COMMUNITY BANK SYSTEM,
INC.
Dated as of December 8,
2006
This GUARANTEE
AGREEMENT (this “Guarantee”), dated as of
December 8, 2006, is executed and delivered by Community Bank
System, Inc., a Delaware corporation (the “Guarantor”),
and Wilmington Trust Company, a Delaware banking corporation, as
trustee (the “Guarantee Trustee”), for the benefit of
the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of Community Capital Trust IV, a
Delaware statutory trust (the “Issuer”).
WHEREAS, pursuant
to an Amended and Restated Declaration of Trust (the
“Declaration”), dated as of the date hereof among
Wilmington Trust Company, not in its individual capacity but solely
as institutional trustee, the administrators of the Issuer named
therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Issuer,
the Issuer is issuing on the date hereof those undivided beneficial
interests, having an aggregate liquidation amount of $75,000,000.00
(the “Capital Securities”); and
WHEREAS, as
incentive for the Holders to purchase the Capital Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the
extent set forth in this Guarantee, to pay to the Holders of
Capital Securities the Guarantee Payments (as defined herein) and
to make certain other payments on the terms and conditions set
forth herein;
NOW, THEREFORE, in
consideration of the purchase by each Holder of the Capital
Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this
Guarantee for the benefit of the Holders.
DEFINITIONS AND
INTERPRETATION
Section 1.1. Definitions and Interpretation . In
this Guarantee, unless the context otherwise requires:
(a) capitalized
terms used in this Guarantee but not defined in the preamble above
have the respective meanings assigned to them in this
Section 1.1;
(b) a term
defined anywhere in this Guarantee has the same meaning
throughout;
(c) all
references to “the Guarantee” or “this
Guarantee” are to this Guarantee as modified, supplemented or
amended from time to time;
(d) all
references in this Guarantee to “Articles” or
“Sections” are to Articles or Sections of this
Guarantee, unless otherwise specified;
(e) terms
defined in the Declaration as at the date of execution of this
Guarantee have the same meanings when used in this Guarantee,
unless otherwise defined in this Guarantee or unless the context
otherwise requires; and
(f) a
reference to the singular includes the plural and vice
versa.
“
Affiliate ” has the same meaning as given to that term
in Rule 405 of the Securities Act of 1933, as amended, or any
successor rule thereunder.
“
Beneficiaries ” means any Person to whom the Issuer is
or hereafter becomes indebted or liable.
“ Capital
Securities ” has the meaning set forth in the recitals to
this Guarantee.
“ Common
Securities ” means the common securities issued by the
Issuer to the Guarantor pursuant to the Declaration.
“
Corporate Trust Office ” means the office of the
Guarantee Trustee at which the corporate trust business of the
Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this
Guarantee is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust
Administration.
“ Covered
Person ” means any Holder of Capital
Securities.
“
Debentures ” means the debt securities of the
Guarantor designated the Floating Rate Junior Subordinated
Deferrable Interest Debentures due 2036 held by the Institutional
Trustee (as defined in the Declaration) of the Issuer.
“
Declaration Event of Default ” means an “Event
of Default” as defined in the Declaration.
“ Event
of Default ” has the meaning set forth in
Section 2.4(a).
“
Guarantee Payments ” means the following payments or
distributions, without duplication, with respect to the Capital
Securities, to the extent not paid or made by the Issuer:
(i) any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital
Securities to the extent the Issuer shall have funds available
therefor, (ii) the Redemption Price to the extent the Issuer has
funds available therefor, with respect to any Capital Securities
called for redemption by the Issuer, (iii) the Special
Redemption Price to the extent the Issuer has funds available
therefor, with respect to Capital Securities redeemed upon the
occurrence of a Special Event, and (iv) upon a voluntary or
involuntary liquidation, dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange
therefor as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued
and unpaid Distributions on the Capital Securities to the date of
payment, to the extent the Issuer shall have funds available
therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer
(in either case, the “Liquidation
Distribution”).
“
Guarantee Trustee ” means Wilmington Trust Company,
until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Guarantee
and thereafter means each such Successor Guarantee
Trustee.
“
Guarantor ” means Community Bank System, Inc. and each
of its successors and assigns.
“
Holder ” means any holder, as registered on the books
and records of the Issuer, of any Capital Securities;
provided , however , that, in determining whether the
Holders of the requisite percentage of Capital Securities have
given any request, notice, consent or waiver hereunder,
“Holder” shall not include the Guarantor or any
Affiliate of the Guarantor.
“
Indemnified Person ” means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Guarantee Trustee.
“
Indenture ” means the Indenture dated as of the date
hereof between the Guarantor and Wilmington Trust Company, not in
its individual capacity but solely as trustee, and any
indenture
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supplemental
thereto pursuant to which the Debentures are to be issued to the
institutional trustee of the Issuer.
“
Issuer ” has the meaning set forth in the opening
paragraph to this Guarantee.
“
Liquidation Distribution ” has the meaning set forth
in the definition of “Guarantee Payments”
herein.
“
Majority in liquidation amount of the Capital Securities
” means Holder(s) of outstanding Capital Securities, voting
together as a class, but separately from the holders of Common
Securities, of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all
Capital Securities then outstanding.
“
Obligations ” means any costs, expenses or liabilities
(but not including liabilities related to taxes) of the Issuer
other than obligations of the Issuer to pay to holders of any Trust
Securities the amounts due such holders pursuant to the terms of
the Trust Securities.
“
Officer’s Certificate ” means, with respect to
any Person, a certificate signed by one Authorized Officer of such
Person. Any Officer’s Certificate delivered with respect to
compliance with a condition or covenant provided for in this
Guarantee shall include:
(a) a statement
that the officer signing the Officer’s Certificate has read
the covenant or condition and the definitions relating
thereto;
(b) a brief
statement of the nature and scope of the examination or
investigation undertaken by the officer in rendering the
Officer’s Certificate;
(c) a statement
that the officer has made such examination or investigation as, in
such officer’s opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as
to whether, in the opinion of the officer, such condition or
covenant has been complied with.
“
Person ” means a legal person, including any
individual, corporation, estate, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever
nature.
“
Redemption Price ” has the meaning set forth in the
Indenture.
“
Responsible Officer ” means, with respect to the
Guarantee Trustee, any officer within the Corporate Trust Office of
the Guarantee Trustee including any Vice President, Assistant Vice
President, Secretary, Assistant Secretary or any other officer of
the Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also,
with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that
officer’s knowledge of and familiarity with the particular
subject.
“ Special
Event ” has the meaning set forth in the
Indenture.
“ Special
Redemption Price ” has the meaning set forth in the
Indenture.
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“
Successor Guarantee Trustee ” means a successor
Guarantee Trustee possessing the qualifications to act as Guarantee
Trustee under Section 3.1.
“ Trust
Securities ” means the Common Securities and the Capital
Securities.
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 2.1. Powers and Duties of the Guarantee
Trustee .
(a) This
Guarantee shall be held by the Guarantee Trustee for the benefit of
the Holders of the Capital Securities, and the Guarantee Trustee
shall not transfer this Guarantee to any Person except a Holder of
Capital Securities exercising his or her rights pursuant to
Section 4.4(b) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment
to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any
Successor Guarantee Trustee, and such vesting and cessation of
title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) If an
Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders
of the Capital Securities.
(c) The
Guarantee Trustee, before the occurrence of any Event of Default
and after curing all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set
forth in this Guarantee, and no implied covenants shall be read
into this Guarantee against the Guarantee Trustee. In case an Event
of Default has occurred (that has not been waived pursuant to
Section 2.4) and is actually known to a Responsible Officer of
the Guarantee Trustee, the Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Guarantee, and use the
same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(d) No
provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the
occurrence of any Event of Default and after the curing or waiving
of all such Events of Default that may have occurred:
(A) the duties and
obligations of the Guarantee Trustee shall be determined solely by
the express provisions of this Guarantee, and the Guarantee Trustee
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee, and no
implied covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
(B) in the absence
of bad faith on the part of the Guarantee Trustee, the Guarantee
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and
conforming to the requirements of this Guarantee; but in
the
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case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee, the
Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Guarantee;
(ii) the Guarantee
Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer of the Guarantee Trustee, unless it
shall be proved that such Responsible Officer of the Guarantee
Trustee or the Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the
Guarantee Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the written direction of the Holders of not less than a Majority in
liquidation amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or relating to the exercise of
any trust or power conferred upon the Guarantee Trustee under this
Guarantee; and
(iv) no provision
of this Guarantee shall require the Guarantee Trustee to expend or
risk its own funds or otherwise incur personal financial liability
in the performance of any of its duties or in the exercise of any
of its rights or powers, if the Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds
is not reasonably assured to it under the terms of this Guarantee
or security and indemnity, reasonably satisfactory to the Guarantee
Trustee, against such risk or liability is not reasonably assured
to it.
Section 2.2. Certain Rights of Guarantee Trustee
.
(a) Subject
to the provisions of Section 2.1:
(i) The Guarantee
Trustee may conclusively rely, and shall be fully protected in
acting or refraining from acting upon, any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the proper
party or parties.
(ii) Any direction
or act of the Guarantor contemplated by this Guarantee shall be
sufficiently evidenced by an Officer’s
Certificate.
(iii) Whenever, in
the administration of this Guarantee, the Guarantee Trustee shall
deem it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Guarantee
Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and
conclusively rely upon an Officer’s Certificate of the
Guarantor which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee
Trustee shall have no duty to see to any recording, filing or
registration of any instrument (or any re-recording, refiling or
re-registration thereof).
(v) The Guarantee
Trustee may consult with counsel of its selection, and the advice
or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and
in accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any
5
of its
Affiliates and may include any of its employees. The Guarantee
Trustee shall have the right at any time to seek instructions
concerning the administration of this Guarantee from any court of
competent jurisdiction.
(vi) The Guarantee
Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Guarantee at the request or
direction of any Holder, unless such Holder shall have provided to
the Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Guarantee Trustee, against the costs, expenses
(including attorneys’ fees and expenses and the expenses of
the Guarantee Trustee’s agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Guarantee Trustee; provided ,
however , that nothing contained in this
Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon
the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this
Guarantee.
(vii) The
Guarantee Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee,
in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(viii) The
Guarantee Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents, nominees, custodians or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it
hereunder.
(ix) Any action
taken by the Guarantee Trustee or its agents hereunder shall bind
the Holders of the Capital Securities, and the signature of the
Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be
required to inquire as to the authority of the Guarantee Trustee to
so act or as to its compliance with any of the terms and provisions
of this Guarantee, both of which shall be conclusively evidenced by
the Guarantee Trustee’s or its agent’s taking such
action.
(x) Whenever in
the administration of this Guarantee the Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request instructions from the
Holders of a Majority in liquidation amount of the Capital
Securities, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are
received, and (iii) shall be protected in conclusively relying
on or acting in accordance with such instructions.
(xi) The Guarantee
Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith, without negligence, and
reasonably believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Guarantee.
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