans with similar terms. The fair value of the Corporation's portfolio of loans to restructuring foreign governments are based upon prices for similar securities quoted in the secondary market. The fair value of all other loans, which are principally to commercial and industrial entities and foreign governments, has been determined by discounting the estimated future cash flows of such loans to their present value using an assigned discount rate which may or may not be the contractual rate in effect with the obligor. This discount rate is the rate at which a loan with similar credit risk and remaining maturity would be entered into at the balance sheet date and was determined based on the Corporation's internal credit quality and pricing systems. Cash and due from banks, federal funds sold and securities purchased under resale agreements, accounts receivable and accrued interest, customers' liability on acceptances and certain other assets, which meet the definintion of financial instruments, have been valued at their respective carrying values due to their short-term nature. These instruments are presented in the table below as other financial assets. FINANCIAL LIABILITIES Deposits without a stated maturity include demand, savings, and money market accounts. These deposits amounted to $6.1 billion in 1993 and $5.7 billion in 1992 and, in accordance with the SFAS, are reported at their carrying value. No value has been assigned to the franchise value of these deposits. Certificates of deposit maturing within six months aggregated $ 1.4 billion in 1993 and $2.1 billion in 1992 and their fair value is considered to equal their carrying value. The fair value of deposits maturing in over six months is based on rates currently offered for deposits with similar remaining maturities. Acceptances outstanding, accounts payable and accrued expenses, due to factored clients and certain other liabilities, are considered to have fair values equal to their carrying values due to their short-term nature. These instruments are presented in the table below as other financial liabilities. Short-term borrowings that mature within six months have fair values equal to their carrying value. The fair value of long-term debt, subordinated long-term debt and perpetual capital notes are based on market quotes obtained from independent investment bankers. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS Commitments to extend credit, standby letters of credit and foreign office guarantees and commercial letters of credit aggregated $3.1 billion and $2.7 billion at year end 1993 and 1992, respectively. If ultimately funded, these commitments are priced at current market rates. Interest rate and foreign exchange contracts entered into for trading purposes are carried at market value. The revaluation of such contracts resulted in unrealized losses of $2 million at year end 1993 and 1992, respectively. Interest rate and foreign exchange contracts entered into for hedging purposes have fair values equivalent to the amount that would be received or paid to terminate the contract at the reporting date. The fair value of foreign exchange hedges are included in the valuation of the underlying 71 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) financial instrument hedged. The fair value of interest rate hedges, which are primarily interest rate swaps, is disclosed separately below.
DECEMBER 31, 1993 December 31, 1992 -------------------------- ------------------------- CARRYING ESTIMATED Carrying Estimated (In millions) VALUE FAIR VALUE Value Fair Value ============================================================================================================ FINANCIAL ASSETS: Interest-bearing deposits with banks $ 5,347 $ 5,354 $ 10,563 $ 10,568 Investment securities 14,950 15,046 12,331 12,685 Trading account assets 1,182 1,182 702 702 Loans (net) 9,197 9,642 7,766 8,024 Other financial assets 6,230 6,230 4,179 4,179 FINANCIAL LIABILITIES: Deposits with no stated maturity and other deposits maturing within six months $ 20,130 $ 20,130 $ 19,249 $ 19,249 Deposits maturing in over six months 2,671 2,696 1,853 1,888 Short-term borrowings 4,275 4,275 5,739 5,739 Long-term debt 2,583 2,620 2,502 2,516 Subordinated long-term debt and perpetual capital notes 2,272 2,516 2,131 2,227 Other financial liabilities 3,721 3,721 3,097 3,097
Notional Estimated Notional Estimated (In millions) Value Fair Value Value Fair Value ============================================================================================================ OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: Interest rate swap hedges: Investment securities $ 4,912 $(88) Loans 210 (5) Interest-bearing deposits with banks 94 20 Premises and equipment 75 (4) Long-term debt and subordinated long-term debt 2,250 82 - ------------------------------------------------------------------------------------------------------------ Total $ 7,541 $ 5 $6,593 $(27) Other interest rate hedges (principally related to long-term debt) 1,150 (7) 2,570 3 ============================================================================================================
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK CREDIT RELATED INSTRUMENTS In the normal course of its business, there are various outstanding commitments and contingent liabilities of the Corporation that are not reflected in the consolidated financial statements. The Corporation enters into various types of agreements with its customers which enhance their credit standing, guarantee performance to third parties or advance funds in the form of loans. These commitments usually have fixed expiration dates and may require the payment of a fee. At December 31, 1993 and 1992, respectively, such obligations included commitments to extend credit of $1,622 million and $1,209 million, standby letters of credit and foreign office guarantees of $1,089 million and $1,086 million, and commercial letters of credit of $432 million and $450 million. These amounts represent the maximum principal which the Corporation may be required to disburse and the maximum potential exposure if all such obligations were ultimately to become worthless. CREDIT RELATED RISK CONCENTRATIONS In the normal course of its business, the Corporation's activities include significant amounts of credit risk in its relationships with domestic and international financial institutions. Such obligations aggregated approximately 30% and 35% of the Corporation's on-balance sheet financial instruments at December 31, 1993 and 1992, respectively. This exposure included approximately 40% and 73% at year end 1993 and 1992, respectively, in the form of interest-bearing deposits to foreign banks and branches and agencies of foreign banks located in the United States. The Corporation's credit exposure to the U.S. federal government and its agencies was approximately 30% and 25% of respective year end on-balance sheet financial instruments. The Corporation's real estate loan portfolio represented approximately 10% of on-balance sheet financial instruments at year end 1993 and 1992, respectively. Credit exposure in the real estate loan portfolio is concentrated in loans secured by multi-family and commercial real estate properties and, to a lesser degree, residential properties in the New York metropolitan area. 72 46 INTEREST RATE, FOREIGN EXCHANGE, PRECIOUS METALS AND OTHER FINANCIAL INSTRUMENTS The Corporation uses various off-balance sheet financial instruments to manage its asset and liability exposure to interest rate and currency fluctuations and to meet similar needs of its customers. Certain instruments commit the Corporation to buy or sell, at a future date, a specified financial instrument, currency or precious metals at an agreed to price. Other contracts involve commitments to settle, in cash, differentials between specified indices which are applied to a notional principal amount. Options contracts give the holder the right, but not the obligation, to acquire or sell for a limited time period a financial instrument, currency or precious metals at a designated price. The writer of an option receives a premium at the outset of a contract as payment for assuming the risk of unfavorable changes in the price of the underlying instrument. Each of these instruments involves exposure to fluctuations in price based on the value of the underlying commodity, instrument or index. Such exposure may be limited by offsetting asset or liability positions held by the Corporation. Exposure to credit risk would occur if a counterparty to a transaction failed to meet its obligation to settle a contract on a timely basis. This risk is managed by limiting positions and using strict credit controls when considering a counterparty. The following table summarizes the notional or contractual amounts of the Corporation's outstanding off-balance sheet instruments at respective year ends.
(In millions) 1993 1992 ========================================================================================= Interest rate: Futures and forward contracts $ 9,513 $17,905 Swaps 25,921 10,939 Written options 5,718 920 Foreign exchange: Commitments to purchase foreign currencies and U.S. dollar exchange 48,909 53,913 Swaps 30,812 21,802 Written options 9,591 8,910 Other - principally precious metals: Futures and forward contracts 7,757 3,331 Swaps 165 95 Written options 946 385 =========================================================================================
An estimate of the amount at risk can be calculated using the replacement cost, at current market rates, of all outstanding contracts in a gain position. Based on this calculation, the Corporation estimates its risk of loss at year end 1993 and 1992 to be $528 million and $107 million, respectively, on interest rate contracts and $992 million and $1.896 billion, respectively, on foreign exchange and precious metal contracts. 17. TRANSACTIONS WITH RELATED PARTIES The following is a summary of significant balances, in the aggregate, of transactions with related parties included in the Corporation's Consolidated Statements of Condition at respective year ends.
(In thousands) 1993 1992 ========================================================================================= ASSETS: Interest-bearing deposits with banks $129,862 $ 45,977 Securities available for sale 30,098 -- Loans 14,357 25,190 ========================================================================================= LIABILITIES: Deposits $395,418 $326,442 Long-term debt 8,885 46,030 =========================================================================================
At December 31, 1993, Mr. Edmond J. Safra, through Saban S.A. and two other entities, owned approximately 28.4% of the Corporation's outstanding Common Stock and, through Saban S.A., owned approximately 20.7% of Safra Republic's outstanding common shares. 73 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 18. STOCKHOLDER'S EQUITY OF REPUBLIC NATIONAL BANK OF NEW YORK A summary of changes in the stockholder's equity accounts of the Bank was as follows:
(In thousands) 1993 1992 ========================================================================================== COMMON STOCK: Balance at beginning and end of year $ 355,000 $ 355,000 ========================================================================================== SURPLUS: Balance at beginning of year $1,160,661 $ 960,220 Capital contribution by parent -- 200,000 Treasury stock transactions of affiliate (225) 441 - ------------------------------------------------------------------------------------------ Balance at end of year $1,160,436 $1,160,661 ========================================================================================== RETAINED EARNINGS: Balance at beginning of year $ 390,918 $ 353,680 Net income 255,716 177,886 Dividends declared (126,502) (120,000) Foreign currency translation, net of taxes (9,586) (21,014) Allowance for unrealized loss on marketable equity securities 1,305 366 - ------------------------------------------------------------------------------------------ Balance at end of year $ 511,851 $ 390,918 ========================================================================================== NET UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE, NET of TAXES: Balance at beginning of year $ -- $ -- Unrealized gains 348,335 -- Income tax expense (136,751) -- - ------------------------------------------------------------------------------------------ Balance at end of year $ 211,584 $ -- ========================================================================================== TOTAL STOCKHOLDER'S EQUITY: Balance at beginning of year $1,906,579 $1,668,900 Net changes during the year 332,292 237,679 - ------------------------------------------------------------------------------------------ Balance at end of year $2,238,871 $1,906,579 ==========================================================================================
The Bank, as a national banking association, is subject to legal limitations on the amount of dividends that may be paid to the Corporation, the Bank's sole shareholder. The prior approval of the Comptroller of the Currency is required to the extent the total of all dividends to be declared and paid by a national bank in any calendar year exceeds net profits (as defined) for that year combined with its retained net profits for the two preceding calendar years, less any required transfers to surplus. Under this limitation, at December 31, 1993, the Bank may declare dividends without the prior approval of the Comptroller of the Currency of up to $187 million plus an additional amount equal the Bank's retained net profits for 1994 to the date of any dividend declaration. The Federal Reserve Act limits extensions of credit to, or guarantees, acceptances or letters of credit issued on behalf of, affiliates by member banks and also requires that such transactions be secured by specific obligations. Such transactions, aggregated with certain other transactions with affiliates, are limited to 10% of the Bank's capital and surplus, as defined, to any one affiliate and to 20% of such amount to all such affiliates in the aggregate. Based upon these requirements, the Bank could have advanced, assuming adequate qualifying collateral was available, up to $247 million to the Corporation. 74 48 19. REPUBLIC NEW YORK CORPORATION (PARENT COMPANY ONLY) Condensed Balance Sheets
December 31, ------------------------- (In thousands) 1993 1992 ========================================================================================== ASSETS Deposits with subsidiary bank, principally interest-bearing $ 979,579 $1,624,955 Investment in bank subsidiaries 2,737,702 2,346,916 Investment in non-bank subsidiaries 656,624 67,525 Securities held to maturity 60,315 410,144 Securities available for sale 634,706 -- Investment in subordinated debt of subsidiary bank 575,000 575,000 Advances to non-bank subsidiaries 369,275 264,055 Loans, net of unearned income 7,448 5,675 Dividends receivable from subsidiaries 65,000 38,000 Other assets 82,639 103,302 - ------------------------------------------------------------------------------------------ Total assets $6,168,288 $5,435,572 ========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Commercial paper $ 881,741 $ 720,308 Other liabilities 73,325 77,085 Long-term debt (note 9) 200,000 250,000 Subordinated long-term debt and perpetual capital notes (note 9) 2,266,000 2,124,750 Stockholders' equity (notes 10 and 12): Cumulative preferred stock, no par value 556,425 556,425 Common stock, $5 par value 263,516 260,951 Surplus 459,713 447,691 Retained earnings 1,204,818 998,362 Net unrealized gain on securities available for sale, net of taxes 262,750 -- - ------------------------------------------------------------------------------------------ Total stockholders' equity 2,747,222 2,263,429 - ------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $6,168,288 $5,435,572 ==========================================================================================
CONDENSED STATEMENTS OF INCOME
(In thousands) 1993 1992 1991 ========================================================================================================= INCOME: Dividends from bank subsidiaries $ 189,502 $ 328,000 $ 253,500 Dividends from non-bank subsidiaries 15,650 13,500 -- Interest from subsidiaries 64,588 41,608 81,806 Interest and dividend income 49,511 59,212 16,735 Investment securities gains (losses), net (3,853) 9,399 (5,131) Other income (expense) (5,347) 160 (168) - --------------------------------------------------------------------------------------------------------- Total income 310,051 451,879 346,742 - --------------------------------------------------------------------------------------------------------- EXPENSES: Salaries and employee benefits 20,352 13,938 11,643 Interest on long-term debt and commercial paper 176,857 170,510 172,471 Other expenses 17,594 12,139 8,967 - --------------------------------------------------------------------------------------------------------- Total expenses 214,803 196,587 193,081 - --------------------------------------------------------------------------------------------------------- Income before income tax benefit and equity in undistributed net income of subsidiaries 95,248 255,292 153,661 Applicable income tax benefit - current 62,327 47,344 35,616 - --------------------------------------------------------------------------------------------------------- INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES 157,575 302,636 189,277 Equity in undistributed net income of subsidiaries* 143,630 (43,753) 38,083 - --------------------------------------------------------------------------------------------------------- NET INCOME $ 301,205 $ 258,883 $ 227,360 =========================================================================================================
*Represents excess of dividends over net income in 1992. 75 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) CONDENSED STATEMENTS OF CASH FLOWS
(In thousands) 1993 1992 1991 =================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income $301,205 $258,883 $227,360 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of subsidiaries* (143,630) 43,753 (38,083) Net (increase) decrease in dividends receivable from subsidiaries (27,000) 40,500 (16,500) Other, net 16,902 (55,903) 33,101 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 147,477 287,233 205,878 - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net decrease in interest-bearing deposits with banks -- 385 2,188 Net (increase) decrease in deposits with subsidiary bank 645,376 (156,997) (921,758) Cash contributions to bank and non-bank subsidiaries (591,800) (200,100) -- Net (increase) decrease in short-term investments (281,659) (169,760) 212,196 Purchases of securities held to maturity -- -- (137,533) Proceeds from maturities and sales of securities held to maturity -- -- 124,535 Net (increase) decrease in advances to subsidiaries (105,220) (100,415) 102,799 Net (increase) decrease in loans (1,773) (589) 913 Investment in subordinated debt of subsidiary bank -- (525,000) (50,000) Other, net 15,078 (18,615) (6,363) - ------------------------------------------------------------------------------------------------------------------- Net cash (used) by investing activities (319,998) (1,171,091) (673,023) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in commercial paper 161,433 196,261 (67,384) Proceeds from issuance of subordinated long-term debt 250,000 750,000 550,000 Repayment of subordinated long-term debt (108,750) (20,000) (15,000) Repayment of long-term debt (50,000) (49,354) (87,756) Net proceeds from issuance of cumulative preferred stock -- 96,660 168,675 Repurchase of cumulative preferred stock -- (500) (25,000) Cash dividends paid (83,945) (78,952) (68,236) Other, net 3,783 (10,257) 11,846 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 172,521 883,858 467,145 - ------------------------------------------------------------------------------------------------------------------- Cash at beginning and end of year $ -- $ -- $ -- ===================================================================================================================
*Represents excess of dividends over net income in 1992. 76 50 Republic New York Corporation INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS [KPMG PEAT MARWICK LETTERHEAD] The Board of Directors and Stockholders Republic New York Corporation: We have audited the accompanying consolidated statements of condition of Republic New York Corporation as of December 31, 1993 and 1992, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three year period ended December 31, 1993, and the consolidated statements of condition of Republic National Bank of New York as of December 31, 1993 and 1992. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Republic New York Corporation at December 31, 1993 and 1992, and the results of their operations, and their cash flows for each of the years in the three year period ended December 31, 1993, and the consolidated financial position of Republic National Bank of New York at December 31, 1993 and 1992 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 3 to the consolidated financial statements, the Corporation changed its method of accounting for investments to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities at December 31, 1993. As discussed in Notes 1 and 11, the Corporation changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's SFAS No. 109, Accounting for Income Taxes. /s/ KPMG PEAT MARWICK --------------------- January 18, 1994 77 51 Republic New York Corporation REPORT OF MANAGEMENT FINANCIAL STATEMENTS The accompanying consolidated financial statements and the related notes thereto have been prepared by the management of Republic New York Corporation (the "Corporation") in accordance with generally accepted accounting principles and, as such, include amounts, some of which are based on judgments and estimates by management. Management's Discussion and Analysis appearing elsewhere in this Annual Report is consistent with the content of the financial statements. KPMG Peat Marwick have audited the accompanying consolidated financial statements of the Corporation and their report thereon is presented herein. Such report represents that all of the Corporation's consolidated financial statements, provided in the Annual Report, present fairly, in all material respects, its financial position and results of operations in conformity with generally accepted accounting principles. INTERNAL CONTROL SYSTEM OVER FINANCIAL REPORTING Management of the Corporation is responsible for establishing and maintaining an effective internal control system over financial reporting presented in conformity with generally accepted accounting principles. The system contains monitoring mechanisms, and actions are taken to correct deficiencies identified. The Audit Committee of the Board of Directors is composed of directors who are not officers or employees of the Corporation. The Audit Committee of the Board of Directors is responsible for ascertaining that the accounting policies employed by management are reasonable and that internal control systems are adequate. The Director of Internal Audit of the Corporation conducts audits and reviews of the Corporation's worldwide operations and reports directly to the Audit Committee of the Board of Directors. In addition, KPMG Peat Marwick, the Corporation's independent auditors, have direct, private access to the Audit Committee of the Board of Directors to discuss the results of their audits as well as other auditing and financial reporting matters they deem necessary. There are inherent limitations in the effectiveness of any Internal control system, including the possibility of human error and the possible circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time. Management assessed the Corporation's internal control system over financial reporting presented in conformity with generally accepted accounting principles as of December 31, 1993. This assessment was based on criteria for effective Internal control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 1993, the Corporation maintained an effective internal control system over financial reporting presented in conformity with generally accepted accounting principles. COMPLIANCE WITH LAWS AND REGULATIONS Management is also responsible for maintaining an effective system of internal control over compliance with federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders. Management has assessed its compliance with the aforementioned laws and regulations. Based on this assessment, management believes that the insured depository subsidiaries, Republic National Bank of New York and Republic Bank for Savings, of Republic New York Corporation, complied, in all material respects, with such laws and regulations during the year ended December 31, 1993. /s/ WALTER H. WEINER /s/ JOHN D. KABERLE, JR. - -------------------- ------------------------ Walter H. Weiner John D. Kaberle, Jr. Chairman of the Board Executive Vice President and Comptroller New York, New York January 18, 1994 78 52 Republic New York Corporation INDEPENDENT AUDITORS' REPORT ON MANAGEMENT'S ASSERTIONS RELATED TO INTERNAL CONTROL [KPMG PEAT MARWICK LETTERHEAD] The Board of Directors Republic New York Corporation We have examined management's assertion, included in the accompanying Report of Management, that as of December 31, 1993, Republic New York Corporation maintained an effective system of internal control over financial reporting presented in conformity with generally accepted accounting principles. Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the internal control system over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control system, and such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Because of inherent limitations in any internal control system, errors or irregularities may occur and not be detected. Also, projections of any evaluation of the internal control system to future periods are subject to the risk that the internal control system may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assertion referred to above is fairly stated, in all material respects, based on the criteria described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. /s/ KPMG PEAT MARWICK --------------------- March 15, 1994 79 53 Republic New York Corporation SELECTED FINANCIAL DATA - SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION
1993 1992 --------------------------------------- ------------------------------------------- (In thousands except per share data) FOURTH THIRD SECOND FIRST Fourth Third Second First - --------------------------------------------------------------------------------------------------------------------------------- Interest income $487,921 $481,572 $471,954 $491,479 $501,007 $507,816 $506,088 $523,681 Interest expense 294,854 288,549 273,678 299,994 314,438 322,032 327,530 354,228 - --------------------------------------------------------------------------------------------------------------------------------- Net interest income 193,067 193,023 198,276 191,485 186,569 185,784 178,558 169,453 Provision for loan losses 15,000 20,000 25,000 25,000 35,000 35,000 30,000 20,000 - --------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 178,067 173,023 173,276 166,485 151,569 150,784 148,558 149,453 Other operating income 111,338 108,200 94,958 80,976 87,569 85,241 67,200 62,237 Other operating expenses 174,409 156,969 156,722 146,865 148,019 141,932 130,779 134,612 - --------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 114,996 124,254 111,512 100,596 91,119 94,093 84,979 77,078 Income taxes 35,069 46,649 36,584 31,851 24,291 26,341 21,080 16,674 - --------------------------------------------------------------------------------------------------------------------------------- Net income $ 79,927 $ 77,605 $ 74,928 $ 68,745 $ 66,828 $ 67,752 $ 63,899 $ 60,404 ================================================================================================================================= Net income applicable to common stock $ 72,792 $ 70,545 $ 67,873 $ 61,580 $ 59,616 $ 60,515 $ 56,376 $ 53,990 ================================================================================================================================= Net income per common share: Primary $1.38 $1.34 $1.30 $1.18 $1.14 $1.16 $1.08 $1.04 Fully diluted 1.34 1.30 1.26 1.15 1.11 1.13 1.06 1.02 Average common shares outstanding: Primary 52,690 52,634 52,336 52,196 52,346 52,329 52,118 52,020 Fully diluted 56,525 56,506 56,201 56,052 56,181 56,145 55,924 55,828 =================================================================================================================================
80 54 Republic Bank for Savings CONSOLIDATED STATEMENTS OF CONDITION
December 31, ----------------------------- (Dollars in thousands) 1993 1992 ================================================================================================== ASSETS Cash and due from banks $ 33,562 $ 62,969 Interest-bearing deposits with banks 256,377 461,817 Securities held to maturity (approximate market value of $947,972 in 1993 and $2,156,763 in 1992) 921,741 2,051,415 Securities available for sale (approximate market value of $1,896,063 in 1993) 1,896,063 -- - -------------------------------------------------------------------------------------------------- Total investment securities 2,817,804 2,051,415 Federal funds sold -- 150,000 Loans, net of unearned income 2,895,555 3,331,897 Allowance for possible loan losses (57,362) (47,539) - -------------------------------------------------------------------------------------------------- Loans (net) 2,838,193 3,284,358 Premises and equipment 33,465 29,314 Accounts receivable and accrued interest 68,580 83,535 Other assets 101,482 70,559 - -------------------------------------------------------------------------------------------------- Total assets $6,149,463 $6,193,967 ================================================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY Noninterest-bearing deposits $ 345,807 $ 311,222 Interest-bearing deposits 4,392,980 4,892,058 Mortgage escrow deposits 37,676 38,029 - -------------------------------------------------------------------------------------------------- Total deposits 4,776,463 5,241,309 Securities sold under repurchase agreements 579,376 362,616 Accounts payable and accrued expenses 303,797 151,099 Other liabilities 12,154 12,051 Stockholder's equity: Common stock, $100 par value, 750,000 shares authorized and outstanding 75,000 75,000 Surplus 255,423 255,423 Retained earnings 106,812 96,469 Net unrealized gain on securities available for sale, net of taxes 40,438 -- - -------------------------------------------------------------------------------------------------- Total stockholder's equity 477,673 426,892 - -------------------------------------------------------------------------------------------------- Total liabilities and stockholder's equity $6,149,463 $6,193,967 ==================================================================================================
81 55 Republic New York Corporation CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data) 1993 1992 1991 1990(1) 1989 ============================================================================================================================== INTEREST INCOME: Interest and fees on loans $ 635,484 $ 721,909 $ 919,342 $1,115,943 $ 895,994 Interest on deposits with banks 295,871 385,299 591,046 686,526 886,114 Interest and dividends on investment securities: Taxable 847,022 807,611 637,919 511,769 342,382 Exempt from federal income taxes 65,759 63,385 60,261 79,297 71,239 Interest on trading account assets 54,467 22,928 6,280 7,372 8,149 Interest on federal funds sold and securities purchased under resale agreements 34,323 37,460 49,059 100,644 143,600 - ------------------------------------------------------------------------------------------------------------------------------ Total interest income 1,932,926 2,038,592 2,263,907 2,501,551 2,347,478 - ------------------------------------------------------------------------------------------------------------------------------ INTEREST EXPENSE: Interest on deposits 689,234 804,906 1,205,989 1,457,600 1,535,593 Interest on short-term borrowings 197,769 234,249 258,010 366,748 202,434 Interest on long-term debt 270,072 279,073 218,662 219,879 252,585 - ------------------------------------------------------------------------------------------------------------------------------ Total interest expense 1,157,075 1,318,228 1,682,661 2,044,227 1,990,612 - ------------------------------------------------------------------------------------------------------------------------------ NET INTEREST INCOME 775,851 720,364 581,246 457,324 356,866 Provision for loan losses 85,000 120,000 62,000 40,000 209,000 - ------------------------------------------------------------------------------------------------------------------------------ Net interest income after provision for loan losses 690,851 600,364 519,246 417,324 147,866 - ------------------------------------------------------------------------------------------------------------------------------ OTHER OPERATING INCOME: Income from precious metals 37,910 22,637 39,449 45,456 41,046 Foreign exchange trading income 111,572 102,571 81,351 77,347 55,076 Trading account profits and commissions 78,742 12,319 22,444 16,481 15,294 Investment securities gains, net 1,295 11,232 4,264 6,613 2,778 Net gain (loss) on loans sold or held for sale (843) 17,089 3,031 12,457 10,390 Commission income 50,956 37,592 34,628 35,388 32,695 Equity in earnings of affiliate 59,463 45,220 41,083 34,703 30,558 Gain on sale of building ownership option -- -- -- -- 51,157 Other income 56,377 53,587 45,183 42,139 39,189 - ------------------------------------------------------------------------------------------------------------------------------ Total other operating income 395,472 302,247 271,433 270,584 278,183 - ------------------------------------------------------------------------------------------------------------------------------ OTHER OPERATING EXPENSES: Salaries 203,759 180,318 166,107 158,605 136,588 Employee benefits 143,748 113,813 97,568 87,476 60,669 Occupancy, net 48,161 45,301 38,048 44,937 28,316 Other expenses 239,297 215,910 201,210 173,565 144,426 - ------------------------------------------------------------------------------------------------------------------------------ Total other operating expenses 634,965 555,342 502,933 464,583 369,999 - ------------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 451,358 347,269 287,746 223,325 56,050 Income taxes 150,153 88,386 60,386 22,105 32,053 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME $301,205 $258,883 $227,360 $201,220 $23,997 ============================================================================================================================== NET INCOME APPLICABLE TO COMMON STOCK $272,790 $230,497 $204,627 $180,177 $1,223 ============================================================================================================================== Net income per common share: Primary $5.20 $4.42 $3.95 $3.62 $.03 Fully diluted 5.05 4.32 3.90 3.62 .03 Cash dividends declared per common share 1.08 1.00 .95 .88 .85 Average common shares outstanding Primary 52,466 52,204 51,852 49,726 45,223 Fully diluted 56,321 56,020 54,292 49,726 45,223 ==============================================================================================================================
(1) Includes the results of operations of Republic Bank for Savings, which was accounted for as a purchase, from May 2, 1990 the date of acquisition. 82 56 Republic New York Corporation CONSOLIDATED STATEMENTS OF CONDITION
December 31, ------------------------------------------------------------------ (In thousands) 1993 1992 1991 1990 1989 =================================================================================================================================== ASSETS Cash and due from banks $ 636,633 $ 490,711 $ 412,026 $ 424,899 $ 397,897 Interest-bearing deposits with banks 5,346,647 10,562,885 8,776,578 7,129,174 8,175,016 Precious metals 1,110,434 412,105 278,309 458,896 412,128 Securities held to maturity 1,992,847 12,011,358 9,666,692 7,642,680 5,638,065 Securities available for sale 12,956,946 320,113 -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total investment securities 14,949,793 12,331,471 9,666,692 7,642,680 5,638,065 Trading account assets 1,182,093 702,479 268,950 98,148 323,448 Federal funds sold and securities purchased under resale agreements 2,322,465 1,505,274 10,546 1,081,719 404,410 Loans, net of unearned income 9,508,558 8,007,457 8,568,958 9,004,859 6,580,389 Allowance for possible loan losses (311,855) (241,020) (227,454) (236,634) (287,501) - ----------------------------------------------------------------------------------------------------------------------------------- Loans (net) 9,196,703 7,766,437 8,341,504 8,768,225 6,292,888 Customers' liability on acceptances 1,134,294 1,611,531 1,699,667 2,378,658 2,162,547 Premises and equipment 399,626 385,557 383,460 391,837 377,653 Accounts receivable and accrued interest 2,117,879 571,648 607,520 568,210 638,038 Investment in affiliate 625,333 553,315 534,744 505,918 484,716 Other assets 471,572 252,975 240,809 148,637 160,187 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $39,493,472 $37,146,388 $31,220,805 $29,597,001 $25,466,993 =================================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Noninterest-bearing deposits: In domestic offices $ 1,427,518 $ 1,236,451 $ 953,321 $ 959,906 $ 890,473 In foreign offices 135,251 79,262 95,446 151,409 100,575 Interest-bearing deposits: In domestic offices 8,724,797 9,164,704 8,971,780 9,572,343 7,400,930 In foreign offices 12,513,684 10,621,770 10,362,355 9,303,156 8,132,824 - ----------------------------------------------------------------------------------------------------------------------------------- Total deposits 22,801,250 21,102,187 20,382,902 19,986,814 16,524,802 Short-term borrowings 4,275,439 5,738,822 1,802,744 1,963,018 1,510,420 Acceptances outstanding 1,137,636 1,616,964 1,718,266 2,390,400 2,174,693 Accounts payable and accrued expenses 2,873,903 1,096,163 1,546,412 601,303 859,773 Due to factored clients 614,549 559,211 493,644 499,454 403,760 Other liabilities 188,658 136,191 158,817 56,849 100,296 Long-term debt 2,582,875 2,502,497 1,718,882 1,551,687 1,831,498 Subordinated long-term debt and perpetual capital notes 2,271,940 2,130,924 1,401,543 864,526 689,782 Stockholders' equity: Preferred stock, no par value 556,425 556,425 456,925 309,425 309,425 Common stock, $5 par value 263,516 260,951 260,227 172,027 151,107 Surplus 459,713 447,691 448,303 531,156 380,701 Retained earnings 1,204,818 998,362 832,140 670,342 530,736 Net unrealized gain on securities available for sale, net of taxes 262,750 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 2,747,222 2,263,429 1,997,595 1,682,950 1,371,969 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $39,493,472 $37,146,388 $31,220,805 $29,597,001 $25,466,993 ===================================================================================================================================
83 57 Republic New York Corporation AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID
YEAR ENDED DECEMBER 31, 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE Average INTEREST RATES Interest Rates AVERAGE INCOME/ EARNED/ Average Income/ Earned/ (Dollars in thousands) BALANCE EXPENSE PAID Balance Expense Paid =============================================================================================================================== INTEREST-EARNING ASSETS: Interest-bearing deposits with banks $ 7,452,339 $ 295,871 3.97% $ 7,792,737 $ 385,299 4.94% Investment securities: Taxable 13,190,788 847,022 6.42 11,147,315 807,611 7.24 Exempt from federal income taxes(1) 987,139 96,892 9.82 780,597 95,473 12.23 ---------------------- ---------------------- Total investment securities 14,177,927 943,914 6.66 11,927,912 903,084 7.57 Trading account assets 969,986 54,467 5.62 489,312 22,928 4.69 Federal funds sold and securities purchased under resale agreements 1,069,247 34,323 3.21 1,020,232 37,460 3.67 Loans, net of unearned income(2): Domestic offices(1) 6,422,421 483,474 7.53 6,307,949 529,570 8.40 Foreign offices 2,468,138 152,357 6.17 2,424,483 192,694 7.95 ---------------------- ---------------------- Total loans, net of unearned income 8,890,559 635,831 7.15 8,732,432 722,264 8.27 ---------------------- ---------------------- TOTAL INTEREST-EARNING ASSETS 32,560,058 $1,964,406 6.03% 29,962,625 $2,071,035 6.91% =================== ==================== Cash and due from banks 587,551 393,992 Other assets(3) 4,223,717 3,310,653 ---------- ---------- TOTAL ASSETS $37,371,326 $33,667,270 ========== ========== INTEREST-BEARING FUNDS: Consumer and other time deposits $ 8,274,344 $ 253,012 3.06% $ 8,147,281 $ 329,904 4.05% Certificates of deposit 705,536 22,823 3.23 905,423 35,552 3.93 Deposits in foreign offices 10,680,094 413,399 3.87 8,530,175 439,450 5.15 ---------------------- ---------------------- Total interest-bearing deposits 19,659,974 689,234 3.51 17,582,879 804,906 4.58 Short-term borrowings 5,380,459 197,769 3.68 5,522,013 234,249 4.24 Total long-term debt 4,637,595 270,072 5.82 4,148,477 279,073 6.73 ---------------------- ---------------------- TOTAL INTEREST-BEARING FUNDS 29,678,028 $1,157,075 3.90% 27,253,369 $1,318,228 4.84% =================== ==================== Noninterest-bearing deposits: In domestic offices 1,189,192 962,183 In foreign offices 101,908 88,974 Other liabilities 4,036,916 3,196,603 STOCKHOLDERS' EQUITY: Preferred stock 556,425 540,984 Common stockholders' equity 1,808,857 1,625,157 ---------- ---------- Total stockholders' equity 2,365,282 2,166,141 ---------- ---------- Total liabilities and stockholders' equity $37,371,326 $33,667,270 ========== ========== Interest income/earning assets $1,964,406 6.03% $2,071,035 6.91% Interest expense/earning assets 1,157,075 3.55 1,318,228 4.40 ------------------- -------------------- NET INTEREST DIFFERENTIAL $ 807,331 2.48% $ 752,807 2.51% =================== ====================
(1) Income has been adjusted to a fully-taxable equivalent basis. The rate used for this adjustment was approximately 44% in 1993 and 42% in all other years. (2) Including non-accrual loans. (3) Including allowance for possible loan losses. 84 58 Republic New York Corporation AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID
YEAR ENDED DECEMBER 31, 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ (Dollars in thousands) Balance Expense Paid Balance Expense Paid ==================================================================================================================================== INTEREST-EARNING ASSETS: Interest-bearing deposits with banks $ 8,558,149 $ 591,046 6.91% $ 8,030,285 $ 686,526 8.55% Investment securities: Taxable 7,178,784 637,919 8.89 5,435,151 511,769 9.42 Exempt from federal income taxes(1) 713,579 91,904 12.88 959,569 119,782 12.48 ------------------------ ----------------------- Total investment securities 7,892,363 729,823 9.25 6,394,720 631,551 9.88 Trading account assets 132,122 6,280 4.75 94,978 7,372 7.76 Federal funds sold and securities purchased under resale agreements 819,697 49,059 5.99 1,246,926 100,644 8.07 Loans, net of unearned income(2): Domestic offices(1) 6,906,899 653,183 9.46 7,782,696 790,271 10.15 Foreign offices 2,716,498 266,564 9.81 2,820,683 326,116 11.56 ------------------------ ----------------------- Total loans, net of unearned income 9,623,397 919,747 9.56 10,603,379 1,116,387 10.53 ------------------------ ----------------------- TOTAL INTEREST-EARNING ASSETS 27,025,728 $2,295,955 8.50% 26,370,288 $2,542,480 9.64% =================== ======================= Cash and due from banks 339,478 349,304 Other assets(3) 3,749,075 4,138,431 ---------- ---------- TOTAL ASSETS $31,114,281 $30,858,023 ========== ========== INTEREST-BEARING FUNDS: Consumer and other time deposits $ 7,883,143 $ 481,274 6.11% $ 6,905,784 $ 498,923 7.22% Certificates of deposit 1,443,330 88,589 6.14 1,991,784 153,980 7.73 Deposits in foreign offices 9,095,280 636,126 6.99 9,583,018 804,697 8.40 ------------------------ ----------------------- Total interest-bearing deposits 18,421,753 1,205,989 6.55 18,480,586 1,457,600 7.89 Short-term borrowings 4,080,232 258,010 6.32 4,084,885 366,748 8.98 Total long-term debt 2,562,166 218,662 8.53 2,389,401 219,879 9.20 ------------------------ ----------------------- TOTAL INTEREST-BEARING FUNDS 25,064,151 $1,682,661 6.71% 24,954,872 $2,044,227 8.19% =================== ======================= Noninterest-bearing deposits: In domestic offices 867,493 834,812 In foreign offices 124,640 94,559 Other liabilities 3,213,840 3,421,980 STOCKHOLDERS' EQUITY: Preferred stock 403,260 309,425 Common stockholders' equity 1,440,897 1,242,375 ---------- ---------- Total stockholders' equity 1,844,157 1,551,800 ---------- ---------- Total liabilities and stockholders' equity $31,114,281 $30,858,023 ========== ========== Interest income/earning assets $2,295,955 8.50% $2,542,480 9.64% Interest expense/earning assets 1,682,661 6.23 2,044,227 7.75 ------------------- ----------------------- NET INTEREST DIFFERENTIAL $ 613,294 2.27% $ 498,253 1.89% =================== =======================
YEAR ENDED DECEMBER 31, 1989 - ----------------------------------------------------------------------------------------------- Average Interest Rates Average Income/ Earned/ (Dollars in thousands) Balance Expense Paid =============================================================================================== INTEREST-EARNING ASSETS: Interest-bearing deposits with banks $ 9,141,358 $ 886,114 9.69% Investment securities: Taxable 3,633,231 342,382 9.42 Exempt from federal income taxes(1) 834,157 107,316 12.87 ------------------------- Total investment securities 4,467,388 449,698 10.07 Trading account assets 177,675 8,149 4.59 Federal funds sold and securities purchased under resale agreements 1,542,265 143,600 9.31 Loans, net of unearned income(2): Domestic offices(1) 6,130,598 650,157 10.61 Foreign offices 2,235,963 246,324 11.02 ------------------------- Total loans, net of unearned income 8,366,561 896,481 10.72 ------------------------- TOTAL INTEREST-EARNING ASSETS 23,695,247 $2,384,042 10.06% ==================== Cash and due from banks 351,901 Other assets(3) 3,867,461 ---------- TOTAL ASSETS $27,914,609 ========== INTEREST-BEARING FUNDS: Consumer and other time deposits $ 5,360,446 $ 421,917 7.87% Certificates of deposit 2,266,775 191,184 8.43 Deposits in foreign offices 9,789,883 922,492 9.42 ------------------------- Total interest-bearing deposits 17,417,104 1,535,593 8.82 Short-term borrowings 2,270,187 202,434 8.92 Total long-term debt 2,641,185 252,585 9.56 ------------------------- TOTAL INTEREST-BEARING FUNDS 22,328,476 $1,990,612 8.92% ==================== Noninterest-bearing deposits: In domestic offices 753,897 In foreign offices 94,586 Other liabilities 3,323,189 STOCKHOLDERS' EQUITY: Preferred stock 309,425 Common stockholders' equity 1,105,036 ---------- Total stockholders' equity 1,414,461 ---------- Total liabilities and stockholders' equity $27,914,609 ========== Interest income/earning assets $2,384,042 10.06% Interest expense/earning assets 1,990,612 8.40 -------------------- NET INTEREST DIFFERENTIAL $ 393,430 1.66% ====================
85 59 Appendix A REPUBLIC NEW YORK CORPORATION 1993 Annual Report to Stockholders Graphic and Image Material Cross-Reference Index Information Conveyed by Omitted Graphic Image Omitted Graphic Image - --------------------- ----------------------- Graphs: - ------ Net Interest Income See "Average Balances, Net (Interest Income; Interest Interest Rate Differential, Expense; Net Interest Income). Average Rates Earned and Paid" Omitted from page 29. on pages 84 and 85. Net Interest Rate Differential See "Average Balances, Net (Rate on Interest-Earning Interest Rate Differential, Assets; Rate on Interest- Average Rates Earned and Paid" Bearing Funds; Net Interest on pages 84 and 85. Differential). Omitted from page 30. Loan Loss Recoveries. See "Allowances for Possible Omitted from page 30. Loan Losses" on page 42. Net Income Applicable to See "Consolidated Statements of Common Stock. Omitted Income" on page 82. from page 34. Average Deposits See "Average Balances, Net Interest (Consumer and Other Time Rate Differential, Average Rates Deposits; Certificates of Earned and Paid" on pages 84 and Deposit; Interest-Bearing 85. Deposits in Foreign Offices; Noninterest-Bearing Deposits). Omitted from page 35. Average Interest-Earning See "Average Balances, Net Interest Assets. Omitted from Rate Differential, Average Rates page 38. Earned and Paid" on pages 84 and 85. Average Interest-Earning See "Average Balances, Net Interest Assets (Loans, Net of Rate Differential, Average Rates Unearned Income; Federal Earned and Paid" on pages 84 and Funds Sold; Investment 85. Securities/Trading Account Assets; Interest-Bearing Deposits with Banks). Omitted from page 40. Allowance for Possible Loan See "Allowance for Possible Loan Losses (Allowance for Losses" on pages 42 and 43. Possible Loan Losses as a Percentage of Year End Loans, Net of Unearned Income; Year End Allowance for Possible Loan Losses). Omitted from page 42. Earnings and Dividends Per See "Consolidated Statements of Common Share (Net Income Income" on page 82. Per Common Share Fully Diluted; Cash Dividends Declared Per Common Share). Omitted from page 47. Book Value Per Common Share The book value per common share at at Year End. Omitted from year end was $23.44 for 1989, page 49. $26.61 for 1990, $29.60 for 1991, $32.71 for 1992 and $41.57 for 1993. EX-21 9 SUBSIDIARIES OF THE CORPORATION Exhibit 21 REPUBLIC NEW YORK CORPORATION Subsidiaries Approximate Percentage Jurisdiction of Voting Name of Entity Incorporation Securities -------------- ------------- ----------- Delaware Securities Processing Corp. Delaware 100% R/CLIP Corp. Delaware 100% RCC Futures (Singapore) Ltd. Singapore 100% Republic Asset Management Corporation New York 100% Republic Bank California, N.A. United States 100% Republic International Bank of New York (California) United States 100% Republic Factors Corp. Maryland 100% Republic Fund Services Limited B.V.I. 100% Republic Information and Communications Services, Inc. Maryland 100% RICS NJ, Inc. New Jersey 100% Republic New York Mortgage Corporation Maryland 100% Republic New York Securities Corporation Maryland 100% Republic New York Securities International Limited England 100% Republic New York Trust Company of Florida, N.A. United States 100% RNYC Liquid Portfolio Corporation Delaware 100% RNYC Liquid Portfolio Company Limited Guernsey 100% RNYC-NJ Realty Corp. New Jersey 100% RNYC Securities Limited Canada 100% Republic Bank for Savings New York 100% Brandywine Mortgage Investors Corporation Delaware 100% Delaware Mortgage Investors Corporation Delaware 100% Nevada Asset Management Corporation Nevada 100% Williamsburgh Financial Corporation Delaware 100% Republic National Bank of New York United States 100% Annie Sonnenblick Scholarship Fund, Inc. New York 100% Finalfa S.p.A. Italy 100% Republic Bullion Corporation New York 100% Republic Forex Options Corporation Maryland 100% Republic International Bank of New York United States 100% Republic Leasing (Chile) S.A. Chile 100% RIBNY Overseas Investments Holding Corporation Delaware 100% Republic International Management Company S.A.M. Monaco 100% Republic Leasing (Uruguay) S.A. Uruguay 100% Republic National Bank of New York (Singapore) Limited Singapore 100% Republic National Bank of New York (Uruguay) S.A. Uruguay 100% RNYOIC Limited Guernsey 100% Republic New York Investment Corporation Delaware 100% Republic Overseas Banks Holding Corporation Delaware 100% Republic National Bank of New York (Canada) Canada 100% Republic National Bank of New York (Cayman) Limited Cayman Islands 100% Republic National Bank of New York (International) Ltd. Bahamas 100% Imarui, Importacao, Exportacao, e Servicos Ltda. Brazil 99% Imarui Imoveis e Representacoes Ltda. Brazil 100% Republic Leasing Do Brazil Brazil 50% Republic New York Holdings (UK) Limited England 100% Republic Mase Bank Limited England 100% Republic Mase Australia Limited Australia 100% Republic Mase Australia (NZ) Limited Australia 100% Republic Mase Hong Kong Limited Hong Kong 100% Republic New York (UK) Limited England 100% Safra Republic Holdings S.A. Luxembourg 49.8% Republic Advisory Services Limited Bermuda 100% Republic National Bank of New York (France) S.A. France 100% Republic National Bank of New York (Gibraltar) Limited Gibraltar 100% Republic National Bank of New York (Guernsey) Limited Guernsey 100% Republic International Trust Company Limited Guernsey 100% Republic National Bank of New York (Luxembourg) S.A. Luxembourg 100% Republic National Bank of New York (Suisse) S.A. Switzerland 100% Safra Republic Management Services Guernsey 100% SR Transportation Services S.A. Switzerland 33.3% Safra Republic Investment Limited Guernsey 100% Safra Republic Investments (UK) Limited England 100% RNB Services Limited England 99.5% 15 East 64th Street Corp. New York 100% EX-23 10 CONSENTS OF EXPERTS AND COUNSEL Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Republic New York Corporation We consent to incorporation by reference in Registration Statements (No. 33-49507 and No. 33-42582) on Form S-3 and in Registration Statements (No. 33-44048, No. 33-38789 and No. 33-49639) on Form S-8 of Republic New York Corporation of our report dated January 18, 1994, relating to the consolidated statements of condition of Republic New York Corporation as of December 31, 1993 and 1992, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, and the consolidated statements of condition of Republic National Bank of New York as of December 31, 1993 and 1992, which report appears on page 77 of the 1993 Republic New York Corporation Annual Report to Stockholders, in the Republic New York Corporation Annual Report on Form 10-K. KPMG PEAT MARWICK New York, New York March 28, 1994 -----END PRIVACY-ENHANCED MESSAGE-----