PROSPECTUS
PATRIOT CAPITAL TRUST I
OFFER TO EXCHANGE ITS
10.30% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10.30% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
PATRIOT BANK CORP., INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON FEBRUARY 27, 1998, UNLESS
EXTENDED
PATRIOT CAPITAL TRUST I, A TRUST FORMED UNDER THE LAWS OF
THE STATE OF DELAWARE (THE "TRUST"), HEREBY OFFERS, UPON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS PROSPECTUS
(AS THE SAME MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME,
THE "PROSPECTUS") AND IN THE ACCOMPANYING LETTER OF TRANSMITTAL
(WHICH TOGETHER CONSTITUTE THE "EXCHANGE OFFER"), TO EXCHANGE UP
TO $19,000,000 AGGREGATE LIQUIDATION AMOUNT OF ITS 10.30%
EXCHANGE CAPITAL SECURITIES (THE "EXCHANGE CAPITAL SECURITIES")
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), PURSUANT TO A REGISTRATION
STATEMENT (AS DEFINED HEREIN) OF WHICH THIS PROSPECTUS
CONSTITUTES A PART, FOR A LIKE LIQUIDATION AMOUNT OF ITS
OUTSTANDING 10.30% CAPITAL SECURITIES (THE "ORIGINAL CAPITAL
SECURITIES"), OF WHICH $19,000,000 AGGREGATE LIQUIDATION AMOUNT
IS OUTSTANDING. PURSUANT TO THE EXCHANGE OFFER, PATRIOT BANK
CORP., A DELAWARE CORPORATION (THE "CORPORATION" OR "PATRIOT"),
IS ALSO OFFERING TO EXCHANGE (I) ITS GUARANTEE OF PAYMENTS OF
CASH DISTRIBUTIONS AND PAYMENTS ON LIQUIDATION OF THE TRUST OR
REDEMPTION OF THE ORIGINAL CAPITAL SECURITIES (THE "ORIGINAL
GUARANTEE") FOR A LIKE GUARANTEE IN RESPECT OF THE EXCHANGE
CAPITAL SECURITIES (THE "EXCHANGE GUARANTEE") AND
(II) $19,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS 10.30% JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE JUNE 1, 2027 (THE
"ORIGINAL JUNIOR SUBORDINATED DEBENTURES") FOR A LIKE AGGREGATE
PRINCIPAL AMOUNT OF ITS 10.30% EXCHANGE JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES DUE JUNE 1, 2027 (THE "EXCHANGE
JUNIOR SUBORDINATED DEBENTURES"), WHICH EXCHANGE GUARANTEE AND
EXCHANGE JUNIOR SUBORDINATED DEBENTURES ALSO HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT. THE ORIGINAL CAPITAL SECURITIES, THE
ORIGINAL GUARANTEE AND THE ORIGINAL JUNIOR SUBORDINATED
DEBENTURES ARE COLLECTIVELY REFERRED TO HEREIN AS THE "ORIGINAL
SECURITIES" AND THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
GUARANTEE AND THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES ARE
COLLECTIVELY REFERRED TO HEREIN AS THE "EXCHANGE SECURITIES."
THE TERMS OF THE EXCHANGE SECURITIES ARE IDENTICAL IN ALL
MATERIAL RESPECTS TO THE RESPECTIVE TERMS OF THE ORIGINAL
SECURITIES, EXCEPT THAT (1) THE EXCHANGE SECURITIES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT AND THEREFORE WILL NOT BE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER APPLICABLE TO THE
ORIGINAL SECURITIES, (2) THE EXCHANGE CAPITAL SECURITIES WILL NOT
PROVIDE FOR ANY INCREASE IN THE DISTRIBUTION RATE THEREON AND
(3) THE EXCHANGE JUNIOR SUBORDINATED DEBENTURES WILL NOT PROVIDE
FOR ANY LIQUIDATED DAMAGES THEREON. SEE "DESCRIPTION OF EXCHANGE
SECURITIES" AND "DESCRIPTION OF ORIGINAL SECURITIES." THE
EXCHANGE CAPITAL SECURITIES ARE BEING OFFERED FOR EXCHANGE IN
ORDER TO SATISFY CERTAIN OBLIGATIONS OF THE CORPORATION AND THE
TRUST UNDER THE REGISTRATION RIGHTS AGREEMENT DATED AS OF JUNE 5,
1997 (THE "REGISTRATION AGREEMENT") AMONG THE CORPORATION, THE
TRUST AND THE INITIAL PURCHASERS (AS DEFINED HEREIN). IN THE
EVENT THAT THE EXCHANGE OFFER IS CONSUMMATED, ANY ORIGINAL
CAPITAL SECURITIES WHICH REMAIN OUTSTANDING AFTER CONSUMMATION OF
THE EXCHANGE OFFER AND THE EXCHANGE CAPITAL SECURITIES ISSUED IN
THE EXCHANGE OFFER WILL VOTE TOGETHER AS A SINGLE CLASS FOR
PURPOSES OF DETERMINING WHETHER HOLDERS OF THE REQUISITE
PERCENTAGE IN OUTSTANDING LIQUIDATION AMOUNT THEREOF HAVE TAKEN
CERTAIN ACTIONS OR EXERCISED CERTAIN RIGHTS UNDER THE
DECLARATION. (CONTINUED ON THE FOLLOWING PAGE)
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST
BEING MAILED TO ALL HOLDERS OF ORIGINAL CAPITAL SECURITIES ON
JANUARY 14, 1998.
SEE "RISK FACTORS" COMMENCING ON PAGE __ FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING
WHETHER TO TENDER ORIGINAL CAPITAL SECURITIES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is November 14, 1997.
<PAGE>
(Continued from the previous page)
The Exchange Capital Securities and the Original Capital
Securities (collectively, the "Capital Securities") represent
beneficial interests in the assets of the Trust. The Corporation
is the owner of all of the beneficial interests represented by
common securities of the Trust (the "Common Securities," and
together with the Capital Securities, the "Trust Securities").
The Bank of New York is the Property Trustee of the Trust. The
Trust exists for the sole purpose of issuing the Trust Securities
and investing the proceeds thereof in the Junior Subordinated
Debentures (as defined herein). The Junior Subordinated
Debentures mature on June 1, 2027 (the "Stated Maturity"). The
Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or
otherwise. See "Description of Exchange Securities--Description
of Exchange Capital Securities--Subordination of Common
Securities."
As used herein, (i) the "Indenture" means the Indenture,
dated as of June 1, 1997, as amended and supplemented, between
the Corporation and The Bank of New York, as Debenture Trustee
(the "Debenture Trustee"), and (ii) the "Declaration" means the
Amended and Restated Declaration of Trust relating to the Trust
among the Corporation, as Sponsor, The Bank of New York as
Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware) as Delaware Trustee (the "Delaware Trustee"), and the
Administrative Trustees named therein (collectively, with the
Property Trustee and Delaware Trustee, the "Issuer Trustees").
In addition, as the context may require, (i) the term "Junior
Subordinated Debentures" includes the Original Junior
Subordinated Debentures and the Exchange Junior Subordinated
Debentures and (ii) the term "Guarantee" includes the Original
Guarantee and the Exchange Guarantee.
Holders of the Trust Securities will be entitled to receive
cumulative cash distributions arising from the payment of
interest on the Junior Subordinated Debentures accruing from
June 5, 1997 and payable semi-annually in arrears on the 1st day
of June and December of each year, commencing December 1, 1997,
at the annual rate of 10.30% of the Liquidation Amount of $1,000
per Exchange Capital Security and at the annual rate of 10.30% of
the Liquidation Amount of $1,000 per Common Security
("Distributions"). Subject to certain exceptions, the
Corporation has the right to defer payments of interest on the
Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 10 consecutive semi-annual periods
with respect to each deferral period (each, an "Extension
Period"); provided, however, that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures.
Upon the termination of any Extension Period and the payment of
all interest then accrued and unpaid (together with interest
thereon at the rate of 10.30%, compounded semi-annually, to the
extent permitted by applicable law), the Corporation may elect to
begin a new Extension Period, subject to the requirements set
forth herein. If interest payments on the Junior Subordinated
Debentures are so deferred, during any Extension Period,
Distributions on the Trust Securities will also be deferred and
the Corporation will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash
distributions with respect to the Corporation's capital stock
(which includes common and preferred stock) or to make any
payment with respect to debt securities of the Corporation that
rank pari passu in all respects with or junior to the Junior
Subordinated Debentures. During an Extension Period, interest on
the Junior Subordinated Debentures will continue to accrue (and
the amount of Distributions to which holders of the Trust
Securities are entitled will accumulate) at the rate of 10.30%
per annum, compounded semi-annually, and holders of Trust
Securities will be required to accrue interest income for United
States federal income tax purposes. See "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain
United States Federal Income Tax Consequences--Interest Income
and Original Issue Discount."
<PAGE>
The Corporation has, through the Guarantee, the Declaration,
the Junior Subordinated Debentures and the Indenture (each as
defined herein), taken together, fully, irrevocably and
unconditionally guaranteed, as described herein, all of the
Trust's obligations under the Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange
Junior Subordinated Debentures and the Exchange Guarantee--Full
and Unconditional Guarantee." Pursuant to the Exchange Guarantee,
the Corporation will guarantee the payment of Distributions and
payments on liquidation or redemption of the Exchange Capital
Securities, but only in each case to the extent of funds held by
the Trust, as described herein. See "Description of Exchange
Securities--Description of Exchange Guarantee." If the
Corporation does not make interest payments on the Junior
Subordinated Debentures held by the Trust, the Trust will have
insufficient funds to pay Distributions on the Capital
Securities. The Guarantee does not cover the payment of
Distributions when the Trust does not have sufficient funds to
pay such Distributions. In such event, a holder of Capital
Securities may institute a legal proceeding directly against the
Corporation for enforcement of payment to such holder of the
principal of or interest on Junior Subordinated Debentures having
a principal amount equal to the aggregate Liquidation Amount of
the Capital Securities held by such holder (a "Direct Action").
See "Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Exchange Capital Securities." The obligations of the
Corporation under the Guarantee and the Junior Subordinated
Debentures are subordinate and junior in right of payment to all
Senior Indebtedness (as defined in "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Subordination") of the Corporation. In addition,
because the Corporation is a holding company, the Junior
Subordinated Debentures and the Guarantee are effectively
subordinated to all existing and future liabilities of the
Corporation's subsidiaries, including deposits.
The Trust Securities will be subject to mandatory redemption
(i) in whole, but not in part, at the Stated Maturity of the
Junior Subordinated Debentures upon the redemption thereof at a
redemption price equal to the principal amount of, plus accrued
interest on, the Junior Subordinated Debentures (the "Maturity
Redemption Price"), (ii) in whole, but not in part, at any time
prior to June 1, 2007, contemporaneously with the optional
redemption of the Junior Subordinated Debentures, upon the
occurrence and continuation of a Special Event (as defined
herein) at a redemption price equal to the Special Event
Prepayment Price (as defined herein) (the "Special Event
Redemption Price"), and (iii) in whole or in part on or after
June 1, 2007 contemporaneously with any optional redemption by
the Corporation of Junior Subordinated Debentures at a redemption
price (the "Optional Redemption Price") equal to the Optional
Prepayment Price (as defined below). Any of the Maturity
Redemption Price, the Special Event Redemption Price or the
Optional Redemption Price may be referred to herein as the
"Redemption Price." See "Description of Exchange Securities--
Description of Exchange Capital Securities--Mandatory
Redemption." Subject to the Corporation having received any
required regulatory approval to do so, the Junior Subordinated
Debentures are redeemable prior to the Stated Maturity (i) at the
option of the Corporation on or after June 1, 2007, in whole or
in part at any time at a redemption price (the "Optional
Prepayment Price") equal to 105.150% of the principal amount
thereof on June 1, 2007 declining ratably on each June 1
thereafter to 100% on or after June 1, 2017, plus accrued and
unpaid interest thereon to the date of redemption or (ii) at any
time prior to June 1, 2007, in whole but not in part, upon the
occurrence and continuation of a Special Event, at a redemption
price (the "Special Event Prepayment Price" equal to the greater
of (a) 100% of the principal amount thereof or (b) the sum, as
determined by a Quotation Agent (as defined herein), of the
present values of the principal amount and premium payable as
part of the prepayment price with respect to an optional
redemption of such Junior Subordinated Debentures on June 1,
2007, together with scheduled payments of interest accruing from
the redemption date to June 1, 2007, in each case, discounted to
the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury
Rate (as defined herein), plus accrued but unpaid interest
thereon to the date of redemption. See "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Optional Redemption" and "--Special Event
Prepayment."
The Corporation, as the holder of the outstanding Common
Securities, has the right at any time (including, without
limitation, upon the occurrence of a Tax Event (as defined
herein)) to terminate the Trust and cause a Like Amount (as
defined herein) of the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities upon
liquidation of the Trust, subject to (i) the Corporation having
received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital
Securities and (ii) any required regulatory approval. In the
event of such termination of the Trust, after satisfaction of
liabilities to creditors of the Trust as required by applicable
law, the holders of the Capital Securities generally will be
entitled to receive a Liquidation Amount of $1,000 per Capital
Security plus accumulated and unpaid Distributions thereon to the
date of payment, which shall be in the form of a distribution of
a Like Amount of Junior Subordinated Debentures, subject to
certain exceptions. See "Description of Exchange Securities--
Description of Exchange Capital Securities--Liquidation of the
Trust and Distribution of Junior Subordinated Debentures."
The Capital Securities, including the Exchange Capital
Securities when issued, may be transferred only in blocks having
a Liquidation Value of not less than $100,000 (100 Capital
Securities)
The Trust is making the Exchange Offer of the Exchange
Capital Securities in reliance on the position of the staff of
the Division of Corporation Finance of the Securities and
Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other
transactions. However, neither the Corporation nor the Trust has
sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the
Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Corporation and the
Trust believe that Exchange Capital Securities issued pursuant to
this Exchange Offer in exchange for Original Capital Securities
may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course
of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of
the Securities Act) of such Exchange Capital Securities.
However, any holder of Original Capital Securities who is an
"affiliate" of the Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust to resell pursuant to
Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (a) will not be
able to rely on the interpretations of the staff of the Division
of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Original Capital Securities in the
Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Original
Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described
below, if any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market-making or
other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-
dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange
Capital Securities.
<PAGE>
Each holder of Original Capital Securities who wishes to
exchange Original Capital Securities for Exchange Capital
Securities in the Exchange Offer will be required to represent
that (i) it is not an "affiliate" of the Corporation or the
Trust, (ii) any Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital
Securities. In addition, the Corporation and the Trust may
require such holder, as a condition to such holder's eligibility
to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) on behalf of whom such holder holds the Capital
Securities to be exchanged in the Exchange Offer. Each broker-
dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it
acquired the Original Capital Securities for its own account as
the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters
referred to above, the Corporation and the Trust believe that
broker-dealers who acquired Original Capital Securities for their
own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers"), may fulfill
their prospectus delivery requirements with respect to the
Exchange Capital Securities received upon exchange of such
Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial
sale of the Original Capital Securities) with a prospectus
meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains
a description of the plan of distribution with respect to the
resale of such Exchange Capital Securities. Each broker-dealer
that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of Exchange Capital Securities received in exchange for Original
Capital Securities acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust
and the Corporation have agreed that, ending on the close of
business on the 180th day following the Expiration Date (as
described herein), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, a Participating Broker-Dealer
who intends to use this Prospectus in connection with the resale
of Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the
Corporation or the Trust, or cause the Corporation or the Trust
to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses
set forth herein under "The Exchange Offer-- Exchange Agent."
Any Participating Broker-Dealer who is an "affiliate" of the
Corporation or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with
any resale transaction. See "The Exchange Offer--Resales of
Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who
surrenders Original Capital Securities pursuant to the Exchange
Offer will be deemed to have agreed, by execution of the Letter
of Transmittal, that upon receipt of notice from the Corporation
or the Trust of the occurrence of any event or the discovery of
any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or
which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Agreement,
such Participating Broker-Dealer will suspend the sale of
Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) pursuant
to this Prospectus until the Corporation or the Trust has amended
or supplemented this Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented
Prospectus to such Participating Broker-Dealer, or the
Corporation or the Trust has given notice that the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be. If the Corporation or the Trust
gives such notice to suspend the sale of the Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 180-
day period referred to above during which Participating Broker-
Dealers are entitled to use this Prospectus in connection with
the resale of Exchange Capital Securities by the number of days
during the period from and including the date of the giving of
such notice to and including the date when Participating Broker-
Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital
Securities or to and including the date on which the Corporation
or the Trust has given notice that the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the
case may be.
Prior to the Exchange Offer, there has been only a limited
secondary market and no public market for the Original Capital
Securities. The Exchange Capital Securities will be a new issue
of securities for which there currently is no market. Although
the Initial Purchasers have informed the Corporation and the
Trust that they each currently intend to make a market in the
Exchange Capital Securities, they are not obligated to do so, and
any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital
Securities. The Corporation and the Trust currently do not
intend to apply for listing of the Exchange Capital Securities on
any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Any Original Capital Securities not tendered and accepted in
the Exchange Offer will remain outstanding and will be entitled
to all the same rights and will be subject to the same
limitations applicable thereto under the Declaration (except for
those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the
holders of Original Capital Securities will continue to be
subject to all of the existing restrictions upon transfer
thereof, and neither the Corporation nor the Trust will have any
further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the
Securities Act of the Original Capital Securities held by them.
To the extent that Original Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell
untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION. HOLDERS OF ORIGINAL CAPITAL
SECURITIES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Original Capital Securities may be tendered for exchange on
or prior to 5:00 p.m., New York City time, on February 27, 1998
(such time on such date being hereinafter called the "Expiration
Date"), unless the Exchange Offer is extended by the Corporation
or the Trust (in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is
extended). Tenders of Original Capital Securities may be
withdrawn at any time on or prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Original Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain
events and conditions which may be waived by the Corporation or
the Trust and to the terms and provisions of the Registration
Agreement. Original Capital Securities may be tendered in whole
or in part having an aggregate Liquidation Amount of not less
than $100,000 (100 Capital Securities) or any integral multiple
of $1,000 Liquidation Amount (one Capital Security) in excess
thereof. The Corporation, as Issuer of the Junior Subordinated
Debentures, has agreed to pay all expenses of the Exchange Offer.
See "The Exchange Offer--Fees and Expenses." Holders of the
Original Capital Securities whose Original Capital Securities are
accepted for exchange will not receive Distributions on such
Original Capital Securities and will be deemed to have waived the
right to receive any Distributions on such Original Capital
Securities accumulated from and after December 1, 1997. See "The
Exchange Offer--Distributions on Exchange Capital Securities."
Neither the Corporation nor the Trust will receive any cash
proceeds from the issuance of the Exchange Capital Securities
offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of
Distribution."
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THIS EXCHANGE OFFER AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
TABLE OF CONTENTS
Page
Available Information
Incorporation of Certain Documents by Reference
Summary
Risk Factors
Ratios of Earnings to Fixed Charges
Patriot Capital Trust I
Patriot Bank Corp.
Selected Financial Data
Capitalization
Accounting Treatment
The Exchange Offer
Description of Exchange Securities
Description of Original Securities
Relationship Among the Exchange Capital Securities, the
Exchange Junior Subordinated Debentures and the
Exchange Guarantee
Certain United States Federal Income Tax Consequences
ERISA Considerations
Plan of Distribution
Validity of Exchange Securities
Experts
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports, proxy
statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected
and copied at the public reference facilities of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, Suite 1300, New York, New York 10048
and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed
electronically by means of the Commission's home page on the
Internet (http://www.sec.gov.). The Corporation's common stock
is traded on the NASDAQ National Market. Such reports, proxy
statements and other information concerning the Corporation can
be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street N.W., Washington, D.C.
20006.
No separate financial statements of the Trust have been
included herein. The Corporation and the Trust do not consider
that such financial statements would be material to holders of
the Capital Securities because the Trust is a newly formed
special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage
in any activity other than holding as trust assets the Junior
Subordinated Debentures and issuing the Trust Securities. See
"Patriot Capital Trust I" and "Description of Exchange
Securities." In addition, the Corporation does not expect that
the Trust will file reports under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration
statement on Form S-4 (the "Registration Statement") filed by the
Corporation and the Trust with the Commission under the
Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and
regulations of the Commission, and reference is hereby made to
the Registration Statement and to the exhibits relating thereto
for further information with respect to the Corporation, the
Trust and the Exchange Securities. Any statements contained
herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the
Commission are incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for
the year ended December 31, 1996;
2. The Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 (as amended on May 30,
1997);
3. The Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (as amended on
September 9, 1997); and
4. The Corporation's Current Report on Form 8-K dated
May 29, 1997.
Each document or report subsequently filed by the
Corporation pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and prior to the termination
of the offering of the Exchange Securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus
and to be a part of this Prospectus from the date of filing of
such document. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean
this Prospectus including the documents incorporated or deemed to
be incorporated herein by reference, as the same may be amended,
supplemented or otherwise modified from time to time. Statements
contained in this Prospectus as to the contents of any contract
or other document referred to herein do not purport to be
complete, and where reference is made to the particular
provisions of such contract or other document, such provisions
are qualified in all respects by reference to all of the
provisions of such contract or other document. The Corporation
will provide without charge to any person to whom this Prospectus
is delivered, on the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated by
reference herein (other than exhibits not specifically
incorporated by reference into the texts of such documents).
Requests for such documents should be directed to: Patriot Bank
Corp., High and Hanover Streets, Pottstown, Pennsylvania 19464,
Attention: Diane M. Davidheiser. Telephone requests may be
directed to Ms. Davidheiser at (610) 323-1500.
<PAGE>
SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus. Reference is made to, and this
summary is qualified in its entirety by, the more detailed
information and financial statements, including the notes
thereto, contained elsewhere in this Prospectus and in documents
incorporated by reference hereto.
PATRIOT CAPITAL TRUST I
The Trust is a statutory business trust formed under
Delaware law pursuant to (i) the Declaration and (ii) the filing
of a certificate of trust with the Delaware Secretary of State on
May 29, 1997. The Trust's business and affairs are conducted by
the Issuer Trustees: The Bank of New York, as Property Trustee,
The Bank of New York (Delaware), as Delaware Trustee, and three
individual Administrative Trustees who are employees or officers
of or affiliated with the Corporation. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures issued
by the Corporation and (iii) engaging in only those other
activities necessary, advisable or incidental thereto (such as
registering the transfer of the Capital Securities). The Junior
Subordinated Debentures will be the sole assets of the Trust, and
payments under the Junior Subordinated Debentures will be the
sole revenues of the Trust. All of the Common Securities will be
owned directly or indirectly by the Corporation.
PATRIOT BANK CORP.
General
The Corporation is a Delaware corporation and bank holding
company which was organized in August 1995 to acquire all of the
capital stock of Patriot Bank (the "Bank") issued in connection
with the Bank's conversion from mutual to stock form of ownership
in December 1995. The Corporation is headquartered in Pottstown,
Pennsylvania and is the holding company for the Bank and Patriot
Investment Company ("PIC"). The Corporation reported net income
of $1,647,000 or $.41 per share for the six-month period ended
June 30, 1997 and net income of $2,811,000 or $.66 per share for
the year ended December 31, 1996 (excluding a special after-tax
charge of $836,000 representing the special deposit insurance
assessment levied by the FDIC on all SAIF member institutions).
At June 30, 1997, the Corporation had total assets of
$699.0 million and total stockholders' equity of $49.5 million.
The Bank is a Pennsylvania state chartered commercial bank
which conducts business from its executive offices in Pottstown,
Pennsylvania and its 13 community banking offices located in
Montgomery, Berks, Lehigh, Northampton and Chester Counties,
Pennsylvania. The Bank is a community-oriented financial
services provider whose business primarily consists of attracting
retail deposits from the general public and small businesses and
originating mortgage, consumer and commercial loans in the Bank's
market area. The Bank also invests in investment and mortgage-
backed securities and uses advances from the Federal Home Loan
Bank of Pittsburgh and repurchase agreements as sources of funds.
At June 30, 1997, the Bank had total assets of $665.6 million and
total stockholder's equity of $34.7 million.
Prior to May 23, 1997, the Bank was a federally-chartered
savings bank. The Bank converted to a Pennsylvania-chartered
commercial bank in order to provide expanded commercial products
and services.
PIC is a Delaware investment corporation whose primary
business consists of maintaining an investment portfolio. At
June 30, 1997, PIC had total assets of $35.7 million and total
stockholder's equity of $25.1 million.
Recent Developments
On August 25, 1997, Patriot announced a 20% stock dividend
that was paid on September 22, 1997 to stockholders of record on
September 8, 1997. The earnings per share and other per share
data stated in this Prospectus have not been adjusted to reflect
such stock split.
On August 21, 1997, Patriot announced that it had entered
into a letter of intent to acquire First Nations Capital Corp., a
privately-owned small-ticket commercial leasing company
headquartered in Reading, Pennsylvania. The acquisition is
expected to be completed in the fourth quarter of 1997. Upon
completion of the acquisition, First Nations Capital Corp. will
be renamed Patriot Commercial Leasing Company.
On July 28, 1997, the Corporation completed the repurchase
of 449,537 shares of its common stock pursuant to a "Modified
Dutch Auction" self-tender offer. The shares were repurchased at
a price of $18.00 per share.
Patriot announced on August 8, 1997 that it had entered into
a nonbinding letter of intent to sell certain of the deposits and
the physical facility of the Bank's Topton, Pennsylvania branch
to National Penn Bank. The sale is subject to regulatory
approval and is expected to be completed during the fourth
quarter of 1997.
The Corporation is a legal entity separate and distinct from
its subsidiaries. The ability of holders of debt and equity
securities of the Corporation to benefit from the distribution of
assets of any subsidiary upon the liquidation or reorganization
of such subsidiary is subordinate to prior claims of creditors of
the subsidiary (including depositors in the case of banking
subsidiaries) except to the extent that a claim of the
Corporation as a creditor may be recognized.
In addition, there are regulatory limitations on the payment
of dividends directly or indirectly to the Corporation from its
existing banking subsidiaries. Under applicable banking
statutes, at June 30, 1997, the Corporation's banking subsidiary
could have declared additional dividends of approximately
$7.5 million. However, Federal and state regulatory agencies
also have the authority to limit further the Corporation's
banking subsidiaries' payment of dividends based on other
factors, such as the maintenance of adequate capital for such
subsidiary bank, which could reduce the amount of dividends
otherwise payable.
THE EXCHANGE OFFER
The Exchange Offer Up to $19,000,000 aggregate Liquidation
Amount of Exchange Capital Securities
are being offered in exchange for a like
aggregate Liquidation Amount of Original
Capital Securities. Original Capital
Securities may be tendered for exchange
in whole or in part in a Liquidation
Amount of $100,000 (100 Capital
Securities) or any integral multiple of
$1,000 (one Capital Security) in excess
thereof. The Corporation and the Trust
are making the Exchange Offer in order
to satisfy their obligations under the
Registration Agreement relating to the
Original Capital Securities. For a
description of the procedures for
tendering Original Capital Securities,
see "The Exchange Offer--Procedures for
Tendering Original Capital Securities."
Expiration Date 5:00 p.m., New York City time, on
February 27, 1998, unless the Exchange
Offer is extended by the Corporation or
the Trust (in which case the Expiration
Date will be the latest date and time to
which the Exchange Offer is extended).
See "The Exchange Offer--Terms of the
Exchange Offer."
Conditions to the
Exchange Offer The Exchange Offer is subject to certain
conditions, which may be waived by the
Corporation and the Trust in their sole
discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation
Amount of Original Capital Securities
being tendered. See "The Exchange
Offer--Conditions to the Exchange
Offer."
Terms of the Exchange
Offer The Corporation and the Trust reserve
the right in their sole and absolute
discretion, subject to applicable law,
at any time and from time to time,
(i) to delay the acceptance of the
Original Capital Securities for
exchange, (ii) to terminate the Exchange
Offer if certain specified conditions
have not been satisfied, (iii) to extend
the Expiration Date of the Exchange
Offer and retain all Original Capital
Securities tendered pursuant to the
Exchange Offer, subject, however, to the
right of holders of Original Capital
Securities to withdraw their tendered
Original Capital Securities, or (iv) to
waive any condition or otherwise amend
the terms of the Exchange Offer in any
respect. See "The Exchange Offer--Terms
of the Exchange Offer."
Withdrawal Rights Tenders of Original Capital Securities
may be withdrawn at any time on or prior
to the Expiration Date by delivering a
written notice of such withdrawal to the
Exchange Agent in conformity with
certain procedures set forth below under
"The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital
Securities Tendering holders of Original Capital
Securities must complete and sign a
Letter of Transmittal in accordance with
the instructions contained therein and
forward the same by mail, facsimile or
hand delivery, together with any other
required documents, to the Exchange
Agent, either with the Original Capital
Securities to be tendered or in
compliance with the specified procedures
for guaranteed delivery of Original
Capital Securities. Certain brokers,
dealers, commercial banks, trust
companies and other nominees may also
effect tenders by book-entry transfer.
Holders of Original Capital Securities
registered in the name of a broker,
dealer, commercial bank, trust company
or other nominee are urged to contact
such person promptly if they wish to
tender Original Capital Securities
pursuant to the Exchange Offer. See
"The Exchange Offer--Procedures for
Tendering Original Capital Securities."
Letters of Transmittal and certificates
representing Original Capital Securities
should not be sent to the Corporation or
the Trust. Such documents should only
be sent to the Exchange Agent.
Resales of Exchange
Capital Securities The Corporation and the Trust are making
the Exchange Offer in reliance on the
position of the staff of the Division of
Corporation Finance of the Commission as
set forth in certain interpretive
letters addressed to third parties in
other transactions. However, neither
the Corporation nor the Trust has sought
its own interpretive letter and there
can be no assurance that the staff of
the Division of Corporation Finance of
the Commission would make a similar
determination with respect to the
Exchange Offer as it has in such
interpretive letters to third parties.
Based on these interpretations by the
staff of the Division of Corporation
Finance of the Commission, and subject
to the two immediately following
sentences, the Corporation and the Trust
believe that Exchange Capital Securities
issued pursuant to this Exchange Offer
in exchange for Original Capital
Securities may be offered for resale,
resold and otherwise transferred by a
holder thereof (other than a holder who
is a broker-dealer) without further
compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such
Exchange Capital Securities are acquired
in the ordinary course of such holder's
business and that such holder is not
participating, and has no arrangement or
understanding with any person to
participate, in a distribution (within
the meaning of the Securities Act) of
such Exchange Capital Securities.
However, any holder of Original Capital
Securities who is an "affiliate" of the
Corporation or the Trust or who intends
to participate in the Exchange Offer for
the purpose of distributing the Exchange
Capital Securities, or any broker-dealer
who purchased the Original Capital
Securities from the Trust to resell
pursuant to Rule 144A or any other
available exemption under the Securities
Act, (a) will not be able to rely on the
interpretations of the staff of the
Division of Corporation Finance of the
Commission set forth in the above-
mentioned interpretive letters, (b) will
not be permitted or entitled to tender
such Original Capital Securities in the
Exchange Offer and (c) must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or other
transfer of such Original Capital
Securities unless such sale is made
pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds
Original Capital Securities acquired for
its own account as a result of market-
making or other trading activities and
exchanges such Original Capital
Securities for Exchange Capital
Securities, then such broker-dealer must
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resales of such
Exchange Capital Securities.
Each holder of Original Capital
Securities who wishes to exchange
Original Capital Securities for Exchange
Capital Securities in the Exchange Offer
will be required to represent that (i)
it is not an "affiliate" of the
Corporation or the Trust, (ii) any
Exchange Capital Securities to be
received by it are being acquired in the
ordinary course of its business, (iii)
it has no arrangement or understanding
with any person to participate in a
distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities, and (iv) if such holder is
not a broker-dealer, such holder is not
engaged in, and does not intend to
engage in, a distribution (within the
meaning of the Securities Act) of such
Exchange Capital Securities. Each
broker-dealer that receives Exchange
Capital Securities for its own account
in exchange for Original Capital
Securities, where such Original Capital
Securities were acquired by such broker-
dealer as a result of market-making
activities or other trading activities,
must acknowledge that it will deliver a
prospectus meeting the requirements of
the Securities Act in connection with
any resale of such Exchange Capital
Securities. The Letter of Transmittal
states that, by so acknowledging and by
delivering such a prospectus, a broker-
dealer will not be deemed to admit that
it is an "underwriter" within the
meaning of the Securities Act. Based on
the position taken by the staff of the
Division of Corporation Finance of the
Commission in the interpretive letters
referred to above, the Corporation and
the Trust believe that Participating
Broker-Dealers who acquired Original
Capital Securities for their own
accounts as a result of market-making
activities or other trading activities
may fulfill their prospectus delivery
requirements with respect to the
Exchange Capital Securities received
upon exchange of such Original Capital
Securities (other than Original Capital
Securities which represent an unsold
allotment from the initial sale of the
Original Capital Securities) with a
prospectus meeting the requirements of
the Securities Act, which may be the
prospectus prepared for an exchange
offer so long as it contains a
description of the plan of distribution
with respect to the resale of such
Exchange Capital Securities.
Accordingly, this Prospectus, as it may
be amended or supplemented from time to
time, may be used by a Participating
Broker-Dealer in connection with resales
of Exchange Capital Securities received
in exchange for Original Capital
Securities where such Original Capital
Securities were acquired by such
Participating Broker-Dealer for its own
account as a result of market-making or
other trading activities. Subject to
certain provisions set forth in the
Registration Agreement and to the
limitations described below under "The
Exchange Offer--Resales of Exchange
Capital Securities," the Corporation and
the Trust have agreed that this
Prospectus, as it may be amended or
supplemented from time to time, may be
used by a Participating Broker-Dealer in
connection with resales of such Exchange
Capital Securities for a period ending
180 days after the Expiration Date
(subject to extension under certain
limited circumstances) or, if earlier,
when all such Exchange Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan
of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of
the Corporation or the Trust may not
rely on such interpretive letters and
must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any
resale transaction. See "The Exchange
Offer--Resales of Exchange Capital
Securities."
Exchange Agent The exchange agent with respect to the
Exchange Offer is The Bank of New York
(the "Exchange Agent"). The addresses,
and telephone and facsimile numbers, of
the Exchange Agent are set forth in "The
Exchange Offer--Exchange Agent" and in
the Letter of Transmittal.
Use of Proceeds Neither the Corporation nor the Trust
will receive any cash proceeds from the
issuance of the Exchange Capital
Securities offered hereby.
Certain United States
Federal Income Tax
Consequences; ERISA
Considerations Holders of Original Capital Securities
should review the information set forth
under "Certain United States Federal
Income Tax Consequences" and "ERISA
Considerations" prior to tendering
Original Capital Securities in the
Exchange Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered Up to $19,000,000 aggregate Liquidation
Amount of the Trust's Exchange Capital
Securities have been registered under
the Securities Act (Liquidation Amount
$1,000 per Exchange Capital Security).
The Exchange Capital Securities will be
issued and the Original Capital
Securities were issued under the
Declaration. The Exchange Capital
Securities and any Original Capital
Securities which remain outstanding
after consummation of the Exchange Offer
will vote together as a single class for
purposes of determining whether holders
of the requisite percentage in
outstanding Liquidation Amount thereof
have taken certain actions or exercised
certain rights under the Declaration.
See "Description of Exchange
Securities--Description of Exchange
Capital Securities--Voting Rights;
Amendment of the Declaration." The terms
of the Exchange Capital Securities are
identical in all material respects to
the terms of the Original Capital
Securities, except that the Exchange
Capital Securities have been registered
under the Securities Act, will not be
subject to certain restrictions on
transfer applicable to the Original
Capital Securities and will not provide
for any increase in the Distribution
rate thereon. See "The Exchange
Offer--Purpose of the Exchange Offer,"
"Description of Exchange Securities" and
"Description of Original Securities."
Distribution Dates June 1 and December 1 of each year,
commencing June 1, 1998.
Extension Periods Distributions on the Exchange Capital
Securities will be deferred for the
duration of any Extension Period elected
by the Corporation with respect to the
payment of interest on the Exchange
Junior Subordinated Debentures. No
Extension Period will exceed
10 consecutive semi-annual periods or
extend beyond the Stated Maturity of the
Junior Subordinated Debentures. See
"Description of Exchange Securities--
Description of Exchange Junior
Subordinated Debentures--Option to
Extend Interest Payment Date" and
"Certain United States Federal Income
Tax Consequences--Interest Income and
Original Issue Discount."
Ranking The Exchange Capital Securities will
rank pari passu, and payments thereon
will be made pro rata, with the Original
Capital Securities and the Common
Securities except as described under
"Description of Exchange Securities--
Description of Exchange Capital
Securities--Subordination of Common
Securities." The Exchange Junior
Subordinated Debentures will rank pari
passu with the Original Junior
Subordinated Debentures and all other
junior subordinated debt securities to
be issued by the Corporation pursuant to
the Indenture with substantially similar
subordination terms ("Other
Debentures"), and which will be issued
and sold to other trusts to be
established by the Corporation in each
case similar to the Trust ("Other
Trusts"), and will be unsecured and
subordinate and junior in right of
payment to the extent and in the manner
set forth in the Indenture to all Senior
Debt of the Corporation. See
"Description of Exchange Securities--
Description of Exchange Junior
Subordinated Debentures." The Exchange
Guarantee will rank pari passu with the
Original Guarantee and all other
guarantees to be issued by the
Corporation with respect to capital
securities to be issued by Other Trusts
("Other Guarantees"), and will
constitute an unsecured obligation of
the Corporation and will rank
subordinate and junior in right of
payment to the extent and in the manner
set forth in the Guarantee to all Senior
Debt. See "Description of Exchange
Securities--Description of Exchange
Guarantee." In addition, because the
Corporation is a holding company, the
Junior Subordinated Debentures and the
Guarantee are effectively subordinated
to all existing and future liabilities
of the Corporation's subsidiaries,
including deposits.
Redemption The Trust Securities are subject to
mandatory redemption (i) in whole, but
not in part, at the Stated Maturity of
the Junior Subordinated Debentures upon
the redemption thereof, (ii) in whole,
but not in part, at any time prior to
June 1, 2007, contemporaneously with the
optional redemption of the Junior
Subordinated Debentures upon the
occurrence and continuation of a Special
Event (as defined herein), and (iii) in
whole or in part at any time on or after
June 1, 2007 contemporaneously with any
optional redemption by the Corporation
of Junior Subordinated Debentures, in
each case at the applicable Redemption
Price. See "Description of Exchange
Securities--Description of Exchange
Capital Securities--Mandatory
Redemption."
Transfer Restrictions The Exchange Capital Securities will be
issued, and may be transferred, only in
blocks having a Liquidation Amount of
not less than $100,000 (100 Capital
Securities).
ERISA Considerations Prospective purchasers must carefully
consider the restrictions on purchase
set forth under "ERISA Considerations."
Absence of Market for
the Exchange Capital
Securities The Exchange Capital Securities will be
a new issue of securities for which
there currently is no market.
Accordingly, there can be no assurance
as to the development or liquidity of
any market for the Exchange Capital
Securities. The Trust and the
Corporation do not intend to apply for
listing of the Exchange Capital
Securities on any securities exchange or
for quotation through the National
Association of Securities Dealers
Automated Quotation System ("NASDAQ").
See "Plan of Distribution."
Risk Factors Prospective investors should carefully
consider the matters set forth under
"Risk Factors."
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition
to the other information contained in this Prospectus, the
following factors in connection with the Exchange Offer and the
Exchange Capital Securities offered hereby. This Prospectus
contains certain forward-looking statements and information
relating to the Corporation that are based on the beliefs of
management as well as assumptions made by and information
currently available to management. The words "anticipate,"
"believe," "estimate," "expect," "intends" and similar
expressions, as they relate to the Corporation or the
Corporation's management, are intended to identify forward-
looking statements. Such statements reflect the current views of
the Corporation with respect to future events and are subject to
certain risks,uncertainties and assumptions, including the risk
factors described in this Prospectus. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated
or expected. The Corporation does not intend to update these
forward-looking statements.
Ranking of Obligations Under the Guarantee and the Junior
Subordinated Debentures
The obligations of the Corporation under the Guarantee
issued by the Corporation for the benefit of the holders of
Capital Securities and under the Junior Subordinated Debentures
are unsecured and rank subordinate and junior in right of payment
to all Senior Debt of the Corporation. At June 30, 1997, the
Corporation had no outstanding Senior Debt. Because the
Corporation is a bank holding company, the right of the
Corporation to participate in any distribution of assets of any
subsidiary, including the Bank, upon such subsidiary's
liquidation or reorganization or otherwise (and thus the ability
of holders of the Capital Securities to benefit indirectly from
such distribution), is subject to the prior claims of creditors
of such subsidiary, except to the extent that the Corporation may
itself be recognized as a creditor of such subsidiary.
Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities
of the Corporation's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the
Corporation for payments on the Junior Subordinated Debentures.
Because the Corporation is a holding company with limited assets
and liabilities, a substantial portion of the consolidated
liabilities of the Corporation are liabilities of its
subsidiaries. The Guarantee will constitute an unsecured
obligation of the Corporation and will rank subordinate and
junior in right of payment to all Senior Debt in the same manner
as the Junior Subordinated Debentures. See "Patriot." None of
the Indenture, the Guarantee or the Declaration places any
limitation on the amount of secured or unsecured debt, including
Senior Debt, that may be incurred by the Corporation or any
subsidiary. See "Description of Exchange Securities--Description
of Exchange Junior Subordinated Debentures--Subordination" and
"--Description of Exchange Guarantee--Status of the Guarantee."
The ability of the Trust to pay amounts due on the Capital
Securities is solely dependent upon the Corporation making
payments on the Junior Subordinated Debentures as and when
required.
In addition, there are regulatory limitations on the payment
of dividends directly or indirectly to the Corporation from the
Bank. Under applicable banking statutes at June 30, 1997, the
Bank could have declared additional dividends of $7.5 million.
Option to Extend Interest Payment Date; Tax Consequences; Market
Price Consequences
So long as no Debenture Event of Default (as defined herein)
has occurred and is continuing, the Corporation has the right
under the Indenture to defer the payment of interest on the
Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 10 consecutive semi-annual periods
with respect to each Extension Period; provided, however, that no
Extension Period shall end on a date other than an Interest
Payment Date or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral,
semi-annual Distributions on the Trust Securities by the Trust
will also be deferred (and the amount of Distributions to which
holders of the Trust Securities are entitled will accumulate
additional Distributions thereon at the rate of 10.30% per annum,
compounded semi-annually, but not exceeding the interest rate
then accruing on the Junior Subordinated Debentures) from the
relevant payment date for such Distributions during any such
Extension Period.
Prior to the termination of any Extension Period, the
Corporation may further extend such Extension Period; provided,
however, that such extension does not cause such Extension Period
to exceed 10 consecutive semi-annual periods or to extend beyond
the Stated Maturity. Upon the termination of any Extension
Period and the payment of all interest then accrued and unpaid on
the Junior Subordinated Debentures (together with interest
thereon at the annual rate of 10.30%, compounded semi-annually,
to the extent permitted by applicable law), the Corporation may
elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See
"Description of Exchange Securities--Description of Exchange
Capital Securities--Distributions" and "--Description of Exchange
Junior Subordinated Debentures--Option to Extend Interest Payment
Date."
During any Extension Period, the Corporation may not
(i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of the Corporation's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or
premium, if any, on, or repay, repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that
rank pari passu with or junior in right of payment to, the Junior
Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including Other
Guarantees) if such guarantee ranks pari passu with or junior in
right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future,
or the redemption or repurchase of any such rights pursuant
thereto, (c) payments under the Guarantee, (d) purchases of
shares of the Corporation's common stock related to the issuance
of common stock or rights under any of the Corporation's benefit
plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans, (e) as a result of a
reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the
Corporation's capital stock or (f) the purchase of fractional
interests in shares of the Corporation's capital stock pursuant
to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged).
Because the Corporation believes that the likelihood of its
exercising its option to defer payments of interest is remote,
the Junior Subordinated Debentures will be treated under Treasury
regulations as issued without original issue discount ("OID") for
United States federal income tax purposes. As a result, holders
of Capital Securities generally will include their allocable
share of the interest on the Junior Subordinated Debentures in
taxable income under their own methods of tax accounting (i.e.,
cash or accrual). Under the Treasury regulations, however, if
the Corporation exercises its right to defer payments of
interest, the Junior Subordinated Debentures will become OID
instruments. Consequently, holders of Capital Securities will be
required to include their pro rata share of OID in gross income
as it accrues for United States federal income tax purposes in
advance of the receipt of cash attributable to such interest
income and such holders will not receive the cash related to such
income if they dispose of the Capital Securities prior to the
record date for payment of distributions thereafter. See
"Certain United States Federal Income Tax Consequences--Interest
Income and Original Issue Discount" and "--Sales of Capital
Securities."
Should the Corporation elect to exercise its right to defer
payments of interest on the Junior Subordinated Debentures in the
future, the market price of the Capital Securities is likely to
be affected. A holder that disposes of its Capital Securities
during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its
Capital Securities. In addition, merely as a result of the
existence of the Corporation's right to defer interest payments
on the Junior Subordinated Debentures, the market price of the
Capital Securities (which represent an undivided beneficial
ownership interest in the Junior Subordinated Debentures) may be
more volatile than the market prices of other securities that are
not subject to such deferrals.
Special Event Redemption; Possible Tax Law Changes Affecting the
Capital Securities
Upon the occurrence and continuation of a Special Event
prior to June 1, 2007, the Corporation may, at its option and
subject to receipt of any required regulatory approval, prepay
the Junior Subordinated Debentures in whole, but not in part, at
the Special Event Prepayment Price (as defined herein) within
90 days following the occurrence of such Special Event. In such
event, the Trust will redeem the Trust Securities on a pro rata
basis to the same extent as the Junior Subordinated Debentures
are prepaid by the Corporation. See "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment", "--Description of Exchange
Capital Securities--Mandatory Redemption" and "--Description of
Exchange Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures."
A "Special Event" means a Tax Event or a Regulatory Capital
Event, as the case may be.
A "Tax Event" means the receipt by the Corporation and the
Trust of an opinion of counsel experienced in such matters to the
effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any
regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or
decision is announced on or after June 2, 1997 (the "Issue
Date"), there is more than an insubstantial risk that (i) the
Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Corporation on the Junior
Subordinated Debentures is not, or within 90 days of the date of
such opinion will not be, deductible by the Corporation, in whole
or in part, for United States federal income tax purposes, or
(iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
A "Regulatory Capital Event" means that the Corporation
shall have become, or pursuant to law or regulation will become
within 180 days, subject to capital requirements under which, in
the written opinion of independent bank regulatory counsel
experienced in such matters, the Capital Securities would not
constitute Tier 1 capital applied as if the Corporation (or its
successor) were a bank holding company (as that concept is used
in the guidelines or regulations issued by the Board of Governors
of the Federal Reserve System as of June 2, 1997) or its then
equivalent ("Tier I Capital").
<PAGE>
Liquidation Distribution of Junior Subordinated Debentures
The Corporation has the right at any time to distribute the
Junior Subordinated Debentures to holders of the Trust
Securities. Under current United States federal income tax law,
a distribution of Junior Subordinated Debentures upon the
dissolution of the Trust would not be a taxable event to holders
of the Capital Securities. If, however, the Trust is
characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution
of the Trust, the distribution of the Junior Subordinated
Debentures may constitute a taxable event to holders of Capital
Securities. Moreover, upon occurrence of a Special Event, a
dissolution of the Trust in which holders of the Capital
Securities receive cash would be a taxable event to such holders.
See "Certain United States Federal Income Taxation
Consequences--Distribution of Junior Subordinated Debentures or
Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for
Capital Securities or Junior Subordinated Debentures that may be
distributed in exchange for Capital Securities if a liquidation
of the Trust occurs. Accordingly, the Capital Securities or the
Junior Subordinated Debentures may trade at a discount to the
price that the investor paid to purchase the Capital Securities
offered hereby. Because holders of Capital Securities may
receive Junior Subordinated Debentures on termination of the
Trust and because Distributions are otherwise limited to payments
on the Junior Subordinated Debentures, prospective purchasers of
Exchange Capital Securities are also making an investment
decision with regard to the Exchange Junior Subordinated
Debentures and should carefully review all the information
regarding the Exchange Junior Subordinated Debentures contained
herein. See "Description of Exchange Securities--Description of
Exchange Capital Securities--Description of Liquidation of the
Trust and Distribution of Junior Subordinated Debentures" and
"--Description of Exchange Junior Subordinated Debentures--
General."
Rights Under the Guarantee
The Guarantee guarantees to the holders of the Capital
Securities the following payments, to the extent not paid by or
on behalf of the Trust: (i) any accumulated and unpaid
Distributions required to be paid on the Capital Securities, to
the extent that the Trust has funds on hand available therefor at
such time, (ii) the applicable Redemption Price with respect to
any Capital Securities called for redemption, to the extent that
the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary termination and liquidation
of the Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment, to the extent
that the Trust has funds on hand available therefor at such time,
and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Capital Securities upon a
termination and liquidation of the Trust.
The holders of a majority in aggregate Liquidation Amount of
the Capital Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the Guarantee Trustee (as defined herein) in respect of the
Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of
the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity. If the
Corporation defaults on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust will not have
funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities would not be able to
rely upon the Guarantee for payment of such amounts. Instead, in
the event a Debenture Event of Default shall have occurred and be
continuing and such event is attributable to the failure of the
Corporation to pay principal of (or premium, if any) or interest
on the Junior Subordinated Debentures on the applicable payment
date, then a holder of Capital Securities may institute a Direct
Action. Notwithstanding any payments made to a holder of Capital
Securities by the Corporation in connection with a Direct Action,
the Corporation shall remain obligated to pay the principal of
(and premium, if any) and interest on the Junior Subordinated
Debentures, and the Corporation shall be subrogated to the rights
of the holder of such Capital Securities with respect to payments
on the Capital Securities to the extent of any payments made by
the Corporation to such holder in any Direct Action. Except as
described herein, holders of Capital Securities will not be able
to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures or assert directly any other
rights in respect of the Junior Subordinated Debentures. See
"Description of Exchange Securities--Description of Exchange
Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Exchange Capital Securities," "--Description of
Exchange Junior Subordinated Debentures--Debenture Events of
Default" and "--Description of Exchange Guarantee." The
Declaration provides that each holder of Capital Securities by
acceptance thereof agrees to the provisions of the Guarantee and
the Indenture. The Bank of New York will act as Guarantee
Trustee under the Exchange Guarantee and will hold the Guarantee
for the benefit of the holders of the Capital Securities. The
Bank of New York will also act as Property Trustee under the
Declaration and as Debenture Trustee under the Indenture.
Limited Voting Rights
Holders of Capital Securities will generally have limited
voting rights relating only to the modification of the Capital
Securities, the termination or liquidation of the Trust, and the
exercise of the Trust's rights as holder of Junior Subordinated
Debentures. Holders of Capital Securities will not be entitled
to vote to appoint, remove or replace the Property Trustee or the
Delaware Trustee, and such voting rights are vested exclusively
in the holder of the Common Securities except upon the occurrence
of certain events described herein. The Property Trustee, the
Administrative Trustees and the Corporation may amend the
Declaration without the consent of holders of Capital Securities
to ensure that the Trust will be classified for United States
Federal income tax purposes as a grantor trust, even if such
action adversely affects the interests of such holders. See
"Description of Exchange Securities--Description of Exchange
Capital Securities--Removal of Issuer Trustees" and "--Voting
Rights; Amendment of the Declaration."
Consequences of a Failure to Exchange Original Capital Securities
The Original Capital Securities have not been registered
under the Securities Act or any state securities laws and
therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with certain
other conditions and restrictions. Original Capital Securities
which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer,
holders of Original Capital Securities which remain outstanding
will not be entitled to any rights to have such Original Capital
Securities registered under the Securities Act or to any similar
rights under the Registration Agreement (subject to certain
limited exceptions). The Corporation and the Trust do not intend
to register under the Securities Act any Original Capital
Securities which remain outstanding after consummation of the
Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Original Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Original Capital Securities could be adversely
affected.
The Exchange Capital Securities and any Original Capital
Securities which remain outstanding after consummation of the
Exchange Offer will vote together as a single class for purposes
of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See
"Description of Exchange Securities--Description of Exchange
Capital Securities--Voting Rights; Amendment of the Declaration."
The Original Capital Securities provide, among other things,
that, if a registration statement relating to the Exchange Offer
has not been filed by October 30, 1997 or has not been declared
effective by November 29, 1997, then the Distribution rate borne
by the Original Capital Securities, commencing on the day after
the registration statement was required to be filed or become
effective as the case may be, will increase by 0.25% per annum
until the Exchange Offer is consummated. Upon consummation of
the Exchange Offer, holders of Original Capital Securities will
not be entitled to any increase in the Distribution rate thereon
or any further registration rights under the Registration
Agreement, except under limited circumstances. See "Description
of Original Securities."
Absence of Public Market
The Original Capital Securities were issued to, and the
Corporation believes such securities are currently owned by, a
relatively small number of beneficial owners. The Original
Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability if
they are not exchanged for the Exchange Capital Securities.
Although the Exchange Capital Securities may be resold or
otherwise transferred by the holders (who are not affiliates of
the Corporation or the Trust) without compliance with the
registration requirements under the Securities Act, they will
constitute a new issue of securities with no established trading
market. Capital Securities may be transferred by the holders
thereof only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities).
No assurance can be given that an active public or other
market will develop for the Exchange Capital Securities or the
Original Capital Securities, or as to the liquidity of or the
trading market for the Exchange Capital Securities or the
Original Capital Securities. If an active public market does not
develop, the market price and liquidity of the Exchange Capital
Securities may be adversely affected.
If a public trading market develops for the Exchange Capital
Securities, future trading prices will depend on many factors,
including, among other things, prevailing interest rates, the
financial condition of the Corporation and the market for similar
securities. Depending on these and other factors, the Exchange
Capital Securities may trade at a discount to the purchase price
paid by the holder.
Notwithstanding the registration of the Exchange Capital
Securities in the Exchange Offer, holders who are "affiliates"
(as defined under Rule 405 of the Securities Act) of the
Corporation or the Trust may publicly offer for sale or resell
the Exchange Capital Securities only in compliance with the
provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities
for its own account in exchange for Original Capital Securities,
where such Original Capital Securities were acquired by such
broker=dealer as a result of market=making activities or other
trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
Exchange Offer Procedures
Except with respect to holders tendering Original Capital
Securities through the Automated Tender Offer Program of DTC
("ATOP"), issuance of the Exchange Capital Securities in exchange
for Original Capital Securities pursuant to the Exchange Offer
will be made only after a timely receipt by the Trust of such
Original Capital Securities, a properly completed and duly
executed Letter of Transmittal and all other required documents.
Therefore, holders of the Original Capital Securities desiring to
tender such Original Capital Securities in exchange for Exchange
Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Corporation nor the Trust is under any
duty to give notification of defects or irregularities with
respect to the tenders of Original Capital Securities for
exchange.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed
charges of the Corporation for the respective periods indicated.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Years Ended December 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios of Earnings
to Fixed Charges:
Excluding interest
on deposits 2.09x 1.83x 2.72x 20.17x 27.62x 60.11x 79.85x
Including interest
on deposits 1.17x 1.32x 1.18x 1.20x 1.23x 1.39x 1.21x
</TABLE>
For purposes of computing the ratios of earnings to combined
fixed charges, earnings represent net income (loss) before
extraordinary items and cumulative effect of changes in
accounting principles plus applicable income taxes and fixed
charges. Fixed charges, excluding interest on deposits, include
gross interest expense (other than on deposits) and the
proportion deemed representative of the interest factor of rent
expense, net of income from subleases. Fixed charges, including
gross interest on deposits, include all interest expense and the
proportion deemed representative of the interest factor of rent
expense, net of income from subleases.
<PAGE>
PATRIOT CAPITAL TRUST I
The Trust is a statutory business trust formed under
Delaware law pursuant to (i) the original declaration of trust
executed by the Corporation, as Sponsor, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrative Trustees
named therein, which original declaration of trust was amended
and restated and executed by the Corporation, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrative Trustees
named therein (the "Declaration"), and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on
May 29, 1997. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of the Trust Securities to acquire the
Junior Subordinated Debentures and (iii) engaging in only those
other activities necessary, advisable or incidental thereto (such
as registering the transfer of the Capital Securities).
Accordingly, the Junior Subordinated Debentures are the sole
assets of the Trust, and payments under the Junior Subordinated
Debentures are the sole revenues of the Trust. All of the Common
Securities are owned directly or indirectly by the Corporation.
The Common Securities will rank pari passu, and payments are and
will be made thereon pro rata, with the Capital Securities,
except that upon the occurrence and continuance of an Event of
Default under the Declaration resulting from a Debenture Event of
Default, the rights of the Corporation as holder of the Common
Securities to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to
the rights of the holders of the Capital Securities. See
"Description of Exchange Securities--Description of Exchange
Capital Securities--Subordination of Common Securities." The
Corporation has acquired Common Securities in an aggregate
Liquidation Amount equal to 3% of the total capital of the Trust.
The Trust has a term of 31 years, but may terminate earlier as
provided in the Declaration. The Trust's business and affairs
are conducted by its trustees, each appointed by the Corporation
as holder of the Common Securities. The trustees for the Trust
will be The Bank of New York, as the Property Trustee, The Bank
of New York (Delaware), as the Delaware Trustee, and three
individual trustees as Administrative Trustees who are employees
or officers of or affiliated with the Corporation (collectively,
the "Issuer Trustees"). The Bank of New York, as Property
Trustee, currently acts as sole indenture trustee under the
Declaration. The Bank of New York also acts as trustee under the
Exchange Guarantee and the Indenture. See "--Description of
Exchange Junior Subordinated Debentures" and "--Description of
Exchange Guarantee." The holder of the Common Securities of the
Trust, or the holders of a majority in Liquidation Amount of the
Capital Securities if an Event of Default under the Declaration
resulting from a Debenture Event of Default has occurred and is
continuing, is entitled to appoint, remove or replace the
Property Trustee and/or Delaware Trustee. In no event do the
holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such
voting rights are vested exclusively in the holder of the Common
Securities. The duties and obligations of each Issuer Trustee
are governed by the Declaration. Pursuant to the expense
provisions under the Indenture, the Corporation, as Issuer of the
Junior Subordinated Debentures, has and will continue to pay all
fees and expenses related to the Trust and the offering of the
Capital Securities and has and will continue to pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the
Trust. See "--Description of Exchange Capital Securities--
Expenses and Taxes." The principal executive office of the Trust
is Patriot Bank Corp., High and Hanover Streets, Pottstown,
Pennsylvania 19464. Telephone inquiries may be directed to
Diane M. Davidheiser at (610) 323-1500.
<PAGE>
PATRIOT BANK CORP.
General
The Corporation is a Delaware corporation and bank holding
company which was organized in August 1995 to acquire all of the
capital stock of the Bank issued in connection with the Bank's
conversion from mutual to stock form of ownership in December
1995. The Corporation is headquartered in Pottstown, Pennsylvania
and is the holding company for the Bank and PIC. The Corporation
reported net income of $1,647,000 or $.41 per share for the six-
month period ended June 30, 1997 and net income of $2.8 million
or $.66 per share for the year ended December 31, 1996 (excluding
a special after-tax charge of $836,000 representing the special
deposit insurance assessment levied by the FDIC on all SAIF
member institutions). At June 30, 1997, the Corporation had
total assets of $699.0 million and total stockholders' equity of
$49.5 million.
The Bank is a Pennsylvania state chartered commercial bank
which conducts business from its executive offices in Pottstown,
Pennsylvania and its 13 community banking offices located in
Montgomery, Berks, Lehigh, Northampton and Chester Counties,
Pennsylvania. The Bank is a community-oriented financial
services provider whose business primarily consists of attracting
retail deposits from the general public and small businesses and
originating mortgage, consumer and commercial loans in the Bank's
market area. The Bank also invests in investment and mortgage-
backed securities and uses advances from the Federal Home Loan
Bank of Pittsburgh and repurchase agreements as sources of funds.
At June 30, 1997, the Bank had total assets of $665.6 million and
total stockholder's equity of $34.7 million.
The Bank endeavors to promote a sales culture in which
highly motivated and trained team members attract and retain
profitable customer relationships. The Bank's primary operating
strategy is to maintain a reputation as a community bank where
consumers and small business customers can obtain a wide range of
financial products and services usually associated with larger
financial institutions while providing personal attention,
service and responsiveness.
For consumers, the Bank provides deposit products which
include checking, savings and money market accounts as well as
certificates of deposit. The Bank offers numerous lending
products to consumers including residential mortgage loans, home
equity lines of credit, home equity loans, personal lines of
credit, credit cards and other consumer loans. The Bank also
offers other consumer products and services such as check cards,
safe deposit boxes, telephone banking and automated teller
services. The Bank intends to introduce annuities, mutual funds,
brokerage service as well as in-home banking via personal
computer by the end of 1997.
For small businesses, the Bank offers various deposit and
transaction services including business checking and savings
accounts, electronic banking and cash management services. The
Bank offers a full array of short-term and adjustable lending
products including loans secured by real estate and other assets,
working capital lines and other commercial loans. The Bank
generally concentrates on loans with balances of $500,000 and
less to small businesses within its local market area.
Prior to May 23, 1997, the Bank was a federally-chartered
savings bank. The Bank converted to a Pennsylvania-chartered
commercial bank in order to compete more effectively as a
community-oriented commercial bank with expanded commercial
products and services.
PIC is a Delaware investment corporation whose primary
business consists of maintaining an investment portfolio. PIC's
investment portfolio consists primarily of mortgage-backed
securities, corporate bonds and equity securities. PIC uses
repurchase agreements as a source of funds. At June 30, 1997, PIC
had total assets of $35.7 million and total stockholder's equity
of $25.1 million.
On August 25, 1997, Patriot announced a 20% stock dividend
that was paid on September 22, 1997 to stockholders of record on
September 8, 1997. The earnings per share and other per share
data stated in this Prospectus have not been adjusted to reflect
such stock split.
On August 21, 1997, Patriot announced that it had entered
into a letter of intent to acquire First Nations Capital Corp., a
privately-owned small-ticket commercial leasing company
headquartered in Reading, Pennsylvania. The acquisition is
expected to be completed in the fourth quarter of 1997. Upon
completion of the acquisition, First Nations Capital Corp. will
be renamed Patriot Commercial Leasing Company.
On July 28, 1997, the Corporation completed the repurchase
of 449,537 shares of its common stock pursuant to a "Modified
Dutch Auction" self-tender offer. The shares were repurchased at
a price of $18.00 per share.
Patriot announced on August 8, 1997 that it had entered into
a nonbinding letter of intent to sell certain of the deposits and
the physical facility of the Bank's Topton, Pennsylvania branch
to National Penn Bank. The sale is subject to regulatory
approval and is expected to be completed during the fourth
quarter of 1997.
The Corporation as a bank holding company is subject to
regulation and examination by the Federal Reserve. The Bank is
subject to regulation and examination by the state of
Pennsylvania and the FDIC. The Bank's deposits are insured by the
FDIC to the maximum extent permitted by law through the Savings
Association Insurance Fund.
The principal executive offices of the Corporation are
located at High and Hanover Streets, Pottstown, Pennsylvania
19464 and its telephone number is (610) 323-1500.
<PAGE>
Patriot is a legal entity separate and distinct from its
subsidiaries. The ability of holders of debt and equity
securities of Patriot to benefit from the distribution of assets
of any subsidiary upon the liquidation or reorganization of such
subsidiary is subordinate to prior claims of creditors of the
subsidiary (including depositors in the case of banking
subsidiaries) except to the extent that a claim of Patriot as a
creditor may be recognized.
There are various statutory and regulatory limitations on
the extent to which present and future banking subsidiaries of
Patriot can finance or otherwise transfer funds to Patriot or its
nonbanking subsidiaries, whether in the form of loans, extensions
of credit, investments or asset purchases.
In addition, there are regulatory limitations on the payment
of dividends directly or indirectly to Patriot from its existing
banking subsidiaries. Under applicable banking statutes, at
June 30, 1997, the Bank could have declared additional dividends
of approximately $7.5 million. However, Federal and state
regulatory agencies also have the authority to further limit
payment of dividends by the Bank based on other factors, such as
the maintenance of adequate capital by the Bank, which could
reduce the amount of dividends otherwise payable.
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial data should be read in
conjunction with the historical Consolidated Financial Statements
of the Corporation included in the Corporation's 1996 Annual
Report on Form 10-K and the Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997. Interim unaudited
data for the three months ended June 30, 1997 and 1996 reflect,
in the opinion of management of the Corporation, all adjustments
(consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the six months ended
June 30, 1997 are not necessarily indicative of results that may
be expected for any other interim period or for the year as a
whole.
<TABLE>
<CAPTION>
At June 30, At December 31,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
(in thousands)
Total assets $699,015 $529,165 $268,869 $221,035 $221,895 $244,171
Investments and mortgage-backed
securities available for sale(1) 259,056 159,148 47,646 33,025 - -
Investments and mortgage-backed
securities held to maturity(1) 69,134 72,710 3,917 8,669 34,436 38,148
Loans receivable 345,286 280,184 194,250 168,974 161,529 195,837
Allowance for possible loan losses (2,041) (1,830) (1,702) (1,720) (1,665) (1,450)
Deposits 283,331 239,514 201,618 189,938 198,876 207,944
Borrowings 342,416 231,595 10,000 10,000 2,000 16,100
Stockholders' equity 49,501 53,117 54,110 17,868 17,517 15,200
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
(in thousands except
per share data)
Interest income $21,644 $12,068 $29,594 $17,168 $15,498 $17,361 $20,298
Interest expense 14,527 6,454 17,502 9,549 8,125 9,628 12,141
Net interest income before
provision for possible
loan losses 7,117 5,614 12,092 7,619 7,373 7,733 8,157
Provision for possible loan
losses 225 115 305 60 56 1 1,115
Net interest income after
provision for possible
loan losses 6,892 5,499 11,787 7,559 7,317 7,732 7,042
Non-interest income 481 252 637 518 674 1,496 641
Non-interest expense 4,894 3,672 9,198 6,151 6,090 5,541 5,132
Income before income taxes
and cumulative effect
of change in method of
accounting for income
taxes 2,479 2,079 3,226 1,926 1,901 3,777 2,551
Income taxes 832 819 1,251 734 717 1,460 593
Income before cumulative
effect of change in
method of accounting
for income taxes 1,647 1,260 1,975 1,192 1,184 2,317 1,958
Cumulative effect of change
in method of accounting
for income taxes - - - - - - 586
Net income 1,647 1,260 1,975 1,192 1,184 2,317 2,544
Earnings per share(2) $.41 $.30 $0.46 N/A N/A N/A N/A
Net income before special
charge(3) N/A N/A $2,811 N/A N/A N/A N/A
Earnings per share before
special charge(2)(3) N/A N/A $0.66 N/A N/A N/A N/A
<CAPTION>
Six Months Ended
Performance Ratios(4): June 30, Years Ended December 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets .55% .12% 0.48% 0.50% 0.54% 0.99% 0.81%
Return on average assets before
special charge(3) - - 0.68 - - - -
Return on average equity 6.77 4.68 3.71 5.40 6.59 13.61 13.90
Return on average equity before
special charge(3) - - 5.28 - - - -
Average interest rate spread(5) 2.36 3.40 2.95 3.29 3.33 3.31 3.38
Net interest margin(6) 2.39 3.45 3.01 3.39 3.45 3.43 3.50
Average interest-earning assets
to average interest-bearing
liabilities 106.67 118.36 113.69 109.20 107.16 106.90 105.84
Total non-interest expense to
average assets(7) 1.62 2.22 1.93 2.65 2.75 2.34 2.13
Dividend payout ratio(2) 41.36 22.22 45.91 - - - -
<CAPTION>
At June 30, At December 31,
Regulatory Capital Ratios: 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Tangible capital to tangible assets 9.59% 9.97% 20.14% 8.46% 7.89% 6.23%
Leverage (core) capital to tangible
assets 9.59 9.97 20.14 8.46 7.89 6.23
Leverage (core) capital to risk-
adjusted assets 16.56 20.28 34.27 13.98 13.61 10.61
Risk-based capital to risk-adjusted
assets 17.81 20.98 35.35 15.33 14.90 11.62
<CAPTION>
At June 30, At December 31,
Asset Quality Ratios(8): 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Non-performing assets as a percent of
total assets .13% 0.12% 0.29% 0.45% 0.64% 0.86%
Non-performing loans as a percent of
loans receivable .21 0.20 0.30 0.43 0.53 0.72
Allowance for possible loan losses as a
percent of loans receivable .59 0.65 0.88 1.01 1.02 0.73
Allowance for possible loan losses as
a percent of non-performing loans 223.38 321.94 292.94 235.94 190.94 102.04
</TABLE>
___________________________
(1) Patriot has classified its investment and mortgage-backed
securities as "held to maturity" or "available for sale"
since fiscal 1994 when it adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
(2) Patriot completed its initial public offering on December 1,
1995. Therefore, earnings per share and dividend payout
ratio are not applicable for years prior to 1996.
(3) Special charge representing the special deposit insurance
assessment levied against all SAIF member financial
institutions by the FDIC to recapitalize its SAIF fund.
(4) All ratios are based on average monthly balances during the
indicated periods. Return on average assets and return on
average equity are calculated before the cumulative effect
of change in method of accounting for income taxes.
(5) The average interest rate spread represents the difference
between the weighted average yield on interest-earning
assets and the weighted average cost of interest-bearing
liabilities and equity.
(6) The net interest margin represents net interest income as a
percent of average interest-earning assets.
(7) Calculated prior to special charge.
(8) Non-performing assets consist of non-performing loans and
real estate owned (REO). Non-performing loans consist of
non-accrual and accruing loans 90 days or more overdue,
while REO consists of real estate acquired through
foreclosure and real estate acquired by acceptance of a deed
in lieu of foreclosure.
(9) Per share data do not reflect the 20% stock dividend paid
to the Corporation's shareholders on September 22, 1997.
<PAGE>
CAPITALIZATION
The following table sets forth the historical consolidated
capitalization of the Corporation as of June 30, 1997. The
issuance of the Exchange Capital Securities will have no effect
on the capitalization of Patriot. The following data should be
read in conjunction with the financial information included in
documents incorporated herein by reference. See "Incorporation of
Certain Documents by Reference."
<TABLE>
<CAPTION>
June 30, 1997
(In thousands)
<S> <C>
Long-term debt $101,000
Corporation-obligated mandatorily redeemable
capital securities of subsidiary trust
holding solely junior subordinated
debentures of the Corporation(1) 18,525
Stockholders' equity:
Preferred Stock, $0.01 par value,
2,000,000 shares authorized, none
issued and outstanding -
Common stock, $0.01 par; 10,000,000 shares
authorized; 4,683,594 shares issued 47
Additional Paid-in Capital 49,014
Common stock acquired by ESOP,
271,377 shares, at cost (2,571)
Common stock acquired by MRP
160,644 shares, at amortized cost (1,364)
Retained earnings 11,263
Treasury stock, 607,092 shares at cost (7,979)
Net unrealized holding loss on securities,
net of taxes 1,091
Total Stockholders' equity 49,501
Total capitalization $169,026
</TABLE>
_________________________
(1) Reflects the Capital Securities. The Trust is a subsidiary
of the Corporation and holds the Junior Subordinated
Debentures as its sole asset.
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust are consolidated into
the Corporation's consolidated financial statements, with the
Capital Securities treated as minority interest and shown in the
Corporation's consolidated balance sheet as "Corporation-
Obligated Mandatorily Redeemable Securities of Subsidiary Trust
Holding Solely Junior Subordinated Debentures of the
Corporation." The financial statement footnotes in the Quarterly
Report of the Corporation for the quarter ended June 30, 1997
reflect that the sole asset of the Trust is approximately $19.6
million principal amount of the Junior Subordinated Debentures,
bearing interest at 10.30% and maturing on June 1, 2027. All
future reports filed by the Corporation under the Exchange Act
will present information regarding the Trust and other similar
trusts in the manner described above.
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the Original Capital
Securities, the Corporation and the Trust entered into the
Registration Agreement with the Initial Purchasers, pursuant to
which the Corporation and the Trust agreed to file and to use
their reasonable efforts to cause to become effective with the
Commission a registration statement with respect to the exchange
of the Original Capital Securities for capital securities with
terms identical in all material respects to the terms of the
Original Capital Securities. A copy of the Registration
Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual
obligations of the Corporation and the Trust under the
Registration Agreement. The form and terms of the Exchange
Capital Securities are the same as the form and terms of the
Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will
not be subject to certain restrictions on transfer applicable to
the Original Capital Securities, and will not provide for any
increase in the Distribution rate thereon. In that regard, the
Original Capital Securities provide, among other things, that, if
a registration statement relating to the Exchange Offer has not
been filed by October 30, 1997 or has not been declared effective
by November 29, 1997, then the Distribution rate borne by the
Original Capital Securities, commencing on the day after the
registration statement was required to be filed or become
effective as the case may be, will increase by 0.25% per annum
until the Exchange Offer is consummated. Upon consummation of
the Exchange Offer, holders of Original Capital Securities will
not be entitled to any increase in the Distribution rate thereon
or any further registration rights under the Registration
Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Original Capital
Securities" and "Description of Original Securities."
The Exchange Offer is not being made to, nor will the Trust
accept tenders for exchange from, holders of Original Capital
Securities in any jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder"
with respect to the Exchange Offer means any person in whose name
the Original Capital Securities are registered on the books of
the Trust or any other person who has obtained a properly
completed bond power from the registered holder, or any person
whose Original Capital Securities are held of record by The
Depository Trust Company ("DTC") who desires to deliver such
Original Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will
exchange as soon as practicable after the date hereof the
Original Guarantee for the Exchange Guarantee and the Original
Junior Subordinated Debentures, in an amount corresponding to the
Original Capital Securities accepted for exchange, for a like
aggregate principal amount of the Exchange Junior Subordinated
Debentures. The Exchange Guarantee and Exchange Junior
Subordinated Debentures have been registered under the Securities
Act.
Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal, to exchange up to $19,000,000 aggregate
Liquidation Amount of Exchange Capital Securities for a like
aggregate Liquidation Amount of Original Capital Securities
properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described
below. The Trust will issue, promptly after the Expiration Date,
an aggregate Liquidation Amount of up to $19,000,000 of Exchange
Capital Securities in exchange for a like principal amount of
outstanding Original Capital Securities tendered and accepted in
connection with the Exchange Offer. Holders may tender their
Original Capital Securities in whole or in part in a Liquidation
Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 Liquidation Amount (one Capital
Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities being tendered.
As of the date of this Prospectus, $19,000,000 aggregate
Liquidation Amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any
appraisal or dissenters' rights in connection with the Exchange
Offer. Original Capital Securities which are not tendered for or
are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of
the Declaration, but will not be entitled to any further
registration rights under the Registration Agreement, except
under limited circumstances. See "Risk Factors--Consequences of
a Failure to Exchange Original Capital Securities" and
"Description of Original Securities."
If any tendered Original Capital Securities are not accepted
for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, certificates
for any such unaccepted Original Capital Securities will be
returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection
with the Exchange Offer will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of
Original Capital Securities in connection with the Exchange
Offer. The Corporation will pay all charges and expenses, other
than certain applicable taxes described below, in connection with
the Exchange Offer. See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE
CORPORATION NOR ANY ISSUER TRUSTEE OF THE TRUST MAKES ANY
RECOMMENDATION TO HOLDERS OF ORIGINAL CAPITAL SECURITIES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF
THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES MUST MAKE
THEIR OWN DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE
OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL
POSITIONS AND REQUIREMENTS.
Expiration Date; Extensions; Amendments.
The term "Expiration Date" means 5:00 p.m., New York City
time, on February 27, 1998 unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which
the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in
their sole and absolute discretion, subject to applicable law, at
any time and from time to time, (i) to delay the acceptance of
the Original Capital Securities for exchange, (ii) to terminate
the Exchange Offer (whether or not any Original Capital
Securities have theretofore been accepted for exchange) if the
Trust determines, in its sole and absolute discretion, that any
of the events or conditions referred to under "--Conditions to
the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange
Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of
holders of Original Capital Securities to withdraw their tendered
Original Capital Securities as described under "--Withdrawal
Rights," and (iv) to waive any condition or otherwise amend the
terms of the Exchange Offer in any respect. If the Exchange
Offer is amended in a manner determined by the Corporation and
the Trust to constitute a material change, or if the Corporation
and the Trust waive a material condition of the Exchange Offer,
the Corporation and the Trust will promptly disclose such
amendment by means of a prospectus supplement that will be
distributed to the holders of the Original Capital Securities,
and the Corporation and the Trust will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or
amendment will be followed promptly by oral or written notice
thereof to the Exchange Agent and by making a public announcement
thereof, and such announcement in the case of an extension will
be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Corporation and the
Trust may choose to make any public announcement and subject to
applicable law, the Corporation and the Trust shall have no
obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to an
appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Capital
Securities
Upon the terms and subject to the conditions of the Exchange
Offer, the Trust will exchange, and will issue to the Exchange
Agent, promptly after the Expiration Date, Exchange Capital
Securities for Original Capital Securities validly tendered and
not withdrawn.
In all cases, delivery of Exchange Capital Securities in
exchange for Original Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of (i) the book-entry
confirmation described below under "-- Procedures for Tendering
Original Capital Securities -- Book-Entry Transfer" or
(ii) certificates representing such Original Capital Securities,
the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of
Transmittal.
Subject to the terms and conditions of the Exchange Offer,
the Trust will be deemed to have accepted for exchange, and
thereby exchanged, Original Capital Securities validly tendered
and not withdrawn as, if and when the Trust gives oral or written
notice to the Exchange Agent of the Trust's acceptance of such
Original Capital Securities for exchange pursuant to the Exchange
Offer. The Exchange Agent will act as agent for the Trust for
the purpose of receiving tenders of book-entry confirmations or
certificates representing Original Capital Securities, Letters of
Transmittal and related documents, and as agent for tendering
holders for the purpose of receiving book-entry confirmations or
certificates representing Original Capital Securities, Letters of
Transmittal and related documents and transmitting Exchange
Capital Securities to validly tendering holders. Such exchange
will be made promptly after the Expiration Date. If for any
reason whatsoever, acceptance for exchange or the exchange of any
Original Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance
for exchange of Original Capital Securities) or the Trust extends
the Exchange Offer or is unable to accept for exchange or
exchange Original Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Trust's rights set
forth herein, the Exchange Agent may, nevertheless, on behalf of
the Trust and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Original Capital Securities and such Original
Capital Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described
under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Original
Capital Securities will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender,
exchange, sell, assign and transfer Original Capital Securities,
that the Trust will acquire good, marketable and unencumbered
title to the tendered Original Capital Securities, free and clear
of all liens, restrictions, charges and encumbrances, and the
Original Capital Securities tendered for exchange are not subject
to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any
additional documents deemed by the Trust or the Exchange Agent to
be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Original Capital Securities
tendered pursuant to the Exchange Offer. Tendering holders of
Original Capital Securities that use ATOP will, by so doing,
acknowledge that they are bound by the terms of the Letter of
Transmittal.
Procedures for Tendering Original Capital Securities
Book-Entry Transfer. For purposes of the Exchange Offer,
the Exchange Agent will establish an account with respect to the
Original Capital Securities at DTC within two business days after
the date of this Prospectus. Any tendering financial institution
that is a participant in DTC's book-entry transfer facility
system may make a book-entry delivery of the Original Capital
Securities by causing DTC to transfer such Original Capital
Securities into the Exchange Agent's account at DTC in accordance
with DTC's ATOP procedures for transfers. Such holder of
Original Capital Securities using ATOP should transmit its
acceptance to DTC on or prior to the Expiration Date (or comply
with the guaranteed delivery procedures set forth below). DTC
will verify such acceptance, execute a book-entry transfer of the
tendered Original Capital Securities into the Exchange Agent's
account at DTC and then send to the Exchange Agent confirmation
of such book-entry transfer, including an agent's message
confirming that DTC has received an express acknowledgement from
such holder that such holder has received and agrees to be bound
by the Letter of Transmittal and that the Trust and the
Corporation may enforce the Letter of Transmittal against such
holder (a "book-entry confirmation").
A beneficial owner of Original Capital Securities that are
held by or registered in the name of a broker, dealer, commercial
bank, trust company or other nominee or custodian is urged to
contact such entity promptly if such beneficial owner wishes to
participate in the Exchange Offer.
Certificates. If the tender is not made through ATOP,
certificates representing Original Capital Securities, as well as
the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of
Transmittal, must be received by the Exchange Agent at its
address set forth under "-- Exchange Agent" on or prior to the
Expiration Date in order for such tender to be effective (or the
guaranteed delivery procedures set forth below must be complied
with).
If less than all of the Original Capital Securities are
tendered, a tendering holder should fill in the amount of
Original Capital Securities being tendered in the appropriate box
on the Letter of Transmittal. The entire amount of Original
Capital Securities delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Signature Guarantees. Certificates for the Original Capital
Securities need not be endorsed and signature guarantees on the
Letter of Transmittal are unnecessary unless (a) a certificate
for the Original Capital Securities is registered in a name other
than that of the person surrendering the certificate or (b) such
holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Original
Capital Securities must be duly endorsed or accompanied by a
properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal guaranteed by
a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including
(as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible
Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
Delivery. The method of delivery of the book-entry
confirmation or certificates representing tendered Original
Capital Securities, the Letter of Transmittal, and all other
required documents is at the option and sole risk of the
tendering holder, and delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail,
registered mail, return receipt requested, properly insured, or
an overnight delivery service is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery.
Notwithstanding any other provision hereof, the delivery of
Exchange Capital Securities in exchange for Original Capital
Securities tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely
receipt by the Exchange Agent of (i) a book-entry confirmation
with respect to such Original Capital Securities or
(ii) certificates representing Original Capital Securities and a
properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature
guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of Exchange Capital
Securities might not be made to all tendering holders at the same
time, and will depend upon when book-entry confirmations with
respect to Original Capital Securities or certificates
representing Original Capital Securities and other required
documents are received by the Exchange Agent.
Guaranteed Delivery. If a holder desires to tender Original
Capital Securities pursuant to the Exchange Offer and the
certificates for such Original Capital Securities are not
immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot
be completed on a timely basis, such Original Capital Securities
may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(1) such tenders are made by or through an Eligible
Institution;
(2) a properly completed and duly executed notice to the
Exchange Agent guaranteeing delivery to the Exchange Agent of
either certificates representing the Original Capital Securities
or a book-entry confirmation in compliance with the requirements
set forth herein (the "Notice of Guaranteed Delivery")
substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior
to the Expiration Date;
(3) (a) a book-entry confirmation or (b) the certificates
representing all tendered Original Capital Securities, in proper
form for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other documents required by
the Letter of Transmittal, are, in any case, received by the
Exchange Agent within three New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand,
or transmitted by facsimile or mail to the Exchange Agent and
must include a guarantee by an Eligible Institution in the form
set forth in such notice.
The Trust's acceptance for exchange of Original Capital
Securities tendered pursuant to any of the procedures described
above will constitute a binding agreement between the tendering
holder and the Trust upon the terms and subject to the conditions
of the Exchange Offer.
Determination of Validity. All questions as to the form of
documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tendered Original Capital
Securities will be determined by the Corporation and the Trust,
in their sole discretion, whose determination shall be final and
binding on all parties. The Corporation and the Trust reserve
the absolute right, in their sole and absolute discretion, to
reject any and all tenders determined by them not to be in proper
form or the acceptance of which, or exchange for, may, in the
opinion of counsel to the Corporation and the Trust, be unlawful.
The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the
Exchange Offer as set forth under "--Conditions to the Exchange
Offer" or any condition or irregularity in any tender of Original
Capital Securities of any particular holder whether or not
similar conditions or irregularities are waived in the case of
other holders.
The interpretation by the Corporation and the Trust of the
terms and conditions of the Exchange Offer (including the Letter
of Transmittal and the instructions thereto) will be final and
binding. No tender of Original Capital Securities will be deemed
to have been validly made until all irregularities with respect
to such tender have been cured or waived. Neither the
Corporation, the Trust, any affiliates or assigns of the
Corporation or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to
give any such notification.
If any Letter of Transmittal, endorsement, bond power, power
of attorney, or any other document required by the Letter of
Transmittal is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such
person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the
Corporation and the Trust, in their sole discretion, of such
person's authority to so act must be submitted.
Resales of Exchange Capital Securities
The Trust is making the Exchange Offer for the Exchange
Capital Securities in reliance on the position of the staff of
the Division of Corporation Finance of the Commission as set
forth in certain interpretive letters addressed to third parties
in other transactions. However, neither the Corporation nor the
Trust sought its own interpretive letter and there can be no
assurance that the staff of the Division of Corporation Finance
of the Commission would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the staff of
the Division of Corporation Finance of the Commission, and
subject to the two immediately following sentences, the
Corporation and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer in exchange for
Original Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder
who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities
are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange
Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of the Corporation or the Trust
or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Capital Securities, or any
broker-dealer who purchased Original Capital Securities from the
Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be able to rely
on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Original Capital Securities in the
Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Original
Capital Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as described
below, if any broker-dealer holds Original Capital Securities
acquired for its own account as a result of market=making or
other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-
dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange
Capital Securities.
Each holder of Original Capital Securities who wishes to
exchange Original Capital Securities for Exchange Capital
Securities in the Exchange Offer will be required to represent
that (i) it is not an "affiliate" of the Corporation or the
Trust, (ii) any Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital
Securities. In addition, the Corporation and the Trust may
require such holder, as a condition to such holder's eligibility
to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the
meaning of Rule 13d-3 under the Exchange Act) on behalf of whom
such holder holds the Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange
Capital Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Original Capital
Securities for its own account as the result of market-making
activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange
Capital Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken
by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the
Corporation and the Trust believe that Participating Broker-
Dealers who acquired Original Capital Securities for their own
accounts as a result of market-making activities or other trading
activities may fulfill their prospectus delivery requirements
with respect to the Exchange Capital Securities received upon
exchange of such Original Capital Securities (other than Original
Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a
prospectus meeting the requirements of the Securities Act, which
may be the prospectus prepared for an exchange offer so long as
it contains a description of the plan of distribution with
respect to the resale of such Exchange Capital Securities.
Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange
for Original Capital Securities where such Original Capital
Securities were acquired by such Participating Broker-Dealer for
its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the
Registration Agreement, the Corporation and the Trust have agreed
that this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Capital Securities for a
period ending 180 days after the Expiration Date (subject to
extension under certain limited circumstances described below)
or, if earlier, when all such Exchange Capital Securities have
been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." However, a Participating Broker-Dealer who
intends to use this Prospectus in connection with the resale of
Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the
Corporation or the Trust, or cause the Corporation or the Trust
to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses
set forth herein under "--Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who
surrenders Original Capital Securities pursuant to the Exchange
Offer will be deemed to have agreed, by execution of the Letter
of Transmittal, that upon receipt of notice from the Corporation
or the Trust of the occurrence of any event or the discovery of
(i) any fact which makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or
(ii) any fact which causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained
or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading, or
(iii) of the occurrence of certain other events specified in the
Registration Agreement, such Participating Broker-Dealer will
suspend the sale of Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) pursuant to this Prospectus until the Corporation or
the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the
amended or supplemented Prospectus to such Participating Broker-
Dealer, or the Corporation or the Trust has given notice that the
sale of the Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the
Corporation or the Trust gives such notice to suspend the sale of
the Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable), it shall
extend the 180-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus
in connection with the resale of Exchange Capital Securities by
the number of days during the period from and including the date
of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the
amended or supplemented Prospectus necessary to permit resales of
the Exchange Capital Securities or to and including the date on
which the Corporation or the Trust has given notice that the sale
of Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Original
Capital Securities may be withdrawn at any time on or prior to
the Expiration Date.
In order for a withdrawal to be effective, a written,
telegraphic, telex or facsimile transmission of such notice of
withdrawal must be timely received by the Exchange Agent at one
of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date. Any such notice of withdrawal must
specify the name of the person who tendered the Original Capital
Securities to be withdrawn, the aggregate principal amount of
Original Capital Securities to be withdrawn, and (if certificates
for such Original Capital Securities have been tendered) the name
of the registered holder of the Original Capital Securities as
set forth on the Original Capital Securities, if different from
that of the person who tendered such Original Capital Securities.
If certificates representing Original Capital Securities have
been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such certificates, the
tendering holder must submit the serial numbers shown on the
particular Original Capital Securities to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Original Capital
Securities tendered for the account of an Eligible Institution.
If Original Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for
Tendering Original Capital Securities -- Book-Entry Transfer,"
the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Original
Capital Securities. Withdrawals of tenders of Original Capital
Securities may not be rescinded. Original Capital Securities
properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following
any of the procedures described above under "--Procedures for
Tendering Original Capital Securities."
All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be
determined by the Trust, in its sole discretion, whose
determination shall be final and binding on all parties. Neither
the Corporation, the Trust, any affiliates or assigns of the
Corporation or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification. Any Original Capital
Securities which have been tendered but which are withdrawn will
be returned to the holder thereof promptly after withdrawal.
Distributions on Exchange Capital Securities
Holders of Original Capital Securities whose Original
Capital Securities are accepted for exchange will not receive
Distributions on such Original Capital Securities and will be
deemed to have waived the right to receive any Distributions on
such Original Capital Securities accumulated from and after
December 1, 1997. Accordingly, holders of Exchange Capital
Securities as of the record date for the payment of Distributions
on June 1, 1998 will be entitled to receive Distributions
accumulated from and after December 1, 1997.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer,
or any extension of the Exchange Offer, the Corporation and the
Trust will not be required to accept for exchange, or to
exchange, any Original Capital Securities for any Exchange
Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Original Capital Securities
have theretofore been accepted for exchange) or may waive any
conditions to or amend the Exchange Offer, if any of the
following conditions have occurred or exists or have not been
satisfied:
(a) there shall occur a change in the current
interpretation by the staff of the Commission which permits the
Exchange Capital Securities issued pursuant to the Exchange Offer
in exchange for Original Capital Securities to be offered for
resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an
"affiliate" of the Corporation or the Trust within the meaning of
Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities
Act, provided that such Exchange Capital Securities are acquired
in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to
participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been
adopted or enacted which, in the judgment of the Corporation or
the Trust, would reasonably be expected to impair its ability to
proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission
or any state securities authority suspending the effectiveness of
the Registration Statement, or proceedings shall have been
initiated or, to the knowledge of the Corporation or the Trust,
threatened for that purpose, or any governmental approval has not
been obtained, which approval the Corporation or the Trust shall,
in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby, or
(d) the Corporation determines in good faith (i) that there
is a reasonable likelihood that, or a material uncertainty exists
as to whether, consummation of the Exchange Offer would result in
an adverse tax consequence to the Trust or the Corporation and
(ii) that such condition exists on January 31, 1998.
If the Corporation or the Trust determines in its sole and
absolute discretion that any of the foregoing events or
conditions has occurred or exists or has not been satisfied, it
may, subject to applicable law, terminate the Exchange Offer
(whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect.
If such waiver or amendment constitutes a material change to the
Exchange Offer, the Corporation or the Trust will promptly
disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of
the Original Capital Securities and will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange
Act.
Exchange Agent
The Bank of New York has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal
and any other required documents, questions, requests for
assistance, and requests for additional copies of this Prospectus
or of the Letter of Transmittal should be directed to the
Exchange Agent as follows:
BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York
Floor 7E, 101 Barclay Street
New York, New York 10286
Attention: Denise Robinson, Reorganization Section
Confirm By Telephone:
(212) 815-2791
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 815-6339
BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attention: Denise Robinson, Reorganization Section
Confirm by Telephone:
(212) 815-2791
Delivery to other than the above addresses or facsimile number
will not constitute a valid delivery.
Fees and Expenses
The Corporation has agreed to pay the Exchange Agent
reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection
therewith. The Corporation will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-
pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of
Original Capital Securities, and in handling or tendering for
their customers.
Holders who tender their Original Capital Securities for
exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Exchange Capital Securities
are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Capital Securities in
connection with the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such
tendering holder.
Neither the Corporation nor the Trust will make any payment
to brokers, dealers or other nominees soliciting acceptances of
the Exchange Offer.
<PAGE>
DESCRIPTION OF EXCHANGE SECURITIES
Description of Exchange Capital Securities
Pursuant to the terms of the Declaration, the Issuer
Trustees on behalf of the Trust will issue the Exchange Capital
Securities. The Exchange Capital Securities will represent
beneficial ownership interests in the Trust and the holders
thereof will be entitled to a preference in certain circumstances
with respect to Distributions and amounts payable on redemption
of the Trust Securities or liquidation of the Trust over the
Common Securities, as well as other benefits as described in the
Declaration. See "--Subordination of Common Securities." The
Declaration has been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). This summary of
certain provisions of the Exchange Capital Securities, the Common
Securities and the Declaration does not purport to be complete
and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Declaration, including the
definitions therein of certain terms. The form of the
Declaration is available upon request from the Issuer Trustees
and has been filed as an exhibit to the Registration Statement,
of which this Prospectus is a part.
General. The Exchange Capital Securities will be limited to $100
million aggregate Liquidation Amount at any one time outstanding.
The Capital Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities except as
described under "--Subordination of Common Securities." Legal
title to the Junior Subordinated Debentures will be held by the
Property Trustee on behalf of the Trust in trust for the benefit
of the holders of the Trust Securities. The Exchange Guarantee
executed by the Corporation for the benefit of the holders of the
Exchange Capital Securities (the "Exchange Guarantee") will not
guarantee payment of Distributions or amounts payable on
redemption of the Exchange Capital Securities or on liquidation
of the Trust when the Trust does not have funds on hand available
to make such payments. See "--Description of Exchange
Guarantee."
Distributions. The Exchange Capital Securities represent
beneficial ownership interests in the Trust, and Distributions on
each Capital Security will be payable at the annual rate of
10.30% of the stated Liquidation Amount of $1,000, and will be
payable semi-annually in arrears on June 1 and December 1 of each
year to the holders of the Exchange Capital Securities at the
close of business on the May 15 or November 15 (each, a "Record
Date"), as the case may be, next preceding the relevant
Distribution Date (as defined herein). Distributions on the
Exchange Capital Securities will be cumulative. Distributions
will accumulate from December 1, 1997. The first Distribution
Date for the Exchange Capital Securities will be June 1, 1998.
The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on which Distributions are payable on
the Exchange Capital Securities is not a Business Day (as defined
herein), payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (and
without any additional Distributions or other payments in respect
to any such delay), except that if such next succeeding Business
Day falls in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on the date such
payment was originally payable (each date on which Distributions
are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in
The City of New York are authorized or required by law or
executive order to remain closed.
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation has the right under the Indenture to
defer the payment of interest on the Exchange Junior Subordinated
Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period shall end on
a date other than an Interest Payment Date or extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a
consequence of any such election, semi-annual Distributions on
the Trust Securities by the Trust will be deferred during any
such Extension Period. Distributions to which holders of the
Trust Securities are entitled during any such Extension Period
will accumulate additional Distributions thereon at the rate per
annum of 10.30% thereof, compounded semi-annually from the
relevant Distribution Date, but not exceeding the interest rate
then accruing on the Junior Subordinated Debentures. The term
"Distributions" as used herein shall include any such additional
Distributions.
Prior to the termination of any such Extension Period, the
Corporation may further extend such Extension Period, provided
that such extension does not cause such Extension Period to
exceed 10 consecutive semi-annual periods, end on a date other
than an Interest Payment Date, or to extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all
amounts then due, and subject to the foregoing limitations, the
Corporation may elect to begin a new Extension Period. The
Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any
such Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable
except for the election to begin such Extension Period or
(ii) the date the Administrative Trustees are required to give
notice to any securities exchange or to holders of such Exchange
Capital Securities of the Record Date for the date such
Distributions are payable, but in any event not less than five
Business Days prior to such Record Date. There is no limitation
on the number of times that the Corporation may elect to begin an
Extension Period. See "--Description of Exchange Junior
Subordinated Debentures--Option to Extend Interest Payment Date"
and "Certain United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not
(i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of the Corporation's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt
securities of, the Corporation (including Other Debentures) that
rank pari passu with or junior in right of payment to the Junior
Subordinated Debentures, or (iii) make any guarantee payments
with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including Other
Guarantees) if such guarantee ranks pari passu with or junior in
right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future,
or the redemption or repurchase of any such rights pursuant
thereto, (c) payments under the Guarantee, (d) purchases of
shares of the Corporation's common stock related to the issuance
of common stock or rights under any of the Corporation's benefit
plans for its directors, officers, or employees or any of the
Corporation's dividend reinvestment plans, (e) as a result of a
reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the
Corporation's capital stock or, (f) the purchase of fractional
interests in shares of the Corporation's capital stock pursuant
to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged).
The Corporation has no current intention of exercising its
right to defer payments of interest on the Exchange Junior
Subordinated Debentures.
The revenue of the Trust available for distribution to
holders of the Trust Securities will be limited to payments under
the Exchange Junior Subordinated Debentures. See "--Description
of Exchange Junior Subordinated Debentures--General." If the
Corporation does not make interest payments on the Exchange
Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Trust
Securities. The payment of Distributions (if and to the extent
the Trust has funds legally available for the payment of such
Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on a limited basis as set forth
herein under "--Description of Exchange Guarantee."
Mandatory Redemption. Upon the repayment on the Stated Maturity
Date or prepayment prior to the Stated Maturity Date of the
Junior Subordinated Debentures (other than following the
distribution of the Junior Subordinated Debentures to the holders
of the Trust Securities), the proceeds from such repayment or
redemption shall be applied by the Property Trustee to redeem a
Like Amount of Trust Securities, upon not less than 30 nor more
than 60 days' notice of a date of redemption (the "Redemption
Date"), at the applicable Redemption Price, which shall be equal
to (i) in the case of the repayment of the Exchange Junior
Subordinated Debentures at the Stated Maturity, the Maturity
Redemption Price (equal to the principal of, and accrued but
unpaid interest on, the Junior Subordinated Debentures), (ii) in
the case of the redemption of the Junior Subordinated Debentures
prior to June 1, 2007 in connection with the occurrence of a
Special Event, the Special Event Redemption Price (equal to the
Special Event Prepayment Price (as defined under "--Description
of the Exchange Junior Subordinated Debentures--Special Event
Prepayment")), and (iii) in the case of the optional redemption
of the Junior Subordinated Debentures on or after June 1, 2007,
the Optional Redemption Price (equal to the Optional Prepayment
Price (as defined under "--Description of Exchange Junior
Subordinated Debentures--Optional Prepayment")).
"Like Amount" means (i) with respect to a redemption of the
Trust Securities, Trust Securities having a Liquidation Amount
equal to the principal amount of Junior Subordinated Debentures
to be paid in accordance with their terms and (ii) with respect
to a distribution of Junior Subordinated Debentures upon the
liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust
Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
The Corporation will have the option to prepay the Junior
Subordinated Debentures, (i) in whole or in part, on or after
June 1, 2007, at the applicable Optional Prepayment Price and
(ii) in whole but not in part, at any time prior to June 1, 2007,
upon the occurrence of a Special Event, at the Special Event
Prepayment Price, in each case subject to receipt of any required
regulatory approval. See "Description of Exchange Junior
Subordinated Debentures--Optional Prepayment" and "--Special
Event Prepayment." If less than all of the Junior Subordinated
Debentures are to be repaid or redeemed on a Redemption Date,
then the proceeds from such repayment or redemption shall be
allocated to the redemption pro rata of the Trust Securities.
Redemption of the Junior Subordinated Debentures prior to
Stated Maturity may be subject to receipt of prior regulatory
approval if then required under applicable capital guidelines or
policies.
If the Trust is required to pay any additional taxes, duties
or other governmental charges as a result of a Tax Event, the
Corporation will pay as additional amounts on the Junior
Subordinated Debentures the Additional Sums.
"Additional Sums" means the additional amounts as may be
necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Trust Securities shall
not be reduced as a result of any additional taxes, duties and
other governmental charges to which the Trust has become subject
as a result of a Tax Event.
Redemption Procedures. Trust Securities shall be redeemed, if at
all, at the applicable Redemption Price with the proceeds from
the contemporaneous repayment or redemption of the Exchange
Junior Subordinated Debentures. Redemptions of the Trust
Securities shall be made and the applicable Redemption Price
shall be payable on each Redemption Date only to the extent that
the Trust has funds on hand available for the payment of such
applicable Redemption Price. See also "--Subordination of Common
Securities."
If the Trust gives a notice of redemption in respect of the
Exchange Capital Securities, then, by 12:00 noon, New York City
time, on the Redemption Date, to the extent funds are available,
with respect to the Exchange Capital Securities held in global
form, the Property Trustee will deposit irrevocably with DTC
funds sufficient to pay the applicable Redemption Price and will
give DTC irrevocable instructions and authority to pay the
applicable Redemption Price to the holders of the Capital
Securities. See "--Form, Denomination, Book-Entry Procedures and
Transfer." With respect to the Exchange Capital Securities held
in certificated form, the Property Trustee, to the extent funds
are available, will irrevocably deposit with the paying agent for
the Exchange Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent
irrevocable instructions and authority to pay the applicable
Redemption Price to the holders thereof upon surrender of their
certificates evidencing the Exchange Capital Securities. See
"--Payment and Paying Agency." Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date shall be
payable to the holders of the Exchange Capital Securities on the
relevant Record Dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the
holders of the Exchange Capital Securities will cease, except the
right of the holders of the Exchange Capital Securities to
receive the applicable Redemption Price, but without interest on
such Redemption Price, and the Exchange Capital Securities will
cease to be outstanding. In the event that any date fixed for
redemption of Capital Securities is not a Business Day, then
payment of the applicable Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and
not paid either by the Trust or by the Corporation pursuant to
the Exchange Guarantee as described under "--Description of
Exchange Guarantee," Distributions on Exchange Capital Securities
will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Trust to the date
such applicable Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for
purposes of calculating the applicable Redemption Price.
In the event that fewer than all of the outstanding Capital
Securities are to be redeemed, the Capital Securities will be
redeemed in accordance with the customary procedures of DTC.
Subject to applicable law (including, without limitation,
United States federal securities law), the Corporation or its
subsidiaries may at any time and from time to time purchase
outstanding Capital Securities by tender, in the open market or
by private agreement.
Notice of any redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each holder
of Trust Securities at its registered address. Unless the
Corporation defaults in payment of the applicable Prepayment
Price on, or in the repayment of, the Junior Subordinated
Debentures, on and after the Redemption Date Distributions will
cease to accrue on the Trust Securities called for redemption.
Liquidation of the Trust and Distribution of Junior Subordinated
Debentures. The Corporation will have the right at any time to
terminate the Trust and cause the Junior Subordinated Debentures
to be distributed to the holders of the Trust Securities in
liquidation of the Trust. Such right is subject to (i) the
Corporation having received an opinion of counsel to the effect
that such distribution will not be a taxable event to holders of
Capital Securities and (ii) any required regulatory approval.
Upon liquidation of the Trust and certain other events, the
Junior Subordinated Debentures may be distributed to holders of
the Trust Securities. Under current United States federal income
tax law, a distribution of Junior Subordinated Debentures upon
the dissolution of the Trust would not be a taxable event to
holders of the Capital Securities. If, however, the Trust is
characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution
of the Trust, the distribution of the Junior Subordinated
Debentures would constitute a taxable event to holders of Capital
Securities. Moreover, upon the occurrence of a Tax Event, a
dissolution of the Trust in which holders of the Capital
Securities receive cash would be a taxable event to such holders.
See "Certain United States Federal Income Tax Consequences--
Distribution of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust."
The Trust shall automatically terminate upon the first to
occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Corporation; (ii) the distribution of a Like
Amount of the Junior Subordinated Debentures to the holders of
the Trust Securities if the Corporation, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust
(which direction is optional and, except as described above,
wholly within the discretion of the Corporation, as Sponsor);
(iii) redemption of all of the Trust Securities as described
under "--Mandatory Redemption" above; (iv) expiration of the term
of the Trust; and (v) the entry of an order for the dissolution
of the Trust by a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii),
(iv) or (v) above, the Trust shall be liquidated by the Issuer
Trustees as expeditiously as the Issuer Trustees determine to be
possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the
holders of the Trust Securities a Like Amount of the Junior
Subordinated Debentures, unless such distribution is determined
by the Property Trustee not to be practicable, in which event
such holders will be entitled to receive out of the assets of the
Trust legally available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution
can be paid only in part because the Trust has insufficient
assets on hand legally available to pay in full the aggregate
Liquidation Distribution or if a Debenture Event of Default has
occurred and is continuing, the Capital Securities shall have a
priority over the Common Securities. See "--Subordination of
Common Securities."
If the Corporation elects not to prepay the Junior
Subordinated Debentures prior to maturity in accordance with
their terms and either elects not to or is unable to liquidate
the Trust and distribute the Junior Subordinated Debentures to
holders of the Trust Securities, the Trust Securities will remain
outstanding until the repayment of the Junior Subordinated
Debentures at the Stated Maturity.
After the liquidation date is fixed for any distribution of
Junior Subordinated Debentures to holders of the Trust Securities
(i) the Trust Securities will no longer be deemed to be
outstanding, (ii) DTC or its nominee will receive in respect of
each global certificate, if any, representing Trust Securities
and held by it, a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered
upon such distribution, and (iii) any certificates representing
Trust Securities not held by DTC or its nominee will be deemed to
represent Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Trust Securities,
and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on such Trust Securities
until such certificates are presented to the Administrative
Trustees or their agent for cancellation, whereupon the
Corporation will issue to such holder, and the Debenture Trustee
will authenticate, a certificate representing such Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the
Capital Securities or the Junior Subordinated Debentures that may
be distributed in exchange for the Trust Securities if a
dissolution and liquidation of the Trust were to occur.
Accordingly, the Capital Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of the Trust, may
trade at a discount to the price that the investor paid to
purchase the Capital Securities offered hereby.
Subordination of Common Securities. Payment of Distributions on,
and the Redemption Price of, the Trust Securities, as applicable,
shall be made pro rata to the holders of Trust Securities based
on the Liquidation Amount of the Trust Securities; provided,
however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing,
no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account
of the redemption, liquidation or other acquisition of the Common
Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price, shall
have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in
cash of all Distributions on, or the Redemption Price of, the
Capital Securities then due and payable.
In the case of any Event of Default, the Corporation as
holder of the Common Securities will be deemed to have waived any
right to act with respect to any such Event of Default until the
effect of all such Events of Default have been cured, waived or
otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee
shall act solely on behalf of the holders of the Capital
Securities and not on behalf of the Corporation as holder of the
Common Securities, and only the holders of the Capital Securities
will have the right to direct the Property Trustee to act on
their behalf.
Events of Default; Notice. The occurrence of a Debenture Event
of Default (see "Description of Exchange Junior Subordinated
Debentures - Debenture Events of Default") constitutes an "Event
of Default" under the Declaration.
Within five Business Days after the occurrence of any Event
of Default actually known to the Property Trustee, the Property
Trustee shall transmit notice of such Event of Default to the
holders of the Capital Securities, the Administrative Trustees
and the Corporation, as Sponsor, unless such Event of Default
shall have been cured or waived. The Corporation, as Sponsor,
and the Administrative Trustees are required to file annually
with the Property Trustee a certificate as to whether or not they
are in compliance with all the conditions and covenants
applicable to them under the Declaration.
If a Debenture Event of Default or an Event of Default under
the Declaration has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as
described above. See "--Liquidation of the Trust and
Distribution of Junior Subordinated Debentures" and
"--Subordination of Common Securities."
Removal of Issuer Trustees. Unless a Debenture Event of Default
shall have occurred and be continuing, any Issuer Trustee may be
removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such
time by the holders of a majority in Liquidation Amount of the
outstanding Capital Securities. In no event will the holders of
the Capital Securities have the right to vote to appoint, remove
or replace the Administrative Trustees, which voting rights are
vested exclusively in the Corporation as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and
no appointment of a successor trustee shall be effective until
the acceptance of appointment by the successor trustee in
accordance with the provisions of the Declaration.
Co-Trustees and Separate Property Trustee. Unless an Event of
Default shall have occurred and be continuing, at any time or
times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of
the Trust's property may at the time be located, the Corporation,
as the holder of the Common Securities, and the Administrative
Trustees shall have power to appoint one or more persons either
to act as a co-trustee, jointly with the Property Trustee, of all
or any part of such Trust's property, or to act as separate
trustee of any such property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in
such person or persons in such capacity any property, title,
right or power deemed necessary or desirable, subject to the
provisions of the Declaration. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
Merger or Consolidation of Issuer Trustees. Any Person into
which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged
or converted or with which it may be consolidated or any Person
resulting from any merger, conversion or consolidation to which
such Issuer Trustee shall be a party, or any Person succeeding to
all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee
under the Declaration, provided such Person shall be otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the
Trust. The Trust may not merge with or into, consolidate,
amalgamate or be replaced by, or convey, transfer or lease its
properties and assets as an entirety or substantially as an
entirety to any corporation or other Person, except as described
below or as otherwise set forth in the Declaration. The Trust
may, at the request of the Corporation, as Sponsor, with the
consent of the Administrative Trustees but without the consent of
the holders of the Capital Securities, the Property Trustee or
the Delaware Trustee, merge with or into, consolidate, amalgamate
or be replaced by, or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to, a
trust organized as such under the laws of any State; provided,
that (i) such successor entity either (a) expressly assumes all
of the obligations of the Trust with respect to the Capital
Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Capital Securities rank in
priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Corporation
expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder
of the Junior Subordinated Debentures, (iii) the Successor
Securities are listed or traded, or any Successor Securities will
be listed or traded upon notification of issuance, on any
national securities exchange or other organization on which the
Capital Securities are then listed or traded, if any, (iv) if the
Capital Securities (including any Successor Securities) are rated
by any nationally recognized statistical rating organization
prior to such transaction, such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
cause the Capital Securities (including any Successor Securities)
to be downgraded by any such nationally recognized statistical
rating organization, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor
Securities) in any material respect, (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Corporation has received an opinion from
independent counsel to the Trust experienced in such matters to
the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in
any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor such successor entity will be
required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), and (viii) the Corporation or any permitted
successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor
entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the
Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or
substantially as an entirety to any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust
or the successor entity to be classified as other than a grantor
trust for United States federal income tax purposes.
Voting Rights; Amendment of the Declaration. Except as provided
below and under "--Mergers, Consolidations, Amalgamations or
Replacements of the Trust" and "Description of Exchange
Guarantee--Amendments and Assignment" and as otherwise required
by law and the Declaration, the holders of the Capital Securities
will have no voting rights.
The Declaration may be amended from time to time by the
Corporation, the Property Trustee and the Administrative
Trustees, without the consent of the holders of the Trust
Securities, (i) to cure any ambiguity, correct or supplement any
provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to
matters or questions arising under the Declaration, which shall
not be inconsistent with the other provisions of the Declaration,
or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that
the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that the Trust will not
be required to register as an "investment company" under the
Investment Company Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any
material respect the interests of the holders of the Trust
Securities, and any amendments of the Declaration shall become
effective when notice thereof is given to the holders of the
Trust Securities. The Declaration may be amended by the Issuer
Trustees and the Corporation with (i) the consent of holders
representing a majority (based upon Liquidation Amount) of the
outstanding Trust Securities, and (ii) upon receipt by the Issuer
Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the
Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an
"investment company" under the Investment Company Act. In
addition, without the consent of each holder of Trust Securities,
the Declaration may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be
made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or
after such date. The Exchange Capital Securities and any
Original Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote together as a single
class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof
have taken certain actions or exercised certain rights under the
Declaration.
So long as any Junior Subordinated Debentures are held by
the Property Trustee, the Issuer Trustees shall not (i) direct
the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee, or executing any trust
or power conferred on the Property Trustee with respect to the
Junior Subordinated Debentures, (ii) waive certain past defaults
under the Indenture, (iii) exercise any right to rescind or annul
a declaration of acceleration of the maturity of the principal of
the Junior Subordinated Debentures or (iv) consent to any
amendment, modification or termination of the Indenture or the
Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of
the holders of a majority in aggregate Liquidation Amount of all
outstanding Capital Securities; provided, however, that where a
consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the
prior approval of each holder of the Capital Securities. The
Issuer Trustees shall not revoke any action previously authorized
or approved by a vote of the holders of the Capital Securities
except by subsequent vote of such holders. The Property Trustee
shall notify each holder of Capital Securities of any notice of
default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of such holders of
the Capital Securities, prior to taking any of the foregoing
actions, the Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that the Trust will not
be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such
action.
Any required approval of holders of Capital Securities may
be given at a meeting of such holders convened for such purpose
or pursuant to written consent. The Property Trustee will cause
a notice of any meeting at which holders of Capital Securities
are entitled to vote, or of any matter upon which action by
written consent of such holders is to be taken, to be given to
each holder of record of Capital Securities in the manner set
forth in the Declaration.
No vote or consent of the holders of Capital Securities will
be required for the Trust to redeem and cancel the Capital
Securities in accordance with the Declaration.
Notwithstanding that holders of the Capital Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Capital Securities that are owned by
the Corporation, the Issuer Trustees or any affiliate of the
Corporation or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
Expenses and Taxes. In the Indenture, the Corporation, as issuer
of the Junior Subordinated Debentures, has agreed to pay all
debts and other obligations (other than with respect to payments
of Distributions, amounts payable upon redemption and the
Liquidation Amount of the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to
the organization of the Trust, the fees and expenses of the
Issuer Trustees and the costs and expenses relating to the
operation of the Trust) and the offering of the Capital
Securities, and to pay any and all taxes and all costs and
expenses with respect to the foregoing (other than United States
withholding taxes) to which the Trust might become subject.
Form, Denomination, Book-Entry Procedures and Transfer. The
Exchange Capital Securities initially will be represented by one
or more Capital Securities in registered, global form
(collectively, the "Global Capital Securities"). The Global
Capital Securities will be deposited upon issuance with the
Property Trustee as custodian for DTC, in New York, New York, and
registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC
as described below.
Except as set forth below, the Global Capital Securities may
be transferred, in whole and not in part, only to another nominee
of DTC or to a successor of DTC or its nominee. Beneficial
interests in the Global Capital Securities may not be exchanged
for Capital Securities in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry
Capital Securities for Certificated Capital Securities."
Depositary Procedures. DTC has advised the Trust and the
Corporation as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, the "Participants")
and to facilitate the clearance and settlement of transactions in
those securities between Participants through electronic book-
entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Indirect access to
DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either
directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Corporation that,
pursuant to procedures established by it, (i) upon deposit of the
Global Capital Securities, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions
of the Liquidation Amount of the Global Capital Securities and
(ii) ownership of such interests in the Global Capital Securities
will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to
the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial
interests in the Global Capital Securities).
Investors in the Global Capital Securities may hold their
interests therein directly through DTC, if they are Participants
in such system, or indirectly through organizations which are
Participants in such system. All interests in a Global Capital
Security will be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take
physical delivery in certificated form of securities that they
own. Consequently, the ability to transfer beneficial interests
in a Global Capital Security to such persons will be limited to
that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a
Global Capital Security to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the Capital
Securities, see "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities" and "--Exchange of Certificated
Capital Securities for Book-Entry Capital Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN
THE GLOBAL CAPITAL SECURITIES WILL NOT BE ENTITLED TO HAVE
CAPITAL SECURITIES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE OR
BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF CAPITAL SECURITIES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR HOLDERS THEREOF UNDER THE DECLARATION FOR ANY PURPOSE.
Payments in respect of the Global Capital Security
registered in the name of DTC or its nominee will be payable by
the Property Trustee to DTC in its capacity as the registered
holder under the Declaration. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose
names the Capital Securities, including the Global Capital
Securities, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Property Trustee nor any
agent thereof has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or
Indirect Participant's records relating to, or payments made on
account of, beneficial ownership interests in the Global Capital
Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the
Global Capital Securities, or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or
Indirect Participants.
DTC has advised the Trust and the Corporation that its
current practice, upon receipt of any payment in respect of
securities such as the Capital Securities, is to credit the
accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective
holdings in Liquidation Amount of beneficial interests in the
Global Capital Security, as shown on the records of DTC, unless
DTC has reason to believe it will not receive payment on such
payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Capital Securities
represented by Global Capital Securities held through such
Participants will be governed by standing instructions and
customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the
responsibility of DTC, the Property Trustee, the Trust, or the
Corporation. Neither the Trust or the Corporation nor the
Property Trustee will be liable for any delay by DTC or any of
its Participants in identifying the beneficial owners of the
Capital Securities, and the Trust or the Corporation and the
Property Trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all
purposes.
Interests in the Global Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market
trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules
and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's
procedures, and will settle in same-day funds.
DTC has advised the Trust and the Corporation that it will
take any action permitted to be taken by a holder of Exchange
Capital Securities (including, without limitation, the
presentation of Capital Securities for exchange as described
below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Capital Securities are
credited and only in respect of such portion of the aggregate
Liquidation Amount of the Capital Securities as to which such
Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Declaration,
DTC reserves the right to exchange the Global Capital Securities
for legended Exchange Capital Securities in certificated form and
to distribute such Exchange Capital Securities to its
Participants.
So long as DTC or its nominee is the registered owner of the
Global Capital Securities, DTC or such nominee, as the case may
be, will be considered the sole owner or holder of the Capital
Securities represented by the Global Capital Security for all
purposes under the Declaration. The information in this section
concerning DTC and its book-entry system has been obtained from
sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to
facilitate transfers of interest in the Global Capital Securities
among Participants in DTC, it is under no obligation to perform
or to continue to perform such procedures, and such procedures
may be discontinued at any time. Neither the Trust or the
Corporation nor the Property Trustee will have any responsibility
for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Capital Securities for Certificated
Capital Securities. A Global Capital Security is exchangeable
for Exchange Capital Securities in registered certificated form
if (i) DTC (x) notifies the Trust that it is no longer willing or
able to continue as Depositary for the Global Capital Security
and the Trust fails to appoint a successor Depositary within
90 days, or (y) has ceased to be a "clearing agency" registered
under the Exchange Act; (ii) the Corporation at its option elects
to cause the issuance of Capital Securities in certificated form;
or (iii) there shall have occurred and be continuing a Debenture
Event of Default or any event which, after notice or lapse of
time or both, would be an Event of Default under the Declaration.
In addition, beneficial interests in a Global Capital Security
may be exchanged for certificated Exchange Capital Securities
upon request, but only upon at least 20 days prior written notice
given to the Property Trustee by or on behalf of DTC in
accordance with DTC's customary procedures. In all cases,
certificated Capital Securities delivered in exchange for any
Global Capital Security or beneficial interests therein will be
registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures).
Exchange of Certificated Capital Securities for Book-Entry
Capital Securities. Capital Securities issued in certificated
form may not be exchanged for beneficial interests in any Global
Capital Security unless such exchange occurs in connection with a
transfer of such Capital Securities and the transferor first
delivers to the Property Trustee a written certificate (in the
form provided in the Declaration) to the effect that such
transfer will comply with the appropriate transfer restrictions
applicable to such Capital Securities.
Payment and Paying Agency. Payments in respect of the Exchange
Capital Securities held in global form shall be made to the
Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates or in respect of
the Capital Securities that are not held by the Depositary, such
payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the
register. The paying agent (the "Paying Agent") shall initially
be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees
and the Corporation. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees
shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and the Corporation) to
act as Paying Agent.
The Bank of New York has informed the Trust that so long as
it serves as paying agent for the Capital Securities, it
anticipates that information regarding Distributions on the
Capital Securities, including payment date, Record Date and
redemption information, will be made available through The Bank
of New York at 1-800-524-4458.
Restrictions on Transfer. The Exchange Capital Securities will
be issued, and may be transferred, only in blocks having a
Liquidation Amount of not less than $100,000 (100 Capital
Securities). Any such transfer of Exchange Capital Securities in
a block having a Liquidation Amount of less than $100,000 shall
be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Exchange
Capital Securities for any purpose, including but not limited to
the receipt of Distributions on such Exchange Capital Securities,
and such transferee shall be deemed to have no interest
whatsoever in such Exchange Capital Securities.
Registrar and Transfer Agent. The Property Trustee will act as
registrar and transfer agent for the Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will
be effected without charge by or on behalf of the Trust, but upon
payment of any tax or other governmental charges that may be
imposed in connection with any transfer or exchange. The Trust
will not be required to register or cause to be registered the
transfer of the Exchange Capital Securities after they have been
called for redemption.
Information Concerning the Property Trustee. The Property
Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are
specifically set forth in the Declaration and, during the
existence of an Event of Default, must exercise the same degree
of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the
request of any holder of Trust Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required
to decide between alternative causes of action, construe
ambiguous provisions in the Declaration or is unsure of the
application of any provision of the Declaration, and the matter
is not one on which holders of the Capital Securities or the
Common Securities are entitled under the Declaration to vote,
then the Property Trustee shall take such action as is directed
by the Corporation and, if not so directed, shall take such
action as it deems advisable and in the best interests of the
holders of the Trust Securities and will have no liability except
for its own bad faith, negligence or willful misconduct.
Miscellaneous. The Administrative Trustees are authorized and
directed to conduct the affairs of and to operate the Trust in
such a way that the Trust will not be deemed to be an "investment
company" required to be registered under the Investment Company
Act or classified as an association taxable as a corporation for
United States federal income tax purposes, and so that the Junior
Subordinated Debentures will be treated as indebtedness of the
Corporation for United States federal income tax purposes. In
this connection, the Corporation and the Administrative Trustees
are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the
Declaration, that the Corporation and the Administrative Trustees
determine in their discretion to be necessary or desirable for
such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust
Securities.
Holders of the Trust Securities have no preemptive or
similar rights.
The Trust may not borrow money, issue debt, execute
mortgages or pledge any of its assets.
Description of Exchange Junior Subordinated Debentures
The Junior Subordinated Debentures were issued as a separate
series under an Indenture, as supplemented from time to time (as
so supplemented, the "Indenture"), between the Corporation and
The Bank of New York, as trustee (the "Debenture Trustee"). The
Indenture has been qualified under the Trust Indenture Act. This
summary of certain terms and provisions of the Junior
Subordinated Debentures and the Indenture does not purport to be
complete, and where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of
certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the
Indenture by the Trust Indenture Act.
General. Concurrently with the issuance of the Trust Securities,
the Trust invested the proceeds thereof in the Original Junior
Subordinated Debentures issued by the Corporation. The Exchange
Junior Subordinated Debentures, similarly to the Original Junior
Subordinated Debentures, will bear interest from June 5, 1997 at
the annual rate of 10.30% of the principal amount thereof,
payable semi-annually in arrears on June 1 and December 1 of each
year (each, an "Interest Payment Date"), commencing June 1, 1998,
to the person in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of
business on the 15th day of the month preceding the month in
which the relevant Interest Payment Date falls. It is
anticipated that, until the liquidation, if any, of the Trust,
each Exchange Junior Subordinated Debenture will be held in the
name of the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The amount of interest payable
for any period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which
interest is payable on the Exchange Junior Subordinated
Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in
respect of any such delay), except that if such next succeeding
Business Day falls in the next succeeding calendar year, then
such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on
the date such payment was originally payable. Accrued interest
that is not paid on the applicable Interest Payment Date will
bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 10.30% thereof,
compounded semi-annually from the relevant Interest Payment Date.
The term "interest" as used herein shall include semi-annual
interest payments, interest on semi-annual interest payments not
paid on the applicable Interest Payment Date and Additional Sums
(as defined herein), as applicable.
The Exchange Junior Subordinated Debentures will be issued
pursuant to the Indenture and will be issued in denominations of
$1,000 and integral multiples thereof. Unless previously
redeemed or repurchased, the Junior Subordinated Debentures will
mature on June 1, 2027.
The Exchange Junior Subordinated Debentures will rank pari
passu with the Original Junior Subordinated Debentures and all
Other Debentures issued under the Indenture and will be unsecured
and subordinate and junior in right of payment to the extent and
in the manner set forth in the Indenture to all Senior
Indebtedness of the Corporation. See "--Subordination."
The Corporation is a non-operating holding company and
almost all of the operating assets of the Corporation are owned
by the Corporation's subsidiaries. The Corporation relies
primarily on dividends from such subsidiaries to meet its
obligations for payment of principal and interest on its
outstanding debt obligations and corporate expenses. The
Corporation is a legal entity separate and distinct from its
banking and non-banking affiliates. The principal sources of the
Corporation's income are dividends, interest, and fees from its
banking and nonbanking affiliates. The Bank is subject to
certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, the Corporation
and certain other affiliates, and on investments in stock or
other securities thereof. Such restrictions prevent the
Corporation and such other affiliates from borrowing from the
Bank unless the loans are secured by various types of collateral.
Further, such secured loans, other transactions and investments
by the Bank are generally limited in amount as to the Corporation
and as to each of such other affiliates to 10% of such Bank's
capital and surplus and as to the Corporation and all of such
other affiliates to an aggregate of 20% of such Bank's capital
and surplus. In addition, payment of dividends to the
Corporation by the subsidiary banks is subject to ongoing review
by banking regulators and is subject to various statutory
limitations and in certain circumstances requires approval by
banking regulatory authorities. Under applicable banking
statutes, at June 30, 1997, the Bank could have declared
additional dividends of approximately $7.5 million. However,
federal and state regulatory agencies also have the authority to
limit further the Bank's payment of dividends based on other
factors, such as the maintenance of adequate capital for the
Bank, which could reduce the amount of dividends otherwise
payable.
Because the Corporation is a holding company, the right of
the Corporation to participate in any distribution of assets of
any subsidiary, upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of
creditors of the subsidiary (including depositors, in the case of
the Bank), except to the extent that the Corporation may itself
be recognized as a creditor of that subsidiary. At June 30,
1997, the subsidiaries of the Corporation had total liabilities
(excluding liabilities owed to the Corporation) of approximately
$625.7 million. Accordingly, the Exchange Junior Subordinated
Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders
of Exchange Junior Subordinated Debentures should look only to
the assets of the Corporation for payments on the Exchange Junior
Subordinated Debentures. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Indebtedness.
Denominations, Registration and Transfer. The Exchange Junior
Subordinated Debentures will be represented by one or more global
certificates registered in the name of Cede & Co. as the nominee
of DTC if, and only if, distributed to the holders of the Trust
Securities. Until such time, the Exchange Junior Subordinated
Debentures will be registered in the name of the Trust and held
by the Property Trustee. Should the Exchange Junior Subordinated
Debentures be distributed to holders of the Trust Securities,
beneficial interests in the Exchange Junior Subordinated
Debentures will be shown on, and transfers thereof will be
effected only through, records maintained by Participants in DTC.
A global security shall be exchangeable for Exchange Junior
Subordinated Debentures registered in the names of persons other
than Cede & Co. only if (i) DTC notifies the Corporation that it
is unwilling or unable to continue as a depositary for such
global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a "clearing agency"
registered under the Exchange Act, at a time when DTC is required
to be so registered to act as such depositary, (ii) the
Corporation in its sole discretion determines that such global
security shall be so exchangeable, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any
global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for certificates registered in
such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from
its Participants with respect to ownership of beneficial
interests in such global security. In the event that Exchange
Junior Subordinated Debentures are issued in certificated form,
such Exchange Junior Subordinated Debentures will be in minimum
denominations of $100,000 and integral multiples of $1,000 in
excess thereof and may be transferred or exchanged only in such
minimum denominations and in the manner and at the offices
described below.
Payments on Exchange Junior Subordinated Debentures
represented by a global security will be made to DTC, as the
depositary for the Exchange Junior Subordinated Debentures. In
the event Exchange Junior Subordinated Debentures are issued in
certificated form, principal and interest will be payable, the
transfer of the Exchange Junior Subordinated Debentures will be
registrable, and Exchange Junior Subordinated Debentures will be
exchangeable for Exchange Junior Subordinated Debentures of other
denominations of a like aggregate principal amount, at the
corporate office of the Debenture Trustee in New York, New York,
or at the offices of any paying agent or transfer agent appointed
by the Corporation, provided that payment of interest may be made
at the option of the Corporation by check mailed to the address
of the persons entitled thereto or by wire transfer. In
addition, if the Exchange Junior Subordinated Debentures are
issued in certificated form, the record dates for payment of
interest will be the fifteenth day of the month preceding each
Payment Date.
For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description
of Exchange Securities--Description of Exchange Capital
Securities--Form, Denomination, Book-Entry Procedures and
Transfer." If the Exchange Junior Subordinated Debentures are
distributed to the holders of the Trust Securities upon the
termination of the Trust, the form, denomination, book-entry and
transfer procedures with respect to the Capital Securities as
described under "Description of Exchange Securities--Description
of Exchange Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer," shall apply to the Exchange Junior
Subordinated Debentures.
Payment and Paying Agents. Payment of principal of (and premium,
if any) and any interest on Exchange Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in
the City of New York or at the office of such Paying Agent or
Paying Agents as the Corporation may designate from time to time,
except that at the option of the Corporation payment of any
interest may be made (except in the case of Exchange Junior
Subordinated Debentures in global form), (i) by check mailed to
the address of the Person entitled thereto as such address shall
appear in the register for Exchange Junior Subordinated
Debentures or (ii) by transfer to an account maintained by the
person entitled thereto as specified in such register, provided
that proper transfer instructions have been received by the
relevant Record Date. Payment of any interest on any Exchange
Junior Subordinated Debenture will be made to the person in whose
name such Exchange Junior Subordinated Debenture is registered at
the close of business on the Record Date for such interest,
except in the case of defaulted interest. The Corporation may at
any time designate additional Paying Agents or rescind the
designation of any Paying Agent; however the Corporation will at
all times be required to maintain a Paying Agent in each Place of
Payment for the Exchange Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any
Paying Agent, or then held by the Corporation in trust, for the
payment of the principal of (and premium, if any) or interest on
any Exchange Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if
any) or interest has become due and payable shall, at the request
of the Corporation, be repaid to the Corporation and the holder
of such Exchange Junior Subordinated Debenture shall thereafter
look, as a general unsecured creditor, only to the Corporation
for payment thereof.
Option to Extend Interest Payment Date. So long as no Debenture
Event of Default has occurred and is continuing, the Corporation
has the right under the Indenture at any time or from to time
during the term of the Exchange Junior Subordinated Debentures to
defer the payment of interest for a period not exceeding
10 consecutive semi-annual periods with respect to each Extension
Period; provided, however, that no Extension Period shall end on
a date other than an Interest Payment Date or extend beyond the
Stated Maturity Date. At the end of an Extension Period, the
Corporation must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of 10.30%,
compounded semi-annually from the relevant Interest Payment Date,
to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of Exchange
Junior Subordinated Debentures (and holders of the Exchange
Capital Securities while Exchange Capital Securities are
outstanding) will be required to accrue such deferred interest
income for United States federal income tax purposes prior to
receipt of the cash attributable to such income. See "Certain
United States Federal Income Tax Consequences--Interest Income
and Original Issue Discount."
During any Extension Period, the Corporation may not
(i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of the Corporation's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including any Other Debentures)
that rank pari passu with or junior in right of payment to the
Exchange Junior Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the
Corporation (including any Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the
Exchange Junior Subordinated Debentures (other than (a) dividends
or distributions in shares of, or options, warrants, or rights to
subscribe for or purchase shares of, common stock of the
Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) purchases of common stock
related to the issuance of common stock or rights under any of
the Corporation's benefit plans for its directors, officers or
employees or any of the Corporation's dividend reinvestment
plans, (e) as a result of a reclassification of the Corporation's
capital stock or the exchange or conversion of one class or
series of the Corporation's capital stock for another class or
series of the Corporation's capital stock, and (f) the purchase
of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged).
Prior to the termination of any Extension Period, the
Corporation may further extend such Extension Period, provided
that such extension does not cause such Extension Period to
exceed 10 consecutive semi-annual periods, end on a date other
than an Interest Payment Date or extend beyond the Stated
Maturity Date. Upon the termination of any Extension Period and
the payment of all amounts then due on any Interest Payment Date,
the Corporation may elect to begin a new Extension Period,
subject to the above requirements. No interest shall be due and
payable during an Extension Period, except at the end thereof.
The Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at
least five Business Days prior to the earlier of (i) the date the
Distributions on the Trust Securities would have been payable
except for the election to begin or extend such Extension Period
or (ii) the date the Administrative Trustees are required to give
notice to any securities exchange or to holders of Exchange
Capital Securities of the Record Date for the date such
Distributions are payable, but in any event not less than five
Business Days prior to such Record Date. The Debenture Trustee
shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Capital
Securities. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period.
Optional Prepayment. The Exchange Junior Subordinated Debentures
will be prepayable, in whole or in part, at the option of the
Corporation on or after June 1, 2007, subject to the Corporation
having received any required regulatory approval, at a prepayment
price (the "Optional Prepayment Price") equal to the percentage
of the outstanding principal amount of the Exchange Junior
Subordinated Debentures specified below, plus, in each case,
accrued interest thereon to but excluding the date fixed for
prepayment if redeemed during the 12-month period beginning
June 1 of the years listed below:
Year Percentage
2007 105.150%
2008 104.635%
2009 104.120%
2010 103.605%
2011 103.090%
2012 102.575%
2013 102.060%
2014 101.545%
2015 101.030%
2016 100.515%
2017 100.0000%
Special Event Prepayment. If, prior to June 1, 2007, a Special
Event shall occur and be continuing, the Corporation may, at its
option and subject to receipt of any required regulatory
approval, prepay the Exchange Junior Subordinated Debentures in
whole (but not in part) at any time within 90 days after the
occurrence of such Special Event, at a prepayment price (the
"Special Event Prepayment Price") equal to the greater of
(i) 100% of the principal amount of such Exchange Junior
Subordinated Debentures or (ii) the sum, as determined by a
Quotation Agent, of the present values of the principal amount
and premium payable with respect to an optional redemption of
such Exchange Junior Subordinated Debentures on June 1, 2007,
together with scheduled payments of interest on the Exchange
Junior Subordinated Debentures from the prepayment date to and
including June 1, 2007, discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus, in each case,
accrued but unpaid interest thereon to the date of prepayment.
See "--Description of Exchange Capital Securities--Liquidation of
the Trust and Distribution of Junior Subordinated Debentures."
"Special Event" means a Tax Event or a Regulatory Capital
Event (as defined below), as the case may be.
"Tax Event" means the receipt by the Corporation and the
Trust of an opinion of counsel experienced in such matters to the
effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any
regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or
decision is announced on or after June 2, 1997, there is more
than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United
States federal income tax with respect to income received or
accrued on the Exchange Junior Subordinated Debentures,
(ii) interest payable by the Corporation on the Exchange Junior
Subordinated Debentures is not, or within 90 days of the date of
such opinion, will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes,
or (iii) the Trust is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
A "Regulatory Capital Event" means that the Corporation
shall have become, or pursuant to law or regulation will become
within 180 days, subject to capital requirements under which, in
the written opinion of independent bank regulatory counsel
experienced in such matters, the Capital Securities would not
constitute Tier 1 Capital applied as if the Corporation (or its
successor) were a bank holding company (as that concept is used
in the guidelines or regulations issued by the Board of Governors
of the Federal Reserve System as of June 2, 1997) or its then
equivalent ("Tier 1 Capital").
"Adjusted Treasury Rate" means, with respect to any
prepayment date, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable
Treasury Price for such prepayment date, plus (i) 3.30% if such
prepayment date occurs on or prior to June 1, 1998 and (ii) 2.75%
in all other cases.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity
comparable to the remaining term of the Exchange Junior
Subordinated Debt Debentures to be prepaid that would be
utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of
the Exchange Junior Subordinated Debentures.
"Quotation Agent" means the Reference Treasury Dealer
appointed by the Corporation. "Reference Treasury Dealer" means:
a nationally recognized U.S. Government Securities Dealer in New
York City selected by the Corporation.
"Comparable Treasury Price" means, with respect to any
prepayment date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third Business Day
preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite
3:30 p.m. Quotations for U.S. Government Securities" or (ii) if
such release (or any successor release) is not published or does
not contain such prices on such Business Day, (A) the average of
Reference Treasury Dealer Quotations for such prepayment date,
after excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (B) if the Debenture Trustee obtains fewer
than three such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any prepayment date, the
average, as determined by the Debenture Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing
to the Debenture Trustee by such Reference Treasury Dealer at
5:00 p.m., New York City time, on the third Business Day
preceding such prepayment date.
"Additional Sums" means the additional amounts as may be
necessary in order that the amount of Distributions then due and
payable by the Trust on the outstanding Capital Securities and
Common Securities shall not be reduced as a result of any such
additional taxes, duties or other governmental charges to which
the Trust has become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but
not more than 60 days before the redemption date to each holder
of Exchange Junior Subordinated Debentures to be prepaid at its
registered address. Unless the Corporation defaults in payment
of the prepayment price, on and after the prepayment date
interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties
or other governmental charges as a result of a Tax Event, the
Corporation will pay as additional amounts on the Exchange Junior
Subordinated Debentures the Additional Sums.
Restrictions on Certain Payments. The Corporation will also
covenant that it will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's
capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any,
on or repay or repurchase or redeem any debt securities of the
Corporation (including Other Debentures) that rank pari passu
with or junior in right of payment to the Exchange Junior
Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including under
Other Guarantees) if such guarantee ranks pari passu with or
junior in right of payment to the Exchange Junior Subordinated
Debentures (other than (a) dividends or distributions in shares
of, or options, warrants, or rights to subscribe for or purchase
shares of, common stock of the Corporation, (b) any declaration
of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the Guarantee,
(d) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's benefit plans for
its directors, officers, or employees or any of the Corporation's
dividend reinvestment plans, (e) as a result of a
reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the
Corporation's capital stock for another class or series of the
Corporation's capital stock or (f) the purchase of fractional
interests in shares of the Corporation's capital stock pursuant
to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged), if at such time
(1) there shall have occurred any event of which the Corporation
has actual knowledge that (a) is, or with the giving of notice or
lapse of time, or both, would be a Debenture Event of Default,
and (b) in respect of which the Corporation shall not have taken
reasonable steps to cure, (2) if such Exchange Junior
Subordinated Debentures are held by the Trust, the Corporation
shall be in default with respect to its payment of any
obligations under the Exchange Guarantee, or (3) the Corporation
shall have given notice of its election of an Extension Period as
provided in the Indenture and shall not have rescinded such
notice, and such Extension Period, or any extension thereof,
shall be continuing.
For so long as the Trust Securities remain outstanding, the
Corporation will covenant (i) to directly or indirectly maintain
100% direct or indirect ownership of the Common Securities of the
Trust; provided, however, that any permitted successor of the
Corporation under the Indenture may succeed to the Corporation's
ownership of such Common Securities, (ii) not to cause, as
Sponsor of the Trust, or to permit, as holder of the Common
Securities, the dissolution, winding-up or termination of the
Trust, except in connection with a distribution of the Exchange
Junior Subordinated Debentures as provided in the Declaration and
in connection with certain mergers, consolidations or
amalgamations and (iii) to use its reasonable efforts to cause
the Trust (a) to remain a business trust, except in connection
with the distribution of Exchange Junior Subordinated Debentures
to the holders of Trust Securities in liquidation of the Trust,
the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as
permitted by the Declaration, and (b) to otherwise continue to be
classified as a grantor trust for United States federal income
tax purposes.
Modification of Indenture. From time to time the Corporation and
the Debenture Trustee may, without the consent of the holders of
Exchange Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among
other things, curing ambiguities, defects or inconsistencies
(provided that any such action does not materially adversely
affect the interest of the holders of Exchange Junior
Subordinated Debentures) and qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and
the Debenture Trustee, with the consent of the holders of a
majority in principal amount of Exchange Junior Subordinated
Debentures, to modify the Indenture in a manner affecting the
rights of the holders of Exchange Junior Subordinated Debentures;
provided, that no such modification may, without the consent of
the holder of each outstanding Exchange Junior Subordinated
Debenture so affected, (i) change the Stated Maturity, or reduce
the principal amount of the Exchange Junior Subordinated
Debentures, or reduce the rate or extend the time of payment of
interest thereon except pursuant to the Corporation's right under
the Indenture to defer the payment of interest as provided
therein (see "--Option to Extend Interest Payment Date") or
(ii) reduce the percentage of principal amount of Exchange Junior
Subordinated Debentures, the holders of which are required to
consent to any such modification of the Indenture.
In addition, the Corporation and the Debenture Trustee may
execute, without the consent of any holder of Exchange Junior
Subordinated Debentures, any supplemental Indenture for the
purpose of creating any Other Debentures.
Debenture Events of Default. The Indenture provides that any one
or more of the following described events with respect to the
Exchange Junior Subordinated Debentures that has occurred and is
continuing constitutes a "Debenture Event of Default" (whatever
the reason for such Debenture Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(i) failure for 30 days to pay any interest on the
Exchange Junior Subordinated Debentures or any Other
Debentures when due (subject to the deferral of any due date
in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any,
on the Exchange Junior Subordinated Debentures or any Other
Debentures when due, whether at maturity, upon redemption,
by declaration of acceleration of maturity or otherwise; or
(iii) failure to observe or perform in any material
respect certain other covenants contained in the Indenture
for 90 days after written notice to the Corporation from the
Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Exchange
Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation.
The holders of a majority in aggregate outstanding principal
amount of the Exchange Junior Subordinated Debentures have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee.
The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Exchange Junior
Subordinated Debentures may declare the principal due and payable
immediately upon a Debenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of the
Exchange Junior Subordinated Debentures may annul such
declaration and waive the default if the default (other than the
non-payment of the principal of the Exchange Junior Subordinated
Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments
of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal
amount of the Exchange Junior Subordinated Debentures affected
thereby may, on behalf of the holders of all the Exchange Junior
Subordinated Debentures, waive any past default, except a default
in the payment of principal of (or premium, if any) or interest
(unless such default has been cured and a sum sufficient to pay
all matured installments of interest (and premium, if any) and
principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding
Exchange Junior Subordinated Debenture. The Corporation is
required to file annually with the Debenture Trustee a
certificate as to whether or not the Corporation is in compliance
with all the conditions and covenants applicable to it under the
Indenture.
Enforcement of Certain Rights by Holders of Exchange Capital
Securities. If a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the
Corporation to pay interest (or premium, if any) on or principal
of the Exchange Junior Subordinated Debentures on the due date, a
holder of Exchange Capital Securities may institute a Direct
Action. The Corporation may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior
written consent of the holders of all of the Exchange Capital
Securities. Notwithstanding any payments made to a holder of
Exchange Capital Securities by the Corporation in connection with
a Direct Action, the Corporation shall remain obligated to pay
the principal of (or premium, if any) or interest on the Exchange
Junior Subordinated Debentures, and the Corporation shall be
subrogated to the rights of the holder of such Capital Securities
with respect to payments on the Exchange Capital Securities to
the extent of any payments made by the Corporation to such holder
in any Direct Action.
The holders of the Exchange Capital Securities will not be
able to exercise directly any remedies, other than those set
forth in the preceding paragraph, available to the holders of the
Exchange Junior Subordinated Debentures unless there shall have
been an Event of Default under the Declaration. See
"--Description of Exchange Capital Securities--Events of Default;
Notice."
Consolidation, Merger, Sale of Assets and Other Transactions.
The Indenture provides that the Corporation shall not consolidate
with or merge into any other Person or convey, transfer or lease
its properties and assets as an entirety or substantially as an
entirety to any Person, and no Person shall consolidate with or
merge into the Corporation or convey, transfer or lease its
properties and assets as an entirety or substantially as an
entirety to the Corporation, unless (i) in case the Corporation
consolidates with or merges into another Person or conveys or
transfers its properties and assets substantially as an entirety
to any Person, the successor Person is organized under the laws
of the United States or any state or the District of Columbia,
and such successor Person expressly assumes the Corporation's
obligations on the Exchange Junior Subordinated Debentures;
(ii) immediately after giving effect thereto, no Debenture Event
of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions as
prescribed in the Indenture are met.
The general provisions of the Indenture do not afford
holders of the Exchange Junior Subordinated Debentures protection
in the event of a highly leveraged or other transaction involving
the Corporation that may adversely affect holders of the Exchange
Junior Subordinated Debentures.
Satisfaction and Discharge. The Indenture provides that when,
among other things, all Exchange Junior Subordinated Debentures
not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become
due and payable at maturity within one year, and the Corporation
deposits or causes to be deposited with the Debenture Trustee
funds, in trust, for the purpose and in an amount sufficient to
pay and discharge the entire indebtedness on the Exchange Junior
Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal (and premium, if any)
and interest to the date of the deposit or to the Stated Maturity
Date, as the case may be, then the Indenture will cease to be of
further effect (except as to the Corporation's obligations to pay
all other sums due pursuant to the Indenture and to provide the
officers' certificates and opinions of counsel described
therein), and the Corporation will be deemed to have satisfied
and discharged the Indenture.
Subordination. In the Indenture, the Corporation has covenanted
and agreed that any Exchange Junior Subordinated Debentures
issued thereunder shall be subordinate and junior in right of
payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors,
marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding of the Corporation, all
Senior Indebtedness must be paid in full before the holders of
Exchange Junior Subordinated Debentures will be entitled to
receive or retain any payment or distribution in respect thereof.
In the event of the acceleration of the maturity of the
Exchange Junior Subordinated Debentures, the holders of all
Senior Indebtedness outstanding at the time of such acceleration
will first be entitled to receive payment in full of all such
Senior Indebtedness before the holders of the Exchange Junior
Subordinated Debentures will be entitled to receive or retain any
payment in respect of the Exchange Junior Subordinated
Debentures.
No payments on account of principal (or premium, if any) or
interest, if any, in respect of the Exchange Junior Subordinated
Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity
thereof, or if any judicial proceeding shall be pending with
respect to any such default.
"Senior Indebtedness" shall mean all Indebtedness for Money
Borrowed, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, except
Indebtedness Ranking on a Parity with the Exchange Junior
Subordinated Debentures or Indebtedness Ranking Junior to the
Exchange Junior Subordinated Debentures, and any deferrals,
renewals or extensions of such Senior Indebtedness.
"Indebtedness for Money Borrowed" shall mean any obligation
of, or any obligation guaranteed by, the Corporation for the
repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments.
"Indebtedness Ranking on a Parity with the Exchange Junior
Subordinated Debentures" shall mean (i) Indebtedness for Money
Borrowed, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks equally with and not prior to the
Exchange Junior Subordinated Debentures in the right of payment
upon the happening of the dissolution or winding-up or
liquidation or reorganization of the Corporation and (ii) all
other debt securities, and guarantees in respect of those debt
securities, issued to any other trust, partnership or other
entity affiliated with the Corporation that is a financing
vehicle of the Corporation (a "financing entity") in connection
with the issuance by such financing entity of equity securities
or other securities guaranteed by the Corporation pursuant to an
instrument that ranks pari passu with our junior in right of
payment to the Guarantee.
"Indebtedness Ranking Junior to the Exchange Junior
Subordinated Debentures" shall mean any Indebtedness for Money
Borrowed, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks junior to and not equally with or
prior to the Exchange Junior Subordinated Debentures (and any
other Indebtedness Ranking on a Parity with the Exchange Junior
Subordinated Debentures) in right of payment upon the happening
of the dissolution or winding-up or liquidation or reorganization
of the Corporation. The securing of any Indebtedness for Money
Borrowed, otherwise constituting Indebtedness Ranking on a Parity
with the Exchange Junior Subordinated Debentures or Indebtedness
Ranking Junior to the Exchange Junior Subordinated Debentures, as
the case may be, shall not be deemed to prevent such Indebtedness
for Money Borrowed from constituting Indebtedness Ranking on a
Parity with the Exchange Junior Subordinated Debentures or
Indebtedness Ranking Junior to the Exchange Junior Subordinated
Debentures, as the case may be.
The Corporation is a non-operating holding company and
almost all of the operating assets of the Corporation are owned
by the Corporation's subsidiaries. The Corporation relies
primarily on dividends from such subsidiaries to meet its
obligations for payment of principal and interest on its
outstanding debt obligations and corporate expenses. The
Corporation is a legal entity separate and distinct from its
banking and non-banking affiliates. The principal sources of the
Corporation's income are dividends, interest and fees from its
banking and non-banking affiliates. The Bank is subject to
certain restrictions imposed by federal law on any extensions of
credit to, and certain other transactions with, the Corporation
and certain other affiliates, and on investments in stock or
other securities thereof. Such restrictions prevent the
Corporation and such other affiliates from borrowing from the
Bank unless the loans are secured by various types of collateral.
Further, such secured loans, other transactions and investments
by the Bank are generally limited in amount as to the Corporation
and as to each of such other affiliates to 10% of such Bank's
capital and surplus and as to the Corporation and all of such
other affiliates to an aggregate of 20% of such Bank's capital
and surplus. In addition, payment of dividends to the
Corporation by the subsidiary banks is subject to ongoing review
by banking regulators and is subject to various statutory
limitations and in certain circumstances requires approval by
banking regulatory authorities. Accordingly, the Exchange Junior
Subordinated Dentures will be effectively subordinated to all
existing and future liabilities of the Corporation's
subsidiaries. Holders of Exchange Junior Subordinated Debentures
should look only to the assets of the Corporation for payments of
interest and principal and premium, if any.
The Indenture places no limitation on the amount of Senior
Indebtedness that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional
indebtedness constituting Senior Indebtedness. At June 30, 1997,
the Corporation had no outstanding Senior Indebtedness.
Restrictions on Transfer. The Exchange Junior Subordinated
Debentures will be issued, and may be transferred only, in blocks
having an aggregate principal amount of not less than $100,000
(100 Exchange Junior Subordinated Debentures). Any such transfer
of Exchange Junior Subordinated Debentures in a block having an
aggregate principal amount of less than $100,000 shall be deemed
to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Exchange
Junior Subordinated Debentures for any purpose, including but not
limited to the receipt of payments on such Exchange Junior
Subordinated Debentures, and such transferee shall be deemed to
have no interest whatsoever in such Exchange Junior Subordinated
Debentures.
Governing Law. The Indenture and the Exchange Junior
Subordinated Debentures will be governed by and construed in
accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee. Following the
Exchange Offer and the qualification of the Indenture under the
Trust Indenture Act, the Debenture Trustee shall have and be
subject to all the duties and responsibilities specified with
respect to an indenture trustee under the Trust Indenture Act.
Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Junior
Subordinated Debentures, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which
might be incurred thereby. The Debenture Trustee is not required
to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the
Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
Description of Exchange Guarantee
The Exchange Guarantee will be executed and delivered by the
Corporation concurrently with the issuance by the Trust of the
Exchange Capital Securities for the benefit of the holders from
time to time of such Exchange Capital Securities. The Bank of
New York will act as trustee (the "Guarantee Trustee") under the
Exchange Guarantee. The Exchange Guarantee has been qualified
under the Trust Indenture Act. This summary of certain
provisions of the Exchange Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Exchange Guarantee,
including the definitions therein of certain terms, and the Trust
Indenture Act. The Guarantee Trustee will hold the Exchange
Guarantee for the benefit of the holders of the Exchange Capital
Securities.
General. The Corporation will irrevocably agree to pay in full
on a subordinated basis, to the extent set forth herein, the
Guarantee Payments (as defined herein) to the holders of the
Exchange Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have
or assert other than the defense of payment. The following
payments with respect to the Exchange Capital Securities, to the
extent not paid by or on behalf of the Trust (the "Guarantee
Payments"), will be subject to the Exchange Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the
Exchange Capital Securities, to the extent that the Trust has
funds on hand legally available therefor at such time, (ii) the
applicable Redemption Price with respect to Exchange Capital
Securities called for redemption, to the extent that the Trust
has funds on hand legally available therefor at such time, and
(iii) upon a voluntary or involuntary termination and liquidation
of the Trust (other than in connection with the distribution of
Exchange Junior Subordinated Debentures to the holders of the
Exchange Capital Securities or the redemption of all of the
Exchange Capital Securities) the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Exchange Capital
Securities. The Corporation's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required
amounts by the Corporation to the holders of the Exchange Capital
Securities or by causing the Trust to pay such amounts to such
holders.
The Exchange Guarantee will rank subordinate and junior in
right of payment to all Senior Indebtedness to the extent
provided therein. See "--Status of the Exchange Guarantee."
Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization
or otherwise, is subject to the prior claims of creditors of such
subsidiary, except to the extent the Corporation may itself be
recognized as a creditor of that subsidiary. Accordingly, the
Corporation's obligations under the Exchange Guarantee will be
effectively subordinated to all existing and future liabilities
of the Corporation's subsidiaries, including deposits, and
claimants should look only to the assets of the Corporation for
payments thereunder. See "Description of the Exchange Junior
Subordinated Debentures - General." The Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of
the Corporation, including Senior Indebtedness, whether under the
Indenture or any other indenture that the Corporation may enter
into in the future or otherwise.
The Corporation has, through the Exchange Guarantee, the
Declaration, the Exchange Junior Subordinated Debentures and the
Indenture, taken together, fully, irrevocably and unconditionally
guaranteed all of the Trust's obligations under the Exchange
Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Trust's
obligations under the Exchange Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange
Junior Subordinated Debentures and the Exchange Guarantee."
Status of the Exchange Guarantee. The Exchange Guarantee will
constitute an unsecured obligation of the Corporation and will
rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as Exchange Junior Subordinated
Debentures, except in the case of a bankruptcy or insolvency
proceeding in respect of the Corporation, in which case the
Exchange Guarantee will rank subordinate and junior in right of
payment to all liabilities (other than Other Guarantees) of the
Corporation.
The Exchange Guarantee will rank pari passu with all Other
Guarantees issued by the Corporation. The Exchange Guarantee
will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding
directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding
against any other person or entity). The Exchange Guarantee will
be held for the benefit of the holders of the Exchange Capital
Securities. The Exchange Guarantee will not be discharged except
by payment of the Guarantee Payments in full to the extent not
paid by the Trust or upon distribution to the holders of the
Exchange Capital Securities of the Exchange Junior Subordinated
Debentures. The Guarantee does not place a limitation on the
amount of additional Senior Indebtedness that may be incurred by
the Corporation. The Corporation expects from time to time to
incur additional indebtedness constituting Senior Indebtedness.
Amendments and Assignment. Except with respect to any changes
which do not materially adversely affect the rights of holders of
the Exchange Capital Securities (in which case no vote will be
required), the Exchange Guarantee may not be amended without the
prior approval of the holders of a majority of the aggregate
Liquidation Amount of such outstanding Exchange Capital
Securities. The manner of obtaining any such approval will be as
set forth under "--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Declaration." All
guarantees and agreements contained in the Exchange Guarantee
shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit
of the holders of the Exchange Capital Securities then
outstanding.
Events of Default. An event of default under the Exchange
Guarantee will occur upon the failure of the Corporation to
perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate Liquidation Amount of the
Exchange Capital Securities will have the right to direct the
time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the
Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange
Guarantee.
Any holder of the Exchange Capital Securities may institute
a legal proceeding directly against the Corporation to enforce
its rights under the Exchange Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
The Corporation, as guarantor, is required to file annually
with the Guarantee Trustee a certificate as to whether or not the
Corporation is in compliance with all the conditions and
covenants applicable to it under the Exchange Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee
Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of the Guarantee, will
undertake to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the
Guarantee, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the Guarantee Trustee
will be under no obligation to exercise any of the powers vested
in it by the Guarantee at the request of any holder of the
Capital Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be
incurred thereby.
Termination of the Exchange Guarantee. The Exchange Guarantee
will terminate and be of no further force and effect upon full
payment of the applicable Redemption Price of the Exchange
Capital Securities, upon full payment of the Liquidation Amount
payable upon liquidation of the Trust or upon distribution of
Exchange Junior Subordinated Debentures to the holders of the
Exchange Capital Securities. The Exchange Guarantee will
continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Exchange Capital Securities
must restore payment of any sums paid under the Exchange Capital
Securities or the Exchange Guarantee.
Governing Law. The Exchange Guarantee will be governed by and
construed in accordance with the laws of the State of New York.
DESCRIPTION OF ORIGINAL SECURITIES
The terms of the Original Securities are identical in all
materials respects to the Exchange Securities, except that
(i) the Original Securities have not been registered under the
Securities Act, are subject to certain restrictions on transfer
and are entitled to certain rights under the applicable
Registration Agreement (which rights will terminate upon
consummation of the Exchange Offer, except under limited
circumstances), (ii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon and
(iii) the Exchange Junior Subordinated Debentures will not
provide for any liquidated damages thereon. The Original
Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed by
October 30, 1997 and been declared effective by November 29,
1997, or, in certain limited circumstances, in the event a shelf
registration statement (the "Shelf Registration Statement") with
respect to the resale of the Original Capital Securities is not
declared effective by October 30, 1997, then liquidated damages
will accrue at the rate of 0.25% per annum on the principal
amount of the Original Junior Subordinated Debentures and
Distributions will accrue at the rate of 0.25% per annum on the
Liquidation Amount of the Original Capital Securities, for the
period from the occurrence of such event until such time as such
required Exchange Offer is consummated or any required Shelf
Registration Statement is effective. The Exchange Securities are
not, and upon consummation of the Exchange Offer the Original
Securities will not be, entitled to any such additional interest
or Distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk
Factors--Consequences of a Failure to Exchange Original Capital
Securities" and "Description of Exchange Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES,
THE EXCHANGE JUNIOR
SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the
Exchange Capital Securities (to the extent the Trust has funds on
hand legally available for the payment of such Distributions) are
irrevocably guaranteed by the Corporation as and to the extent
set forth under "--Description of Exchange Guarantee." Taken
together, the Corporation's obligations under the Exchange Junior
Subordinated Debentures, the Indenture, the Declaration and the
Exchange Guarantee provide, in the aggregate, a full, irrevocable
and unconditional guarantee of payments of Distributions and
other amounts due on the Exchange Capital Securities. No single
document standing alone or operating in conjunction with fewer
than all of the other documents constitutes such guarantee. It
is only the combined operation of these documents that has the
effect of a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. If
and to the extent that the Corporation does not make payments on
the Exchange Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including
Distributions, on the Exchange Capital Securities. The Guarantee
does not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such
event, the remedy of a holder of Exchange Capital Securities is
to institute a Direct Action. The obligations of the Corporation
under the Exchange Guarantee are subordinate and junior in right
of payment to all Senior Indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made
when due on the Exchange Junior Subordinated Debentures, such
payments will be sufficient to cover Distributions and other
payments due on the Exchange Capital Securities, primarily
because (i) the aggregate principal amount or Prepayment Price of
the Exchange Junior Subordinated Debentures will be equal to the
sum of the aggregate Liquidation Amount or Redemption Price, as
applicable, of the Trust Securities; (ii) the interest rate and
interest and other payment dates on the Exchange Junior
Subordinated Debentures will match the Distribution rate and
Distribution and other payment dates for the Trust Securities;
(iii) the Corporation, as Sponsor, shall pay for all costs,
expenses and liabilities of the Trust except the Trust's
obligations to holders of Trust Securities under such Trust
Securities; and (iv) the Declaration further provides that the
Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
Enforcement Rights of Holders of Exchange Capital Securities
A holder of any Exchange Capital Security may institute a
legal proceeding directly against the Corporation to enforce its
rights under the Exchange Guarantee without first instituting a
legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness
would not constitute a default or Event of Default under the
Declaration. However, in the event of payment defaults under, or
acceleration of, Senior Indebtedness, the subordination
provisions of the Indenture provide that no payments may be made
in respect of the Exchange Junior Subordinated Debentures until
such Senior Indebtedness has been paid in full or any payment
default thereunder has been cured or waived. Failure to make
required payments on Exchange Junior Subordinated Debentures
would constitute an Event of Default under the Declaration.
Limited Purpose of the Trust
The Capital Securities evidence a beneficial interest in the
Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of
the Trust Securities to acquire the Junior Subordinated
Debentures, and engaging in only those other activities
necessary, advisable or incidental thereto. A principal
difference between the rights of a holder of an Exchange Capital
Security and a holder of an Exchange Junior Subordinated
Debenture is that a holder of an Exchange Junior Subordinated
Debenture will be entitled to receive from the Corporation the
principal amount (and premium, if any) and interest on Exchange
Junior Subordinated Debentures held, while a holder of Exchange
Capital Securities is entitled to receive Distributions from the
Trust (or, in certain circumstances from the Corporation under
the Guarantee) if and to the extent the Trust has funds on hand
legally available for the payment of such Distributions.
Rights Upon Termination
Unless the Exchange Junior Subordinated Debentures are
distributed to holders of the Trust Securities, upon any
voluntary or involuntary termination and liquidation of the
Trust, after satisfaction of the liabilities of creditors of the
Trust as required by applicable law, the holders of the Trust
Securities will be entitled to receive, out of assets held by the
Trust, the Liquidation Distribution in cash. See "Description of
Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Junior
Subordinated Debentures." Upon any voluntary or involuntary
liquidation or bankruptcy of the Corporation, the Property
Trustee, as holder of the Exchange Junior Subordinated
Debentures, would be a subordinated creditor of the Corporation,
subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in
full of principal (and premium, if any) and interest, before any
stockholders of the Corporation receive payments or
distributions. Since the Corporation is the guarantor under the
Exchange Guarantee and has agreed to pay for all costs, expenses
and liabilities of the Trust (other than the Trust's obligations
to the holders of its Trust Securities), the positions of a
holder of Exchange Capital Securities and a holder of Exchange
Junior Subordinated Debentures relative to other creditors and to
stockholders of the Corporation in the event of liquidation or
bankruptcy of the Corporation are expected to be substantially
the same.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of certain of the material United
States federal income tax consequences of the purchase, ownership
and disposition of Capital Securities held as capital assets
(generally, assets held for investment) by a holder who purchases
such Capital Securities upon original issuance. The tax
treatment of a holder of Capital Securities may vary depending
upon his particular situation. This summary does not address all
of the tax consequences that may be relevant to holders who may
be subject to special tax treatment such as, for example, banks,
thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or
currencies, tax-exempt investors, or, except to the extent
described below, foreign taxpayers. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder and the administrative and judicial
interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis. Each
investor is urged to consult his tax advisor as to the particular
tax consequences of purchasing, owning and disposing of Capital
Securities, including the application and effect of United States
federal, state, local, foreign, and other tax laws.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER UNITED STATES FEDERAL, STATE, LOCAL, FOREIGN,
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE
POSSIBLE REDEMPTION OF THE CAPITAL SECURITIES UPON THE OCCURRENCE
OF CERTAIN TAX EVENTS SEE "DESCRIPTION OF EXCHANGE SECURITIES--
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES--LIQUIDATION OF THE
TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES."
Exchange of Capital Securities
The exchange of Original Securities for Exchange Securities
should not be a taxable event to holders for United States
federal income tax purposes. The exchange of Original Securities
for Exchange Securities pursuant to the Exchange Offer should not
be treated as an "exchange" for United States federal income tax
purposes because the Exchange Securities should not be considered
to differ materially in kind or extent from the Original
Securities and because the exchange will occur by operation of
the terms of the Original Securities. Accordingly, the Exchange
Capital Securities should have the same issue price as the
Original Capital Securities, and a holder should have the same
adjusted tax basis and holding period in the Exchange Capital
Securities as the holder had in the Original Capital Securities
immediately before the exchange. Moreover, a holder which had
acquired Original Capital Securities with either market discount
or bond premium will be treated as holding Exchange Capital
Securities with the same amount of market discount or bond
premium and will be required to include such market discount in
or deduct such bond premium from their income in the same manner
as on the Original Capital Securities. Holders are urged to
consult their tax advisors regarding the applicability of the
market discount and bond premium rules.
Classification of the Junior Subordinated Debentures
The Corporation intends to take the position that the
Exchange Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the
Corporation under current law and, by acceptance of Capital
Securities, each holder covenants to treat the Exchange Junior
Subordinated Debentures as indebtedness and the Capital
Securities as evidence of an indirect beneficial ownership
interest in the Exchange Junior Subordinated Debentures. No
assurance can be given, however, that the IRS will not challenge
such position or, if challenged, that such a challenge will not
be successful. The remainder of this discussion assumes that the
Exchange Junior Subordinated Debentures will be treated as
indebtedness of the Corporation for United States federal income
tax purposes.
Classification of the Trust
In connection with the issuance of the Capital Securities,
Stevens & Lee, P.C., special tax counsel to the Corporation and
the Trust ("Tax Counsel") is of the opinion that, under current
law and assuming full compliance with the terms of the
Declaration, the Indenture, and other documents, and based upon
certain facts and assumptions contained in such opinion, the
Trust will be classified as a grantor trust for United States
federal income tax purposes and not as an association taxable as
a corporation. Accordingly, for United States federal income tax
purposes, each holder of Capital Securities will generally be
treated as the owner of an undivided interest in the Junior
Subordinated Debentures and, as further discussed below, each
holder will be required to include in ordinary income his
allocable share of interest (or original issue discount ("OID"))
paid or accrued on the Junior Subordinated Debentures.
Interest Income and Original Issue Discount
Under recently issued Treasury regulations (the
"Regulations"), a debt instrument will be deemed to be issued
with OID if there is more than a "remote" contingency that
periodic stated interest payments due on the instrument will not
be timely paid. Because the exercise by the Corporation of its
option to defer the payment of stated interest on the Exchange
Junior Subordinated Debentures would prevent the Corporation from
declaring dividends on any class of equity, the Corporation
believes that the likelihood of its exercising the option is
"remote" within the meaning of such regulations. As a result,
the Corporation intends to take the position, based on the advice
of Tax Counsel, that the Junior Subordinated Debentures will not
be deemed to be issued with OID. Accordingly, based upon this
position, and except as set forth below, stated interest payments
on the Junior Subordinated Debentures generally will be
includible in the ordinary income of a holder of Capital
Securities at the time that such payments are paid or accrued in
accordance with such holder's regular method of accounting.
Because the Regulations have not yet been addressed in any
published rulings or other published interpretations issued by
the Internal Revenue Service, it is possible that the Internal
Revenue Service could take a position contrary to the position
taken by the Corporation.
Exercise of Deferral Option. If the Corporation were to
exercise its option to defer the payment of stated interest on
the Junior Subordinated Debentures, the Junior Subordinated
Debentures would be treated, solely for purposes of the OID
rules, as being "re-issued" at such time with OID. Under these
rules, a holder of the Junior Subordinated Debentures would be
required to include OID in ordinary income, on a current basis,
over the period that the instrument is held even though the
Corporation would not be making any actual cash payments during
the extended interest payment period. The amount of interest
income includible in the taxable income of a holder of the Junior
Subordinated Debentures would be determined on the basis of a
constant yield method over the remaining term of the instrument
and the actual receipt of future payments of stated interest on
the Junior Subordinated Debentures would no longer be separately
reported as taxable income. The amount of OID that would accrue,
in the aggregate, during the extended interest payment period
would be approximately equal to the amount of the cash payment
due at the end of such period. Any OID included in income would
increase the holder's adjusted tax basis in the Junior
Subordinated Debentures and the holder's actual receipt of
interest payments would reduce such basis.
Because income on the Capital Securities will constitute
interest for United States federal income tax purposes, corporate
holders of Capital Securities will not be entitled to a
dividends-received deduction in respect of such income.
Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of the Trust
If the Corporation exercises its right to liquidate the
Trust and cause the Exchange Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities, such
distribution would be treated as a nontaxable event to the
holders of Capital Securities. In such event, each holder of
Capital Securities would have an adjusted tax basis in the
Exchange Junior Subordinated Debentures, received in the
liquidation, equal to such holder's adjusted tax basis in his
Capital Securities surrendered therefor, and the holding period
of the Exchange Junior Subordinated Debentures would include the
period during which the holder had held the Capital Securities.
If, however, the Trust is characterized, for United States
federal income tax purposes, as an association taxable as a
corporation at the time of such liquidation, the distribution of
the Exchange Junior Subordinated Debentures would constitute a
taxable event to holders of Capital Securities.
If the Exchange Junior Subordinated Debentures are redeemed
for cash and the proceeds of such redemption are distributed to
holders in redemption of their Capital Securities, the redemption
would for United States federal income tax purposes be treated as
a sale of the Capital Securities, in which gain or loss would be
recognized, as described immediately below. See "--Sales of
Capital Securities."
Sales of Capital Securities
Upon the sale of Capital Securities (including a redemption
of Capital Securities) a holder will recognize gain or loss in an
amount equal to the difference between the amount realized by the
holder on the sale of the Capital Securities (except to the
extent that such amount realized is characterized as a payment in
respect of accrued but unpaid interest on such holder's allocable
share of the Junior Subordinated Debentures that the holder had
not included in gross income previously) and the holder's
adjusted tax basis in the Capital Securities sold or redeemed. A
holder's adjusted tax basis in the Capital Securities will
generally be its initial purchase price increased by OID (if any)
previously includible in such holder's gross income to the date
of disposition and decreased by payments (if any) received on the
Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss, and generally will be a
long-term capital gain or loss if the Capital Securities have
been held for more than one year. Under the Taxpayer Relief Act
of 1997, for noncorporate taxpayers, such gain is taxed at
different rates, which vary with the taxpayer's holding period
for the capital asset. Generally, for capital assets held for
more than one year but not more than eighteen months, the maximum
rate is twenty-eight percent. For capital assets held for more
than eighteen months, the maximum rate is twenty percent.
Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal
income tax purposes.
The Capital Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest (or
OID if the Junior Subordinated Debentures are treated as having
been issued, or reissued with OID) with respect to the underlying
Junior Subordinated Debentures. A holder who uses the accrual
method of accounting for tax purposes (and a cash method holder,
if the Junior Subordinated Debentures are deemed to have been
issued with OID) who disposes of his Capital Securities will be
required to include in ordinary income (i) any portion of the
amount realized that is attributable to such accrued but unpaid
interest to the extent not previously included in income or
(ii) any OID, in either case that has accrued on his pro rata
share of the underlying Junior Subordinated Debentures during the
taxable year of sale through the date of disposition. Any such
income inclusion will increase the holder's adjusted tax basis in
his Capital Securities disposed of. To the extent the amount
realized in the sale is less than the holder's adjusted tax basis
a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
United States Alien Holders
For purposes of this discussion, a "United States Alien
Holder" is any corporation, individual, partnership, estate or
trust that is not a U.S. Holder for United States federal income
tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or
which is (i) a citizen or individual resident (or is treated as a
citizen or individual resident) of the United States for federal
income tax purposes, (ii) a corporation or partnership created or
organized (or treated as created or organized for federal income
tax purposes) in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of
which is includible in its gross income for federal income tax
purposes without regard to its source, or (iv) a trust if a court
within the United States is able to exercise primary supervision
over the administration of the trust and one or more United
States persons have the authority to control all substantial
decisions of the trust.
Under present United States federal income tax laws:
(i) payments by the Trust or any of its paying agents to any
holder of a Capital Security who or which is a United States
Alien Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the
Capital Security does not actually or constructively own 10
percent or more of the total combined voting power of all classes
of stock of the Corporation entitled to vote, (b) the beneficial
owner of the Capital Security is not a controlled foreign
corporation that is related to the Corporation through stock
ownership, and (c) either (A) the beneficial owner of the Capital
Security certifies to the Trust or its agent, under penalties of
perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank
or other financial institution that holds customers' securities
in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner
by it or by a Financial Institution between it and the beneficial
owner and furnishes the Trust or its agent with a copy thereof;
and (ii) a United States Alien Holder of a Capital Security will
not be subject to United States federal withholding tax on any
gain realized upon the sale or other disposition of a Capital
Security.
Information Reporting to Holders
Generally, income on the Capital Securities will be reported
to holders on Forms 1099, which forms should be mailed to holders
of Capital Securities by January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital
Securities may be subject to a "backup" withholding tax of 31
percent unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a credit
against the holder's United States federal income tax, provided
the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH
ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS
OF CHANGE IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the Junior
Subordinated Debentures held by the Trust, and its affiliates and
the Property Trustee may be considered a "party in interest"
(within the meaning of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to
many employee benefit plans ("Plans") that are subject to ERISA.
Any purchaser proposing to acquire Capital Securities with assets
of any Plan should consult with its counsel. The purchase and/or
holding of Capital Securities by a Plan that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including
individual retirement arrangements and other plans described in
Section 4975(e)(1) of the Code) and with respect to which the
Corporation, the Property Trustee or any affiliate is a service
provider (or otherwise is a party in interest or a disqualified
person) may constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code, unless such Capital
Securities are acquired pursuant to and in accordance with an
applicable exemption, such as Prohibited Transaction Class
Exemption ("PTCE") 84-14 (an exemption for certain transactions
determined by an independent qualified professional asset
manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an
exemption for certain transactions involving insurance company
pooled separate accounts), PTCE 95-60 (an exemption for certain
transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions
determined by an in-house asset manager). In addition, a Plan
fiduciary considering the purchase of Capital Securities should
be aware that the assets of the Trust may be considered "plan
assets" for ERISA purposes. Therefore, to avoid certain
prohibited transactions under ERISA and the Code that could
thereby result, each investing Plan, by purchasing the Capital
Securities, will be deemed to have directed the Trust to invest
in the Junior Subordinated Debentures and to have appointed the
Property Trustee.
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Capital Securities. This Prospectus,
as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange
Capital Securities received in exchange for Capital Securities
where such Capital Securities were acquired by such broker-dealer
as a result of market-making activities or other trading
activities. The Trust and the Corporation have agreed that,
starting on the Expiration Date and ending on the close of
business on the 180th day following the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In
addition, until April 10, 1998, all dealers effecting
transactions in the Exchange Securities may be required to
deliver a prospectus.
The Trust and the Corporation will not receive any proceeds
from any sale of Exchange Capital Securities by broker-dealers.
Exchange Capital Securities received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time
to time in one or more transactions, in the over-the-counter
market, in negotiated transactions, through the writing of
options on the Exchange Capital Securities or a combination of
such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or
at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange
Capital Securities. Any broker-dealer that resells Exchange
Capital Securities that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Capital
Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit of any such resale
of Exchange Capital Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the
Trust and the Corporation will promptly send additional copies of
this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in
the Letter of Transmittal. The Trust and the Corporation have
agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the
Capital Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Capital
Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Guarantee and the Exchange
Junior Subordinated Debentures will be passed upon for the
Corporation by Stevens & Lee, P.C., Reading, Pennsylvania.
Certain matters relating to United States federal income tax
consequences will be passed upon for the Corporation by Stevens &
Lee, P.C., Reading, Pennsylvania.
Certain matters of Delaware law relating to the validity of
the Exchange Capital Securities will be passed upon on behalf of
the Trust by Richards, Layton & Finger, special Delaware counsel
to the Trust.
EXPERTS
The consolidated financial statements of Patriot, as of
December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996, appearing in the 1996 Annual
Report of the Corporation to its shareholders and included in the
Annual Report on Form 10-K for the year ended December 31, 1996,
are incorporated by reference in this Prospectus and in the
Registration Statement of which this Prospectus forms a part,
have been audited by Grant Thornton LLP, independent certified
public accountants, whose reports thereon appear herein, and in
reliance upon such reports of Grant Thornton LLP, given upon the
authority of such firm as experts in accounting and auditing.
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THIS EXCHANGE OFFER AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
<PAGE>
TABLE OF CONTENTS
PAGE
Available Information .............
Incorporation of Certain Documents
by Reference ....................
Summary ...........................
Risk Factors ......................
Ratios of Earnings to Fixed
Charges .........................
Patriot Capital Trust I ...........
Patriot Bank Corp..................
Selected Financial Data............
Capitalization ....................
Accounting Treatment ..............
The Exchange Offer ................
Description of Exchange
Securities ......................
Description of Original
Securities ......................
Relationship Among the Exchange
Capital Securities, the
Exchange Junior Subordinated
Debentures and the Exchange
Guarantee .......................
Certain United States Federal
Income Tax Consequences .........
ERISA Considerations ..............
Plan of Distribution ..............
Validity of Exchange Securities ...
Experts ...........................
<PAGE>
$19,000,000
PATRIOT CAPITAL TRUST I
OFFER TO EXCHANGE ITS
10.30% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR ANY AND
ALL OF ITS OUTSTANDING
10.30% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
PATRIOT BANK CORP.
_______________________________
PROSPECTUS
_______________________________
NOVEMBER 14, 1997
