<PAGE> 1
As filed with the Securities and Exchange Commission on December 24, 1997
Registration No. 333-_______
Registration No. 333-_______
===============================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement Under the Securities Act of 1933
------------------------------
PITTSBURGH HOME FINANCIAL CORP. PITTSBURGH HOME CAPITAL
(Exact name of Registrant as specified TRUST I
in its charter) (Exact name of Registrant as specified
in its trust agreement)
PENNSYLVANIA DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
---------- -------------
25-1772349 23-7941939
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
------------------------------
438 Wood Street
Pittsburgh, Pennsylvania 15222
(412) 281-0780
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
J. Ardie Dillen
Chairman, President and Chief Executive Officer
Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
(412) 281-0780
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies to:
Norman B. Antin, Esq. James S. Fleischer, Esq.
Jeffrey D. Haas, Esq. Silver, Freedman & Taff, L.L.P.
Elias, Matz, Tiernan & Herrick, L.L.P. 1100 New York Avenue, N.W.
734 15th Street, N.W. Washington, D.C. 20005
Washington, D.C. 20005
----------------------------
Approximate date of commencement of proposed sale
to public: As soon as practicable after this
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ X ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Offering Price Aggregate Registration
To be Registered Registered Per Unit(1) Offering Price(1) Fee(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Preferred Securities of Pittsburgh Home
Capital Trust I................................ $11,500,000 100% $11,500,000 $3,392.50
- -----------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Deferrable Interest
Debentures of Pittsburgh Home Financial Corp.(2) $11,500,000 100% $11,500,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Pittsburgh Home Financial Corp. Guarantee with
respect to the Trust Preferred Securities...... N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Total....................................... $11,500,000(4) 100% $11,500,000(4) $3,392.50
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) No separate consideration will be received for the Junior Subordinated
Deferrable Interest Debentures of Pittsburgh Home Financial Corp. (the
"Junior Subordinated Debentures") distributed upon any liquidation of
Pittsburgh Home Capital Trust I.
(3) No separate consideration will be received for the Pittsburgh Home
Financial Corp. Guarantee.
(4) Such amount represents the liquidation amount of the Pittsburgh Home
Capital Trust I Trust Preferred Securities and the principal amount of
Junior Subordinated Debentures that may be distrusted to holders of
such Trust Preferred Securities upon any liquidation of Pittsburgh
Home Capital Trust I.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER __, 1997
PROSPECTUS
$10,000,000
PITTSBURGH HOME CAPITAL TRUST I
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
1,000,000 PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO]
PITTSBURGH HOME FINANCIAL CORP.
The ____% Cumulative Trust Preferred Securities (the "Preferred
Securities") offered hereby represent beneficial interests in Pittsburgh Home
Capital Trust I, a trust created under the laws of the State of Delaware (the
"Trust Issuer"). Pittsburgh Home Financial Corp., a Pennsylvania corporation
("Pittsburgh Home" or the "Company"), will be the owner of all of the
beneficial interests represented by common securities of the Trust Issuer (the
"Common Securities" and, collectively with the Preferred Securities, the "Trust
Securities"). The Bank of New York is the Property Trustee of the Trust Issuer.
The Trust Issuer exists for the sole purpose of issuing the Trust Securities
and investing the proceeds from the sale thereof in ___% Junior Subordinated
Deferrable Interest Debentures (the "Junior Subordinated Debentures") to be
issued by the Company. The Junior Subordinated Debentures will mature on
_______, 2028 (the "Stated Maturity"). The Preferred 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 the Preferred Securities--Subordination of the
Common Securities."
Application has been made to list the Preferred Securities on the
Nasdaq Stock Market's National Market under the symbol "PHFCP." See "Risk
Factors--Absence of Prior Public Market for the Preferred Securities; Trading
Price and Tax Considerations."
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS
AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND
OR THE BANK INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------------
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.
<PAGE> 3
<TABLE>
<CAPTION>
=============================================================================================================================
Price to Underwriting Proceeds to
Public Commission(1) Issuer (2)(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Per Preferred Security............................... $10.00 (2) $10.00
- -----------------------------------------------------------------------------------------------------------------------------
Total(4)............................................. $10,000,000 (2) $10,000,000
=============================================================================================================================
</TABLE>
- -------------
(1) The Trust Issuer and Pittsburgh Home have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures of
Pittsburgh Home, Pittsburgh Home has agreed to pay the Underwriter, as
compensation for their arranging the investment of such proceeds in
the Junior Subordinated Debentures, $_____ per Preferred Security, or
$____ in the aggregate ($_______ in the aggregate if the
over-allotment option is exercised in full). See "Underwriting."
(3) Before deducting expenses payable by Pittsburgh Home, estimated to be
approximately $____.
(4) The Trust Issuer and Pittsburgh Home have granted the Underwriter a
30-day option to purchase up to 150,000 additional Preferred
Securities on the same terms and conditions set forth above solely to
cover over-allotments, if any. If this option is exercised in full,
the total Price to Public and Proceeds to Issuer will be $11,500,000.
See "Underwriting."
The Preferred Securities are offered by the Underwriter subject to
receipt and acceptance by it, prior sale and the Underwriter's right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Preferred Securities will
be made in book-entry form through the book-entry facilities of The Depository
Trust Company on or about _________, 1998 against payment therefor in
immediately available funds.
RYAN, BECK & CO.
The date of this Prospectus is ____________, 1998
<PAGE> 4
(continued from the previous page)
The Preferred Securities will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"). Beneficial interests in the global securities will be
shown on, and transfer thereof will be effected only through, records
maintained by DTC and its participants. Except as described under "Description
of Preferred Securities," Preferred Securities in definitive form will not be
issued and owners of beneficial interests in the global securities will not be
considered holders of the Preferred Securities. Settlement for the Preferred
Securities will be made in immediately available funds. The Preferred
Securities will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity for the Preferred Securities will therefore settle in
immediately available funds.
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions accumulating from the date of
original issuance and payable quarterly in arrears on March 1, June 1,
September 1 and December 1 of each year, commencing March 1, 1998, at the
annual rate of ___% of the Liquidation Amount (as defined herein) of $10 per
Preferred Security ("Distributions"). Subject to certain exceptions, Pittsburgh
Home has the right to defer payment of interest on the Junior Subordinated
Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
such Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of ___%, compounded quarterly, to
the extent permitted by applicable law), Pittsburgh Home 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, Distributions
on the Preferred Securities will also be deferred, and Pittsburgh Home will not
be permitted, subject to certain exceptions described herein, to declare or pay
any cash distributions with respect to the capital stock of Pittsburgh Home or
debt securities of Pittsburgh Home that rank pari passu with or junior to the
Junior Subordinated Debentures.
During an Extension Period, interest on the Junior Subordinated
Debentures would continue to accrue (and the amount of Distributions to which
holders of the Preferred Securities are entitled would accumulate) at the rate
of ___% per annum, compounded quarterly, and holders of the Preferred
Securities would be required to include interest income in their gross income
for United States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. Pittsburgh Home
believes that the mere existence of its right to defer interest payments should
not cause the Preferred Securities to be issued with original issue discount
for federal income tax purposes. However, it is possible that the Internal
Revenue Service ("IRS") could take the position that the likelihood of deferral
was not a remote contingency within the meaning of applicable Treasury
Regulations. See "Description of the Junior Subordinated Debentures-Right to
Defer Interest Payment Obligation" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
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<PAGE> 5
Pittsburgh Home and the Trust Issuer believe that, taken together, the
obligations of Pittsburgh Home under the Guarantee, the Trust Agreement, the
Junior Subordinated Debentures, the Indenture and the Expense Agreement (each
as defined herein), constitute in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of all of the Trust Issuer's
obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures, the Expense Agreement
and the Guarantee--Full and Unconditional Guarantee." The Guarantee of
Pittsburgh Home (the "Guarantee") guarantees the payment of Distributions and
payments on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by the Trust Issuer, as described herein.
See "Description of the Guarantee." If Pittsburgh Home does not make interest
payments on the Junior Subordinated Debentures held by the Trust Issuer, the
Trust Issuer will have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover payment of Distributions when the
Trust Issuer does not have sufficient funds to pay such Distributions. In such
event, a holder of the Preferred Securities may institute a legal proceeding
directly against Pittsburgh Home to enforce payment of amounts equal to such
Distributions to such holder. See "Description of the Junior Subordinated
Debentures-Enforcement of Certain Rights by Holders of the Preferred
Securities."
The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at their
Stated Maturity or their earlier redemption. Subject to regulatory approval, if
then required under applicable capital guidelines or regulatory policies, the
Junior Subordinated Debentures are redeemable prior to their Stated Maturity at
the option of the Company (i) on or after _____________, 2003, in whole at any
time or in part from time to time, or (ii) at any time, in whole (but not in
part), upon the occurrence and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event (each as defined herein) at a
redemption price (the "Redemption Price") equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed
for redemption plus 100% of the principal amount thereof. See "Description of
the Junior Subordinated Debentures-Redemption or Exchange."
The obligations of Pittsburgh Home under the Guarantee and the Junior
Subordinated Debentures will be unsecured and are subordinate and junior in
right of payment to all Senior Indebtedness (as defined in "Description of the
Junior Subordinated Debentures--Subordination") of Pittsburgh Home. At
September 30, 1997, Pittsburgh Home had no outstanding Senior Indebtedness.
There is no limitation on the amount of Senior Indebtedness which Pittsburgh
Home may issue. Pittsburgh Home may from time to time incur indebtedness
constituting Senior Indebtedness. See "Description of the Junior Subordinated
Debentures-Subordination."
Pittsburgh Home, as the holder of the Common Securities, will have the
right at any time to dissolve the Trust Issuer. The ability of Pittsburgh Home
to do so may be subject to Pittsburgh Home's prior receipt of regulatory
approval. In the event of the dissolution of the Trust Issuer, after
satisfaction of liabilities to creditors of the Trust Issuer as required by
applicable law, the holders of the Preferred Securities will be entitled to
receive a Liquidation Amount of $10 per Preferred Security plus accumulated and
unpaid Distributions thereon to the
ii
<PAGE> 6
date of payment, which may be in the form of a distribution of such amount in
Junior Subordinated Debentures, subject to certain exceptions. See "Description
of the Preferred Securities--Liquidation Distribution upon Termination."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING
TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. ANY OF
THE FOREGOING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME
WITHOUT NOTICE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
iii
<PAGE> 7
[MAP INDICATING
PITTSBURGH HOME FINANCIAL CORP.'S BRANCH OFFICES]
iv
<PAGE> 8
AVAILABLE INFORMATION
The Company 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 material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
The Company and the Trust Issuer have filed with the Commission a
Registration Statement on Form S-1 (together with all amendments thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company, the Trust Issuer, the Preferred
Securities and the Junior Subordinated Debentures, reference is made to the
Registration Statement, including the exhibits thereto. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified
in its entirely by such reference. The Registration Statement may be inspected
without charge at the principal office of the Commission in Washington, D.C.,
and copies of all or part of it may be obtained from the Commission upon
payment of the prescribed fees.
No separate financial statements of the Trust Issuer have been
included herein. The Company does not consider that such financial statements
would be material to holders of Preferred Securities because (i) all of the
voting securities of the Trust Issuer will be owned by the Company, a reporting
company under the Exchange Act, (ii) the Trust Issuer has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust Issuer and investing
the proceeds thereof in Junior Subordinated Debentures issued by the Company,
and (iii) the obligations of the Company described herein to provide certain
indemnities in respect of and be responsible for certain costs, expenses, debts
and liabilities of the Trust Issuer under the Indenture and pursuant to the
Trust Agreement, the guarantee issued by the Company with respect to the
Preferred Securities, the Junior Subordinated Debentures purchased by the Trust
Issuer, the related Indenture and the Expense Agreement, taken together,
constitute, in the belief of the Company and the Trust Issuer
1
<PAGE> 9
full and unconditional guarantee of payments due on the Preferred Securities.
See "Description of the Junior Subordinated Debentures" and "Description of the
Guarantee."
The Trust Issuer is not currently subject to the information reporting
requirements of the Exchange Act and the Company does not expect that the Trust
Issuer will file reports, proxy statements and other information under the
Exchange Act with the Commission.
2
<PAGE> 10
SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the underwriters' over-allotment option will not
be exercised.
PITTSBURGH HOME FINANCIAL CORP.
Pittsburgh Home Financial Corp. (the "Company") is a Pennsylvania
corporation and the sole stockholder of Pittsburgh Home Savings Bank (the
"Bank"), which converted to the stock form of organization in April 1996. The
only significant assets of the Company are the capital stock of the Bank and
assets purchased with the balance of the net conversion proceeds retained by the
Company. The business of the Company consists primarily of the business of the
Bank. At September 30, 1997, the Company had total consolidated assets of $273.3
million, total consolidated deposits of $138.7 million, and total consolidated
stockholders' equity of $28.8 million.
The Bank is a Pennsylvania-chartered stock savings bank which was
founded in 1942 and has expanded its operations over the years through the
acquisition of three savings institutions. The Bank conducts business from its
main office in Pittsburgh, Pennsylvania and eight branch offices located in
Allegheny and Butler Counties, Pennsylvania. The Bank's deposits are insured by
the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation ("FDIC") to the maximum extent permitted by law.
References herein to the Company refer to the consolidated operations of the
Company and the Bank unless otherwise noted.
The Company is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers.
The Company has concentrated its lending activities on real estate loans
secured by single family residential properties and construction loans on
primarily residential properties. To a significantly lesser extent, in recent
years, the Company has also engaged in commercial lease financing. At September
30, 1997 the total loan portfolio amounted to $192.7 million or 70.5% of total
consolidated assets. The Company during the fiscal year ended September 30,
1997 continued to increase its originations of residential mortgage loans and
residential construction loans, as it has continued its relationships with
local mortgage brokers and building contractors. When compared to September 30,
1996, residential mortgages increased $37.8 million or 33.1%; residential
construction loans increased by $5.8 million or 30.3%; and other loans,
comprised of home equity loans and lines of credit, consumer loans and
commercial leases increased by $4.7 million or 56.6%. Primarily as a result of
the foregoing, loans receivable, net, increased by $45.8 million or 33.8%
between September 30, 1996 and September 30, 1997.
3
<PAGE> 11
The Company also invests its funds in U.S. Government and agency
securities, as well as mortgage-backed, municipal, equity securities and short
term investments. At September 30, 1997, mortgage-backed securities were $38.2
million or 14.0% of total consolidated assets and other investment securities
were $37.2 million or 13.6% of total assets, as compared to $23.8 million or
12.2% and $22.5 million or 11.5%, respectively, at September 30, 1996. During
the quarter ended June 30, 1997, the Company established a securities trading
account, with a Board approved limit at any one time of $2.5 million in the
aggregate and $1.0 million per investment. The Company recognized a pre-tax net
gain of $310,000 for the year ended September 30, 1997. At September 30, 1997,
the Company had an aggregate of $956,000 invested in seven securities. The
investments purchased were equity securities of financial institutions.
During fiscal 1997, the Company also implemented a wholesale
leveraging strategy designed to take advantage of its excess capital. The
Company determined to invest in mortgage-backed securities and U.S. government
and agency obligations, at a positive interest rate spread over the funding
obligation, which has been Federal Home Loan Bank ("FHLB") advances. During
fiscal 1997, the Company invested an aggregate of $29.3 million pursuant to
this strategy.
The Company derives its income principally from interest earned on
loans, securities and its other investments and, to a lesser extent, from fees
received in connection with the origination of loans and for other services.
The Company's primary expenses are interest expense on deposits, borrowings,
and other operating expenses.
The Bank currently exceeds all applicable minimum regulatory capital
requirements. At September 30, 1997, the Bank had Tier 1 risk-based, total
risk-based and Tier 1 leverage capital levels of 18.91%, 20.04% and 8.80%,
respectively, as compared to the minimum requirements of 4.0%, 8.0% and 4.0%,
respectively.
On December 19, 1997, the Company paid a special one-time cash dividend
of $4.9 million, or $2.50 per share, to stockholders of record as of December 5,
1997. The Company paid $4.2 million and the Bank paid $700,000 of the special
one-time cash dividend of $4.9 million. The Company has obtained a private
letter ruling from the IRS to the effect that the portion of its distribution
which exceeds the Company's unconsolidated accumulated earnings and profits
would qualify as a non-taxable return of capital. The Company estimates that
approximately 97% of the special distribution qualifies as a return of capital,
which reduces the cost basis of each share of common stock and is not subject to
taxation as a dividend to stockholders. On a pro forma basis, as of September
30, 1997, taking the special distribution into effect, the Bank's Tier 1
risk-based, total risk-based and Tier 1 leverage capital levels would have been
18.46%, 19.59% and 8.56%, respectively. On a pro forma consolidated basis at
September 30, 1997, shareholders' equity to total assets was reduced from 10.54%
to 8.90%.
The Company, as a registered bank holding company, is subject to
examination and regulation by the Board of Governors of the Federal Reserve
System ("Federal Reserve Board") and the Pennsylvania Department of Banking
(the "Department"), and is subject to various reporting and other requirements
of the Securities and Exchange Commission ("Commission"). The Bank is also
subject to examination and comprehensive regulation by the Department, which is
the Bank's chartering authority, and by the FDIC, as the administrator of the
SAIF. The Bank is subject to certain reserve requirements established by the
Federal Reserve Board and is a member of the FHLB of Pittsburgh, which is one
of the 12 regional banks comprising the FHLB System.
The Company's executive office is located at 438 Wood Street,
Pittsburgh, Pennsylvania 15222 and its telephone number is (412) 281-0780.
4
<PAGE> 12
THE TRUST ISSUER
The Trust Issuer is a statutory business trust created under Delaware
law pursuant to (i) the Trust Agreement executed by the Company, as depositor,
The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the Administrative Trustees named therein and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on
December __, 1997. The trust agreement will be amended and restated in its
entirety (as so amended, the "Trust Agreement"). All of the Common Securities
will be owned by the Company. The Company will acquire Common Securities in an
aggregate Liquidation Amount equal to 3% of the total capital of the Trust
Issuer. The Trust Issuer 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 Junior Subordinated Debentures issued by the
Company and (iii) engaging in only those other activities necessary, advisable
or incidental thereto (such as registering the transfer of the Trust
Securities). Accordingly, the Junior Subordinated Debentures will be the sole
assets of the Trust Issuer, and payments under the Junior Subordinated
Debentures will be the sole revenue of the Trust Issuer. The principal
executive office of the Trust Issuer is 438 Wood Street, Pittsburgh,
Pennsylvania 15222 and its telephone number is (412) 281-0780.
THE OFFERING
<TABLE>
<S> <C>
THE TRUST ISSUER................................ Pittsburgh Home Capital Trust I, a Delaware statutory
business trust (the "Trust Issuer"). The sole assets of
the Trust Issuer will be the Junior Subordinated
Debentures.
SECURITIES OFFERED.............................. 1,000,000 shares of ___% Cumulative Trust Preferred
Securities (the "Preferred Securities"), evidencing
preferred undivided beneficial interests in the assets of
the Trust Issuer, which will consist only of the Junior
Subordinated Debentures.
OFFERING PRICE.................................. $10 per Preferred Security (Liquidation Amount $10).
DISTRIBUTIONS................................... Holders of the Preferred Securities will be entitled to
receive cumulative cash Distributions at an annual rate
of ___% of the Liquidation Amount of $10 per
Preferred Security, accumulating from the date of
original issuance and payable quarterly in arrears on
March 1, June 1, September 1 and December 1 of each
year, commencing on March 1, 1998. The distribution
rate and the distribution and other payment dates for
the Preferred Securities will correspond to the interest
</TABLE>
5
<PAGE> 13
<TABLE>
<S> <C>
rate and interest and other payment dates on the Junior
Subordinated Debentures. See "Description of the
Preferred Securities."
JUNIOR SUBORDINATED DEBENTURES.................. The Trust Issuer will invest the proceeds from the
issuance of the Trust Securities in an equivalent
amount of the Junior Subordinated Debentures. The
Junior Subordinated Debentures will mature on
___________, 2028. The Junior Subordinated
Debentures will rank subordinate and junior in right of
payment to all Senior Indebtedness of Pittsburgh
Home. At September 30, 1997, Pittsburgh Home had
no outstanding Senior Indebtedness. There is no
limitation on the amount of Senior Indebtedness, or
Subordinated Debt (as defined in "Description of Junior
Subordinated Debentures- Subordination") which is
pari passu with the Junior Subordinated Debentures,
which Pittsburgh Home may issue. Pittsburgh Home
may from time to time, incur indebtedness constituting
Senior Indebtedness. In addition, because Pittsburgh
Home is a holding company, Pittsburgh Home's
obligations under the Junior Subordinated Debentures
will effectively be subordinated to all existing and
future liabilities and obligations of its subsidiaries,
including the Bank. See "Risk Factors--Subordination
of the Guarantee and the Junior Subordinated
Debentures," "Risk Factors--Source of Payments to
Holders of Preferred Securities" and "Description of the
Junior Subordinated Debentures--Subordination."
GUARANTEE....................................... Payments of Distributions out of funds held by the
Trust Issuer, and payments on liquidation of the Trust
Issuer or the redemption of the Preferred Securities, are
guaranteed by Pittsburgh Home to the extent the Trust
Issuer has funds available therefor. Pittsburgh Home
and the Trust Issuer believe that, taken together, the
obligations of Pittsburgh Home under the Guarantee,
the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense Agreement,
constitute, in the aggregate, a full and unconditional
guarantee, on a subordinated basis, of all of the Trust
Issuer's obligations under the Preferred Securities. See
"Description of the Guarantee" and "Relationship
Among the Preferred Securities, the Junior
Subordinated Debentures, the Expense Agreement and
</TABLE>
6
<PAGE> 14
<TABLE>
<S> <C>
the Guarantee." The obligations of Pittsburgh Home
under the Guarantee are subordinate and junior in right
of payment to all Senior Indebtedness of Pittsburgh
Home. See "Risk Factors-- Subordination of the
Guarantee and the Junior Subordinated Debentures" and
"Description of the Guarantee."
RIGHT TO DEFER INTEREST PAYMENTS................ So long as no event of default under the Indenture has
occurred and is continuing, Pittsburgh Home has the
right under the Indenture at any time during the term
of the Junior Subordinated Debentures to defer the
payment of interest at any time or from time to time
for a period not exceeding 20 consecutive quarters with
respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. At
the end of such Extension Period, Pittsburgh Home
must pay all interest then accrued and unpaid (together
with interest thereon at the annual rate of ___%,
compounded quarterly, to the extent permitted by
applicable law). During an Extension Period, interest
will continue to accrue and holders of the Junior
Subordinated Debentures (or holders of the Preferred
Securities, while outstanding) will be required to accrue
interest income for United States federal income tax
purposes in advance of receipt of payment of such
deferred interest. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue
Discount").
During any such Extension Period, Pittsburgh Home
may not, and may not permit any subsidiary of
Pittsburgh Home to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of Pittsburgh
Home's capital stock (other than (a) the reclassification
of any class of Pittsburgh Home's capital stock into
another class of capital stock, (b) dividends or
distributions payable in common stock of Pittsburgh
Home, (c) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan,
the issuance of stock under any such plan in the future
or the redemption or repurchase of any such rights
pursuant thereto, (d) payments under the Guarantee and
(e) purchases of common stock related to the issuance
</TABLE>
7
<PAGE> 15
<TABLE>
<S> <C>
of common stock or rights under any of Pittsburgh Home's
benefit plans for its directors, officers or employees),
(ii) make any payment of principal, interest or premium, if
any, on, or repay, repurchase or redeem, any debt securities
of Pittsburgh Home 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 Pittsburgh Home of the debt securities of any
subsidiary of Pittsburgh Home if such guarantee ranks pari
passu with or junior in right of payment to the Junior
Subordinated Debentures other than payments pursuant to the
Guarantee. Prior to the termination of any such Extension
Period, Pittsburgh Home may further defer the payment of
interest on the Junior Subordinated Debentures, provided
that no Extension Period may exceed 20 consecutive quarters
or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. There is no limitation on the
number of times that Pittsburgh Home may elect to begin an
Extension Period. See "Description of the Junior
Subordinated Debentures--Right to Defer Interest Payment
Obligation" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
Pittsburgh Home has no current intention of exercising
its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated
Debentures. However, should Pittsburgh Home elect
to exercise such right in the future, the market price of
the Preferred Securities is likely to be adversely
affected. As a result of the existence of Pittsburgh
Home's right to defer interest payments, the market
price of the Preferred Securities may be more volatile
than the market prices of other similar securities that
do not provide for such optional deferrals.
REDEMPTION...................................... The Junior Subordinated Debentures are subject to
redemption prior to their Stated Maturity at the option
of Pittsburgh Home (i) on or after ___________, 2003,
in whole at any time or in part from time to time, or
(ii) at any time, in whole (but not in part), within 180
days following the occurrence and continuation of a
Tax Event, an Investment Company Event or a Capital
</TABLE>
8
<PAGE> 16
<TABLE>
<S> <C>
Treatment Event (each as defined herein), in each case at a
redemption price equal to 100% of the principal amount of
the Junior Subordinated Debentures so redeemed, together
with any accrued and unpaid interest to the date fixed for
redemption.
If the Junior Subordinated Debentures are redeemed
prior to their Stated Maturity, the Trust Issuer must
apply the proceeds of such redemption to redeem a
Like Amount (as defined herein) of the Preferred
Securities and the Common Securities. The Preferred
Securities will be redeemed upon repayment of the
Junior Subordinated Debentures at their Stated
Maturity. See "Description of the Preferred Securities-
-Redemption."
DISTRIBUTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON
LIQUIDATION OF THE TRUST ISSUER............... Pittsburgh Home will have the right at any time to
dissolve the Trust Issuer and, after satisfaction of
creditors of the Trust Issuer, if any, as provided by
applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of the
Preferred Securities and the Common Securities in
exchange therefor upon liquidation of the Trust Issuer.
The ability of Pittsburgh Home to do so may be subject
to Pittsburgh Home's prior receipt of regulatory
approval.
In the event of the liquidation of the Trust Issuer, after
satisfaction of the claims of creditors of the Trust
Issuer, if any, as provided by applicable law, the
holders of the Preferred Securities will be entitled to
receive a Liquidation Amount of $10 per Preferred
Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the
form of a distribution of a Like Amount (as defined
herein) of the Junior Subordinated Debentures, subject
to certain exceptions as described herein. See
"Description of the Preferred Securities--Liquidation of
the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders."
VOTING RIGHTS................................... Except in limited circumstances, the holders of the
Preferred Securities will have no voting rights. See
</TABLE>
9
<PAGE> 17
<TABLE>
<S> <C>
"Description of the Preferred Securities--Voting Rights;
Amendment of Trust Agreement."
USE OF PROCEEDS................................. All of the proceeds from the sale of the Preferred
Securities will be used by the Trust Issuer to purchase
Junior Subordinated Debentures. Pittsburgh Home
intends that the net proceeds from the sale of such
Junior Subordinated Debentures will be used for
general corporate purposes, including, but not limited
to, acquisitions by either the Company or the Bank
(although there presently exist no agreements or
understandings with respect to any such acquisition),
capital contributions to the Bank to support growth and
for working capital, and the possible repurchase of
shares of Pittsburgh Home's common stock, subject to
acceptable market conditions.
RISK FACTORS.................................... An investment in the Preferred Securities involves
substantial risks that should be considered by
prospective purchasers. In addition, because holders of
the Preferred Securities may receive Junior
Subordinated Debentures on termination of the Trust
Issuer, and because payments on the Junior
Subordinated Debentures are the sole source of funds
for Distributions on and redemptions of the Preferred
Securities, prospective purchasers of the Preferred
Securities are also making an investment decision with
regard to the Junior Subordinated Debentures and
should carefully review all of the information regarding
the Junior Subordinated Debentures contained herein.
See "Risk Factors" and "Description of the Junior
Subordinated Debentures."
NASDAQ NATIONAL MARKET SYMBOL................... Application has been made to have the Preferred
Securities approved for listing on The Nasdaq Stock
Market's National Market under the symbol "PHFCP."
ERISA CONSIDERATIONS............................ For a discussion of certain restrictions on purchases,
see "ERISA Considerations."
</TABLE>
10
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE COMPANY
The selected consolidated financial and other data of the Company set
forth below does not purport to be complete and should be read in conjunction
with, and is qualified in its entirety by, the more detailed information,
including the Consolidated Financial Statements and related Notes, appearing
elsewhere herein.
<TABLE>
<CAPTION>
As of or For the
Year Ended September 30,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL AND OTHER DATA:
Total assets $273,304 $195,330 $157,570 $130,646 $135,403
Investment securities 37,145 22,481 18,758 21,999 32,576
Mortgage-backed securities 38,216 23,825 27,458 25,858 26,764
Loans receivable, net 181,339 135,552 102,938 65,341 67,432
Cash and cash equivalents 5,224 7,562 3,545 13,347 4,653
Deposits 138,731 124,342 115,497 110,394 114,377
FHLB advances 101,700 36,500 29,000 8,500 9,500
Stockholders' equity 28,814 30,372 10,610 9,905 9,554
Non-performing assets(1) 4,612 2,377 2,320 2,172 1,822
Full-service offices at end of
period 7 6 5 5 5
SELECTED OPERATING DATA:
Interest income $17,964 $12,933 $ 9,998 $ 8,756 $ 9,233
Interest expense 10,808 7,492 5,836 4,917 5,176
------ ------ ------ ------- -------
Net interest income 7,156 5,441 4,162 3,839 4,057
Provision for losses on loans 360 300 304 135 249
------ ------ ------ ------- -------
Net interest income after
provision for losses on loans 6,796 5,141 3,858 3,704 3,808
Gain (loss) on trading/sale of
securities 310 -- -- (740) (36)
Other non-interest income 419 369 333 378 591
Special SAIF assessment(2) N/A 739 N/A N/A N/A
Other noninterest expenses 4,464 3,557 2,932 2,761 2,765
------ ------ ------ ------- -------
Income before income taxes 3,061 1,214 1,259 581 1,598
Income taxes 1,078 442 554 230 673
------ ------ ------ ------- -------
Net income $ 1,983 $ 772(2) $ 705 $ 351 $ 925
====== ====== ====== ======= =======
PER COMMON SHARE:
Net income $ 1.04 $ .15(2) N/A N/A N/A
Cash dividends(3) .29 .05 N/A N/A N/A
Book value 14.63 13.92 N/A N/A N/A
SELECTED OPERATING RATIOS(4):
Average yield earned on
interest-earning assets 7.78% 7.66% 7.42% 6.63% 7.19%
Average rate paid on interest-
bearing liabilities 5.29 5.02 4.64 3.90 4.21
Average interest rate spread(5) 2.49 2.64 2.78 2.73 2.98
Net interest margin(5) 3.10 3.22 3.09 2.90 3.16
Ratio of interest-earning assets
to interest-bearing liabilities 113.05 113.19 107.12 104.82 104.47
Net interest income to
operating expenses 1.60 1.27 1.40 1.39 1.47
Operating expenses as a
percent of average assets 1.88 2.47(2) 2.14 2.02 2.08
Return on average assets .84 .44(2) .51 .26 .70
Return on average equity 6.95 3.80(2) 6.83 3.60 10.31
Ratio of average equity to
average assets 12.02 11.68 7.43 7.14 6.76
ASSET QUALITY RATIOS(4):
Non-performing loans as a percent
of total loans 1.92% 1.55% 2.09% 3.05% 2.56%
Non-performing assets as a percent
of total assets 1.69 1.22 1.47 1.66 1.35
Allowance for loan losses as a
percent of total loans .74 .78 .83 1.00 .85
Allowance for loan losses as a
percent of non-performing loans 38.30 50.27 39.70 32.73 32.82
BANK CAPITAL RATIOS:
Tier 1 risk-based capital ratio 18.91% 24.33% 14.87% 19.88% 19.07%
Total risk-based capital ratio 20.04 25.58 16.12 21.13 20.27
Tier 1 leverage capital ratio 8.80 11.55 6.73 7.58 7.06
</TABLE>
(Footnotes on following page)
11
<PAGE> 19
- ---------------
(1) Non-performing assets consist of non-performing loans and real estate
owned ("REO"). Non-performing loans consist of non-accrual loans 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.
(2) Per common share data have been stated only for a partial period
because of the Company's conversion to stock form on April 1, 1996.
Without giving effect to the one- time special Savings Association
Insurance Fund ("SAIF") assessment of $739,000 or $473,000 after tax
($.23 per share) incurred in the September 1996 quarter to
recapitalize the SAIF of the Federal Deposit Insurance Corporation
("FDIC"), net income and net income per share would have been $1.25
million and $.38, respectively, and operating expenses as a percent of
average assets, return on average assets and return on average equity
would have been 2.05%, .71% and 6.14%, respectively.
(3) On December 19, 1997, the Company paid a special one-time cash dividend
of $4.9 million, or $2.50 per share, to stockholders of record as of
December 5, 1997. The Company paid $4.2 million and the Bank paid
$700,000 of the special one-time cash dividend of $4.9 million.
The Company has obtained a private letter ruling from the IRS to the
effect that the portion of its distribution which exceeds the Company's
unconsolidated accumulated earnings and profits would qualify as a
non-taxable return of capital. The Company estimates that approximately
97% of the special distribution qualifies as a return of capital, which
reduces the cost basis of each share of common stock and is not subject
to taxation as a dividend to stockholders. On a pro forma basis, as of
September 30, 1997, taking the special distribution into effect, the
Bank's Tier 1 risk-based, total risk-based and Tier 1 leverage capital
levels would have been 18.46%, 19.59% and 8.56%, respectively. On a pro
forma consolidated basis at September 30, 1997, shareholders' equity to
total assets was reduced from 10.54% to 8.90%.
(4) Asset Quality Ratios and Capital Ratios are end of period ratios. With
the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods.
(5) Interest rate spread represents the difference between the weighted
average yield on average interest-earning assets and the weighted
average cost of average interest-bearing liabilities, and net interest
margin represents net interest income as a percent of average
interest-earning assets.
12
<PAGE> 20
RISK FACTORS
An investment in the Preferred Securities involves a high degree of
risk. Prospective investors should carefully consider, together with the other
information contained in this Prospectus, the following factors in evaluating
the Company, its business and the Trust Issuer before purchasing the Preferred
Securities offered hereby. Prospective investors should note, in particular,
that this Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve substantial risks and uncertainties. When used in
this Prospectus, the words "anticipate," "believe," "estimate," "may," "intend"
and "expect" and similar expressions identify certain of such forward-looking
statements. Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements
contained herein. The considerations listed below represent certain important
factors the Company believes could cause such results to differ. These
considerations are not intended to represent a complete list of the general or
specific risks that may affect the Company and the Trust Issuer. It should be
recognized that other risks, including general economic factors and expansion
strategies, may be significant, presently or in the future, and the risks set
forth below may affect Pittsburgh Home and the Trust Issuer to a greater extent
than indicated.
RISK FACTORS RELATING TO THE OFFERING
SUBORDINATION OF THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES
The obligations of Pittsburgh Home under the Guarantee issued by
Pittsburgh Home for the benefit of the holders of the Preferred Securities and
under the Junior Subordinated Debentures issued to the Trust Issuer will be
unsecured and will rank subordinate and junior in right of payment to all
Senior Indebtedness of Pittsburgh Home. At September 30, 1997, Pittsburgh Home
had no outstanding Senior Indebtedness. There is no limitation on the amount of
Senior Indebtedness, or subordinated debt which is pari passu with the Junior
Subordinated Debentures, which Pittsburgh Home may issue. Because Pittsburgh
Home is a holding company, the right of Pittsburgh Home 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 Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary
(including depositors in the Bank), except to the extent that Pittsburgh Home
may itself be recognized as a creditor of that subsidiary. If Pittsburgh Home
is a creditor of a subsidiary, the claims of Pittsburgh Home would be subject
to any prior security interest in the assets of the subsidiary and any
indebtedness of the subsidiary senior to that of Pittsburgh Home. Accordingly,
the Junior Subordinated Debentures and the Guarantee will be effectively
subordinated to all existing and future liabilities of Pittsburgh Home's
subsidiaries, including the Bank. At September 30, 1997, the Bank had aggregate
liabilities of $244.5 million (including $138.7 million in deposits). Only the
capital stock of Pittsburgh Home is currently junior in right of payment to the
Junior Subordinated Debentures to be issued to the Trust Issuer. Holders of the
Junior Subordinated Debentures will
13
<PAGE> 21
be able to look only to the assets of Pittsburgh Home for payments on the
Junior Subordinated Debentures. None of the Indenture, the Guarantee, the
Expense Agreement or the Trust Agreement places any limitation on the amount of
secured or unsecured debt, including Senior Indebtedness, that may be incurred
by Pittsburgh Home. Pittsburgh Home may, from time to time, incur indebtedness
constituting Senior Indebtedness. See "Description of the Guarantee--Status of
the Guarantee" and "Description of the Junior Subordinated
Debentures--Subordination."
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
As a bank holding company, Pittsburgh Home conducts its operations
principally through its subsidiaries and, therefore, its principal source of
cash, other than its investing and financing activities, is the receipt of
dividends from the Bank. Since Pittsburgh Home is without significant assets
other than the capital stock of the Bank, the ability of Pittsburgh Home to pay
interest on the principal of the Junior Subordinated Debentures to the Trust
Issuer (and consequently, the Trust Issuer's ability to pay Distributions on
the Preferred Securities and Pittsburgh Home's ability to pay its obligations
under the Guarantee) will be dependent on the ability of the Bank to pay
dividends to Pittsburgh Home in amounts sufficient to service Pittsburgh Home's
obligations. Pittsburgh Home may become obligated to make other payments with
respect to securities issued by Pittsburgh Home in the future which are pari
passu or have a preference over the Junior Subordinated Debentures issued to
the Trust Issuer with respect to the payment of principal, interest or
dividends. There is no restriction on the ability of Pittsburgh Home to issue,
or limitations on the amount of securities which Pittsburgh Home may issue,
which are pari passu or have a preference over the Junior Subordinated
Debentures issued to the Trust Issuer, nor is there any restriction on the
ability of the Bank to issue additional capital stock or incur additional
indebtedness.
There are regulatory limitations on the payment of dividends directly
or indirectly to the Company from the Bank. As of September 30, 1997, under
applicable banking statutes, the total capital available for payment of
dividends by the Bank to the Company was approximately $13.0 million. On
December 19, 1997, the Company paid a special one-time cash dividend of $4.9
million, or $2.50 per share, to stockholders of record as of December 5, 1997.
The Company paid $4.2 million and the Bank paid $700,000 of the special one-time
cash dividend of $4.9 million. The Company has obtained a private letter ruling
from the IRS to the effect that the portion of its distribution which exceeds
the Company's unconsolidated accumulated earnings and profits would qualify as a
non-taxable return of capital. The Company estimates that approximately 97% of
the special distribution qualifies as a return of capital, which reduces the
cost basis of each share of common stock and is not subject to taxation as a
dividend to stockholders. On a pro forma basis, as of September 30, 1997, taking
the special distribution into effect, the Bank's Tier 1 risk-based, total
risk-based and Tier 1 leverage capital levels would have been 18.46%, 19.59% and
8.56%, respectively. On a pro forma consolidated basis at September 30, 1997,
shareholders' equity to total assets was reduced from 10.54% to 8.90%.
Federal and state bank regulatory agencies have the power to prohibit
any act, including the payment of dividends, if such act would reduce the Bank's
capita to a point that, in their opinion, would render the Bank undercapitalized
and thus constitute an unsafe or unsound banking practice. In addition to
restrictions on the payment of dividends, the Bank is subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, the Company and certain other affiliates, and on
investments in stock or other securities thereof. Such restrictions prevent the
Company 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 Company and as to each of such other affiliates to 10% of the Bank's capital
and surplus and as to the Company and all of such other affiliates to an
aggregate of 20% of the Bank's capital and surplus.
14
<PAGE> 22
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no event of default under the Indenture has occurred and is
continuing, Pittsburgh Home 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 20 consecutive quarters with respect
to each Extension Period, provided that no Extension Period may extend beyond
the Stated Maturity of the Junior Subordinated Debentures. As a consequence of
any such deferral, quarterly Distributions on the Preferred Securities by the
Trust Issuer would also be deferred (and the amount of Distributions to which
holders of the Preferred Securities are entitled would accumulate additional
Distributions thereon at the rate of ___% per annum, compounded quarterly from
the relevant payment date for such Distributions) during any such Extension
Period. During any such Extension Period, Pittsburgh Home may not, and may not
permit any subsidiary of Pittsburgh Home to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of Pittsburgh Home's capital stock, (other than (a) the
reclassification of Pittsburgh Home's capital stock into another class of
capital stock, (b) dividends or distributions in common stock of Pittsburgh
Home, (c) 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,
(d) payments under the Guarantee and (e) purchases of common stock related to
the issuance of common stock or rights under any of Pittsburgh Home's benefit
plans for its directors, officers or employees), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of Pittsburgh Home that rank pari passu with or junior in
interest to the Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by Pittsburgh Home of the debt
securities of any subsidiary of Pittsburgh Home if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures other
than payments pursuant to the Guarantee. Prior to the termination of any such
Extension Period, Pittsburgh Home may further defer the payment of interest,
provided that no Extension Period may exceed 20 consecutive quarters or 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 on the Junior Subordinated Debentures (together with
interest thereon at the annual rate of ___%, compounded quarterly from the
relevant payment date for such interest, to the extent permitted by applicable
law), Pittsburgh Home may elect to begin a new Extension Period subject to the
above requirements. There is no limitation on the number of times that
Pittsburgh Home may elect to begin an Extension Period so long as no event of
default under the Indenture has occurred and is continuing. See "Description of
the Preferred Securities--Distributions" and "Description of the Junior
Subordinated Debentures--Right to Defer Interest Payment Obligation."
If an Extension Period were to occur, a holder of the Preferred
Securities would continue to accrue income (in the form of original issue
discount) for United States federal income tax purposes in respect of its pro
rata share of the interest accruing on the Junior Subordinated Debentures held
by the Trust Issuer. As a result, a holder of the Preferred Securities would be
required to include such income in gross income for United States federal
income tax purposes in advance of the receipt of cash and would not receive the
cash related to such income from the
15
<PAGE> 23
Trust Issuer if the holder disposed of the Preferred Securities prior to the
record date for the payment of Distributions. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount" and "--Sales or
Redemption of the Preferred Securities."
Pittsburgh Home has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debentures. However,
should Pittsburgh Home elect to exercise such right in the future, the market
price of the Preferred Securities would likely be adversely affected. A holder
that disposed of its Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continued to hold its Preferred Securities. In addition, as a result of the
existence of Pittsburgh Home's right to defer interest payments, the market
price of the Preferred Securities may be more volatile than the market prices
of other similar securities that are not subject to such deferrals.
OPTIONAL REDEMPTION AFTER 2003
Pittsburgh Home has the right to redeem the Junior Subordinated
Debentures prior to their stated Maturity on or after ______, 2003 in whole at
one time or in part from time to time. The exercise of such right may be
subject to Pittsburgh Home having received prior regulatory approval. See
"Description of the Junior Subordinated Debentures--General."
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT
EVENT
Pittsburgh Home has the right, but not the obligation, to redeem the
Junior Subordinated Debentures in whole (but not in part) within 180 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event (whether occurring before or after __________, 2003),
and, therefore, cause a mandatory redemption of the Preferred Securities. The
exercise of such right may be subject to Pittsburgh Home having received prior
regulatory approval.
A "Tax Event" means the receipt by the Trust Issuer of an Opinion of
Counsel 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 the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) the Trust Issuer 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 Pittsburgh Home on the Junior Subordinated Debentures is not, or
within 90 days of the date of such opinion will not be, deductible by
Pittsburgh Home, in whole or in part, for United States federal income tax
purposes or (iii) the Trust Issuer 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. The Trust Issuer or Pittsburgh Home must request
and receive an opinion with regard to such matters within a reasonable period
of time after it becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
16
<PAGE> 24
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which change occurs or becomes
effective on or after the date of original issuance of the Preferred
Securities.
"Capital Treatment Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that as a result of any amendment to, or
change (including any proposed change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement or
action or judicial decision interpreting or applying such laws or regulations,
which amendment or change is effective or such proposed change, pronouncement,
action or decision is announced on or after the date of original issuance of
the Preferred Securities, there is more than an insubstantial risk that the
Preferred Securities would not constitute Tier 1 Capital (or the then
equivalent thereof) applied as if Pittsburgh Home (or its successor) were a
bank holding company for purposes of applicable capital adequacy guidelines of
the Federal Reserve (or any successor regulatory authority with jurisdiction
over bank holding companies), or any capital adequacy guidelines as then in
effect and applicable to Pittsburgh Home.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as are being opined upon.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION
AND TAX CONSEQUENCES
Pittsburgh Home has the right at any time to dissolve the Trust Issuer
and, after the satisfaction of liabilities to creditors of the Trust Issuer as
required by applicable law, cause the Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities in exchange therefor in
liquidation of the Trust Issuer. The exercise of such right may be subject to
Pittsburgh Home having received prior regulatory approval. Pittsburgh Home will
have the right, in certain circumstances, to redeem the Junior Subordinated
Debentures in whole or in part, in lieu of a distribution of the Junior
Subordinated Debentures by the Trust Issuer, in which event the Trust Issuer
will redeem the Preferred Securities on a pro rata basis to the same extent as
the Junior Subordinated Debentures are redeemed by Pittsburgh Home. Any such
distribution or redemption prior to the Stated Maturity will be subject to
prior regulatory approval if then required under applicable capital guidelines
or regulatory policies. See "Description of the Preferred
Securities--Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders" and "Description of the Junior Subordinated
Debentures--Redemption or Exchange."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust Issuer would
not be a taxable event to holders of the Preferred Securities. If, however, the
Trust Issuer were characterized as an association taxable as a corporation at
the time of the dissolution of the Trust Issuer, the distribution of the
17
<PAGE> 25
Junior Subordinated Debentures would constitute a taxable event to holders of
Preferred Securities. Moreover, any redemption of the Preferred Securities for
cash would be a taxable event to such holders. See "Certain Federal Income Tax
Consequences--Distribution of the Junior Subordinated Debentures to Holders of
the Preferred Securities" and "--Sales or Redemption of the Preferred
Securities."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of the
Trust Issuer. The Preferred Securities or the Junior Subordinated Debentures
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities
may receive Junior Subordinated Debentures as a result of the liquidation of
the Trust, and because payments on the Junior Subordinated Debentures are the
sole source of funds for Distributions and redemptions of the Preferred
Securities, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein.
If the Junior Subordinated Debentures are distributed to the holders
of Preferred Securities upon the liquidation of the Trust Issuer, Pittsburgh
Home will use its reasonable efforts to list the Junior Subordinated Debentures
on the Nasdaq Stock Market's National Market or SmallCap Market or such stock
exchanges, if any, on which the Preferred Securities are then listed.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities
the following payments, to the extent not paid by the Trust Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that the Trust Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Preferred
Securities called for redemption, to the extent that the Trust Issuer has funds
on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities in exchange therefor), 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 Issuer has funds on hand available
therefor at such time, and (b) the amount of assets of the Trust Issuer
remaining available for distribution to holders of the Preferred Securities
after payment of creditors of the Trust Issuer as required by applicable law.
If Pittsburgh Home were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, the Trust Issuer would lack
funds for the payment of Distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. The holders of not less than a majority in aggregate Liquidation
Amount of the Preferred Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any
holder of the Preferred Securities may institute a legal proceeding directly
18
<PAGE> 26
against Pittsburgh Home to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust Issuer, the Guarantee Trustee
or any other person or entity. In the event an event of default under the
Indenture shall have occurred and be continuing and such event is attributable
to the failure of Pittsburgh Home to pay interest on or principal of the Junior
Subordinated Debentures on the applicable payment date, a holder of the
Preferred Securities may institute a legal proceeding directly against
Pittsburgh Home for enforcement of payment to such holder of the principal of
or interest on such Junior Subordinated Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Preferred Securities of such
holder (a "Direct Action"). The exercise by Pittsburgh Home of its right, as
described herein, to defer the payment of interest on the Junior Subordinated
Debentures does not constitute an event of default under the Indenture. In
connection with any Direct Action, Pittsburgh Home will have a right of set-off
under the Indenture to the extent of any payment made by Pittsburgh Home to
such holder of the Preferred Securities in the Direct Action. Except as
described herein, holders of the Preferred 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. The Bank of New York will act as the guarantee
trustee under the Guarantee (the "Guarantee Trustee") and will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The Bank
of New York will also act as Debenture Trustee for the Junior Subordinated
Debentures and as Property Trustee, and The Bank of New York (Delaware) will
act as Delaware Trustee under the Trust Agreement. See "Description of the
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of the
Preferred Securities," "Description of the Junior Subordinated
Debentures--Debenture Events of Default" and "Description of the Guarantee."
The Trust Agreement provides that each holder of the Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants
in the Trust Agreement. As a result, neither the Indenture nor the Trust
Agreement protects holders of Junior Subordinated Debentures or Preferred
Securities, respectively, in the event of a material adverse change in
Pittsburgh Home's financial condition or results of operations or limits the
ability of Pittsburgh Home or any subsidiary to incur or assume additional
indebtedness or other obligations. Additionally, neither the Indenture nor the
Trust Agreement contains any financial ratios or specified levels of liquidity
to which Pittsburgh Home must adhere. Therefore, the provisions of these
governing instruments should not be considered a significant factor in
evaluating whether Pittsburgh Home will be able to or will comply with its
obligations under the Junior Subordinated Debentures or the Guarantee.
LIMITED VOTING RIGHTS
Holders of the Preferred Securities will generally have limited voting
rights relating only to the modification of the Preferred Securities and the
exercise of the Trust Issuer's rights as holder of the Junior Subordinated
Debentures and the Guarantee. Holders of the Preferred Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee, the
Delaware Trustee or the Administrative Trustees, as such voting rights are
vested exclusively in Pittsburgh Home, as the holder of the Common Securities
(except, with respect to the Property
19
<PAGE> 27
Trustee and the Delaware Trustee, upon the occurrence of certain events
described herein). The Property Trustee, the Administrative Trustees and
Pittsburgh Home may amend the Trust Agreement without the consent of holders of
the Preferred Securities to ensure that the Trust Issuer 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 the
Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and
"--Removal of the Trust Issuer Trustees."
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
There is no current public market for the Preferred Securities.
Application has been made to list the Preferred Securities on the Nasdaq Stock
Market's National Market. However, one of the requirements for listing and
continued listing is the presence of two market makers for the Preferred
Securities. Pittsburgh Home has been advised that the Underwriter intends to
make a market in the Preferred Securities. However, the Underwriter is not
obligated to do so and such market making may be discontinued at any time.
Therefore, there is no assurance that an active trading market will develop for
the Preferred Securities or, if such market develops, that it will be
maintained or that the market price will equal or exceed the public offering
price set forth on the cover page of this Prospectus. Accordingly, holders of
Preferred Securities may experience difficulty reselling them or may be unable
to sell them at all. The public offering price for the Preferred Securities has
been determined through negotiations between Pittsburgh Home and the
Underwriter. Prices for the Preferred Securities will be determined in the
marketplace and may be influenced by many factors, including prevailing
interest rates, the liquidity of the market for the Preferred Securities,
investor perceptions of Pittsburgh Home and general industry and economic
conditions.
Further, should Pittsburgh Home exercise its option to defer any
payment of interest on the Junior Subordinated Debentures, the Preferred
Securities would be likely to trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. In the event of such a deferral, a holder of Preferred
Securities that disposed of its Preferred Securities between record dates for
payments of Distributions (and consequently did not receive a Distribution from
the Trust Issuer for the period prior to such disposition) would nevertheless
be required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income and to
add such amount to the adjusted tax basis of the Preferred Securities disposed
of. Upon disposition of the Preferred Securities, such holder would recognize a
capital loss to the extent the selling price (which might not fully reflect the
value of accrued but unpaid interest) was less than its adjusted tax basis
(which would include all accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Sales or Redemption of the Preferred Securities."
20
<PAGE> 28
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
Under current law, Pittsburgh Home will be able to deduct interest on
the Junior Subordinated Debentures. However, there is no assurance that future
legislation will not affect the ability of the Company to deduct interest on
the Junior Subordinated Debentures. Such a change would give rise to a Tax
Event. A Tax Event would permit Pittsburgh Home, upon receipt of regulatory
approval if then required under applicable capital guidelines or regulatory
policies, to cause a redemption of the Preferred Securities before, as well as
after, __, 2003. See "Description of the Junior Subordinated
Debentures--Redemption or Exchange."
RISK FACTORS RELATING TO THE COMPANY
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability is dependent to a large extent on its net
interest income, which is the difference between its income on interest-earning
assets and its expense on interest-bearing liabilities. The Bank, like most
financial institutions, is affected by changes in general interest rate levels
and by other economic factors beyond its control. Interest rate risk arises in
part from mismatches (i.e., the interest sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in terms
of the ratio of the interest rate sensitivity gap to total assets. More assets
than liabilities repricing or maturing over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities than
assets repricing or maturing over a given time frame is considered
liability-sensitive and is reflected as a negative gap. A liability-sensitive
position (i.e., a negative gap) will generally enhance earnings in a falling
interest rate environment and reduce earnings in a rising interest rate
environment, while an asset-sensitive position (i.e., a positive gap) will
generally enhance earnings in a rising interest rate environment and will reduce
earnings in a falling interest rate environment. Fluctuations in interest rates
are not predictable or controllable. At September 30, 1997, the Company had a
consolidated one year cumulative negative gap of 7.1%. The Company utilizes OTS
guidelines in calculating their gap position. This negative one year gap
position may, as noted above, have a negative impact on earnings in a rising
interest rate environment. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Asset and Liability Management."
COMPOSITION OF LOAN PORTFOLIO
Most of the loans in the Company's portfolio are secured by real
estate. At September 30, 1997, the Company estimates that a substantial
majority of its total loans receivable were secured by properties located in
its primary market areas of Allegheny County and Butler County, Pennsylvania.
Conditions in the real estate markets in which the collateral for the Company's
mortgage loans are located strongly influence the level of the Company's
non-performing loans and its results of operations. Real estate values are
affected by, among other things, changes in general or local economic
conditions, changes in governmental rules or policies, the availability of
loans to potential purchasers, and natural disasters. Declines in real estate
markets could negatively impact the value of the collateral securing the
Company's loans and its results of operations.
21
<PAGE> 29
As of September 30, 1997, $152.1 million, or 78.9% of the Company's
total loan portfolio consisted of loans secured by first liens on one- to
four-family residences. At that date, $25.1 million or 13.0% of the Company's
total loan portfolio consisted of construction loans, $8.8 million or 4.6% of
the Company's total loan portfolio consisted of home equity loans and lines of
credit, an aggregate of $4.1 million or 2.1% of the Company's total loan
portfolio consisted of consumer loans and commercial leases and $2.6 million or
1.4% of the Company's total loan portfolio consisted of commercial and
multi-family real estate loans. Although these types of loans generally have
higher yields than one- to four-family loans, such loans generally carry a
higher level of credit risk than do single-family residential loans. See
"Business - Lending Activities."
ASSET QUALITY
The future success of the Company is dependent upon the quality of its
assets. Although management of the Company devotes substantial time and
resources to the identification, collection and work-out of non-performing
assets, the real estate markets and the overall economy in its market area are
likely to be significant determinants of the quality of the Company's assets in
future periods and, thus, its financial condition and results of operations.
During the fiscal year ended September 30, 1997, total non-performing assets
increased by $2.2 million or 94.0%. The increase in non-performing assets is
primarily attributable to a $1.5 million or 101.4% increase in non-accruing
single-family residential mortgage loans. The Company has significantly
increased its originations of single-family loans during the past several
years, which management attributes to be the primary reason that non-performing
residential loans have trended up. Management does not attribute the increase
to any specific weakness within the Company or in the marketplace generally.
Subsequent to September 30, 1997, the Company's non-performing assets
have continued to increase. From September 30, 1997 to November 30, 1997, the
Company's non-performing assets increased from $4.6 million to $6.6 million.
This $2.0 million or 42.6% increase in non-performing assets was primarily
attributable to a $1.5 million or 327.2% increase in non-accruing construction
loans. In addition, non-accruing single-family residential loans increased by
$476,000 or 15.8%. The increase in non-performing residential loans during the
two months ended November 30, 1997 was primarily attributable to the factors
which contributed to the increase in non-performing residential loans during
fiscal 1997, discussed above. The increase in non-performing construction loans
during the two months ended November 30, 1997 was due to five construction loans
without pre-sold commitments (which had principal balances ranging from $200,000
to $402,000) which became non-accruing during the period. Two of such loans,
with an aggregate outstanding balance of $640,000 as of November 30, 1997, were
made to a building contractor with whom the Company had the largest loan
concentration at September 30, 1997. The Bank has four other loans outstanding
to such borrower, which were performing as of November 30, 1997. See "Business -
Lending Activities - Origination, Purchase and Sale of Loans." Management does
not attribute the increase in non-performing construction loans to any specific
weakness within the Company or in the marketplace generally. Although management
utilizes its best judgment in providing for losses with respect to its
non-performing assets, there can be no assurance that the Company will be able
to dispose of such non-performing assets without establishing additional
provisions for losses on loans or further reductions in the carrying value of
its real estate owned. See "Business - Asset Quality - Non-Performing Assets."
22
<PAGE> 30
ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's loans
will become delinquent and a portion of the loans may require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which would have loan loss potential, delinquency
trends, estimated fair value of the underlying collateral, current economic
conditions, the views of the Company's regulators (who have the authority to
require additional reserves), and geographic and industry loan concentration.
However, if delinquency levels were to increase as a result of adverse general
economic conditions, especially in Pennsylvania where the Company's exposure is
greatest, the loan loss reserve so determined by the Company may not be
adequate. There can be no assurance that the allowance will be adequate to cover
loan losses or that the Company will not experience significant losses in its
loan portfolios which may require significant increases to the allowance for
loan losses in the future. During the last half of fiscal 1997, management
increased its provisions for loan losses from $75,000 per quarter to $105,000
per quarter. The Company provided an aggregate of $360,000 to the allowance for
loan losses during fiscal 1997. Effective with the first quarter of fiscal 1998,
the Company will be providing $120,000 per quarter. The increase in the amount
of the Company's provision for loan losses is due to both the increased levels
of loan originations as well as the increase in the Company's non-performing
assets. There can be no assurance that the Company will not further increase its
provision for loan losses, which could negatively impact results of operations.
At September 30, 1997 and November 30, 1997, the ratio of the Company's
allowance for loan losses to total loans was 0.74% and 0.74% respectively, and
the allowance for loan losses to non-performing loans was 38.3% and 22.15%
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Results of Operations - Provision for Losses on
Loans" and "Business - Asset Quality - Allowance for Loan Losses."
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and
examination by the Department as its chartering authority and primary
regulator, and by the FDIC, which insures its deposits up to applicable limits.
The Bank is a member of the FHLB of Pittsburgh and is subject to certain
limited regulation by the Federal Reserve Board. As the holding company of the
Bank, Pittsburgh Home is also subject to regulation and oversight by the
Federal Reserve Board. Such regulation and supervision governs the activities
in which an institution may engage and is intended primarily for the protection
of the FDIC insurance funds and depositors. Regulatory authorities have been
granted extensive discretion in connection with their supervisory and
enforcement activities and regulations have been implemented which have
increased capital requirements, increased insurance premiums and have resulted
in increased administrative, professional and compensation expenses. Any change
in the regulatory structure or the applicable statutes or regulations could
have a material impact on the Company and the Bank and their operations.
Additional legislation and regulations may be enacted or adopted in the future
which could significantly affect the powers, authority and operations of the
Bank and the Bank's
23
<PAGE> 31
competitors which in turn could have a material adverse effect on the Bank and
its operations. See "Regulation."
COMPETITION
The Company faces substantial competition in purchasing and
originating real estate loans and in attracting deposits. The Company's
competition in originating real estate loans is principally from banks, other
thrifts, mortgage banking companies, real estate financing conduits, and small
insurance companies. Although it has not done so in recent years, in purchasing
real estate loans, the Company competes with other participants in the
secondary mortgage market. Many entities competing with the Company enjoy
competitive advantages over the Company relative to a potential borrower or
seller in terms of a prior business relationship, wide geographic presence or
more accessible branch office locations, the ability to offer additional
services or more favorable pricing alternatives, a lower origination and
operating cost structure, and other relevant items. Increased competition in
the areas in which the Company conducts operations from traditional competitors
or new sources could result in a decrease in the origination or purchase of
mortgage loans and could adversely affect the Company's results of operations.
In its deposit gathering activities, the Company competes with insured
depository institutions such as thrifts, credit unions, and banks, as well as
uninsured investment alternatives including money market funds. These
competitors may offer higher rates than the Company, which could result in the
Company either attracting fewer deposits or in requiring the Company to
increase the rates it pays to attract deposits. Increased deposit competition
could adversely affect the Company's ability to generate the funds necessary
for its lending operations and could adversely affect the Company's results of
operations.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by the Trust Issuer in Junior Subordinated Debentures. The net
proceeds to the Company from the sale of the Junior Subordinated Debentures are
estimated to be approximately $_____ million ($____ million if the
Underwriter's over-allotment option is exercised in full after deduction of the
underwriting discount and estimated expenses), Pittsburgh Home intends to use
the net proceeds from the sale of the Junior Subordinated Debentures for
general corporate purposes, including, but not limited to, acquisitions by
either the Company or the Bank (although there presently exist no agreements or
understandings with respect to any such acquisition), capital contributions to
the Bank to support growth and for working capital, including continuation of
the wholesale leveraging strategy discussed under "Summary - Pittsburgh Home
Financial Corp." and possible repurchase of shares of Pittsburgh Home's common
stock, subject to regulatory requirements and acceptable market conditions.
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<PAGE> 32
MARKET FOR THE PREFERRED SECURITIES
Application has been made to list the Preferred Securities on the
Nasdaq Stock Market's National Market under the symbol "PHFCP." Although the
Underwriter has informed the Company that it presently intends to make a market
in the Preferred Securities, the Underwriter is not obligated to do so and any
such market making may be discontinued at any time. Accordingly, there is no
assurance that an active and liquid trading market will develop or, if
developed, that such a market will be sustained. The offering price and
distribution rate have been determined by negotiations among representatives of
the Company and the Underwriter, and the offering price of the Preferred
Securities may not be indicative of the market price following the offering.
See "Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust Issuer will be treated as
a subsidiary of the Company and, accordingly, the Trust Issuer's financial
statements will be included in the consolidated financial statements of the
Company. The Preferred Securities will be presented as a separate line item in
the consolidated statements of financial condition of the Company under the
caption "Guaranteed Preferred Beneficial Interests in the Company's Junior
Subordinated Debentures" and appropriate disclosures about the Preferred
Securities will be included in the notes to the consolidated financial
statements. For financial reporting purposes, the Company will record
distributions payable on the Preferred Securities as an interest expense in the
consolidated statements of operations.
In its future financial reports, the Company will: (i) present the
Preferred Securities on the Company's statements of financial condition as a
separate line item entitled "Guaranteed Preferred Beneficial Interests in the
Company's Junior Subordinated Debentures;" (ii) include in a footnote to the
financial statements disclosure that the sole assets of the Trust Issuer are
the Junior Subordinated Debentures specifying the principal amount, interest
rate and maturity date of Junior Subordinated Debentures held; and (iii) if
Staff Accounting Bulletin No. 53 treatment is sought, include, in an audited
footnote to the financial statements, disclosure that (a) the Trust Issuer is
wholly owned, (b) the sole assets of the Trust Issuer are its Junior
Subordinated Debentures, and (c) the obligations of the Company under the
Junior Subordinated Debentures, the Indenture, the Trust Agreement and the
Guarantee, in the aggregate, constitute a full and unconditional guarantee by
the Company of the Trust Issuer's obligations under the Preferred Securities.
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<PAGE> 33
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Including interest on deposits....... 1.28x 1.16x 1.22x 1.12x 1.31x
Excluding interest on deposits....... 1.71x 1.60x 2.28x 1.75x 3.93x
</TABLE>
For purposes of computing the ratios of earnings to fixed charges,
earnings represent income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting principle
plus fixed charges. Fixed charges represent total interest expense, including
and excluding interest on deposits, as applicable, as well as the interest
component of rental expense.
26
<PAGE> 34
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997, as adjusted to give effect to the
consummation of the offering of the Preferred Securities. The following data
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto of the Company included in the Appendices attached hereto.
<TABLE>
<CAPTION>
As
Actual Adjusted
------------------ -----------------
(In thousands)
<S> <C> <C>
Deposits................................................... $138,731 $138,731
Borrowings:
FHLB of Pittsburgh advances............................ 101,700 101,700
Other borrowings....................................... 1,649 1,649
--------- ---------
Total deposits and borrowed funds................... 242,080 242,080
--------- ---------
Guaranteed Preferred Beneficial Interests in the
Company's Junior Subordinated Debentures(1)............... -- 10,000
--------- --------
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000
authorized; none issued............................... -- --
Common stock, $.01 par value, 10,000,000 shares
authorized; 2,182,125 issued and outstanding ......... 22 22
Additional paid-in capital................................. 21,017 21,017
Treasury stock, at cost; 212,756 shares.................... (2,948) (2,948)
Unearned shares of Employee Stock Ownership Plan........... (1,670) (1,670)
Unearned shares of Recognition and Retention Plan.......... (868) (868)
Net unrealized gain on securities available for sale, net
of tax.................................................... 597 597
Retained income, substantially restricted.................. 12,664 12,664
--------- ---------
Total stockholders' equity (2)...................... 28,814 28,814
--------- ---------
</TABLE>
- --------------
(1) Preferred Securities of the Trust Issuer representing beneficial
interests in $10.0 million aggregate principal amount of the Junior
Subordinated Debentures issued by the Company to the Trust Issuer. The
Junior Subordinated Debentures will bear interest at the annual rate
of ___% of the principal amount thereof, payable quarterly and will
mature on _________, 2028. The Company owns all of the Common
Securities of the Trust Issuer.
(2) On December 19, 1997, the Company paid a special one-time cash dividend
of $4.9 million, or $2.50 per share, to stockholders of record as of
December 5, 1997. The Company paid $4.2 million and the Bank paid
$700,000 of the special one-time cash dividend of $4.9 million.
The Company has obtained a private letter ruling from the IRS to the
effect that the portion of its distribution which exceeds the Company's
unconsolidated accumulated earnings and profits would qualify as a
non-taxable return of capital. The Company estimates that approximately
97% of the special distribution qualifies as a return of capital, which
reduces the cost basis of each share of common stock and is not subject
to taxation as a dividend to stockholders. On a pro forma basis, as of
September 30, 1997, taking the special distribution into effect, the
Bank's Tier 1 risk-based, total risk-based and Tier 1 leverage capital
levels would have been 18.46%, 19.59% and 8.56%, respectively. On a pro
forma consolidated basis at September 30, 1997, shareholders' equity to
total assets was reduced from 10.54% to 8.90%.
27
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a Pennsylvania corporation organized in September 1995
by the Bank for the purpose of acquiring all of the capital stock of the Bank
issued in the conversion (the "Conversion") of the Bank from a
Pennsylvania-chartered mutual savings bank to a Pennsylvania-chartered stock
savings bank. The Conversion was completed on April 1, 1996. The only
significant assets of the Company are the capital stock of the Bank and assets
purchased with the balance of the net Conversion proceeds retained by the
Company. The business of the Company consists primarily of the business of the
Bank.
The operating results of the Company depend primarily upon its net
interest income, which is determined by the difference between interest income
on interest-earning assets, which consist principally of loans, investment
securities and other investments, and interest expense on interest-bearing
liabilities, which consist principally of deposits and borrowings. The Bank's
net income also is affected by its provision for loan losses, as well as the
level of its other operating income, including loan fees and service charges
and its other operating expenses, including salaries and employee benefits,
occupancy expense, federal deposit insurance premiums and miscellaneous other
expenses, and income taxes.
CHANGES IN FINANCIAL CONDITION
The Company's assets increased by $78.0 million or 39.9%, from $195.3
million at September 30, 1996 to $273.3 million at September 30, 1997. The
increase in total assets was primarily attributable to increased residential
mortgage and residential construction loan originations, as the Company
continued a more aggressive approach to originations in these loan categories,
as well as from increases in mortgage-backed and U.S. Government and agency
securities. During fiscal 1997, the Company adopted a leveraged asset policy in
order to utilize its excess capital. The Company invested in mortgage-backed
securities and U.S. Government and agency securities at a positive spread over
advances from the FHLB of Pittsburgh.
The Company's loans receivable, net increased $45.7 million or 33.7%
from $135.6 million at September 30, 1996 to $181.3 million at September 30,
1997. Investments and mortgage-backed securities increased an aggregate of
$29.1 million or 62.9%, from $46.3 million at September 30, 1996 to $75.4
million at September 30, 1997. Increased loan originations, investments and
mortgage-backed securities were funded by a $65.2 million or 178.6% increase in
advances from the FHLB of Pittsburgh as well as from a $14.4 million or 11.6%
increase in deposits. The increase in deposits during fiscal 1997 was primarily
a result of the Bank's assumption of the deposits (as well as all equipment and
real estate) of the branch of another financial institution. Stockholders'
equity totaled $28.8 million, representing 10.5% of assets, at September 30,
1997.
28
<PAGE> 36
AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES
PAID. The following table sets forth, for the periods and at the date
indicated, information regarding the Company's average balance sheet.
Information is based on average daily balances during the periods presented.
<TABLE>
<CAPTION>
Year Ended September 30,
At September 30, ---------------------------------------------
1997 1997
--------------- ---------------------------------------------
Average Average
Yield/ Average Yield/
Rate(1) Balance Interest Rate
--------------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Investment securities 6.89% $ 31,942 $ 2,214 6.93%
Mortgage-backed securities 7.13 31,449 2,194 6.98
Loans receivable(1):
First mortgage loans 8.30 150,099 12,351 8.23
Other loans 8.80 9,461 826 8.73
------- ------
Total loans receivable 8.35 159,560 13,177 8.26
Other interest-earning assets 5.75 7,987 380 4.76
------- ------
Total interest-earning assets 7.90% 230,938 $17,965 7.78%
==== ====== ====
Noninterest-earning assets 6,348
-------
Total assets $237,286
=======
Interest-bearing liabilities:
Deposits 4.81% $132,280 $ 6,437 4.87%
FHLB advances 6.01 69,268 4,312 6.23
Escrows 2.00 2,734 59 2.16
---- ------- ------
Total interest-bearing 5.31% 204,282 $10,808 5.29%
==== ====== ====
liabilities
Noninterest-bearing liabilities 4,489
-------
Total liabilities 208,771
Shareholders' equity 28,515
-------
Total liabilities and retained
earnings $237,286
=======
Net interest-earning assets $ 26,656
=======
Net interest income/interest
rate spread 2.59% $7,157 2.49%
==== ===== ====
Net interest margin(2) 3.10%
====
Ratio of average interest-
earning assets to average
interest-bearing liabilities 113.05%
======
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------------------------------
1996 1995
------------------------------------------- -------------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------- ----------- ----------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Investment securities $ 18,868 $ 1,124 5.96% $ 21,236 $1,129 5.32%
Mortgage-backed securities 25,597 1,703 6.65 28,956 1,808 6.24
Loans receivable(1):
First mortgage loans 109,032 8,991 8.25 73,401 6,197 8.44
Other loans 6,745 609 9.03 6,683 614 9.19
------- ------ ------- -----
Total loans receivable 115,777 9,600 8.29 80,084 6,811 8.50
------- ------ ------- -----
Other interest-earning assets 8,695 506 5.82 4,444 250 5.63
------- ------ ------- -----
Total interest-earning assets 168,937 $12,933 7.66% 134,720 $9,998 7.42%
====== ==== ===== ====
Noninterest-earning assets 4,810 4,278
------- -------
Total assets $173,747 $138,998
======= =======
Interest-bearing liabilities:
Deposits $114,377 $5,373 4.70% $109,209 $4,806 4.40%
FHLB advances 30,092 2,012 6.69 14,129 981 6.94
Escrows 4,777 107 2.24 2,425 49 2.02
------- ----- ------- -----
Total interest-bearing 149,246 $7,492 5.02% 125,763 $5,836 4.64%
===== ==== ===== ====
liabilities
Noninterest-bearing liabilities 4,216 2,907
------- -------
Total liabilities 153,462 128,670
Shareholders' equity 20,285 10,328
------- -------
Total liabilities and retained
earnings $173,747 $138,998
======= =======
Net interest-earning assets $ 19,691 $ 8,957
======= =======
Net interest income/interest
rate spread $5,441 2.64% $4,162 2.78%
===== ==== ===== ====
Net interest margin(2) 3.22% 3.09%
==== ====
Ratio of average interest-
earning assets to average
interest-bearing liabilities 113.19% 107.12%
====== ======
</TABLE>
- ------------
(1) Includes non-accrual loans.
(2) Net interest income divided by interest-earning assets.
29
<PAGE> 37
RATE/VOLUME ANALYSIS. The following table describes the extent to
which changes in interest rates and changes in volume of interest-related
assets and liabilities have affected the Company's interest income and expense
during the periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (change in volume multiplied by prior year rate), (ii)
changes in rate (change in rate multiplied by prior year volume), and (iii)
total change in rate and volume.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------
1997 vs. 1996
--------------------------------------------------------------------
Increase
(Decrease) Due to
-----------------------------------------------
Total Increase
Rate Volume Rate/Volume (Decrease)
------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Interest-earnings assets:
Investment securities $184 $ 779 $127 $1,090
Mortgage-backed securities 83 389 19 491
Loans receivable, net (39) 3,631 (15) 3,577
Other interest-earning assets (93) (41) 8 (126)
--- ----- ---- -----
Total interest-earning assets 135 4,758 139 5,032
--- ----- ---- -----
Interest-bearing liabilities
Deposits 193 841 30 1,064
FHLB advances (139) 2,620 (181) 2,300
Escrows (4) (46) 2 (48)
--- ----- ---- -----
Total interest-bearing liabilities 50 3,415 (149) 3,316
--- ----- ---- -----
Increase (decrease) in net interest income $ 85 $1,343 $ 288 $1,716
=== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------
1996 vs. 1995
------------------------------------------------------------------
Increase
(Decrease) Due to
-----------------------------------------------
Total Increase
Rate Volume Rate/Volume (Decrease)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Interest-earnings assets: $ 136 $(126) $ (15) $ (5)
Investment securities 119 (210) (14) (105)
Mortgage-backed securities (154) 3,013 (70) 2,789
Loans receivable, net 9 239 8 256
Other interest-earning assets ---- ----- ---- -----
110 2,916 (91) 2,935
Total interest-earning assets ---- ----- ---- -----
Interest-bearing liabilities 324 228 15 567
Deposits (36) 1,108 (41) 1,031
FHLB advances 5 48 5 58
Escrows ---- ----- ---- -----
293 1,384 (21) 1,656
Total interest-bearing liabilities ---- ----- ---- -----
$(183) $1,532 $ (70) $1,279
Increase (decrease) in net interest income ==== ===== ==== =====
</TABLE>
30
<PAGE> 38
RESULTS OF OPERATIONS
NET INCOME. The Company reported net income of $1.98 million,
$772,000, and $705,000 for the fiscal years ended September 30, 1997, 1996 and
1995, respectively. Results for 1996 were affected by a $473,000 after-tax
charge relating to the recapitalization of the SAIF. Exclusive of this one-time
charge, net income would have been $1.25 million for the year ended September
30, 1996. For fiscal 1997, the $1.21 million or 156.5% increase in net income
from fiscal 1996 was attributable to a $1.7 million or 31.5% increase in net
interest income and a $361,000 or 97.8% increase in noninterest income. These
increases in income during fiscal 1997 were offset by an increase of $200,000
or 4.65% in noninterest expense, which increased from $4.3 million in fiscal
1996 to $4.5 million in fiscal 1997. For the fiscal year ended 1996, the
one-time $739,000 pre-tax charge for the special assessment to recapitalize the
SAIF is the primary reason for the increase in noninterest expense.
For fiscal 1997, the Company's net interest margin decreased to 3.10%
from 3.22% in fiscal 1996 and the Company's interest rate spread decreased 15
basis points to 2.49% from 2.64% for fiscal 1996. The yield earned on the
Company's interest-earning assets increased 12 basis points to 7.78% from
7.66%, while the Company's average cost of interest-bearing liabilities
increased 27 basis points to 5.29% in 1997 from 5.02% in 1996. The increase in
the Company's yield earned was attributable to having a greater portion of its
interest-earning assets in higher yielding first mortgage loans and higher
yielding investments. The increase in the average cost of liabilities reflects
more aggressive pricing on the Company's certificate of deposit accounts,
coupled with increased borrowings from the FHLB.
For fiscal 1996, the Company's net interest margin increased to 3.22%
from 3.09% in fiscal 1995 and the Company's interest rate spread decreased 14
basis points to 2.64% from 2.78% for fiscal 1995. The yield earned on the
Company's interest-earning assets increased 24 basis points to 7.66% from
7.42%, while the Company's average cost of interest-bearing liabilities
increased 38 basis points to 5.02% in 1996 from 4.64% in 1995. The increase in
the Company's yield earned was attributable to having a greater portion of its
interest-earning assets in higher yielding first mortgage loans. The increase
in the average cost of liabilities reflects more aggressive pricing on the
Company's certificate of deposit accounts, coupled with increased borrowings
from the FHLB. The improvement in the Company's net interest margin is also
attributable to the overall increase in interest-earning assets purchased with
the proceeds from the stock offering.
NET INTEREST INCOME. Net interest income before the provision for
losses on loans increased $1.7 million or 31.5% during fiscal 1997 compared to
the prior fiscal year, due to a $62.0 million or 36.7% increase in the average
balance of interest-earning assets, primarily attributable to a 42.6% increase
in average investments and mortgage-backed securities and a 37.8% increase in
average loans receivable. As noted, the increase in interest-earning assets
over interest-bearing liabilities was attributable to an increase in the
average yield earned on interest-earning assets. The increases in both average
balances and yield on earnings assets more than
31
<PAGE> 39
offset an increase of $55.0 million in average interest-bearing liabilities,
from $149.2 million with a related cost of 5.02% in 1996 to $204.3 million with
a related cost of 5.29% in 1997.
During fiscal 1997, total interest income increased by $5.0 million or
38.9% compared to fiscal 1996, primarily due to a $3.6 million or 37.3%
increase in interest earned on loans receivable, a $1.1 million or 88.5%
increase in interest earned on investments and a $491,000 or 28.8% increase in
interest earned on mortgage-backed securities, which was offset by an $118,000
or 29.1% decrease in interest earned on interest-bearing deposits. The increase
in interest on loans receivable was due to an increase in the average balance
of loans receivable outstanding, which increased 37.8% or $43.8 million during
fiscal 1997. One-to-four family residential loans increased by $41.3 million or
32.9% as the Company continued to utilize local mortgage brokers in the
acquisition of new loan customers in addition to its emphasis on internally
generated product. In addition, the Company continues to expand its
construction loan program by slowly increasing the number of home builders that
are approved to deal with the Company. The decrease in interest earned on
interest-bearing deposits relates to the improved ability of the Company to
generate mortgage originations and alternative investments.
During fiscal 1997, interest expense increased $3.3 million or 44.0%
over the prior comparable year, due to a $1.0 million or 18.5% increase in
interest expense on deposits as well as a $2.3 million or 109.5% increase in
interest on FHLB advances and other borrowings. The increase in interest
expense on deposits was primarily attributable to an increase in average
deposits of $17.9 million or 15.7% from 1996 to 1997. A contributing factor was
a 17 basis point increase in the average cost of savings from 4.70% in 1996 to
4.87% in 1997. The increase in interest paid on FHLB advances was due to an
increase in the average balance of $39.2 million or 130.2%, which was partially
offset by a decrease in the related borrowing cost of 46 basis points from
6.69% in 1996 to 6.23% in 1997. The increased borrowings were used to fund the
increased loan demand and to fund the purchase of mortgage-backed and
investment securities as part of the Company's leveraged asset strategy.
During fiscal 1996, total interest income increased by $2.9 million or
29.4% compared to fiscal 1995, primarily due to a $2.8 million or 41.0%
increase in interest earned on loans receivable, a $33,000 or 2.8% increase in
interest earned on investments, and a $217,000 or 114.7% increase in interest
earned on interest-bearing deposits, which more than offset a $105,000 or 5.8%
decrease in interest earned on mortgage-backed securities. The increase in
interest on loans receivable was due to an increase in the average balance of
loans receivable outstanding increasing 44.6% to $115.8 million during fiscal
1996 as compared to $80.0 million during fiscal 1995. This increase in the
average outstanding balance more than offset a decrease in the yield on loans
receivable of 21 basis points to 8.3% during 1996 from 8.5% during 1995. The
decrease of 21 basis points can be attributed to an increase in originations in
the Company's adjustable rate mortgage (ARM) and balloon mortgage products. At
September 30, 1995, total ARM and balloon mortgages totaled $67.4 million; at
September 30, 1996, these mortgages products totaled $106.2 million, a $38.8
million or 57.5% increase. ARM and balloon mortgages are priced lower than the
conventional 30 year fixed rate mortgage product due to their repricing
features.
32
<PAGE> 40
During fiscal 1996, interest expense increased $1.7 million or 28.4%
over the prior comparable year, due to a $567,000 or 11.8% increase in interest
expense on deposits as well as a $1.1 million or 105.7% increase in interest on
FHLB advances and other borrowings. The increase in interest expense on
deposits was primarily attributable to an increase in average deposits of $5.2
million or 4.7% from 1995 to 1996. A contributing factor was a 30 basis point
increase in the average cost of savings from 4.40% in 1995 to 4.70% in 1996.
The increase in interest paid on FHLB advances was due to an increase in the
average balance of $16.0 million or 113.0%, which was partially offset by a
decrease in the related borrowing cost of 25 basis points from 6.94% in 1995 to
6.69% in 1996. The increased borrowings were used to fund the increased loan
demand.
Net interest income before provision for losses on loans increased
$1.3 million or 30.7% during fiscal 1996 compared to the prior fiscal year, due
to a $34.2 million or 25.4% increase in the average balance of interest-earning
assets, primarily attributable to a 44.6% increase in average loans receivable,
which more than offset a $1.7 million or 28.4% increase in total interest
expense, due to a 38 basis point increase in the average rate paid on
interest-bearing liabilities.
PROVISION FOR LOSSES ON LOANS. The Company establishes provisions for
losses on loans, which are charged to operations, in order to maintain the
allowance for loan losses at a level which is deemed to be appropriate based
upon an assessment of prior loss experience, the volume and type of lending
presently being conducted by the Company, industry standards, past due loans,
economic conditions in the Company's market area generally and other factors
related to the collectibility of the Company's loan portfolio. For the fiscal
years ended September 30, 1997, 1996 and 1995, provisions for losses on loans
amounted to $360,000, $300,000 and $304,000, respectively. During the last half
of fiscal 1997, management increased its provisions for loan losses from
$75,000 per quarter to $105,000 per quarter. The Company provided an aggregate
of $360,000 to the allowance for loan losses during fiscal 1997. Effective with
the first quarter of fiscal 1998, the Company will be providing $120,000 per
quarter. The increase in the amount of the Company's provision for loan losses
is due to both the increased levels of loan originations as well as the
increase in the Company's non-performing assets. At September 30, 1997, the
Company's allowance for loan losses amounted to 38.3% of total non-performing
loans and 0.8% of total loans outstanding.
Although management utilizes its best judgment in providing for
possible loan losses, there can be no assurance that the Company will not have
to increase its provisions for losses on loans in the future as a result of
future increases in non-performing loans or for other reasons, which could
adversely affect the Company's results of operations. In addition, various
regulatory agencies, as an integral part of their examinations process,
periodically review the Company's provision for losses on loans and the
carrying value of its other non-performing assets based on their judgments
about information available to them at the time of their examination.
NONINTEREST INCOME. Total noninterest income increased $361,000 or
97.8% during fiscal 1997 over the prior fiscal year. The primary reason for the
gain was due to gains associated with the Company's newly established trading
account. Pursuant to its trading account strategy, the
33
<PAGE> 41
Company recognized a $310,000 net gain. The investments purchased were
primarily equity securities of financial institutions. Total noninterest income
increased $36,000 or 10.9% during fiscal 1996 over the prior fiscal year. The
increase was primarily attributable to income from services charges and other
fees related to the larger number of Company customers.
NONINTEREST EXPENSE. Total noninterest expense increased $200,000 or
4.65% during fiscal 1997 compared to the prior fiscal year. Compensation and
employee benefits increased $700,000 or 36.8% which is attributable to the
implementation of the Recognition and Retention Plan and a full year of expense
related to the employee stock ownership plan, acquiring the branch of another
financial institution, the hiring of a Senior Vice President of Strategic
Planning for the Bank and the addition of two new board members at the Bank
level. Data processing expenses increased $138,000 or 92.0% as the Company
upgraded its data processing system. Additionally, the Company is working
towards full compliance with year 2000 issues. Other expenses increased $297,000
or 50.4% of which $267,000 consisted of professional fees primarily related to
operating the Company as a public reporting entity.
Total noninterest expense increased $1.4 million or 46.5% during
fiscal 1996 compared to the prior fiscal year. As noted previously, the SAIF
special assessment of $739,000 accounted for 54.2% of this increase in 1996.
The other reasons for the increase were an increase in compensation and
employee benefits of $396,000 or 26.0%, which is attributable to the hiring a
controller and a consumer loan manager in addition to new personnel to staff
the branch office opened in October, 1995, along with the implementation of the
401(k) Plan and employee stock ownership plan. Premises, occupancy and
equipment costs increased $85,000 or 22.8%, due primarily to operating a new
branch facility coupled with additional depreciation expense related to
building and equipment improvements. Other expenses increased $107,000 or
22.3%, primarily as the result of additional costs related to operating the
Company as a public reporting entity. Professional fees increased $74,000 or
56.7%, and printing related costs increased $14,000 or 28.5%. The Company also
incurred additional data processing costs during 1996 of $18,000 or 18.6%.
PROVISION FOR INCOME TAXES. The Company incurred a provision for
income taxes of $1.1 million, $442,000, and $554,000 for the fiscal years ended
September 30, 1997, 1996 and 1995, respectively. The effective tax rate during
each of the foregoing respective fiscal years was 35.2%, 36.4%, and 44.0%. See
Note 8 to Consolidated Financial Statements for additional information relating
to income taxes.
ASSET AND LIABILITY MANAGEMENT
The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is
34
<PAGE> 42
considered positive when the amount of interest-rate sensitive assets exceeds
the amount of interest-rate sensitive liabilities, and is considered negative
when the amount of interest-rate sensitive liabilities exceeds the amount of
interest-rate sensitive assets during a given time period. Generally, during a
period of rising interest rates, a negative gap within shorter maturities would
adversely affect net interest income, while a positive gap within shorter
maturities would result in an increase in net interest income, and during a
period of falling interest rates, a negative gap within shorter maturities
would result in an increase in net interest income while a positive gap within
shorter maturities would have the opposite effect. As of September 30, 1997,
the amount of the Company's interest-bearing liabilities which were estimated
to mature or reprice within one year exceeded the Company's interest-earning
assets with the same characteristics by $19.4 million or 7.1% of the Company's
total assets.
The Company's actions with respect to interest rate risk and its
asset/liability gap management are taken under the guidance of the
Asset/Liability Management Committee of the Board of Directors. This Committee
meets quarterly to, among other things, set interest rate risk targets and
review the Company's current composition of assets and liabilities in light of
the prevailing interest rate environment. The Committee assesses its interest
rate risk strategy quarterly, which is reviewed by the full Board of Directors.
The Company has historically emphasized the origination of long-term
fixed-rate residential real estate loans for retention in its portfolio. At
September 30, 1997, $121.6 million or 63.1% of the Company's total loan
portfolio consisted of fixed-rate or balloon residential mortgage construction
loans. However, as of such date, the Company also held in its loan portfolio
$15.1 million of construction loans which reprice annually and $51.4 million of
long-term residential mortgage loans which have interest rate adjustment
features at seven years and fifteen years. Although the Company anticipates
that a majority of its loan portfolio will continue to consist of fixed-rate
loans, the Company has recently attempted to mitigate the interest rate risk of
holding a significant portion of fixed-rate loans in its portfolio through the
origination of ARMs and short-term construction and consumer loans. At
September 30, 1997, ARMs comprised $45.8 million or 23.8% of the total loan
portfolio and construction and consumer loans aggregated $35.5 million or 18.4%
of the total loan portfolio. At September 30, 1997, $37.1 million or 13.6% of
the Company's total assets consisted of investment securities, 30.9% of which
have terms to maturity of less than five years. In addition, the Company has
invested in adjustable rate mortgage-backed securities. At September 30, 1997,
$18.5 million or 48.4% of the Company's mortgage-backed securities portfolio
was comprised of ARMs. At September 30, 1997, the Company classified $65.3
million or 86.7% of its investment and mortgage-backed securities portfolios as
available for sale, which permits the Company to sell such securities if deemed
appropriate in response to, among other things, changes in interest rates.
Management presently monitors and evaluates the potential impact of
interest rate changes upon the market value of the Company's portfolio equity
(MVPE) and the level of net interest income on a quarterly basis. MVPE is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities, and off-balance sheet contracts. The Company utilizes an outside
banking consultant for assistance in modeling its interest rate risk position.
35
<PAGE> 43
The following table presents the Company's MVPE as of September 30,
1997:
<TABLE>
<CAPTION>
Market Value of Portfolio Equity
- ---------------------------------------------------------------------------------------------------------------------------
Estimated
Change in MVPE as a
Interest Rates Estimated Percentage Amount
(basis points) MVPE of Assets of Change Percent
- ------------------- ------------------- ------------------------- ------------------- --------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
+400 $16,159 5.9% $(18,010) (52.7)%
+300 21,175 7.7 (12,993) (38.0)
+200 25,838 9.5 (8,330) (24.4)
+100 30,499 11.2 (3,669) (10.7)
-- 34,168 12.5 -- --
-100 36,262 13.3 2,094 6.1
-200 37,201 13.6 3,033 8.9
-300 38,258 14.0 4,090 12.0
-400 40,340 14.8 6,172 18.1
</TABLE>
As noted on the above table, significant increases in interest rates
may adversely affect the Company's net interest income and/or MVPE because of
the excess of interest-bearing liabilities over interest-earning assets
repricing within shorter periods and because the Company's adjustable-rate,
interest-earning assets generally are not as responsive to changes in interest
rates as its interest-bearing liabilities due to terms which generally permit
only annual adjustments to the interest rate and which generally limit the
amount which interest rates can adjust at such time and over the life of the
related asset. In addition, the proportion of adjustable-rate loans and assets
in the Company's loan and investment portfolio could decrease in future periods
if market rates of interest remain at or decrease below current levels.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, advances from the
FHLB, repayments, prepayments and maturities of outstanding loans, maturities
of investment securities and other short-term investments, and funds provided
from operations. While scheduled loan repayments and maturing investment
securities and short-term investments are relatively predictable sources of
funds, deposit flows and loan prepayments are greatly influenced by the
movement of interest rates in general, economic conditions and competition. The
Company manages the pricing of its deposits to maintain a deposit balance
deemed appropriate and desirable. In addition, the Company invests in
short-term investment securities and interest-earning assets which provide
liquidity to meet lending requirements. Although the Company's deposits have
historically represented the majority of its total liabilities, the Company
also utilizes other borrowing sources, primarily advances from the FHLB.
36
<PAGE> 44
Liquidity management is both a daily and long-term function. Excess
liquidity is generally invested in short-term investments such as cash and cash
equivalents, and U.S. Government agency securities. On a longer-term basis, the
Company invests in various loans, mortgage-backed securities, and investment
securities. The Company uses its sources of funds primarily to meet its ongoing
commitments to pay maturing savings certificates and savings withdrawals, fund
loan commitments and maintain an investment securities portfolio. At September
30, 1997, the total approved loan commitments outstanding (excluding
undisbursed portions of loans in process) amounted to $9.2 million. At the same
date, the unadvanced portion of loans in process approximated $10.0 million.
Certificates of deposit scheduled to mature in one year or less at September
30, 1997 totalled $64.7 million. Management of the Company believes that the
Company has adequate resources, including principal prepayments and repayments
of loans and maturing investments, to fund all of its commitments to the extent
required. Based upon its historical run-off experience, management believes
that a significant portion of maturing deposits will remain with the Company.
As of September 30, 1997, the Company had regulatory capital which was
in excess of applicable limits. On December 19, 1997, the Company paid a special
one-time cash dividend of $4.9 million, or $2.50 per share, to stockholders of
record as of December 5, 1997. The Company paid $4.2 million and the Bank paid
$700,000 of the special one-time cash dividend of $4.9 million. The Company has
obtained a private letter ruling from the IRS to the effect that the portion of
its distribution which exceeds the Company's unconsolidated accumulated earnings
and profits would qualify as a non-taxable return of capital. The Company
estimates that approximately 97% of the special distribution qualifies as a
return of capital, which reduces the cost basis of each share of common stock
and is not subject to taxation as a dividend to stockholders. On a pro forma
basis, as of September 30, 1997, taking the special distribution into effect,
the Bank's Tier 1 risk-based, total risk-based and Tier 1 leverage capital
levels would have been 18.46%, 19.59% and 8.56%, respectively. On a pro forma
consolidated basis at September 30, 1997, shareholders' equity to total assets
was reduced from 10.54% to 8.90%.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements of the Company and related notes
presented herein have been prepared in accordance with generally accepted
accounting principles which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes
in the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates. In the current interest rate environment,
liquidity and the maturity structure of the Company's assets and liabilities
are critical to the maintenance of acceptable performance levels.
37
<PAGE> 45
BUSINESS
LENDING ACTIVITIES
GENERAL. At September 30, 1997, the Company's total loans receivable
portfolio ("total loan portfolio") amounted to $192.7 million, or 70.5% of
total assets at that date. The Company has traditionally concentrated its
lending activities on conventional first mortgage loans secured by
single-family residential properties. Consistent with its lending orientation,
during the fiscal year ended September 30, 1997, residential mortgages
increased $37.8 million or 33.1% to $152.1 million or 78.9% of the Company's
total loan portfolio. During fiscal 1997, residential construction loans
increased by $5.8 million or 30.3% to $25.1 million; multi-family residential
and commercial real estate loans remained substantially the same at $2.6
million; home equity loans and lines, consumer loans and commercial leases
increased by $4.7 million or 56.6% to $12.9 million.
Historically, the Company's lending activities have been concentrated
in its primary market area of Allegheny County and Butler County, Pennsylvania
and portions of the surrounding counties. The Company estimates that a
substantial majority of its mortgage loans are secured by properties located in
primary market area, and that substantially all of its non-mortgage loan
portfolio consists of loans made to residents and businesses located in such
primary market area.
38
<PAGE> 46
LOAN PORTFOLIO COMPOSITION. The following table sets forth the
composition of the Company's loan portfolio by type of loan at the dates
indicated.
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------------
1997 1996 1995
--------------------- ------------------- --------------------
Amount % Amount % Amount %
--------- ------ ---------- ---- ---------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four family residential $152,113 78.9% $114,311 79.2% $ 85,109 76.9%
Construction 25,102 13.0 19,265 13.3 16,586 15.0
Multi-family residential and
commercial 2,596 1.4 2,592 1.8 1,527 1.3
-------- ---- ------- ----- ------- ----
179,811 93.3 136,168 94.3 103,222 93.2
-------- ---- ------- ----- ------- ----
Other loans:
Commercial leases 2,539 1.3 1,974 1.4 2,491 2.2
Home equity loans and lines 8,821 4.6 5,312 3.7 4,312 3.9
Consumer loans 1,547 0.8 957 0.6 782 0.7
-------- ---- ------- ------- ----
Total loans receivable 192,718 100.0% 144,411 100.0% 110,807 100.0%
-------- ===== ------- ===== ------- =====
Less:
Allowance for loan losses (1,419) (1,128) (921)
Loans in process (10,003) (7,745) (6,926)
Deferred loan fees 43 14 22
-------- ------- -------
Loans receivable, net $181,339 $135,552 $102,982
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------
1994 1993
---------------------- ----------------------
Amount % Amount %
---------- ------- ---------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
First mortgage loans:
One-to-four family residential $55,119 77.5% $59,150 84.4%
Construction 8,740 12.3 4,198 6.0
Multi-family residential and
commercial 1,485 2.1 1,820 2.6
------ ----- ------ -----
65,344 91.9 65,168 93.0
------ ---- ------ -----
Other loans:
Commercial leases 1,835 2.6 1,237 1.8
Home equity loans and lines 2,979 4.2 2,530 3.6
Consumer loans 951 1.3 1,133 1.6
------ ---- ------ -----
Total loans receivable 71,109 100.0% 70,068 100.0%
------ ===== ------ =====
Less:
Allowance for loan losses (711) (599)
Loans in process (4,821) (1,811)
Deferred loan fees 236 226
----- ------
Loans receivable, net $65,341 $67,432
====== ======
</TABLE>
CONTRACTUAL PRINCIPAL REPAYMENTS AND INTEREST RATES. The following
table sets forth certain information at September 30, 1997 regarding the dollar
amount of loans maturing in the Company's total loan portfolio, based on the
contractual terms to maturity. Loans having no stated schedule of repayments
and no stated maturity are reported as due in one year or less.
<TABLE>
<CAPTION>
Due 1-5 years Due more than 5
Due 1 year after years after
or less September 30, 1997 September 30, 1997 Total
------------ ---------------------- --------------------- -----------
(In Thousands)
<S> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential $ 1,787 $25,513 $124,813 $152,113
Construction 25,102 -- -- 25,102
Multi-family residential and
commercial 179 485 1,932 2,596
------- ------- -------- --------
27,068 25,998 126,745 179,811
------- ------- -------- --------
Other loans:
Commercial leases 432 2,107 -- 2,539
Home equity loans and lines 1,933 1,898 4,990 8,821
Consumer loans 554 988 5 1,547
-------
Total $29,987 $30,991 $131,740 $192,718
======= ======= ======== ========
</TABLE>
39
<PAGE> 47
The following table sets forth the dollar amount of total loans due
after one year from September 30, 1997, as shown in the preceding table, which
have fixed interest rates or which have floating or adjustable interest rates.
<TABLE>
<CAPTION>
Floating or
Fixed rate adjustable-rate Total
----------------- --------------------- ---------------
(In Thousands)
<S> <C> <C> <C>
First mortgage loans:
One-to-four-family residential $104,538 $45,788 $150,326
Construction -- -- --
Multi-family residential and commercial 2,417 -- 2,417
Other loans 9,988 -- 9,988
------- ------ -------
Total $116,943 $45,788 $162,731
======= ====== =======
</TABLE>
Scheduled contractual principal repayments do not reflect the actual
maturities of loans. The average maturity of loans is substantially less than
their average contractual terms because of prepayments and, in the case of
conventional mortgage loans, due-on-sale clauses, which generally give the
Company the right to declare a loan immediately due and payable in the event,
among other things, that the borrower sells the real property subject to the
mortgage and the loan is not repaid. The average life of mortgage loans tends
to increase when current mortgage loan rates are substantially higher than
rates on existing mortgage loans and, conversely, decrease when rates on
existing mortgages are substantially lower than current mortgage loan rates
(due to refinancings of adjustable-rate and fixed-rate loans at lower rates).
ORIGINATION, PURCHASE AND SALE OF LOANS. The lending activities of the
Company are subject to the written, non-discriminatory, underwriting standards
and loan origination procedures established by the Company's Board of Directors
and management. Loan originations are obtained from a variety of sources,
including existing customers, builders, realtors, walk-in customers, loan
officers and advertising. The Company also has developed a network of mortgage
bankers who underwrite mortgage loans in accordance with the Company's loan
underwriting procedures.
Loan applications originated by the Bank are generally processed at
the Company's main office in Pittsburgh. The loan applications are initially
processed by loan officers and, once completed, are submitted to the Bank's
Loan Committee, which is comprised of the senior management of the Bank. The
Loan Committee may approve loans up to $300,000. Loans in excess of $300,000
are submitted for approval to the Bank's Board of Directors with a report and
recommendation from the Loan Committee. The Loan Committee has delegated to the
Assistant Vice President/Consumer Lending authority to approve unsecured loans
of up to $10,000, automobile loans up to $20,000 and home equity loans and
lines of credit up to $50,000.
Property appraisals on the real estate and improvements securing the
Company's single-family residential loans are made by independent appraisers.
Appraisals are performed in
40
<PAGE> 48
accordance with federal regulations and policies. The Company obtains title
insurance policies on first mortgage real estate loans originated by it.
Borrowers also must obtain hazard insurance prior to closing and, when
required, flood insurance. Borrowers may be required to advance funds, with
each monthly payment of principal and interest, to a loan escrow account from
which the Company makes disbursements for items such as real estate taxes and
mortgage insurance premiums as they become due.
Historically, the Company has not been an active purchaser of whole
loans or participation interests in loans or an active seller of participation
interests in loans. During fiscal 1997 and 1996, the Company did not purchase or
sell participation interests in loans. However, during fiscal 1995, the Company
sold a $400,000 participation interest in a $1.2 million construction loan
originated to construct a six unit condominium.
The following table shows total loan activity during the periods
indicated.
<TABLE>
<CAPTION>
Year Ended
September 30,
-----------------------------------------------------------
1997 1996 1995
---------------- ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Loan originations:
First mortgage loans:
One-to-four-family residential $53,150 $40,740 $38,314
Construction 19,391 19,034 17,205
Multi-family residential and commercial 688 1,189 105
------- ------ -------
Total mortgage originations 73,229 60,963 55,624
------ ------ ------
Other loans:
Commercial leases 412 1,059 2,003
Home equity loans and lines 5,727 2,269 2,843
Consumer loans 1,250 866 327
------- ------ -------
Total loans originated 80,618 65,157 60,797
------ ------ ------
Loans and loan participations sold (618) (1,935) (3,009)
Loan principal reductions (31,693) (29,618) (18,090)
------- ------- -------
Net increase in loan portfolio $48,307 $33,604 $39,698
======= ======= =======
</TABLE>
A savings institution generally may not make loans to one borrower and
related entities in an amount which exceeds 15% of its unimpaired capital and
surplus, although loans in an amount equal to an additional 10% of unimpaired
capital and surplus may be made to a borrower if the loans are fully secured by
readily marketable securities. At September 30, 1997, the Bank's limit on
loans-to-one borrower was approximately $3.6 million as compared to $3.3
million at September 30, 1996. At September 30, 1997, the Company's five
largest loans or groups of loans-to-one borrower, including persons or entities
related to the borrower, ranged from an aggregate of $1.2 million to $1.7
million and are secured primarily by real estate located in the Company's
primary market area, each of which involves relationships with building
41
<PAGE> 49
contractors. While all of such loans were performing in accordance with their
original terms at September 30, 1997, subsequent to September 30, 1997, two of
the loans which are part of the Company's largest loan concentration became
non-performing. The Company's largest loan concentration at September 30, 1997
amounted to $1.7 million ($855,000 net of loans in process) and consisted of
six loans to a local contractor which were made without pre-sold commitments.
In November 1997, two of such loans, with an aggregate balance of $640,000
($619,000 net of loans in process), became 90 days or more delinquent and the
Company ceased accruing interest. However, the Company does not anticipate that
it will recognize any material losses with respect to such loans. See "Asset
Quality - Non-Performing Assets."
ONE-TO-FOUR FAMILY RESIDENTIAL REAL ESTATE LOANS. The Company had an
aggregate of $152.1 million of one- to four-family residential loans in its
loan portfolio at September 30, 1997. The Company's fixed-rate loans generally
have maturities ranging from 15 to 30 years and are fully amortizing with
monthly payments sufficient to repay the total amount of the loan with interest
by the end of the loan term. Such loans are typically originated under terms,
conditions and documentation which permit them to be sold to U.S. Government
sponsored agencies such as the Federal Home Loan Mortgage Corporation ("FHLMC")
and the Federal National Mortgage Association ("FNMA"). The Company's
fixed-rate loans customarily include "due on sale" clauses, which give the
Company the right to declare a loan immediately due and payable in the event
the borrower sells or otherwise disposes of the real property subject to the
mortgage or the loan is not repaid.
The Company also currently holds a limited amount of loans insured by
the Federal Housing Administration ("FHA") or partially guaranteed by the
Department of Veterans Affairs ("VA"). The Company no longer originates FHA/VA
loans and has not originated these types of loans for over ten years. At
September 30, 1997, the Company held an aggregate of $7.0 million of FHA and VA
loans in its loan portfolio.
In addition to conventional fixed-rate loans, the Company offers
residential loans which reprice once during the loan term at the end of the
seventh or fifteenth year, respectively. At such time, the loan's interest rate
is adjusted based on the index value of the FHLMC net yield on 30-year
fixed-rate mortgage loans plus a margin. These loans are typically based on a
30-year amortization schedule. The amount of any interest rate increase during
the repricing period is limited to 5%.
The Company also originates for its portfolio one-to-four family
residential real estate loans which provide for an interest rate which adjusts
every year or which are fixed for a three and five year period and adjust every
three and five years, respectively, after the initial period (such
adjustable-rate loans are referred to as "ARMs"). The Company's one-year ARM
adjusts every year in accordance with the one year U.S. Treasury securities
with a constant maturity ("CMT") index. The interest rate adjustment for the
Company's three and five year ARMs after the initial fixed period is based on
the three and five year CMT index, respectively. The Company's ARMs are
typically based on a 30-year amortization schedule. The amount of any increase
or decrease after the initial term is limited to 2% per year, with a limit of
6% increase
42
<PAGE> 50
and 2% decrease over the life of the loan. The Company qualifies the borrowers
on its loans which are fixed for three or five years based on the initial rate
and qualifies its borrowers for its one-year ARM based on the fully indexed
rate. The adjustable rate loans offered by the Company may generally be
converted to a fixed-rate loan within five years from the start of the initial
adjustment period. The Company had $45.8 million and $31.0 million of ARMs in
its loan portfolio as of September 30, 1997 and 1996, respectively, which
represented 23.8% and 21.5% of the Company's total loan portfolio,
respectively.
Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrower rises to the extent permitted by the terms of
the loan, thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher
interest rates. The Company believes that these risks, which have not had a
material adverse effect on the Company to date, generally are less than the
risks associated with holding fixed-rate loans in an increasing interest rate
environment.
The Company's residential mortgage loans typically do not exceed 80%
of the appraised value of the security property. Pursuant to underwriting
guidelines adopted by the Board of Directors, the Company can lend up to 95% of
the appraised value of the property securing a one-to-four family residential
loan; however, the Company generally requires private mortgage insurance on the
portion of the principal amount that exceeds 80% of the appraised value of the
security property. At September 30, 1997, the Company had an aggregate of
$152.1 million of one-to four family residential loans in its portfolio.
CONSTRUCTION LOANS. The Company originates primarily residential
construction loans to local contractors, generally with whom it has an
established relationship. To a significantly lesser extent, the Company
originates such loans to individuals who have a contract with a contractor for
the construction of their residence. The Company's construction loans are
secured by property located primarily in the Company's primary market area. At
September 30, 1997, the Company had an aggregate of $25.1 million of such loans
in its portfolio.
The Company's construction loans to individuals generally have fixed
interest rates during the construction period. Construction loans to
individuals are typically made in connection with the granting of the permanent
loan on the property. Such loans convert to a fully amortizing adjustable or
fixed-rate loan at the end of the construction term. The Company requires that
permanent financing with the Company be in place prior to closing any
construction loan to an individual.
The Company's construction loans to local contractors are made on
either a pre-sold or speculative (unsold) basis. However, the Company generally
limits the number of unsold homes under construction by its contractors, with
the amount dependent on the reputation of the contractor, the present exposure
of the contractor, the location of the property and prior sales of homes in the
development. Construction loans to contractors are typically made with a
maximum
43
<PAGE> 51
loan to value ratio of 80%. The Company estimates that approximately 95% of its
construction loans to contractors are on a speculative basis.
Prior to making a commitment to fund a construction loan, the Company
requires an appraisal of the property by an independent state-licensed and
qualified appraiser. The Bank's Senior Vice President of Lending also generally
reviews and inspects each project at the commencement of construction and
throughout the term of the construction loan. Loan proceeds are disbursed after
inspections of the project by the appraiser or the Senior Vice President of
Lending based on a percentage of completion. The Company requires monthly
interest payments during the construction term. The amount of funds available
for advance under the Company's construction loans usually do not include any
amount from which the borrower can pay the stated interest due thereon until
completion of the loan term.
Construction lending is generally considered to involve a higher level
of risk as compared to permanent one-to-four family residential lending, due to
the concentration of principal in a limited number of loans and borrowers and
the effects of general economic conditions on developers and contractors.
Moreover, a construction loan can involve additional risks because of the
inherent difficulty in estimating both a property's value at completion of the
project and the estimated cost (including interest) of the project. The nature
of these loans is such that they are generally more difficult to evaluate and
monitor. In addition, speculative construction loans to a contractor are not
pre-sold and thus pose a greater potential risk to the Company than
construction loans to individuals on their personal residences. Non-accruing
construction loans amounted to $449,000, or 9.7% of total non-performing assets
at September 30, 1997. However, at November 30, 1997, total non-accruing
construction loans increased by an additional $1.5 million, or 327.2%. See
"Asset Quality - Non-Performing Assets."
The Company has attempted to minimize the foregoing risks by, among
other things, limiting the extent of its construction lending as a proportion
of the total loan portfolio and by limiting its construction lending to
primarily residential properties. In addition, the Company has adopted
underwriting guidelines which impose stringent loan-to-value, debt service and
other requirements for loans which are believed to involve higher elements of
credit risk, by limiting the geographic area in which the Company will do
business to its existing market and by generally working with contractors with
whom it has established relationships. It is also the Company's general policy
to obtain personal guarantees from the principals of its corporate borrowers on
its construction loans.
MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LOANS. The Company
originates mortgage loans for the acquisition and refinancing of multi-family
residential properties and properties secured by commercial real estate. The
Company does not solicit such loans, which do not constitute an active part of
its business, and generally offers such loans to accommodate its present
customers. The majority of the Company's commercial real estate loans are
secured by office buildings and warehouses, most of which are secured by
property located in the Company's market area. The Company has engaged an
officer with commercial real estate
44
<PAGE> 52
experience and expects to be more active in its origination of commercial real
estate lending. At September 30, 1997, the Company had an aggregate of $2.6
million of such loans in its portfolio.
The Company requires appraisals of all properties securing
multi-family residential and commercial real estate loans. Appraisals are
performed by an independent appraiser designated by the Company, all of which
are reviewed by management. The Company considers the quality and location of
the real estate, the credit of the borrower, the cash flow of the project and
the quality of management involved with the property.
The Company originates multi-family residential and commercial real
estate loans with both fixed and adjustable interest rates which vary as to
maturity. Loan to value ratios on the Company's multi-family residential and
commercial real estate loans are generally limited to 80%. As part of the
criteria for underwriting these loans, the Company's general policy is to
obtain personal guarantees from the principals of its corporate borrowers.
Multi-family residential and commercial real estate lending entails
significant additional risks as compared with single-family residential
property lending. The payment experience on such loans is typically dependent
on the successful operation of the real estate project. The success of such
projects is sensitive to changes in supply and demand conditions in the market
for and commercial real estate as well as regional and economic conditions
generally.
COMMERCIAL LEASE RECEIVABLES. The Company in recent years has become
involved in originating office equipment and other commercial leases, primarily
through two leasing companies. The leasing companies underwrite the leases
under the Company's underwriting standards and procedures. The Company then
generally reviews the documents and makes a determination whether to originate
such lease. The Loan Committee may approve leases of up to $100,000 and leases
over $100,000 must be approved by the Bank's Board of Directors. Generally, the
leasing companies do not fund a lease unless the Company has approved the lease
and has made a commitment to fund. At September 30, 1997, the Company had an
aggregate of $2.5 million of such loans in its portfolio.
The Company files the necessary documentation to perfect its security
interest in both the equipment and the payment of the lease obligations.
Commercial lease receivables generally have shorter terms than mortgage loans
but generally involve more credit risk since payment may be dependent on
successful operation of the business. As of September 30, 1997 and 1996,
respectively, the Company had $339,000 and $440,000 of non-performing
commercial lease receivables, which constituted 7.4% and 18.5% of total
non-performing assets at such date. All of the 1996 and $265,000 of the 1997
non-performing commercial lease receivables were attributable to one of the two
leasing companies. As of September 30, 1995, the Company discontinued
consideration of any additional leases from this company. As of September 30,
1997, in addition to the above-referenced non-performing loans, the Company had
an aggregate of $269,000 of performing commercial leases attributable to such
firm, which constitutes 10.6% of all commercial leases, as compared to $437,000
or 22.1%, on September 30, 1996. See "Asset Quality - Non-Performing Assets."
45
<PAGE> 53
OTHER LOANS. The Company also offers home equity loans and lines of
credit, deposit account secured loans, auto loans and unsecured consumer loans.
The Company's home equity loans and lines of credit are secured by the
underlying equity in the borrower's home. Home equity loans generally have
fixed interest rates and terms of five to 15 years. The Company's home equity
loans generally require loan-to-value ratios of 80% or less after taking into
consideration the first mortgage loan; however, the Company in 1995 began
extending fixed rate, fixed term home equity loans up to 100% of loan-to-value.
The Company prices these loans at a higher rate than those loans originated
with a lower loan-to-value ratio. Home equity lines of credit generally have
variable interest rates based on the prime rate plus a 2% margin and terms of 5
to 15 years. Home equity lines of credit generally require loan-to-value ratios
of 80% or less after taking into consideration the first mortgage loan;
however, the Company since 1995 has also been extending home equity lines of
credit up to 100% of loan-to-value. At September 30, 1997, the Company had $8.8
million of aggregate home equity loans and lines of credit in its portfolio.
Consumer loans generally have shorter terms and higher interest rates
than mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. These risks are not as prevalent in the case of the
Company's consumer and other loans portfolio, however, because a high
percentage of the portfolio is comprised of home equity loans and lines of
credit, which are secured by real estate and underwritten in a manner such that
they result in a lending risk which is substantially similar to single-family
residential loans, as well as deposit account secured loans which are secured
by the deposits of the borrower.
LOAN FEE INCOME. In addition to interest earned on loans, the Company
receives income from fees in connection with loan originations, loan
modifications, late payments and for miscellaneous services related to its
loans. Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.
The Company charges loan origination fees which are calculated as a
percentage of the amount borrowed. Loan origination and commitment fees in
excess of loan origination costs are deferred and recognized over the
contractual remaining lives of the related loans on a level yield basis.
Discounts and premiums on loans purchased are credited and amortized in the
same manner. The Bank recognized $49,000, $88,000 and $123,000 of deferred loan
fees during fiscal 1997, 1996 and 1995, respectively, in connection with loan
refinancing, payoffs and ongoing amortization of outstanding loans.
ASSET QUALITY
When a borrower fails to make a required payment on a loan, the
Company attempts to cure the deficiency by contacting the borrower and seeking
the payment. Contacts are generally made 15 days after a payment is due. In
most cases, deficiencies are cured promptly. If a delinquency continues, the
loan and payment history are reviewed and efforts are made to collect
46
<PAGE> 54
the loan. While the Company generally prefers to work with borrowers to resolve
such problems, the Company will institute foreclosure or other proceedings, as
necessary, to minimize any potential loss. The Company generally initiates such
proceedings when a loan becomes 90 days delinquent.
Loans are placed on non-accrual status when, in the judgment of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest
income. The Company will continue to accrue interest on delinquent
conventional real estate loans if the loan has a loan-to-value ratio of less
than 90%, active collection efforts are underway and, in the opinion of
management, there is a reasonable expectation of collection of the delinquent
interest. Loans may be reinstated to accrual status when, in the opinion of
management, collection of the remaining balance can be reasonably expected.
Real estate acquired by the Company as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as other real estate owned until
sold. Pursuant to a statement of position ("SOP 92-3") issued by the American
Institute of Certified Public Accountants in April 1992, which provides
guidance on determining the balance sheet treatment of foreclosed assets in
annual financial statements for periods ending on or after December 15, 1992,
there is a rebuttable presumption that foreclosed assets are held for sale and
such assets are recommended to be carried at the lower of fair value minus
estimated costs to sell the property, or cost (generally the balance of the
loan on the property at the date of acquisition). After the date of
acquisition, all costs incurred in maintaining the property are expensed and
costs incurred for the improvement or development of such property are
capitalized up to the extent of their net realizable value. The Company's
accounting for its real estate acquired by foreclosure complies with the
guidance set forth in SOP 92-3.
47
<PAGE> 55
NON-PERFORMING ASSETS. The following table sets forth the amounts and
categories of the Company's non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- --------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accruing loans:
First mortgage loans:
One-to-four family residential $2,914 $1,447 $1,011 $1,220 $1,190
Construction 449 349 -- -- --
Other loans:
Commercial leases 339 440 394 77 --
----- ----- ----- ----- -----
Total non-accruing loans 3,702 2,236 1,405 1,297 1,190
----- ----- ----- ----- -----
Accruing loans greater than
90 days delinquent:
First mortgage loans:
One-to-four family residential -- -- 886 860 517
Other loans:
Consumer and other loans 3 8 29 15 89
----- ----- ----- ----- -----
Total accruing loans greater
than 90 days delinquent 3 8 915 875 606
----- ----- ----- ----- -----
Total non-performing loans 3,705 2,244 2,320 2,172 1,796
----- ----- -----
Real estate owned 907 133 -- -- 26
----- ----- ----- ----- -----
Total non-performing assets $4,612 $2,377 $2,320 $2,172 $1,822
===== ===== ===== ===== =====
Total non-performing loans as a
percentage of total loans 1.92% 1.55% 2.09% 3.05% 2.56%
===== ===== ===== ===== =====
Total non-performing assets as a
percentage of total assets 1.69% 1.22% 1.47% 1.66% 1.35%
===== ===== ===== ===== =====
</TABLE>
For the year ended September 30, 1997, approximately $127,000 in
interest income would have been recorded on loans accounted for on a
non-accrual basis if such loans had been current in accordance with their
original terms and had been outstanding throughout the year or since
origination if held for part of the year. For the year ended September 30,
1997, no amount was included in net income for these same loans. Results of
operations for the two months ended November 30, 1997 have been negatively
impacted in the amount of $62,000,which relates to the increase in
non-performing assets.
Total non-performing assets increased by $2.2 million or 94.0% between
September 30, 1996 and September 30, 1997. The increase in total non-performing
assets is primarily attributable to a $1.5 million or 101.4% increase in
non-accruing single family residential mortgage loans. Of this amount, 38 loans
aggregating $697,000 were FHA or VA insured which the Bank has had outstanding
for a number of years with an average balance of $18,000. A total
48
<PAGE> 56
of 32 loans aggregating $2.4 million had an average balance of $74,000 and
ranged from a low of $1,000 to a high of $379,000. The Company has
significantly increased its originations of single-family loans during the past
several years, which management attributes to be the primary reason that
non-performing residential loans have trended up. At September 30, 1997, a few
of the non-performing residential loans had larger loan balances than the
historical average loan balance for the portfolio. Management does not
attribute the increase to any specific weakness within the Company or in the
marketplace generally.
Non-accruing delinquent construction loans increased $100,000 or 28.7%
between September 30, 1996 and September 30, 1997. There are three construction
loans by three contractors at September 30, 1997 which comprise the total
$449,000 non-accruing construction loan balance. Construction on each of these
properties has been completed and the properties are listed for sale. The
Company is not engaged in other projects with these contractors.
Non-accruing commercial leases decreased $101,000 from September 30,
1996 to September 30, 1997. There are currently six non-accruing delinquent
commercial leases, five of which have balances ranging between $14,000 and
$52,000. In addition to being secured by the equipment in all instances and the
personal guarantee by a principal of one of the lessee companies, two of these
leases are additionally collateralized by real estate. There is one additional
delinquent non-accruing commercial lease totalling $201,000 for manufacturing
equipment which is secured by a first lien position on the leased equipment, a
second mortgage lien against the personal residence of the owner of the lessee,
and stock of the lessee held by the Bank as collateral. The Bank also holds the
first mortgage lien against the personal residence of the owner of the lessee.
The balance of the non-performing assets relates to real estate owned
(REO) properties, which increased $774,000 to $907,000. There are seven
properties included in REO which range from $19,000 to $232,000. Each of these
properties has been written down to its estimated net realizable value. Of the
seven properties included in REO at September 30, 1997, three loans aggregating
$158,000 were VA insured loans. The Company expects to recover through
insurance any difference between its carrying value and the proceeds to be
received upon future sales of these properties. Three properties represent
$632,000 of repossessed construction loans on substantially completed
properties which were being built by two contractors, one of whom died during
construction. The Company expects to complete these projects, which are in good
developments where the Bank has completed other projects, with developers with
whom the Bank has done previous business. The remaining property with an
estimated value of $117,000 at September 30, 1997, was acquired by the Bank in
December 1997 and is being marketed for sale.
Subsequent to September 30, 1997, the Company's non-performing assets
have continued to increase. From September 30, 1997 to November 30, 1997, the
Company's non-performing assets increased from $4.6 million to $6.6 million.
This $2.0 million or 43.5% increase in non-performing assets was primarily
attributable to a $1.5 million or 327.2% increase in non-accruing construction
loans. In addition, non-accruing single-family residential loans increased by
$476,000 or 15.8%. The increase in non-performing residential loans during the
two months
49
<PAGE> 57
ended November 30, 1997 was primarily attributable to the factors which
contributed to the increase in non-performing residential loans during fiscal
1997 which are discussed above. The increase in non-performing construction
loans during the two months ended November 30, 1997 was due to five speculative
construction loans (which had principal balances ranging from $200,000 to
$402,000) which became non-accruing during the period. Two of such loans, with
an aggregate outstanding balance of $640,000 as of November 30, 1997, were made
to the building contractor with whom the Company had the largest loan
concentration at September 30, 1997. See "Origination, Purchase and Sale of
Loans." Management does not attribute the increase in non-performing
construction loans to any specific weakness within the Company or in the
marketplace generally.
ALLOWANCE FOR LOAN LOSSES. It is management's policy to maintain an
allowance for estimated losses based on the perceived risk of loss in the loan
portfolio and the adequacy of the allowance. Management's periodic evaluation
of the adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of the
underlying collateral and current economic conditions. The allowance is
increased by provisions for loan losses which are charged against income.
During the last half of fiscal 1997, management increased its provisions for
loan losses from $75,000 per quarter to $105,000 per quarter. As shown in the
table below, the Company provided an aggregate of $360,000 to the allowance for
loan losses during fiscal 1997. Effective with the first quarter of fiscal
1998, the Company will be providing $120,000 per quarter. The increase in the
amount of the Company's provision for loan losses id due to both the increased
levels of loan originations as well as the increase in the Company's
non-performing assets.
Although management uses the best information available to make
determinations with respect to the provisions for loan losses, additional
provisions for loan losses may be required to be established in the future
should economic or other conditions change substantially. In addition, the
Department and the FDIC, as an integral part of their examination process,
periodically review the Company's allowance for possible loan losses. Such
agencies may require the Company to recognize additions to such allowance based
on their judgments about information available to them at the time of their
examination.
50
<PAGE> 58
The following table sets forth an analysis of the Company's allowance
for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Year Ended
September 30,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ---------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $1,128 $ 921 $ 711 $ 598 $ 360
----- ----- ----- ---- ----
Charge-offs:
First mortgage loans:
One-to-four family residential 28 9 100 19 10
Other loans:
Commercial leases 30 93 2 -- --
Consumer and other loans 18 12 1 10 11
---- --- ----- --- ---
76 114 103 29 21
---- --- ----- --- ---
Recoveries:
First mortgage loans
One-to-four family residential 3 20 7 5 2
Other loans:
Consumer and other loans 4 1 2 2 8
----- --- ---
Net charge-offs 69 93 94 22 11
----- ----- ----- --- ---
Provision for losses on loans 360 300 304 135 249
----- ----- ----- --- ---
Balance at end of period $1,419 $1,128 $ 921 $711 $598
===== ===== ===== === ===
Allowance for loan losses as a percent
of total loans outstanding 0.74% 0.78% 0.83% 1.00% .85%
===== ===== ===== ===== ====
Allowance for loan losses to total non-
performing loans 38.30% 50.27% 39.70% 32.73% 32.82%
===== ===== ===== ===== ====
Ratio of net charge-offs to average
loans outstanding 0.04% 0.08% 0.12% .03% .02%
===== ===== ===== ===== ====
</TABLE>
The following table sets forth information concerning the allocation
of the Company's allowance for loan losses by loan category at the dates
indicated.
<TABLE>
<CAPTION>
September 30,
------------------------------------------------------------------------------------
1997 1996 1995
------------------------ ------------------------- -------------------------
Percent of Percent of Percent of
Allowance Allowance Allowance
to Loan to Loan to Loan
Amount Category Amount Category Amount Category
-------- ----------- -------- ----------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans $1,129 79.6% $ 891 79.0% $662 71.8%
Other loans 290 20.4 237 21.0 259 28.2
----- ---- ----- ---- ---- ----
Total $1,419 100.0% $1,128 100.0% $921 100.0%
===== ===== ===== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------
1994 1993
------------------------ ------------------------
Percent of Percent of
Allowance Allowance
to Loan to Loan
Amount Category Amount Category
-------- ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
First mortgage loans $586 82.4% $538 90.0%
Other loans 125 17.6 60 10.0
--- ----- --- -----
Total $711 100.0% $598 100.0%
=== ===== === =====
</TABLE>
51
<PAGE> 59
INVESTMENT ACTIVITIES
MORTGAGE-BACKED SECURITIES. The Company invests in a portfolio of
mortgage-backed securities which are insured or guaranteed by the FHLMC, the
FNMA and the Government National Mortgage Association ("GNMA"). Mortgage-backed
securities increase the quality of the Bank's assets by virtue of the
guarantees that back them, are more liquid than individual mortgage loans and
may be used to collateralize borrowings or other obligations of the Company. At
September 30, 1997, the Company's mortgage-backed securities portfolio had a
book value and fair market value of $37.7 million and $38.2 million,
respectively. During the year ended September 30, 1997, the Company purchased
an aggregate of $18.8 million of mortgage-backed securities, which was the
primary reason for the $14.4 million or 60.4% increase in the portfolio between
September 30, 1996 and September 30, 1997. The increase in the mortgage-backed
securities portfolio was attributable primarily to the Company's wholesale
leveraging strategy.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
GNMA certificates $19,334 $11,824 $12,830
FNMA certificates 8,432 4,752 5,693
FHLMC certificates 9,559 7,069 8,698
------- ------- -------
37,325 23,645 27,221
Unamortized premiums 401 188 281
Unearned discounts (25) (33) (44)
------ ------ ------
37,701 23,800 27,458
FASB 115 adjustment 515 25 --
------- ------- -------
$38,216 $23,825 $27,458
======= ======= =======
Weighted average interest rate 6.70% 6.33% 6.78%
======= ======= =======
</TABLE>
52
<PAGE> 60
The following table sets forth the activity in the Company's
mortgage-backed securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
At or For the Year Ended
September 30,
---------------------------------------------
1997 1996
-------------------- -------------------
(In Thousands)
<S> <C> <C>
Mortgage-backed securities at beginning of period $23,825 $27,458
Purchases 18,760 2,531
Sales (149) --
Repayments (4,931) (6,058)
Accretion and amortization, net 221 (81)
Gain (loss) on mortgage-backed securities 490 (25)
------ ------
Mortgage-backed securities at end of period $38,216 $23,825
====== ======
</TABLE>
In recent years, the Company's investment decisions have been
directed, in part, at increasing the interest-rate sensitivity of its assets.
Accordingly, the Company has emphasized investing in adjustable-rate
mortgage-backed securities and short-term, fixed-rate investments. Previously,
the Company had invested significantly in fixed-rate mortgage-backed
securities. At September 30, 1997, $18.5 million or 49.6% of the Company's
portfolio of mortgage-backed securities were secured by ARMs.
In connection with the Company's wholesale leveraging strategy, the
Company purchased $15.0 million of mortgage-backed securities during fiscal
1997, approximately $12.0 million of which were fixed-rate. These purchases
were undertaken on a matched fund basis to yield a positive spread.
The following table sets forth the amount of the Company's
mortgage-backed securities which mature during each of the periods indicated
and the weighted average yields for each range of maturities at September 30,
1997.
<TABLE>
<CAPTION>
Contractually Maturing
-------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Under Average 1-5 Average 5-10 Average Over 10 Average
1 Year Yield Years Yield Years Yield Years Yield
--------- ----------- ------- ----------- ---------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GNMA certificates $ -- --% $ 8 8.00% $ 859 8.07% $18,976 7.22%
FNMA certificates -- 0.00 14 8.00 9,754 7.08 -- --
FHLMC certificates 503 5.44 206 7.25 7,896 4.93 -- --
---- ---- ------- --------
$503 5.44% $228 7.32% $18,509 8.71% $18,976 7.22%
==== ==== ==== ==== ======= ==== ======== ====
</TABLE>
53
<PAGE> 61
Due to prepayments of the underlying loans, the actual maturities of the
securities are expected to be substantially less than the scheduled maturities.
OTHER INVESTMENT SECURITIES. The investment policy of the Company, as
established by the Board of Directors, is designed primarily to provide and
maintain liquidity and to generate a favorable return on investments without
incurring undue interest rate risk, credit risk, and investment portfolio asset
concentrations. The Company's investment policy is currently implemented by the
Bank's Senior Vice President and Chief Financial Officer and is overseen by the
Asset/Liability Management Committee of the Board of Directors. The Bank's
Senior Vice President and Chief Financial Officer is authorized to invest in
various types of securities, and in recent years, the emphasis has been on U.S.
Treasury and agency obligations, municipal securities and corporate debt
securities. There are no aggregate limits on the investment portfolio, however,
there are certain limits on specific product types (e.g., no limit on U.S.
Government and agency obligations; municipal securities are limited to 10% of
the Bank's capital). The Company's investment portfolio increased by $14.7
million or 65.2% between September 30, 1996 and September 30, 1997, primarily
due to purchases of $15.0 million of U.S. Government and agency obligations in
connection with the Company's wholesale leveraging strategy.
In April 1997, the Board authorized a trading account whereby up to
$2.5 million could be invested in trading account securities, with not more
than $1.0 million in any single issue, to be accounted for as trading
securities in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115. Pursuant to SFAS No. 115, unrealized gains and losses are
marked-to-market on a monthly basis and recognized on the income statement.
Under Board authorization, there is no limit on the types of securities that
the Company may invest in provided that the securities are approved under the
Company's investment policy, although to date the Company has limited its
investments to equity securities of financial institutions. The Company
implemented the trading account strategy in the quarter ended June 30, 1997 and
recognized a pre-tax net gain of $310,000 for the year ended September 30,
1997.
The following table sets forth certain information relating to the
Company's investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------
1997 1996 1995
------------- -------------- -------------
(In Thousands)
<S> <C> <C> <C>
U.S. Government and agency obligations $34,894 $21,774 $17,057
Corporate obligations 502 508 1,701
Marketable equity securities 1,749 199 --
------ ------ ------
$37,145 $22,481 $18,758
====== ====== ======
</TABLE>
The following table sets forth the amount of the Company's investment
securities which mature during each of the periods indicated and the weighted
average yields for each range of maturities at September 30, 1997.
54
<PAGE> 62
<TABLE>
<CAPTION>
Contractually Maturing
-----------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Under 1 Average 1-5 Average 5-10 Average Over 10 Average
Year Yield Years Yield Years Yield years Yield
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and
agency obligations $1,504 6.40% $8,244 6.39% $8,386 7.02% $6,743 5.97%
Corporate obligations 502 8.19 -- -- -- -- -- --
------ ------- ------- --------
$2,006 7.09% $8,244 6.39% $8,386 6.60% $6,743 5.97%
====== ==== ======= ==== ======= ==== ======== ====
</TABLE>
The actual maturity of the Company's investment securities may differ from
contractual maturity since certain of the Company's investment securities are
subject to call provisions which allow the issuer to accelerate the maturity
date of the security.
SOURCES OF FUNDS
GENERAL. Deposits are the primary source of the Company's funds for
lending and other investment purposes. In addition to deposits, the Company
derives funds from loan principal repayments and prepayments and advances from
the FHLB of Pittsburgh. Loan repayments are a relatively stable source of
funds, while deposit inflows and outflows are significantly influenced by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds from
other sources. They may also be used on a longer term basis for general
business purposes.
DEPOSITS. The Company's deposit products include a broad selection of
deposit instruments, including checking accounts, money market accounts,
regular savings accounts and certificates of deposit. Deposit account terms
vary, with the principal differences being the minimum balance required, the
time periods the funds must remain on deposit and the interest rate.
The Company's deposits are obtained primarily from residents of
Allegheny County and Butler County, Pennsylvania. The Company attracts deposit
accounts by offering a wide variety of accounts, competitive interest rates,
and convenient office locations and service hours. The Company utilizes
traditional marketing methods to attract new customers and savings deposits,
including print media advertising and direct mailings. The Company does not
utilize the services of deposit brokers, and management believes that an
insignificant number of deposit accounts were held by non-residents of
Pennsylvania at September 30, 1997.
In December 1996, the Company purchased a branch office in the
Pittsburgh area with deposits totalling $10.4 million at a purchase premium of
3.13%. The branch had deposits of $10.9 million at September 30, 1997. The
deposit premium is being amortized using the straight line method over a ten
year period.
In October 1997, the Company opened a branch in a supermarket located
in the Bethel Park area of Pittsburgh, Pennsylvania. The branch operates seven
days a week and offers
55
<PAGE> 63
customers a full range of services and expanded banking hours. This is the
Company's second supermarket branch and the Company will continue to evaluate
additional supermarket branch opportunities.
The Company has been competitive in the types of accounts and in
interest rates it has offered on its deposit products. Deposits increased in
fiscal 1997 primarily as a result of the Company's branch acquisition and
competitive interest rates offered by the Company. As a result, the Company
experienced an increase in certificates of deposit during fiscal 1997. The
average rate paid on the Company's deposits increased to 4.87% for fiscal 1997
compared to 4.70% for fiscal 1996. Although market demand generally dictates
which deposit maturities and rates will be accepted by the public, the Company
intends to continue to promote longer term deposits to the extent possible and
consistent with its asset and liability management goals.
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Company at the dates
indicated.
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------------------------------------
1997 1996 1995
-------------------------- --------------------------- --------------------------
Amount Percentage Amount Percentage Amount Percentage
----------- ------------- ----------- -------------- ----------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts $ 26,065 18.8% $ 26,041 20.9% $ 30,007 26.0%
Money market 5,130 3.7 3,346 2.7 3,674 3.2
Interest checking 7,234 5.2 6,795 5.5 5,469 4.7
Noninterest checking 2,372 1.7 2,808 2.3 2,062 1.8
Certificates of deposit 97,930 70.6 85,352 68.6 74,285 64.3
------- ----- ------ ---- ------- -----
Total deposits $138,731 100.0% $124,342 100.0% $115,497 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
The following table presents the average balance of each deposit type
and the average rate paid on each deposit type for the periods indicated.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- -------------------------- ----------------------
Average Average Average
Average Rate Average Rate Average Rate
Balance Paid Balance Paid Balance Paid
---------------- ---------- ------------ ------------ ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts $ 26,558 2.81% $ 36,656 2.90% $ 34,090 2.90%
Money market 4,332 2.45 3,504 2.45 4,242 2.45
Interest checking 7,457 2.02 5,772 2.26 5,096 2.28
Noninterest checking 2,756 -- 2,507 -- 2,260 --
Certificates of deposit 93,638 5.74 77,180 5.30 65,781 5.46
------ ---- ------- ---- -------
Total deposits $134,741 4.75% $125,619 4.28% $111,469 4.31%
======= ==== ======= ==== ======= ====
</TABLE>
56
<PAGE> 64
The following table sets forth the savings activities of the Company
during the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ---------------
(In Thousands)
<S> <C> <C> <C>
Increase before interest credited $ 8,609 $3,899 $1,551
Interest credited 5,780 5,006 3,552
------ ----- -----
Net increase in deposits $14,389 $8,905 $5,103
====== ===== =====
</TABLE>
The following table shows the interest rate and maturity information
for the Company's certificates of deposit at September 30, 1997.
<TABLE>
<CAPTION>
Maturity Date
-------------------------------------------------------------------------------------------------
One Year Over Over Over
or Less 1-2 Years 2-3 Years 3 Years Total
--------------- --------------- --------------- --------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00 - 4.00% -- -- -- -- --
4.01 - 6.00% $41,999 $11,524 $3,136 $ 1,577 $58,236
6.01 - 8.00% 22,522 4,343 1,307 10,753 38,925
8.01 - 10.00% 160 200 110 299 769
------ ------ ------ ------ ------
Total $64,681 $16,067 $4,553 $12,629 $97,930
====== ====== ===== ====== ======
</TABLE>
The following table sets forth the maturities of Company's
certificates of deposit having principal amounts of $100,000 or more at
September 30, 1997.
<TABLE>
<CAPTION>
Certificates of deposit maturing in quarter ending:
- --------------------------------------------------------- -------------------------
(In Thousands)
<S> <C>
December 31, 1997 $ 5,185
March 31, 1998 1,015
June 30, 1998 1,574
September 30, 1998 1,081
After September 30, 1998 3,620
-----
Total certificates of deposit with
balances of $100,000 or more $12,475
======
</TABLE>
BORROWINGS. The Company may obtain advances from the FHLB of
Pittsburgh upon the security of the common stock it owns in that bank and
certain of its residential mortgage loans, provided certain standards related
to creditworthiness have been met. Such advances are made pursuant to several
credit programs, each of which has its own interest rate and range of
maturities. Such advances are generally available to meet seasonal and other
withdrawals of
57
<PAGE> 65
deposit accounts and to permit increased lending. At September 30, 1997, the
Company had $101.7 million of advances from the FHLB of Pittsburgh. The Company
used FHLB advances to fund assets purchased in connection with its wholesale
leveraging strategy.
The following table sets forth information with respect to the
Company's FHLB advances during the periods indicated.
<TABLE>
<CAPTION>
At or For the Year Ended September 30,
--------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum balance $101,700 $36,500 $29,000
Average balance 69,268 30,092 14,130
Year end balance 101,700 36,500 29,000
Weighted average interest rate:
At end of year 6.12% 6.40% 6.66%
During the year 6.03% 6.69% 6.94%
</TABLE>
COMPETITION
The Company faces significant competition for real estate loans,
principally from mortgage banking companies, other savings institutions,
commercial banks and credit unions. Factors which affect competition generally
include the general and local economic conditions, current interest rate levels
and volatility in the mortgage markets. The Company also faces significant
competition in attracting deposits. Its most direct competition for deposits
has historically come from commercial banks and other savings institutions
located in its market area. The Company faces additional significant
competition for investors' funds from other financial intermediaries. The
Company competes for deposits principally by offering depositors a variety of
deposit programs, convenient branch locations, hours and other services. The
Company does not rely upon any individual group or entity for a material
portion of its deposits.
Federal legislation in recent years has eliminated many of the
distinctions between commercial banks and savings institutions and holding
companies and allowed bank holding companies to acquire savings institutions.
Such legislation has generally resulted in an increase in the competition
encountered by savings institutions and has resulted in a decrease in both the
number of savings institutions and the aggregate size of the savings industry.
SUBSIDIARIES
As of September 30, 1997, the Bank was the Company's only subsidiary.
58
<PAGE> 66
REGULATION
The following description of statutory and regulatory provisions and
proposals, which is not intended to be a complete description of these
provisions or their effects on the Company or the Bank, is qualified in its
entirety by reference to the particular statutory or regulatory provisions or
proposals.
THE COMPANY
GENERAL. The Company is a registered bank holding company pursuant to
the Bank Holding Company Act of 1956, as amended (the "BHCA") and is subject to
regulation and supervision by the Federal Reserve Board and the Department. The
Company is required to file annually a report of its operations with, and is
subject to examination by, the Federal Reserve Board and the Department.
BHCA ACTIVITIES AND OTHER LIMITATIONS. The BHCA prohibits a bank
holding company from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any bank, or increasing such ownership or
control of any bank, without prior approval of the Federal Reserve Board. The
BHCA also generally prohibits a bank holding company from acquiring any bank
located outside of the state in which the existing bank subsidiaries of the
bank holding company are located unless specifically authorized by applicable
state law. No approval under the BHCA is required, however, for a bank holding
company already owning or controlling 50% of the voting shares of a bank to
acquire additional shares of such bank.
The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring more than 5% of the voting shares of any company
that is not a bank and from engaging in any business other than banking or
managing or controlling banks. Under the BHCA, the Federal Reserve Board is
authorized to approve the ownership of shares by a bank holding company in any
company, the activities of which the Federal Reserve Board has determined to be
so closely related to banking or to managing or controlling banks as to be a
proper incident thereto. In making such determinations, the Federal Reserve
Board is required to weigh the expected benefit to the public, such as greater
convenience, increased competition or gains in efficiency, against the possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
The Federal Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include operating a mortgage company, finance company, credit card
company, factoring company, trust company or savings association; performing
certain data processing operations; providing limited securities brokerage
services; acting as an investment or financial advisor; acting as an insurance
agent for certain types of credit-related insurance; leasing personal property
on a full-payout, non-operating basis; providing tax planning and preparation
services; operating a collection agency; and providing certain courier
services. The Federal Reserve Board also has determined that certain other
activities, including real estate brokerage and syndication, land development,
property
59
<PAGE> 67
management and underwriting of life insurance not related to credit
transactions, are not closely related to banking and a proper incident thereto.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company
or entity which controls, is controlled by or is under common control with the
savings institution. In a holding company context, the parent holding company
of a savings institution (such as the Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
institution. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar transactions. In
addition to the restrictions imposed by Sections 23A and 23B, no savings
institution may (i) loan or otherwise extend credit to an affiliate, except for
any affiliate which engages only in activities which are permissible for bank
holding companies, or (ii) purchase or invest in any stocks, bonds, debentures,
notes or similar obligations of any affiliate, except for affiliates which are
subsidiaries of the savings institution.
In addition, Sections 22(h) and (g) of the Federal Reserve Act places
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the institution and (ii) does not
give preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution. Section 22(h) also requires prior board approval for certain
loans. In addition, the aggregate amount of extensions of credit by a savings
institution to all insiders cannot exceed the institution's unimpaired capital
and surplus. Furthermore, Section 22(g) places additional restrictions on loans
to executive officers.
CAPITAL REQUIREMENTS. The Federal Reserve Board has adopted capital
adequacy guidelines pursuant to which it assesses the adequacy of capital in
examining and supervising a bank holding company and in analyzing applications
to it under the BHCA. The Federal Reserve Board capital adequacy guidelines
generally require bank holding companies to maintain total capital equal to 8%
of total risk-adjusted assets, with at least one-half of that amount consisting
of Tier I or core capital and up to one-half of that amount consisting of Tier
II or supplementary
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capital. Tier I capital for bank holding companies generally consists of the
sum of common stockholders' equity and perpetual preferred stock (subject in
the case of the latter to limitations on the kind and amount of such stocks
which may be included as Tier I capital), less goodwill and, with certain
exceptions, intangibles. Tier II capital generally consists of hybrid capital
instruments; perpetual preferred stock which is not eligible to be included as
Tier I capital; term subordinated debt and intermediate-term preferred stock;
and, subject to limitations, general allowances for loan losses. Assets are
adjusted under the risk-based guidelines to take into account different risk
characteristics, with the categories ranging from 0% (requiring no additional
capital) for assets such as cash to 100% for the bulk of assets which are
typically held by a bank holding company, including multi-family residential
and commercial real estate loans, commercial business loans and consumer loans.
Single-family residential first mortgage loans which are not past-due (90 days
or more) or non-performing and which have been made in accordance with prudent
underwriting standards are assigned a 50% level in the risk-weighing system, as
are certain privately-issued mortgage-backed securities representing indirect
ownership of such loans. Off-balance sheet items also are adjusted to take into
account certain risk characteristics.
In addition to the risk-based capital requirements, the Federal
Reserve Board requires bank holding companies to maintain a minimum leverage
capital ratio of Tier I capital to total assets of 3.0%. Total assets for this
purpose does not include goodwill and any other intangible assets and
investments that the Federal Reserve Board determines should be deducted from
Tier I capital. The Federal Reserve Board has announced that the 3.0% Tier I
leverage capital ratio requirement is the minimum for the top-rated bank
holding companies without any supervisory, financial or operational weaknesses
or deficiencies or those which are not experiencing or anticipating significant
growth. Other bank holding companies will be expected to maintain Tier I
leverage capital ratios of at least 4.0% to 5.0% or more, depending on their
overall condition.
At September 30, 1997, the Company was in compliance with the
above-described Federal Reserve Board regulatory capital requirements.
FINANCIAL SUPPORT OF AFFILIATED INSTITUTIONS. Under Federal Reserve
Board policy, the Company will be expected to act as a source of financial
strength to the Bank and to commit resources to support the Bank in
circumstances when it might not do so absent such policy. The legality and
precise scope of this policy is unclear, however, in light of recent judicial
precedent.
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THE BANK
GENERAL. The Bank is incorporated under the Banking Code, is subject
to extensive regulation and examination by the Department and by the FDIC, and,
is subject to certain requirements established by the Federal Reserve Board.
The federal and state laws and regulations which are applicable to banks
regulate, among other things, the scope of their business, their investments,
their reserves against deposits, the timing of the availability of deposited
funds and the nature and amount of and collateral for certain loans. There are
periodic examinations by the Department and the FDIC to test the Bank's
compliance with various regulatory requirements. This regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
regulation, whether by the Department, the FDIC or the Congress could have a
material adverse impact on the Company, the Bank and their operations.
FDIC ASSESSMENTS. The deposits of the Bank are insured by the SAIF of
the FDIC, up to applicable limits, and are subject to deposit premium
assessments by the SAIF. Under the FDIC's risk-based insurance system,
SAIF-assessed deposits have been subject to premiums of between 23 and 31 basis
points, depending upon the institution's capital position and other supervisory
factors.
Under legislation enacted in 1996, SAIF-assessable deposits held as of
March 31, 1995 were subject to a tax-deductible one-time special assessment at
a rate sufficient to achieve the 1.25% designated reserve ratio of the SAIF as
of October 1, 1996. This special SAIF assessment generally was payable no later
than November 29, 1996. The special assessment amounted to 65.7 cents per $100
of SAIF-assessable deposits and was collected on November 27, 1996. The Bank's
one-time special assessment amounted to $739,000 pre-tax. The payment of such
special assessment had the effect of immediately reducing the Bank's capital by
$473,000 after tax.
Under the new legislation, institutions with Bank Insurance Fund
("BIF") deposits are required to share the cost of funding debt obligations
issued by the Financing Corporation ("FICO"), a corporation established by the
federal government in 1987 to finance the recapitalization of FSLIC. However,
until the earlier of December 31, 1999 or the date of elimination of the thrift
charter, the FICO assessment rate for BIF deposits is only 1/5 of the rate
applicable to SAIF deposits. Consequently, the annual FICO assessments to be
added to deposit insurance premiums are expected to equal approximately 6.4
basis points for SAIF deposits and 1.3 basis points for BIF deposits from
January 1, 1997 through December 31, 1999, and approximately 2.4 basis points
for both BIF and SAIF deposits thereafter. From January 1, 1997, FICO payments
will be paid directly by SAIF and BIF institutions in addition to deposit
insurance assessments.
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On October 16, 1996, the FDIC lowered the rates on SAIF-assessable
deposits. The rule established SAIF rates ranging from 0 to 27 basis points as
of October 1, 1996.
The Bank's deposit insurance premiums, which had amounted to 23 basis
points were thus reduced to 6.4 basis points effective January 1, 1997. Based
upon the $126.5 million of assessable deposits at September 30, 1996, the Bank
would expect to pay $52,000 less in insurance premiums per quarter during 1997,
or $.03 per share.
Following the special assessment and the new FICO funding mechanism
effective January 1, 1997, future SAIF assessment rates are expected to depend
primarily on the rate of any new losses from the SAIF insurance fund. Under the
recent legislation, however, the FDIC is not permitted to establish SAIF
assessment rates that are lower than comparable BIF assessment rates.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances which would
result in termination of the Bank's deposit insurance.
CAPITAL REQUIREMENTS. The FDIC has promulgated regulations and adopted
a statement of policy regarding the capital adequacy of state-chartered banks
which, like the Bank, will not be members of the Federal Reserve System. These
requirements are substantially similar to those adopted by the Federal Reserve
Board regarding bank holding companies, as described above.
The FDIC's capital regulations establish a minimum 3.0% Tier I
leverage capital requirement for the most highly-rated state-chartered,
non-member banks, with an additional cushion of at least 100 to 200 basis
points for all other state-chartered, non-member banks, which effectively will
increase the minimum Tier I leverage ratio for such other banks to 4.0% to 5.0%
or more. Under the FDIC's regulation, highest-rated banks are those that the
FDIC determines are not anticipating or experiencing significant growth and
have well diversified risk, including no undue interest rate risk exposure,
excellent asset quality, high liquidity, good earnings and, in general, which
are considered a strong banking organization and are rated composite 1 under
the Uniform Financial Institutions Rating System. Leverage or core capital is
defined as the sum of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, and
minority interests in consolidated subsidiaries, minus all intangible assets
other than certain qualifying supervisory goodwill and certain purchased
mortgage servicing rights.
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The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier I capital and
supplementary (Tier 2) capital) to risk weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the
FDIC believes are inherent in the type of asset or item. The components of Tier
I capital are equivalent to those discussed above under the 3% leverage capital
standard. The components of supplementary capital include certain perpetual
preferred stock, certain mandatory convertible securities, certain subordinated
debt and intermediate preferred stock and general allowances for loan and lease
losses. Allowance for loan and lease losses includable in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount
of capital counted toward supplementary capital cannot exceed 100% of core
capital. At September 30, 1997, the Bank met each of its capital requirements.
In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account of
the exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate risk
management process, the overall financial condition of the bank and the level
of other risks at the bank for which capital is needed. Institutions with
significant interest rate risk may be required to hold additional capital. The
agencies also have issued a joint policy statement providing guidance on
interest rate risk management, including a discussion of the critical factors
affecting the agencies' evaluation of interest rate risk in connection with
capital adequacy. The agencies have determined not to proceed with a previously
issued proposal to develop a supervisory framework for measuring interest rate
risk and an explicit capital component for interest rate risk.
The Bank is also subject to more stringent Department capital
guidelines. Although not adopted in regulation form, the Department utilizes
capital standards requiring a minimum of 6% leverage capital and 10% risk-based
capital. The components of leverage and risk-based capital are substantially
the same as those defined by the FDIC. At September 30, 1997, the Bank exceeded
the Department's capital guidelines.
ACTIVITIES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally
may not directly or indirectly acquire or retain any equity investment of a
type, or in an amount, that is not permissible for a national bank. An insured
state bank is not prohibited from, among other things, (i) acquiring or
retaining a majority interest in a subsidiary, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation or new construction of a
qualified housing project, provided that such limited partnership investments
may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of the
voting stock of a company that solely provides or reinsures directors',
trustees' and officers' liability insurance coverage or bankers' blanket bond
group
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insurance coverage for insured depository institutions, and (iv) acquiring or
retaining the voting shares of a depository institution if certain requirements
are met. In addition, an insured state-chartered bank may not, directly, or
indirectly through a subsidiary, engage as "principal" in any activity that is
not permissible for a national bank unless the FDIC has determined that such
activities would pose no risk to the insurance fund of which it is a member and
the bank is in compliance with applicable regulatory capital requirements. Any
insured state-chartered bank directly or indirectly engaged in any activity
that is not permitted for a national bank must cease the impermissible
activity.
PENNSYLVANIA BANK LAW. The Banking Code contains detailed provisions
governing the organization, location of offices, rights and responsibilities of
directors, officers, employees and members, as well as corporate powers,
savings and investment operations and other aspects of the Bank and its
affairs. The Banking Code delegates extensive rulemaking power and
administrative discretion to the Department so that the supervision and
regulation of state-chartered savings banks may be flexible and readily
responsive to changes in economic conditions and in savings and lending
practices.
One of the purposes of the Banking Code is to provide savings banks
with the opportunity to be competitive with each other and with other financial
institutions existing under other Pennsylvania laws and other state, federal
and foreign laws. A Pennsylvania savings bank may locate or change the location
of its principal place of business and establish an office anywhere in the
Commonwealth, with the prior approval of the Department.
The Department generally examines each savings bank not less
frequently than once every two years. Although the Department may accept the
examinations and reports of the FDIC in lieu of the Department's examination,
the present practice is for the Department to conduct individual examinations.
The Department may order any savings bank to discontinue any violation of law
or unsafe or unsound business practice and may direct any trustee, officer,
attorney or employee of a savings bank engaged in an objectionable activity,
after the Department has ordered the activity to be terminated, to show cause
at a hearing before the Department why such person should not be removed.
REGULATORY ENFORCEMENT AUTHORITY. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties, as defined. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with regulatory authorities.
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FEDERAL AND STATE TAXATION
GENERAL. The Company and the Bank are subject to the corporate tax
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as certain additional provisions of the Code which apply to thrift and
other types of financial institutions. The following discussion of tax matters
is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Company and the Bank.
METHOD OF ACCOUNTING. The Bank maintains its books and records for
federal income tax purposes using the accrual method of accounting. The accrual
method of accounting generally requires that items of income be recognized when
all events have occurred that establish the right to receive the income and the
amount of income can be determined with reasonable accuracy, and that items of
expense be deducted at the later of (i) the time when all events have occurred
that establish the liability to pay the expense and the amount of such
liability can be determined with reasonable accuracy or (ii) the time when
economic performance with respect to the item of expense has occurred.
BAD DEBT RESERVES. Prior to the enactment, on August 20, 1996, of the
Small Business Job Protection Act of 1996 (the "Small Business Act"), for
federal income tax purposes, thrift institutions such as the Bank, which met
certain definitional tests primarily relating to their assets and the nature of
their business, were permitted to establish tax reserves for bad debts and to
make annual additions thereto, which additions could, within specified
limitations, be deducted in arriving at their taxable income. The Bank's
deduction with respect to "qualifying loans," which are generally loans secured
by certain interests in real property, could be computed using an amount based
on a six-year moving average of the Bank's actual loss experience (the
"Experience Method"), or a percentage equal to 8.0% of the Bank's taxable
income (the "PTI Method"), computed without regard to this deduction and with
additional modifications and reduced by the amount of any permitted addition to
the non-qualifying reserve.
Under the Small Business Act, the PTI Method was repealed and the Bank
will be required to use the Experience Method of computing additions to its bad
debt reserve for taxable years beginning with the Bank's taxable year beginning
October 1, 1996. In addition, the Bank will be required to recapture (i.e.,
take into taxable income) over a six-year period, beginning with the Bank's
taxable year beginning October 1, 1996, the excess of the balance of its bad
debt reserves (other than the supplemental reserve) as of September 30, 1996
over (a) the greater of the balance of such reserves as of September 30, 1987
or (b) an amount that would have been the balance of such reserves as of
September 30, 1996 had the Bank always computed the additions to its reserves
using the Experience Method. However, under the Small Business Act such
recapture requirements will be suspended for each of the two successive taxable
years beginning October 1, 1996 in which the Bank originates a minimum amount
of certain residential loans during such years that is not less than the
average of the principal amounts of such loans made by the Bank during its six
taxable years preceding October 1, 1996.
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At September 30, 1997, the federal income tax reserves of the Bank
included $3.4 million for which no federal income tax has been provided, of
this amount, $2.9 million and $500,000 are attributable to pre-1987 and
post-1987 bad debt reserves, respectively. The Bank will recapture into income
approximately $24,000 per year over the six year period which was set to begin
October 1, 1996, however, the Bank is eligible to suspend until 1998 the
recapture as the residential loan exemption is met as discussed above.
DISTRIBUTIONS. If the Bank were to distribute cash or property to its
sole stockholder, and the distribution was treated as being from its pre-1987
bad debt reserves, the distribution would cause the Bank to have additional
taxable income. A distribution is deemed to have been made from pre-1987 bad
debt reserves to the extent that (a) the reserves exceed the amount that would
have been accumulated on the basis of actual loss experience, and (b) the
distribution is a "non-qualified distribution." A distribution with respect to
stock is a non-qualified distribution to the extent that, for federal income
tax purposes, (i) it is in redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case of a current distribution,
together with all other such distributions during the taxable year, it exceeds
the institution's current and post-1951 accumulated earnings and profits. The
amount of additional taxable income created by a non-qualified distribution is
an amount that when reduced by the tax attributable to it is equal to the
amount of the distribution.
MINIMUM TAX. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income" or
"AMTI") and is payable to the extent such AMTI is in excess of an exemption
amount. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage of
taxable income method over the amount allowable under the experience method.
Other items of tax preference that constitute AMTI include (a) tax-exempt
interest on newly issued (generally, issued on or after August 8, 1986) private
activity bonds other than certain qualified bonds and (b) 75% of the excess (if
any) of (i) adjusted current earnings as defined in the Code, over (ii) AMTI
(determined without regard to this preference and prior to reduction by net
operating losses).
NET OPERATING LOSS CARRYOVERS. A financial institution may carry back
net operating losses ("NOLs") to the preceding two taxable years and forward to
the succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 5, 1997. At September 30, 1997, the Bank
had no NOL carryforwards for federal income tax purposes.
AUDIT BY IRS. The Bank's federal income tax returns for taxable years
through September 30, 1993 have been closed for the purpose of examination by
the Internal Revenue Service.
STATE TAXATION. The Company and its non-thrift Pennsylvania
subsidiaries are subject to the Pennsylvania Corporate Net Income Tax and
Capital Stock and Franchise Tax. The Corporation Net Income Tax rate for 1997
is 9.99% and is imposed on the Company's
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unconsolidated taxable income for federal purposes with certain adjustments. In
general, the Capital Stock Tax is a property tax imposed at the rate of
approximately 1.3% of a corporation's capital stock value, which is determined
in accordance with a fixed formula based upon average net income and net worth.
The Bank is taxed under the Pennsylvania Mutual Thrift Institutions
Tax Act (the "MTIT"), as amended to include thrift institutions having capital
gain stock, pursuant to the MTIT, the Bank's tax rate is 11.5%. The MTIT
exempts the Bank from all other taxes imposed by the Commonwealth of
Pennsylvania for state income tax purposes and from all local taxation imposed
by political subdivisions, except taxes on real estate and real estate
transfers. The MTIT is a tax upon net earnings, determined in accordance with
GAAP with certain adjustments. The MTIT, in computing GAAP income, allows for
the deduction of interest earned on state and federal securities, while
disallowing a percentage of a thrift's interest expense deduction in the
proportion of interest income on those securities to the overall interest
income of the Bank. Net operating losses, if any, thereafter can be carried
forward three years for MTIT purposes.
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MANAGEMENT
DIRECTORS
The following tables present information concerning the directors of
the Company and director nominees.
<TABLE>
<CAPTION>
Director Term
Name Age(1) Since(2) Expires
- ---------------------------- ------------ --------------- ---------------
<S> <C> <C> <C>
Kenneth F. Maxcy, Jr. 78 1957 2001(3)
Gregory G. Maxcy 43 1986 2001(3)
Richard F. Lerach 57 1990 2001(3)
James M. Droney, Jr. 45 1997 2001(3)
Stephen Spolar 76 1986 1999
Charles A. Topnick 70 1990 1999
Joseph G. Lang 72 1986 1999
Jess B. Mellor 79 1954 2000
J. Ardie Dillen 39 1992 2000
Kenneth R. Rieger 52 1997 2000
</TABLE>
- ------------------
(1) As of December 10, 1997.
(2) Includes service as a director of the Bank.
(3) Assumes election at the Annual Meeting of Stockholders to be held on
January 22, 1998.
Information concerning the principal position with the Company and the
Bank and principal occupation of each director during the past five years is
set forth below.
J. Ardie Dillen. Mr. Dillen was named Chairman of the Board of the
Company and the Bank in November 1996 and August 1997, respectively. Mr. Dillen
is President and Chief Executive Officer of the Bank and has held the same
position with the Company since its inception in September 1995. Mr. Dillen has
been President and Chief Executive Officer of the Bank since 1992 and was
Senior Vice President of Finance and Administration of the Bank from 1986 to
1992. Prior to joining the Bank, Mr. Dillen was an auditor with Main Hurdman,
Pittsburgh, Pennsylvania, a certified public accounting firm, from 1980 to
1986. Mr. Dillen is a certified public accountant.
Jess B. Mellor. Mr. Mellor has been Secretary of the Bank since 1955.
Mr. Mellor served as Secretary of the Company from its inception in September
1995 to June 1997. Mr. Mellor is retired and was formerly Vice President of the
Bank from 1954 to 1986. Mr. Mellor has been with the Bank since its inception
in 1942 and has been a director of the Bank since 1954.
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Joseph G. Lang. Mr. Lang has been retired since 1991. Prior thereto,
from 1961 to 1991, Mr. Lang was an associate architect with W.D. Slowik &
Associates, Pittsburgh, Pennsylvania, an architectural firm, and also was
employed by its predecessor firms.
Richard F. Lerach. Mr. Lerach has been Senior General Attorney -
Litigation with U.S. Steel Group, a unit of USX Corporation, Pittsburgh,
Pennsylvania, since 1985 and has been an attorney with such corporation since
1968.
Gregory G. Maxcy. Mr. Maxcy has been Senior Vice President and
Secretary of the Company since May 1997 and July 1997, respectively. Mr. Maxcy
has been Senior Vice President - Director of Strategic Planning of the Bank
since May 1997. Mr. Maxcy was President of Maxcy, Gmys & Company, PC,
Pittsburgh, Pennsylvania, a certified public accounting firm, from 1992 to May
1997. Mr. Maxcy also was employed by Resource Capital, Inc., Pittsburgh,
Pennsylvania, an investment management services and financial planning company,
from 1988 to 1994. Mr. Maxcy is a certified public accountant and a certified
financial planner. Mr. Maxcy is the son of Kenneth F. Maxcy, Jr. See "- Consent
to Findings of Securities Violations."
Kenneth F. Maxcy, Jr. Mr. Maxcy has been retired since 1985. Mr. Maxcy
was Assistant to the Chairman of Wheeling Pittsburgh Steel Corporation,
Pittsburgh, Pennsylvania from 1975 to 1985. Mr. Maxcy is the father of Gregory
G. Maxcy.
Stephen Spolar. Mr. Spolar has been retired since 1992. Mr. Spolar was
President and Chief Executive Officer of the Bank from 1986 to 1992. Mr. Spolar
has been a director of the Bank since 1986 and served as an officer of the Bank
from 1961 to 1986.
Charles A. Topnick. Mr. Topnick has been retired since 1992. Mr.
Topnick served as Senior Vice President of the Bank from 1991 to 1992. From
1983 to 1991, Mr. Topnick was President of Columbia Savings and Loan
Association, Pittsburgh, Pennsylvania.
James M. Droney, Jr. Mr. Droney, Jr. has been the President and Chief
Executive Officer of Mt. Lebanon Office Equipment Co. Inc., Pittsburgh,
Pennsylvania, an office equipment retailer, since 1976.
Kenneth R. Rieger. Mr. Rieger is co-founder of and an investment
advisor with G&R Investment Consultants, Inc., Pittsburgh, Pennsylvania, a
consulting firm, since January 1980.
DIRECTOR EMERITUS
Effective August 1997, Frank J. Malone became a Director Emeritus of
the Bank. Mr. Malone served as Chairman of the Board of Directors of the Bank
from 1986 to August 1997 and held the same position with the Company from its
inception in September 1995 until November 1996. Mr. Malone is retired and was
formerly the President and Chief Executive Officer of the Bank from 1955 to
1986. Mr. Malone was a director of the Bank from its inception in 1942 to
August 1997.
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EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information concerning the executive officers of
the Company and the Bank who do not serve on the Board of Directors of the
Company. All executive officers are elected by the Board of Directors and
serve until their successors are elected and qualified. No executive officer is
related to any director or other executive officer of the Company by blood,
marriage or adoption, and there are no arrangements or understandings between a
director of the Company and any other person pursuant to which such person was
elected an executive officer.
Michael J. Kirk. Mr. Kirk has been Senior Vice President and Chief
Financial Officer of the Company and the Bank since January 1996. Mr. Kirk
became Vice President and Chief Financial Officer of the Bank in 1992 and was
Vice President and Chief Financial Officer of the Company from its inception in
September 1995 through January 1996. Mr. Kirk served as an Analyst and
Controller of Community Savings Association, Monroeville, Pennsylvania from
1988 to 1992 and as an auditor with Ernst & Whinney, the predecessor to Ernst &
Young, LLP, from 1985 to 1988. Mr. Kirk is a certified public accountant.
Joseph E. Archer. Mr. Archer has been Senior Vice President of Lending
of the Bank since 1988. Mr. Archer served as Vice President of the Bank from
1986 to 1988 and Assistant Vice President from 1970 to 1986. Mr. Archer joined
the Bank in 1962.
Albert L. Winters. Mr. Winters has been Senior Vice President of
Operations of the Bank since 1994. Mr. Winters served as Vice President of the
Bank from 1991 to 1993 and Assistant Vice President of the Savings Bank from
1989 to 1990. Mr. Winters joined the Bank in 1970.
Patricia J. Nesbit. Ms. Nesbit has been Vice President of Retail
Banking of the Bank since January 1996. Ms. Nesbit served as a Branch Manager
of the Bank from 1994 to 1995. Prior to 1994, Ms. Nesbit was employed by
Integra Bank, Pittsburgh, Pennsylvania and certain predecessor institutions
from 1969 to 1994 as a Branch Manager and in other related capacities.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table on the following page sets forth, as of the December 10,
1997, certain information as to the Common Stock beneficially owned by (i) each
person or entity, including any "group" as that term is used in Section
13(d)(3) of the Exchange Act, who or which was known to the Company to be the
beneficial owner of more than 5% of the issued and outstanding Common Stock,
(ii) the directors and nominees of the Company, (iii) those executive officers
of the Company whose salary and bonus exceeded $100,000 in fiscal 1997, and
(iv) all directors and executive officers of the Company and the Bank as a
group.
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<PAGE> 79
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group December 10, 1997(1) Common Stock
- ------------------------------------------------ ------------------------------ -------------------------
<S> <C> <C>
Pittsburgh Home Financial Corp. 174,570(2) 8.9%
Employee Stock Ownership Plan Trust
438 Wood Street
Pittsburgh, Pennsylvania 15222
John Hancock Mutual Life Insurance 190,000(3) 9.6
Company
John Hancock Subsidiaries, Inc.
John Hancock Asset Management
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
The Berkeley Financial Group
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Directors and Nominees:
J. Ardie Dillen 42,196(4)(5) 2.1
James M. Droney, Jr. 502 *
Jess B. Mellor 7,421(6) *
Joseph G. Lang 4,282(6) *
Richard F. Lerach 35,247(6) 1.8
Gregory G. Maxcy 22,508 1.1
Kenneth F. Maxcy, Jr. 9,247(5)(6) *
Kenneth R. Rieger 3,750 *
Stephen Spolar 10,813(5)(6) *
Charles A. Topnick 8,747(6) *
All directors and executive officers 195,131(7) 9.8%
of the Company and the Bank
as a group (14 persons)
</TABLE>
- -----------------
* Represents less than 1% of the outstanding Common Stock.
(Footnotes continued on following page)
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<PAGE> 80
- ------------
(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has
or shares (i) voting power, which includes the power to vote or to
direct the voting of the shares, or (ii) investment power, which
includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has
sole voting and dispositive power with respect to the shares. Shares
which are subject to stock options and which may be exercised within
60 days of December 10, 1997 are deemed to be outstanding for the
purpose of computing the percentage of Common Stock beneficially owned
by such person.
(2) The Pittsburgh Home Financial Corp. Employee Stock Ownership Plan
Trust ("Trust") was established pursuant to the Pittsburgh Home
Financial Corp. Employee Stock Ownership Plan ("ESOP") by an agreement
between the Company and Messrs. J. Ardie Dillen, Kenneth F. Maxcy,
Jr., and Stephen Spolar who act as trustees of the plan ("Trustees").
As of the December 10, 1997, 23,421 shares held in the Trust had been
allocated to the accounts of participating employees. Under the terms
of the ESOP, the Trustees will generally vote the allocated shares
held in the ESOP in accordance with the instructions of the
participating employees. Unallocated shares held in the ESOP will
generally be voted in the same ratio on any matter as those allocated
shares for which instructions are given, subject in each case to the
fiduciary duties of the ESOP trustees and applicable law. Any
allocated shares which either abstain on a proposal or are not voted
will be disregarded in determining the percentage of stock voted for
and against each proposal by the participants and beneficiaries. The
amount of Common Stock beneficially owned by directors who serve as
Trustees of the ESOP and by all directors and executive officers as a
group does not include the unallocated shares held by the Trust.
(3) Based on a Schedule 13G joint filing on January 31, 1997 made on
behalf of John Hancock Mutual Life Insurance Company ("JHMLICO"),
JHMLICO's direct, wholly-owned subsidiary, John Hancock Subsidiaries,
Inc. ("JHSI"), JHSI's direct, wholly-owned subsidiary, John Hancock
Asset Management ("JHAM"), JHAM's wholly-owned subsidiary, The
Berkeley Financial Group ("TBFG") and TBFG's wholly-owned subsidiary,
John Hancock Advisers, Inc. ("JHA"). Pursuant to an advisory agreement
with the John Hancock Bank and Thrift Opportunity Fund dated July 21,
1994, JHA has sole voting and dispositive power as to 100,000 shares
of Common Stock. Pursuant to an advisory agreement with the John
Hancock Regional Bank Fund dated July 1, 1996, JHA has sole voting and
dispositive power as to 90,000 shares of Common Stock. Through their
parent-subsidiary relationship to JHA, JHMLICO, JHSI, JHAM and TBFG
have indirect, beneficial ownership of these same shares.
(4) Includes 1,500 shares held by Mr. Dillen's spouse in her Individual
Retirement Account, 600 shares held by Mr. Dillen as custodian for his
children, 2,072 shares which are held by the ESOP which have been
allocated to the account of Mr. Dillen, and 6,982 shares which may be
acquired by Mr. Dillen upon the exercise of stock options.
(5) Excludes the shares held by the ESOP, of which the named director is
one of three trustees.
(6) Includes 1,636 shares which may be acquired by the named director upon
the exercise of stock options.
(7) Includes 28,271 shares which may be acquired by all directors and
executive officers of the Company and the Bank as a group upon the
exercise of stock options. Also includes 6,320 shares which are held
by the Company's ESOP which have been allocated to the accounts of
executive officers.
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<PAGE> 81
SUMMARY COMPENSATION TABLE
The Company does not pay separate compensation to its officers. The
following table sets forth a summary of certain information concerning the
compensation paid by the Bank for services rendered in all capacities during
the three fiscal years ended September 30, 1997 to the Chairman, President and
Chief Executive Officer of the Bank. No other executive officer of the Bank had
total compensation during the fiscal year which exceeded $100,000.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------- --------------------------------
Restricted
Fiscal Stock Number of All Other
Name and Principal Position Year Salary (1) Bonus Awards(2) Options(3) Compensation(4)
- ---------------------------------- ------------ -------------- --------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
J. Ardie Dillen 1997 $106,875 $20,000 $182,640 34,913 $29,063
Chairman, President and Chief 1996 97,500 11,212 -- -- 11,475
Executive Officer 1995 86,167 8,500 -- -- --
</TABLE>
- -----------
(1) Does not include amounts attributable to miscellaneous benefits
received by the named executive officer. In the opinion of management
of the Bank, the costs to the Bank of providing such benefits to the
named executive officer during the indicated period did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual.
(2) Represents the grant of 15,711 shares of restricted Common Stock to
Mr. Dillen pursuant to the Company's Recognition and Retention Plan
and Trust ("Recognition Plan"), which were deemed to have had the
indicated value at the date of grant. The restricted Common Stock
awarded to Mr. Dillen had a fair market value of $300,473 at
September 30, 1997, based on the $19.125 per share closing market
price on September 29, 1997, the last date in fiscal 1997 on which
shares of the Common Stock were traded. The awards vest 20% each year
beginning October 15, 1997, and dividends are paid on restricted
shares.
(3) Consists of stock options granted pursuant to the Company's Stock
Option Plan ("Stock Option Plan") which are exercisable at the rate of
20% each year beginning October 15, 1997.
(4) Represents $25,857, $8,550 and $0, the allocation on behalf of Mr.
Dillen under the Company's ESOP, and $3,206, $2,925 and $0 in
contributions pursuant to the Bank's Thrift Plan, in each case in
fiscal 1997, 1996 and 1995, respectively. See "Benefits - Thrift
Plan."
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<PAGE> 82
The following table discloses the total options granted to the
executive officer named in the Summary Compensation Table during the year ended
September 30, 1997:
<TABLE>
<CAPTION>
Number of % of Total Options
Options Granted To Exercise Grant Date
Name Granted Employees(1) Price(2) Expiration Date Present Value(3)
- ----------------- ------------ --------------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
J. Ardie Dillen 34,913 19.78% $11.625 October 15, 2006 $129,178
</TABLE>
- ------------
(1) Percentage of options granted to all employees during fiscal 1997.
(2) The exercise price was based on the closing market price of a share of
the Company's Common Stock on the date of grant.
(3) Present Value of the grant at the date of grant under the
Black-Scholes option pricing model.
The following table sets forth, with respect to the executive officer
named in the Summary Compensation Table, information with respect to the
aggregate amount of options exercised during the last fiscal year, any value
realized thereon, the number of unexercised options at the end of the fiscal
year (exercisable and unexercisable) and the value with respect thereto under
specified assumptions.
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired on Value Number of Unexercised in the Money Options at
Name Exercise Realized Options at Fiscal Year End September 30, 1997
- ----------------- ------------- ---------- --------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Ardie Dillen -- -- -- 34,913(1) -- $261,848(2)
</TABLE>
- -------------
(1) Shares are exercisable at the rate of 20% per year on each annual
anniversary of the date the options were granted (October 15, 1996) at
$11.625 per share.
(2) Value is calculated as the difference between the market price of the
Company's stock at September 29, 1997 ($19.125), the last date in
fiscal 1997 on which shares of the Company's stock were traded, and
the $11.625 exercise price.
COMPENSATION OF DIRECTORS
The Company pays non-employee directors a quarterly retainer of $500.
As of January 23, 1997, the monthly Bank Board retainer was increased to $400
from $300 and the per meeting
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<PAGE> 83
fee was increased to $500 from $450. Members of committees of the Board of the
Company and the Bank are paid $250 ($350 for committee chairmen) for each
committee meeting attended. In addition to the foregoing, Messrs. Malone and
Mellor received $5,400 and $4,375, respectively, for service as Chairman of the
Board and Secretary of the Bank, respectively, for fiscal 1997. Mr. Dillen and
Mr. Gregory G. Maxcy receive no additional compensation as Chairman of the
Board of the Company and the Bank and Secretary of the Company, respectively.
Mr. Malone receives $400 per month as director emeritus of the Bank.
EMPLOYMENT AGREEMENTS
The Company and the Bank (collectively, the "Employers") have entered
into employment agreements with each of Messrs. Dillen, Kirk, and Gregory G.
Maxcy, and the Bank has entered into employment agreements with Messrs. Archer
and Winters (the "Executives"). Messrs. Dillen and Kirk are the Chairman,
President and Chief Executive Officer, and the Senior Vice President and Chief
Financial Officer of the Company and the Bank, respectively. Mr. Maxcy is the
Senior Vice President and Secretary of the Company and Senior Vice President of
the Bank. Messrs. Archer and Winters are Senior Vice Presidents of the Bank.
The Employers have agreed to employ Mr. Dillen for a term of three years and
each of the other Executives for a term of two years in their current
respective positions at their current salary levels. The employment agreements
will be reviewed annually by the Boards of Directors of the Employers, and the
term of employment agreements shall be extended each year for a successive
additional one-year period upon approval of the Employers' Board of Directors,
unless either party elects, not less than 30 days prior to the annual
anniversary date, not to extend the employment term.
Each of the employment agreements are terminable with or without cause
by the Employers. The Executives shall have no right to compensation or other
benefits pursuant to the employment agreements for any period after voluntary
termination or termination by the Employers for cause. The agreements provide
for certain benefits in the event of an Executives' death, disability or
retirement. In the event that (i) the Executive terminates his employment (a)
because of failure of the Employers to comply with any material provision of
the agreement or (b) as a result of certain adverse actions which are taken
with respect to the officer's employment following a Change in Control of the
Company, as defined, or (ii) the employment agreement is terminated by the
Employers other than for cause, disability, retirement or death, the Executive
will be entitled to a cash severance amount equal to three times the officer's
base salary, as defined, in the case of Mr. Dillen, and two times base salary
for the other Executives payable in installments over three years (in the case
of Mr. Dillen) or two years (in the case of the other Executives). Based upon
compensation levels at September 30, 1997, in the event of a termination of
employment following a Change in Control, Mr. Dillen would receive $330,000 in
cash severance and each of the other four Executives would receive between
$113,000 and $150,000. Mr. Dillen's agreement also provides for a severance
payment in the event of a termination of the agreement resulting from a change
by the Employers to his title or duties. Severance payments are generally
reduced by 50% of the compensation paid by another employer during the payment
period. In certain cases of voluntary resignation, the reduction would not
apply.
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<PAGE> 84
A Change in Control is generally defined in the employment agreement
to include any change in control of the Company required to be reported under
the federal securities laws, as well as (i) the acquisition by any person of
25% or more of the Company's outstanding voting securities and (ii) a change in
a majority of the directors of the Company during any two-year period without
the approval of at least two-thirds of the persons who were directors of the
Company at the beginning of such period.
Each employment agreement provides that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the officer, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
being non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments contingent on a change of control
with a present value equal to or in excess of three times the base amount,
which is defined to mean the recipient's average annual compensation from the
employer includable in the recipient's gross income during the most recent five
taxable years ending before the date on which a change in control of the
employer occurred. Recipients of excess parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
generally not deductible by the employer as compensation expense for federal
income tax purposes.
Although the above-described employment agreements could increase the
cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant anti-takeover
effect.
BENEFITS
Employee Stock Ownership Plan. The Company has established the ESOP
for employees of the Company and the Bank. Employees of the Company and the
Bank who have been credited with at least 1,000 hours of service during a
twelve month period and who have attained age 21 are eligible to participate in
the ESOP.
The ESOP borrowed funds from the Company to purchase 174,570 shares of
Common Stock in the Bank's conversion from mutual to stock form. The loan to
the ESOP will be repaid from the Company's contributions to the ESOP over a
period of 10 years, and the collateral for the loan is the Common Stock
purchased by the ESOP. The Company may, in any plan year, make additional
discretionary contributions for the benefit of plan participants in either cash
or shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders, upon the
original issuance of additional shares by the Company or upon the sale of
treasury shares by the Company. Such purchases, if made, would be funded
through additional borrowing by the ESOP or additional contributions from the
Company. The timing, amount and manner of future contributions to the ESOP will
be affected
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<PAGE> 85
by various factors, including prevailing regulatory policies, the requirements
of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are held in
a suspense account and will be released on a pro rata basis as debt service
payments are made. Discretionary contributions to the ESOP and shares released
from the suspense account will be allocated among participants on the basis of
compensation. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Company might otherwise have
contributed to the ESOP. Participants will be 100% vested in their rights to
receive their account balances within the ESOP after completing five years of
service. Credit is given for years of service with the Bank prior to adoption
of the ESOP. In the case of a "change in control," as defined, however,
participants will become immediately fully vested in their account balances,
subject to certain tax considerations. Benefits may be payable upon retirement
or separation from service. The Company's contributions to the ESOP are not
fixed, so benefits payable under the ESOP cannot be estimated.
The ESOP is subject to the requirements of the Employment Retirement
Income Securities Act of 1974, as amended, and the regulations of the IRS and
the Department of Labor thereunder.
Stock Option Plan. The Company's stockholders approved the Stock
Option Plan at a special meeting held on October 15, 1996. The Stock Option
Plan is designed to attract and retain qualified personnel in key positions,
provide officers and key employees with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and reward key
employees for outstanding performance. The Stock Option Plan is also designed
to retain qualified directors for the Company. The Stock Option Plan provides
for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"),
non-qualified or compensatory stock options and stock appreciation rights
(collectively "Awards"). Awards will be available for grant to directors and
key employees of the Company and any subsidiaries, except that directors will
not be eligible to receive incentive stock options. A total of 218,212 shares
of Common Stock has been reserved for issuance pursuant to the Stock Option
Plan. The Stock Option Plan is administered and interpreted by a committee of
the Board of Directors ("Committee") that is composed solely of two or more
"Non-Employee Directors." Unless sooner terminated, the Stock Option Plan shall
continue in effect for a period of ten years from the adoption by the Board of
Directors.
Under the Stock Option Plan, the Board of Directors or the Committee
determines which officers and key employees will be granted options, whether
such options will be incentive or compensatory options, the number of shares
subject to each option, whether such options may be exercised by delivering
other shares of Common Stock and when such options become exercisable. The per
share exercise price of a stock option shall be equal to the fair market value
of a share of Common Stock on the date the option is granted. Subject to
certain exceptions, all options granted to participants under the Stock Option
Plan shall become vested and exercisable at the rate of 20% per year on each
annual anniversary of the date the options were granted, and the right to
exercise shall be cumulative.
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<PAGE> 86
At September 30, 1997, the Company had granted stock options to
directors and officers of the Company and the Bank to purchase an aggregate of
176,511 shares of Common Stock at exercise prices ranging from $11.625 per
share to $15.00 per share.
Recognition and Retention Plan. The Company's stockholders also
approved the Recognition Plan at the special meeting held on October 15, 1996.
The objective of the Recognition Plan is to retain qualified personnel in key
positions, provide officers, key employees and directors with a proprietary
interest in the Company as an incentive to contribute to its success and reward
key employees for outstanding performance. Officers and key employees of the
Company who are selected by the Board of Directors of the Company or a
committee thereof, as well as non-employee directors of the Company, will be
eligible to receive benefits under the Recognition Plan. The Recognition Plan
Trust acquired 87,285 shares of Common Stock on behalf of the Recognition Plan.
These shares were acquired through open market purchases. The Recognition Plan
is administered and interpreted by a committee of the Board of Directors that
is composed solely of two or more "Non-Employee Directors."
Shares of Common Stock granted pursuant to the Recognition Plan will
be in the form of restricted stock payable over a five-year period at a rate of
20% per year, beginning one year from the anniversary date of the grant. A
recipient will be entitled to all voting and other stockholder rights with
respect to shares which have been earned and allocated under the Recognition
Plan. However, until such shares have been earned and allocated, they may not
be sold, pledged or otherwise disposed of and are required to be held in the
Recognition Plan Trust. Under the terms of the Recognition Plan, all shares
which have not yet been earned and allocated are required to be voted by the
trustees in their sole discretion. In addition, any cash dividends or stock
dividends declared in respect of unvested share awards will be held by the
Recognition Plan Trust for the benefit of the recipients and such dividends,
including any interest thereon, will be paid out proportionately by the
Recognition Plan Trust to the recipients thereof as soon as practicable after
the share awards become earned. Any cash dividends or stock dividends declared
in respect of each vested share held by the Recognition Plan Trust will be paid
by the Recognition Plan Trust as soon as practicable after the Recognition Plan
Trust's receipt thereof to the recipient on whose behalf such share is then
held by the Recognition Plan Trust. At September 30, 1997, the Company had
granted an aggregate of 79,490 shares to directors and executive officers of
the Company and the Bank, including 15,711 shares to Mr. Dillen.
Pension Plan. The Bank participates in a multiple employer defined
benefit pension plan that covers all employees that have attained 21 years of
age and have completed one full year of service (consisting of 1,000 hours
worked during the year). In general, the pension plan provides for benefits
payable monthly at retirement or normal retirement age 65 in an amount equal to
a percentage of the participant's average annual salary for the five
consecutive years of highest salary during his service with the Bank,
multiplied by the number of his years of service, with a reduced level of
benefits in the event of early retirement prior to having attained age 65.
Payment of benefits under the pension plan generally will be made in
the form of a life annuity to an unmarried participant or in the form of a
qualified joint and survivor annuity to a
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<PAGE> 87
married participant, although alternative forms of benefits are available. The
pension plan provides a death benefit payment, in the event of death prior to
retirement.
For the years ended September 30, 1997, 1996 and 1995 pension expense
amounted to $60,000, $60,000 and $60,000, respectively. The amounts expended as
contributions to the pension plan for financial reporting purposes on behalf of
any particular individual or group of individuals participating in the pension
plan cannot be determined.
Thrift Plan. Effective October 1, 1996, the Bank began maintaining a
Thrift Plan for the benefit of employees who have been employed for at least
one year and who have attained the age of 21. The Thrift Plan is a contributory
defined contribution plan which is intended to qualify under Section 401(k) of
the Code. Participants may contribute to the Thrift Plan by salary reduction up
to 15% of annual compensation for the year. Such contributions defer the
employee's earnings up to a maximum of $9,500 in each plan year, indexed
annually. The Bank matches 50% of an employee's contribution to the Thrift Plan
up to 6% of an employee's compensation. An employee is immediately vested in
his or her contributions to the Thrift Plan and is vested in the Bank's
matching contributions after five years of service. All funds contributed to
the Thrift Plan are held in a trust fund, which are invested at the direction
of the employee in five separate funds: a short term government money market
fund, a diversified equity portfolio fund, a government bond fund, a fund that
invests solely in companies that make up the Standard & Poor's Stock Index, and
a fund that invests solely in companies that make up the Standard & Poor's
MidCap Index.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
All loans or extensions of credit to executive officers and directors
must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
the general public, unless the loans are made pursuant to a benefit or
compensation program that (i) is widely available to employees of the
institution and (ii) does not give preference to any director, executive
officer or principal stockholder, or certain affiliated interests of either,
over other employees of the savings institution, and must not involve more than
the normal risk of repayment or present other unfavorable features.
The Bank's policy provides that all loans made by the Bank to its
directors and officers are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do
not involve more than the normal risk of collectibility or present other
unfavorable features. As of September 30, 1997, mortgage and consumer loans to
executive officers and directors aggregated $50,000 or .2% of the Bank's equity
as of such date. The Bank believes that such loans do not involve more than the
normal risk of collectibility.
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<PAGE> 88
CONSENT TO FINDINGS OF SECURITIES VIOLATIONS
Mr. Gregory G. Maxcy, Senior Vice President of the Bank, Secretary of
the Company, and a director of the Company and the Bank, previously served as
an officer and director of Equity Management Associates ("EMA"), a Delaware
corporation, whose purpose was to acquire, finance, lease, develop, purchase,
manage and syndicate real estate. Between approximately March 1985 to March
1986, Mr. Maxcy allegedly offered and sold securities of EMA to the public. In
October 1991, the Pennsylvania Securities Commission (the "Pennsylvania
Commission"), agreed to the entry of Mr. Maxcy's Offer for Settlement pursuant
to which, without admitting or denying the allegations thereof, Mr. Maxcy
accepted findings by the Pennsylvania Commission that he caused violations of
Section 401(b) of the Pennsylvania Securities Act of 1972, as amended relating
to violations of the securities anti-fraud provisions for allegedly offering
and selling securities through the use of untrue statements of material facts
and omissions of material facts necessary in order to make the statements made,
in light of the circumstances in which they were made, not misleading and
agreed to an Order of the Pennsylvania Commission that, among other things, (i)
suspended Mr. Maxcy's registration as an agent in the Commonwealth of
Pennsylvania for a period of one year, (ii) barred Mr. Maxcy from offering or
selling securities, acting as an investment adviser or being affiliated with a
broker-dealer, agent or investment adviser in the Commonwealth of Pennsylvania
for a period of one year, and (iii) barred Mr. Maxcy from holding a position as
an officer or director of a company offering or selling securities in the
Commonwealth of Pennsylvania for a period of eighteen months.
In March 1993, the United States District Court for the Western
District of Pennsylvania entered into a final judgment and order against Mr.
Maxcy for his dealings with EMA described above, pursuant to which Mr. Maxcy
did not admit or deny the allegations, which permanently enjoined Mr. Maxcy
from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act
and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder for
his alleged misrepresentations and omissions of material facts. In April 1993,
Mr. Maxcy entered into an Offer of Settlement and related Order with the
Commission pursuant to which, without admitting or denying the allegations
contained therein, the Commission found that Mr. Maxcy had violated Sections
5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder. Under the provisions of the Order,
Mr. Maxcy was barred from associating with any broker, dealer, municipal
securities dealer, investment adviser or investment company for a period of
five years.
DESCRIPTION OF THE PREFERRED SECURITIES
GENERAL
The following is a summary of certain terms and provisions of the
Preferred Securities. This summary of certain terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement. The
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<PAGE> 89
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Unless otherwise expressly
stated or the context otherwise requires, all references to the "Company"
appearing under this caption "Description of the Preferred Securities" and
under the caption "Description of the Junior Subordinated Debentures" shall
mean Pittsburgh Home Financial Corp. excluding its consolidated subsidiaries.
DISTRIBUTIONS
The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Trust Issuer. Distributions on such Preferred
Securities will be payable at the annual rate of ___% of the stated Liquidation
Amount of $10, payable quarterly in arrears on March 1, June 1, September 1 and
December 1 of each year, to the holders of the Preferred Securities on the
relevant record dates. The record date will be the 15th day of the preceding
month in which the relevant Distribution payment date occurs. Distributions
will accumulate from the date of the initial issuance of the Preferred
Securities and are cumulative. The first Distribution payment date for the
Preferred Securities will be March 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
Preferred Securities is not a Business Day, then 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 payment in respect of
any such delay), except that, if such Business Day is 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 or a day on which the principal corporate
trust office of the Property Trustee or the Debenture Trustee is closed for
business.
So long as no event of default under the Indenture has occurred and is
continuing, the Company 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 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral of interest, quarterly Distributions on the Preferred Securities
by the Trust Issuer will also be deferred during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of ___%
thereof, compounded quarterly from the relevant payment date for such
Distributions. The term "Distributions" as used herein, shall include any such
additional Distributions. During any such Extension Period, the Company may
not, and may not permit any subsidiary of the Company to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock other
than payments pursuant to the Guarantee (other than (a) the reclassification of
any class of the Company's capital stock into another class of capital stock,
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(b) dividends or distributions in common stock of the Company, (c) 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, (d)
payments under the Guarantee and (e) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to
the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Junior Subordinated Debentures other than payments pursuant to
the Guarantee. Prior to the termination of any such Extension Period, the
Company may further defer the payment of interest on the Junior Subordinated
Debentures, provided that no Extension Period may exceed 20 consecutive
quarters periods or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon at the rate of %, compounded quarterly, to the extent permitted by
applicable law), the Company may elect to begin a new Extension Period. There
is no limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Junior Subordinated Debentures--Right
to Defer Interest Payment Obligation" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The revenue of the Trust Issuer available for distribution to holders
of its Preferred Securities will be limited to payments under the Junior
Subordinated Debentures in which the Trust Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of the Junior
Subordinated Debentures." If the Company does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (if and to the extent the Trust Issuer has funds legally
available for the payment of such Distributions and cash sufficient to make
such payments) is guaranteed by the Company on a limited basis as set forth
herein under "Description of the Guarantee."
The Company has no current intention of exercising its right to defer
payments of interest on the Junior Subordinated Debentures.
SUBORDINATION OF THE COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Preferred Securities and the Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date an event of default under the Indenture shall have occurred and be
continuing, no payment of any Distribution on, or Redemption Price of, any of
the Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the outstanding Preferred Securities for all
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Distribution periods terminating on or prior thereto, or, in the case of
payment of the Redemption Price, the full amount of such Redemption Price on
all of the outstanding Preferred Securities then called for redemption 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 Redemption Price of, the Preferred Securities then due and payable.
In the case of any event of default under the Trust Agreement
resulting from an event of default under the Indenture, the Company as holder
of the Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the Trust Agreement until the effect
of all such events of default with respect to the Preferred Securities shall
have been cured, waived or otherwise eliminated. Until any such events of
default under the Trust Agreement shall have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
the Preferred Securities and not on behalf of the Company as holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
REDEMPTION
The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Junior Subordinated Debentures at their
Stated Maturity or earlier redemption as provided in the Indenture. The
proceeds from such repayment or redemption shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Preferred Securities
upon not less than 30 nor more than 60 days notice prior to the date fixed for
repayment or redemption, at a redemption price equal to the aggregate
Liquidation Amount of such Preferred Securities plus accumulated and unpaid
Distributions thereon (the "Redemption Price") to the date of redemption (the
"Redemption Date"). For a description of the Stated Maturity and redemption
provisions of the Junior Subordinated Debentures, see "Description of the
Junior Subordinated Debentures--General" and "--Redemption or Exchange."
The Company has the option to redeem the Junior Subordinated
Debentures prior to maturity on or after ________, 2003, in whole at any time
or in part from time to time, and thereby cause a mandatory redemption of a
Like Amount of the Preferred Securities. See "Description of the Junior
Subordinated Debentures--Redemption or Exchange." Any time that a Tax Event, an
Investment Company Event or a Capital Treatment Event (each as defined below)
shall occur and be continuing, the Company has the right to redeem the Junior
Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Preferred Securities in whole (but not in part).
See "Description of the Junior Subordinated Debentures--Redemption or
Exchange."
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of a Like Amount of the Junior Subordinated
Debentures. Redemptions of the Preferred Securities shall
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be made and the Redemption Price shall be paid on each Redemption Date only to
the extent that the Trust Issuer has funds on hand available for the payment of
such Redemption Price. See also "Description of the Preferred
Securities--Subordination of the Common Securities."
If the Trust Issuer gives a notice of redemption in respect of the
Preferred Securities, then, by 10:00 a.m., New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with the DTC funds sufficient to pay the applicable
Redemption Price and will give DTC irrevocable instructions and authority to
pay the Redemption Price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for the
Preferred Securities called for redemption shall be payable to the holders of
the Preferred 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 such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding.
In the event that any date fixed for redemption of the Preferred
Securities is not a Business Day, then payment of the 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 Redemption Price in respect of the Preferred Securities called
for redemption is improperly withheld or refused and not paid either by the
Trust Issuer or by the Company pursuant to the Guarantee as described under
"Description of the Guarantee," Distributions on such Preferred Securities will
continue to accrue at the then applicable rate, from the Redemption Date
originally established by the Trust Issuer for such Preferred Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, United
States federal securities law), the Company or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by private
agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of the Junior Subordinated Debentures to holders of the Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date shall be one business day prior to the relevant Redemption Date, however,
in the event the Preferred Securities do not remain in book entry form, the
relevant record date shall be the date at least 15 days prior to the Redemption
Date or liquidation date, as applicable.
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If less than all of the Preferred Securities and Common Securities
issued by the Trust Issuer are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of the Preferred Securities and Common Securities
to be redeemed shall be allocated pro rata to the Preferred Securities and the
Common Securities based upon the relative Liquidation Amounts of such classes.
The particular Preferred Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, or if
the Preferred Securities are then held in the form of a global preferred
security in accordance with DTC's customary procedures. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of the Preferred Securities shall
relate, in the case of the Preferred Securities redeemed or to be redeemed only
in part, to the portion of the aggregate Liquidation Amount of the Preferred
Securities which has been or is to be redeemed.
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 the Preferred
Securities to be redeemed at its registered address. Unless the Company
defaults in payment of the Redemption Price on the Junior Subordinated
Debentures, on and after the Redemption Date interest will cease to accrue on
the Junior Subordinated Debentures or portions thereof called for redemption.
LIQUIDATION OF THE TRUST ISSUER AND DISTRIBUTION OF THE JUNIOR SUBORDINATED
DEBENTURES TO HOLDERS
The Company has the right at any time to dissolve the Trust Issuer
and, after satisfaction of the liabilities of creditors of the Trust Issuer as
provided by applicable law, cause Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities and Common Securities in
exchange therefor upon liquidation of the Trust Issuer.
After the liquidation date fixed for any distribution of the Junior
Subordinated Debentures for Preferred Securities (i) such Preferred Securities
will no longer be deemed to be outstanding, and (ii) DTC or its nominee, as the
registered holder of Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution with respect to Preferred Securities held
by DTC or its nominee, (iii) any certificates representing the Preferred
Securities not held by DTC or its nominee will be deemed to represent Junior
Subordinated Debentures having a principal amount equal to the stated
Liquidation Amount of such Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
series of the Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
Under current United States federal income tax law and
interpretations, a distribution of the Junior Subordinated Debentures should
not be a taxable event to holders of the Preferred
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Securities. Should there be a change in law, a change in legal interpretation,
a Tax Event or other circumstances, however, the distribution could be a
taxable event to holders of the Preferred Securities. See "Certain Federal
Income Tax Consequences--Distribution of the Junior Subordinated Debentures to
Holders of the Preferred Securities."
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust Issuer shall automatically
dissolve upon expiration of its term and shall dissolve on the first to occur
of (i) certain events of bankruptcy, dissolution or liquidation of the Company,
subject in certain instances to any such event remaining in effect for a period
of 90 consecutive days; (ii) the distribution of a Like Amount of the Junior
Subordinated Debentures to the holders of its Preferred Securities, if the
Company, as depositor, has given written direction to the Property Trustee to
dissolve the Trust Issuer (which direction is optional and wholly within the
discretion of the Company, as depositor); (iii) redemption of all of the
Preferred Securities as described under "Description of the Preferred
Securities-Redemption;" and (iv) the entry of an order for the dissolution of
the Trust Issuer by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) or
(iv) of the preceding paragraph, the Trust Issuer shall be liquidated by the
Trust Issuer Trustees as expeditiously as the Trust Issuer Trustees determine
to be possible by distributing, after satisfaction of liabilities to creditors
of the Trust Issuer, if any, as provided by applicable law, to the holders of
the Preferred Securities a Like Amount of the Junior Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practical, in which event such holders will be entitled to receive out of the
assets of the Trust Issuer available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust Issuer, if any, as
provided by applicable law, an amount equal to, in the case of holders of the
Preferred Securities, the aggregate of the Liquidation Amount plus accrued 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 Issuer has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust Issuer on Preferred Securities shall be paid on a pro rata basis.
The Company, as the holder of the Common Securities, will be entitled to
receive distributions upon any such liquidation pro rata with the holders of
the Preferred Securities, except that if an event of default under the
Indenture has occurred and is continuing, the Preferred Securities shall have a
priority over the Common Securities with respect to any such distributions.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default"
under the Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
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(i) the occurrence of an event of default under the Indenture
(see "Description of the Junior Subordinated Debentures--Debenture
Events of Default"); or
(ii) default in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default in the payment of any Redemption Price of any
Preferred Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trust Issuer Trustees in
the Trust Agreement (other than a covenant or warranty a default in
the performance of which or the breach of which is dealt with in
clause (ii) or (iii) above), and continuation of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trust Issuer Trustee
or Trustees by the holders of at least 25% in aggregate Liquidation
Amount of the outstanding Preferred Securities, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Trust
Agreement; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by the
Company to appoint a successor Property Trustee within 60 days
thereof.
Within 90 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 Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default shall have been cured or waived. The Company, as depositor, 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 Trust Agreement.
If an event of default under the Indenture has occurred and is
continuing, the Preferred Securities shall have a preference over the Common
Securities as described above. See "Description of the Preferred
Securities--Subordination of the Common Securities" and "--Liquidation
Distribution Upon Termination". The existence of an event of default does not
entitle the holders of the Preferred Securities to accelerate the payment
thereof.
REMOVAL OF THE TRUST ISSUER TRUSTEES
Unless an event of default under the Indenture shall have occurred and
be continuing, any Trust Issuer Trustee may be removed at any time by the
holder of the Common Securities. If an event of default under the Indenture 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 Preferred Securities. In no event will the holders of the
Preferred
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Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of
any Trust 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 Trust Agreement.
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, if applicable, or of any jurisdiction in which any part of
the Trust Property (as defined in the Trust Agreement) may at the time be
located, the Company, as the holder of the Common Securities, 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 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 Trust Agreement. In the event an
event of default under the Indenture has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF THE TRUST ISSUER TRUSTEES
Any entity 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 entity resulting from
any merger, conversion or consolidation to which such Trustee shall be a party
or any entity succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under the
Trust Agreement, provided such entity shall be otherwise qualified and
eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST ISSUER
The Trust Issuer may not merge with or into, consolidate, amalgamate,
be replaced by, convey, transfer or lease its properties and assets
substantially as an entirety to any entity or other Person, except as described
below or as otherwise described in the Trust Agreement. The Trust Issuer may,
at the request of the Company, with the consent of the Administrative Trustees
and without the consent of the holders of the Preferred Securities, the
Property Trustee or the Delaware Trustee, merge with or into, consolidate,
amalgamate, be replaced by, convey, transfer or lease its properties and assets
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 Issuer with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities in priority with respect to Distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity
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possessing the same powers and duties as the Property Trustee as the holder of
the Junior Subordinated Debentures, (iii) the Successor Securities are
registered or listed, or any Successor Securities will be registered or listed
upon notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then registered or listed
(including, if applicable, the Nasdaq Stock Market's National Market), if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose substantially identical to that of the Trust Issuer, (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Company has received an opinion from independent counsel to the
Trust Issuer 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 Preferred Securities (including any Successor Securities) in any material
respect and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust Issuer 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 Company or any permitted successor or assignee owns all of the
common securities or its equivalent 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
Issuer shall not, except with the consent of holders of 100% in Liquidation
Amount of the Preferred Securities, consolidate, amalgamate, merge with or into
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any 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 Issuer 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 TRUST AGREEMENT
Except as provided below and under "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the Company,
the Property Trustee and the Administrative Trustees, without the consent of
the holders of the Preferred Securities, (i) with respect to acceptance of
appointment of a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement or (iii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Trust Issuer will be classified for United
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States federal income tax purposes as a grantor trust at all times that the
Preferred Securities are outstanding or to ensure that the Trust Issuer will
not be required to register as an "investment company" under the Investment
Company Act; provided, however, that in the case of clause (ii), such action
shall not adversely affect in any material respect the interests of any holder
of the Preferred Securities, and any such amendments of the Trust Agreement
shall become effective when notice thereof is given to the holders of the
Preferred Securities. The Trust Agreement may be amended by the Trust Issuer
Trustees and the Company with (i) the consent of holders representing not less
than a majority (based upon Liquidation Amounts) of the outstanding Preferred
Securities and (ii) receipt by the Trust Issuer Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Trust Issuer Trustees in accordance with such amendment will not affect
the Trust Issuer's status as a grantor trust for United States federal income
tax purposes or the Trust Issuer's exemption from status as an "investment
company" under the Investment Company Act, provided that without the consent of
each holder of the Preferred Securities, the Trust Agreement may not be amended
to (a) change the amount or timing of any Distribution on the Preferred
Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Preferred Securities as of a specified
date or (b) restrict the right of a holder of the Preferred Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as the Junior Subordinated Debentures are held by the Property
Trustee, the Trust 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 any past default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable 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
Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of the Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the Preferred Securities.
The Trust Issuer Trustees shall not revoke any action previously authorized or
approved by a vote of the holders of the Preferred Securities except by
subsequent vote of the holders of the Preferred Securities. The Property
Trustee shall notify each holder of the Preferred Securities of any notice of
default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Trust Issuer Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
Trust Issuer 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 the Preferred Securities may be
given at a meeting of holders of the Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of the Preferred
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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
the Preferred Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Preferred Securities will be
required for the Trust Issuer to redeem and cancel the Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trust Issuer Trustees
or any affiliate of the Company or the Trust Issuer Trustees shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
LIQUIDATION VALUE
The amount payable on the Preferred Securities in the event of any
liquidation of the Trust Issuer is $10 per Preferred Security plus accumulated
and unpaid Distributions, which may be in the form of a distribution of such
amount in Junior Subordinated Debentures, subject to certain exceptions. See
"Description of the Preferred Securities --Liquidation Distribution Upon
Termination."
EXPENSES AND TAXES
In the Indenture, the Company, as borrower, has agreed to pay all
debts and other obligations (other than with respect to the Preferred
Securities) and all costs and expenses of the Trust Issuer (including costs and
expenses relating to the organization of the Trust Issuer, the fees and
expenses of the Trust Issuer Trustee and the costs and expenses relating to the
operation of the Trust Issuer) and to pay any and all taxes and all costs and
expenses with respect thereto (other than United States withholding taxes) to
which the Trust Issuer might become subject. The foregoing obligations of the
Company under the Indenture are for the benefit of, and shall be enforceable
by, any person to whom any such debts, obligations, costs, expenses and taxes
are owed (a "Creditor") whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations of the Company directly
against the Company, and the Company has irrevocably waived any right or remedy
to require that any such Creditor take any action against the Trust Issuer or
any other person before proceeding against the Company. The Company has also
agreed in the Indenture to execute such additional agreements as may be
necessary or desirable to give full effect to the foregoing.
BOOK ENTRY, DELIVERY AND FORM
The Preferred Securities will be issued in the form of one or more
fully registered global securities which will be deposited with, or on behalf
of, DTC and registered in the name of DTC's nominee. Unless and until it is
exchangeable in whole on in part for the Preferred Securities in definitive
form, a global security may not be transferred except as a whole by DTC
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to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or
by DTC or any such nominee to a successor of such Depository or a nominee of
such successor.
Ownership of beneficial interests in a global security will be limited
to persons that have accounts with DTC or its nominee ("Participants") or
persons that may hold interests through Participants. The Company expects that,
upon the issuance of a global security, DTC will credit, on its book-entry
registration and transfer system, the Participants' accounts with their
respective principal amounts of the Preferred Securities represented by such
global security. Ownership of beneficial interests in such global security will
be shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of Participants)
and on the records of Participants (with respect to interests of Persons held
through Participants). Beneficial owners will not receive written confirmation
from DTC of their purchase, but are expected to receive written confirmations
from the Participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests will be accomplished by entries
on the books of Participants acting on behalf of the beneficial owners.
So long as DTC, or its nominee, is the registered owner of a global
security, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such global security
for all purposes under the Junior Subordinated Indenture. Except as provided
below, owners of beneficial interests in a global security will not be entitled
to receive physical delivery of the Preferred Securities in definitive form and
will not be considered the owners or holders thereof under the Junior
Subordinated Indenture. Accordingly, each person owning a beneficial interest
in such a global security must rely on the procedures of DTC and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interest, to exercise any rights of a holder of Preferred
Securities under the Junior Subordinated Indenture. The Company understands
that, under DTC's existing practices, in the event that the Company requests
any action of holders, or an owner of a beneficial interest in such a global
security desires to take any action which a holder is entitled to take under
the Junior Subordinated Indenture, DTC would authorize the Participants holding
the relevant beneficial interests to take such action, and such Participants
would authorize beneficial owners owning through such Participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them. Redemption notices will also be sent to DTC. If less than all of
the Preferred Securities are being redeemed, the Company understands that it is
DTC's existing practice to determine by lot the amount of the interest of each
Participant to be redeemed.
Distributions on the Preferred Securities registered in the name of
DTC or its nominee will be made to DTC or its nominee, as the case may be, as
the registered owner of the global security representing such Preferred
Securities. None of the Company, the Trust Issuer Trustee, the Administrators,
any Paying Agent or any other agent of the Company or the Trust Issuer Trustees
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the global security for such Preferred Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. Disbursements of Distributions to Participants shall be the
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responsibility of DTC. DTC's practice is to credit Participants' accounts on a
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
the payable date. Payments by Participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, the Company, the Trust Issuer Trustees, the Paying Agent or any other
agent of the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities at any time by giving reasonable
notice to the Company or the Trust Issuer Trustees. If DTC notifies the Company
that it is unwilling to continue as such, or if it is unable to continue or
ceases to be a clearing agency registered under the Exchange Act and a
successor depository is not appointed by the Company within ninety days after
receiving such notice or becoming aware that DTC is no longer so registered,
the Company will issue the Preferred Securities in definitive form upon
registration of transfer of, or in exchange for, such global security. In
addition, the Company may at any time and in its sole discretion determine not
to have the Preferred Securities represented by one or more global securities
and, in such event, will issue Preferred Securities in definitive form in
exchange for all of the global securities representing such Preferred
Securities.
DTC has advised the Company and the Trust Issuer 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 Participants and to facilitate the clearance and
settlement of securities transactions 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, banks, trust companies and clearing corporations and may
include certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
Participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Preferred Securities will be made by the
Underwriter in immediately available funds.
Secondary trading in preferred securities of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the
Preferred Securities will trade in DTC's Same-Day Funds Settlement System, and
secondary market trading activity in the Preferred Securities will therefore be
required by DTC to settle in immediately available funds. No assurance can
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be given as to the effect, if any, of settlement in immediately available funds
on trading activity in the Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made to DTC,
which will credit the relevant accounts at DTC on the applicable Distribution
Dates or, if the Preferred Securities are not held by DTC, such payments will
be made by check mailed to the address of the holder entitled thereto. as such
address appears on the securities register for the Trust Securities. The paying
agent (the "Paying Agent") will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrators. The Paying Agent will be permitted to resign as Paying Agent
upon 30 days' written notice to the Property Trustee and the Administrators. If
the Property Trustee is no longer the Paying Agent, the Property Trustee will
appoint a successor (which must be a bank or trust company reasonably
acceptable to the Administrators) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent
for the Preferred Securities. Registration of transfers of Preferred Securities
will be effected without charge by or on behalf of the Trust Issuer, except for
the payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. In the event of any redemption, the
Trust Issuer will not be required to (i) issue, register the transfer of, or
exchange any Preferred Securities during a period beginning at the opening of
business 15 days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close of business
on the day of such mailing; or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except
the unredeemed portion of any such Preferred Securities being redeemed in part.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such 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 Trust Agreement at the request of any holder of
Preferred 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 Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such action as it deems advisable and in the best
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interests of the holders of the Preferred 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 Issuer in such a way that the Trust Issuer
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 Company
for United States federal income tax purposes. In this connection, the Company
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust Issuer
or the Trust Agreement, that the Company and the Administrative Trustees
determine in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Trust Agreement and the Preferred Securities will be governed by,
and construed in accordance with, the laws of the State of Delaware.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture
(the "Indenture") between the Company and The Bank of New York, as trustee (the
"Debenture Trustee"). The Indenture will be qualified as an Indenture 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
is subject to, and is qualified in its entirety by reference to, the Indenture,
and to the Trust Indenture Act. Wherever particular defined terms of the
Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
Concurrently with the issuance of the Preferred Securities, the Trust
Issuer will invest the proceeds thereof, together with the consideration paid
by the Company for the Common Securities, in the Junior Subordinated
Debentures. The Junior Subordinated Debentures will bear interest at the
annual rate of %, payable quarterly in arrears on March 1, June 1, September 1
and December 1 of each year (each, an "Interest Payment Date"), commencing
March 1, 1998, to the person in whose name each Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of the Trust Issuer, the Junior
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Subordinated Debentures will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Preferred 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 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 Business Day is 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. 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 % thereof, compounded quarterly from the relevant Interest Payment
Date. The term "interest" as used herein shall include quarterly interest
payments, interest on quarterly interest payments not paid on the applicable
Interest Payment Date and Additional Interest (as defined below), as
applicable.
The Junior Subordinated Debentures will mature on ____________, 2028
(the "Stated Maturity").
The Junior Subordinated Debentures will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Debt and
Subordinated Debt (collectively "Senior Indebtedness") of the Company. Because
the Company is a holding company, the right of the Company to participate in
any distribution of assets of any subsidiary, including the Bank, upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Company may itself be recognized as a creditor of that subsidiary. Accordingly,
the Junior Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, and holders of
the Junior Subordinated Debentures should look only to the assets of the
Company for payments on the Junior Subordinated Debentures. The Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt and Subordinated Debt, whether under the
Indenture or any existing or other indenture that the Company may enter into in
the future or otherwise.
RIGHT TO DEFER INTEREST PAYMENT OBLIGATION
So long as no event of default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture at any time or from
time to time during the term of the Junior Subordinated Debentures to defer the
payment of interest on the Junior Subordinated Debentures for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. At the end of each Extension Period, the
Company must pay all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest on such unpaid interest at the
annual rate of %, compounded quarterly from the relevant Interest Payment Date,
to the extent permitted by applicable law, referred to herein as "Compounded
Interest"). During an Extension Period, interest would continue to accrue and
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holders of the Junior Subordinated Debentures would be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences-- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not, and may not
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (other than (a) the
reclassification of any class of the Company's capital stock into another class
of capital stock, (b) dividends or distributions in common stock of the
Company, (c) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, the issuance of stock under any
such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (d) payments under the Guarantee and (e) purchases of common
stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers or employees) or (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu with or
junior in interest to the Junior Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or junior
in interest to the Junior Subordinated Debentures other then payments pursuant
to the Guarantee; and (iii) the Company shall not redeem, purchase or acquire
less than all the outstanding Junior Subordinated Debentures or any of the
Preferred Securities. Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
such Extension Period and the payment of all interest then accrued and unpaid
(together with interest thereon at the rate of %, compounded quarterly, to the
extent permitted by applicable law), the Company 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 Company
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of such Extension Period at least one Business
Day prior to the earlier of (i) the date interest on the Junior Subordinated
Debentures 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 of the record date, or the date such Distributions are payable, to
the Nasdaq Stock Market's National Market or other applicable self-regulatory
organization or to holders of the Preferred Securities as of the record date or
the date such Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee shall give notice
of the Company's election to begin a new Extension Period to the holders of the
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
ADDITIONAL INTEREST
If the Trust Issuer or the Property Trustee is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Company will pay such additional
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amounts (the "Additional Sums") on the Junior Subordinated Debentures as shall
be required so that the Distributions payable by the Trust Issuer shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after , 2003, in whole at any time or in
part from time to time, or (ii) at any time in whole (but not in part), within
180 days following the occurrence of a Tax Event, an Investment Company Event
or a Capital Treatment Event, in each case at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures so redeemed
to the date fixed for redemption, plus 100% of the principal amount thereof.
Any such redemption prior to the Stated Maturity will be subject to prior
regulatory approval if then required.
"Investment Company Event" means the receipt by the Trust Issuer of an
Opinion of Counsel to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority, the Trust Issuer is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which
change becomes effective on or after the date of original issuance of the
Preferred Securities.
"Capital Treatment Event" means the receipt by the Trust of an Opinion
of Counsel to the effect that, as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change, pronouncement, action or decision
is announced on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that the Preferred
Securities would not constitute Tier 1 Capital (or the then equivalent thereof)
applied as if the Company (or its successor) were a bank holding company for
purposes of the capital adequacy guidelines of the Federal Reserve (or any
successor regulatory authority with jurisdiction over bank holding companies),
or any capital adequacy guidelines as then in effect and applicable to the
Company. There are currently no capital adequacy guidelines applicable to
savings bank holding companies such as the Company.
The Junior Subordinated Debentures will not be subject to any sinking
fund.
"Tax Event" means the receipt by the Trust Issuer of an Opinion of
Counsel to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that
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(i) the Trust Issuer is, or will be within 90 days of the date of such opinion,
subject to United Stated federal income tax with respect to income received or
accrued on the Junior Subordinated Debentures, (ii) interest payable by the
Company on the Junior Subordinated Debentures is not, or within 90 days of the
date of such opinion will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes or (iii) the Trust Issuer
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.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as being opined upon, that is delivered to
the Trustee.
"Additional Interest" means the additional amounts as may be necessary
in order that the amount of Distributions then due and payable by the Trust
Issuer on the outstanding Preferred Securities and Common Securities shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust Issuer has become subject as a result of a Tax
Event.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities, Preferred Securities having a Liquidation Amount equal to that
portion of the principal amount of the Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities pro rata based upon the
relative Liquidation Amounts of such Preferred Securities and the proceeds of
which will be used to pay the Redemption Price of such Preferred Securities and
(ii) with respect to a distribution of the Junior Subordinated Debentures to
holders of the Preferred Securities in exchange therefor in connection with a
dissolution or liquidation of the Trust Issuer, Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the Preferred
Securities of the holder to whom such Junior Subordinated Debentures would be
distributed.
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 the Junior
Subordinated Debentures to be redeemed at its registered address. Unless the
Company defaults in payment of the redemption price, on and after the
redemption date interest ceases to accrue on the Junior Subordinated Debentures
or portions thereof called for redemption.
REGISTRATION, DENOMINATION AND TRANSFER
The Junior Subordinated Debentures will initially be registered in the
name of the Trust Issuer. If the Junior Subordinated Debentures are distributed
to holders of Preferred Securities, it is anticipated that the depository
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Preferred Securities. See "Description of
Preferred Securities -- Book Entry, Delivery and Form."
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Although DTC has agreed to the procedures described above, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days of receipt of notice from DTC to such effect, the
Company will cause the Junior Subordinated Debentures to be issued in
definitive form.
Payments on Junior Subordinated Debentures represented by a global
security will be made to Cede & Co., the nominee for DTC, as the registered
holder of the Junior Subordinated Debentures, as described under "Description
of Preferred Securities -- Book Entry, Delivery and Form." If Junior
Subordinated Debentures are issued in certificated form, principal and interest
will be payable, the transfer of the Junior Subordinated Debentures will be
registrable, and Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other authorized denominations of a like aggregate
principal amount, at the corporate trust office of the Debenture Trustee in New
York, New York or at the offices of any Paying Agent or transfer agent
appointed by the Company, provided that payment of interest may be made at the
option of the Company by check mailed to the address of the persons entitled
thereto. However, a holder of $1 million or more in aggregate principal amount
of Junior Subordinated Debentures may receive payments of interest (other than
interest payable at the Stated Maturity) by wire transfer of immediately
available funds upon written request to the Debenture Trustee not later than 15
calendar days prior to the date on which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations. and of
a like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the
form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed), at the office of the securities registrar appointed
under the Indenture or at the office of any transfer agent designated by the
Company for such purpose without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. The Company will
appoint the Debenture Trustee as securities registrar under the Indenture. The
Company may at any time designate additional transfer agents with respect to
the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
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Any monies deposited with the Debenture Trustee or any paying agent,
or then held by the Company in trust, for the payment of the principal of (and
premium, if any) or interest on any 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 Company, be repaid to
the Company and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant, as to the Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the Company
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions in common stock of the Company, (c) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, the
issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (d) payments under the
Guarantee and (e) purchases of common stock related to the issuance of common
stock or rights under any of the Company's benefit plans for its directors,
officers or employees), (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Junior
Subordinated Debentures other than payments pursuant to the Guarantee or (iii)
the Company shall not redeem, purchase or acquire less than all the outstanding
Junior Subordinated Debentures or any of the Preferred Securities if at such
time (i) there shall have occurred an Event of Default under the Indenture with
respect to the Junior Subordinated Debentures, (ii) if the Junior Subordinated
Debentures are held by the Trust Issuer, the Company shall be in default with
respect to its payment of any obligations under the Guarantee relating to such
Preferred Securities or (iii) the Company shall have given notice of its
selection of an Extension Period as provided in the Indenture with respect to
the Junior Subordinated Debentures and shall not have rescinded such notice, or
such Extension Period, or any extension thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without
the consent of the holders of the 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 the
Junior Subordinated Debentures or the ability to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting the Company and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of the
Junior Subordinated Debentures affected, to modify the Indenture in a manner
affecting the rights of the holders of the Junior Subordinated Debentures,
provided that no such modification may, without the consent of the holder of
each outstanding Subordinated Debenture so affected, (i) extend the Stated
Maturity of the Junior
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Subordinated Debentures, reduce the principal amount thereof or reduce the rate
or extend the time of payment of interest thereon or (ii) reduce the percentage
of principal amount of the Junior Subordinated Debentures, the holders of which
are required to consent to any such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default":
(i) failure for 30 days to pay interest (including Additional
Interest or Compounded Interest, if any) on the Junior Subordinated
Debentures when due (subject to the deferral of certain due dates in
the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debentures when due, whether at maturity, upon declaration of
acceleration of maturity or otherwise; or
(iii) failure to observe or perform certain other covenants
contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the outstanding Junior
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Company, subject in certain instances to any
such event remaining in effect for a period of 60 consecutive days.
The holders of a majority in aggregate outstanding principal amount of
the 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 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 Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
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 Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal or interest (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture
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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 Subordinated Debenture. The Company is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants applicable to it
under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of the Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on the Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The Company 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 Preferred Securities. If the right to bring a Direct Action is
removed, the Trust Issuer may become subject to the reporting obligations under
the Exchange Act. The Company shall have the right under the Indenture to
set-off any payment made to such holder of the Preferred Securities by the
Company in connection with a Direct Action.
The holders of the Preferred 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 Junior Subordinated Debentures. See
"Description of the Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other entity or convey, transfer or lease its properties and
assets substantially as an entirety to any entity, and no entity shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless: (i)
in the event the Company consolidates with or merges into another entity or
conveys or transfers its properties and assets substantially as an entirety to
any entity, the successor entity is organized under the laws of the United
States or any state or the District of Columbia, and such successor entity
expressly assumes the Company's obligations on the Junior Subordinated
Debentures issued under the Indenture; (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 by
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of
the Junior Subordinated Debentures.
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SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all of the
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 their Stated Maturity within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount in the currency or currencies in which the
Junior Subordinated Debentures are payable sufficient to pay and discharge the
entire indebtedness on the Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity, as the case may
be, then the Indenture will cease to be of further effect (except as to the
Company'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 Company will be deemed to have satisfied and discharged the
Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that the
Junior Subordinated Debentures issued thereunder will 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 the
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 Company, the holders of Senior Indebtedness will
first be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Indebtedness before the holders of
the Junior Subordinated Debentures, or the Property Trustee on behalf of the
holders, will be entitled to receive or retain any payment in respect of the
principal of or interest, if any, on the Junior Subordinated Debentures.
In the event of the acceleration of the maturity of any of the 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 amounts due thereon (including any amounts due upon acceleration) before
the holders of the Junior Subordinated Debentures will be entitled to receive
or retain any payment in respect of the principal of or interest, if any, on
the Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of
the 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.
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for
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money borrowed; (ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person; (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of such Person; (vi) all indebtedness of such
Person whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest
rate, foreign exchange rate and commodity forward contracts, options and swaps
and similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include:
(i) any Debt of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (ii) any Debt of the Company to
any of its subsidiaries, and (iii) any Debt to any employee of the Company.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures), except that
Subordinated Debt shall not include debentures sold by the Company to the
Trust.
The Indenture places no limitation on the amount of Senior
Indebtedness that may be incurred by the Company. The Company may from time to
time incur indebtedness constituting Senior Indebtedness.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof.
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INFORMATION CONCERNING THE DEBENTURE TRUSTEE
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 the 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.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
As described under "Description of the Preferred
Securities--Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders," under certain circumstances involving the
termination of the Trust Issuer, Junior Subordinated Debentures may be
distributed to the holders of the Preferred Securities in exchange therefor
upon liquidation of the Trust Issuer, after satisfaction of liabilities to
creditors of the Trust Issuer as provided by applicable law. Any such
distribution will be subject to receipt of prior regulatory approval if then
required. If the Junior Subordinated Debentures are distributed to the holders
of Preferred Securities upon the liquidation of the Trust Issuer, the Company
will use its best efforts to list the Junior Subordinated Debentures on the
Nasdaq Stock Market's National Market or such stock exchanges, if any, on which
the Preferred Securities are then listed. There can be no assurance as to the
market price of any Junior Subordinated Debentures that may be distributed to
the holders of the Preferred Securities.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the offices of the Debenture Trustee in the city of
New York or at the offices of such Paying Agent or Paying Agents as the Company
may designate from time to time, except that at the option of the Company
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Securities Register
or (ii) by transfer to an account maintained by the Person entitled thereto as
specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date. Payment of any
interest on the Junior Subordinated Debentures will be made to the Person in
whose name the Subordinated Debenture is registered at the close of business on
the Regular Record Date for such interest, except in the case of Defaulted
Interest. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent; however, the Company will at all
times be required to maintain a Paying Agent in each Place of Payment for the
Junior Subordinated Debentures.
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Any moneys deposited with the Debenture Trustee or any Paying Agent,
or then held by the Company in trust, for the payment of the principal of or
interest on the Junior Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall be
repaid to the Company upon written request of the Company on May 31 of each
year or (if then held in trust by the Company) will be discharged from such
trust and the holders of the Junior Subordinated Debentures shall thereafter
look, as general unsecured creditors, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent
for the Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at
the office of the registrar. The Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts; provided that the Company maintains
a transfer agent in the place of payment. The Company may at any time designate
additional transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture Trustee
will be required to (i) issue, register the transfer of or exchange Junior
Subordinated Debentures during a period beginning at the opening of business 15
days before the day of selection for redemption of Junior Subordinated
Debentures and ending at the close of business on the day of mailing of the
relevant notice of redemption, or (ii) transfer or exchange any Junior
Subordinated Debentures so selected for redemption, except, in the case of any
Junior Subordinated Debentures being redeemed in part, any portion thereof not
to be redeemed.
DESCRIPTION OF THE GUARANTEE
A Guarantee will be executed and delivered by the Company concurrently
with the issuance of the Preferred Securities for the benefit of the holders
from time to time of such Preferred Securities (the "Guarantee"). The Bank of
New York will act as trustee ("Guarantee Trustee") under the Guarantee. This
summary of certain provisions of the 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 Guarantee. Wherever particular defined terms of the Guarantee
are referred to, but not defined herein, such defined terms are incorporated
herein by reference. The form of the Guarantee has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below) to the holders of the Preferred Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust Issuer may have
or assert other than the defense of payment. The following payments with
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respect to the Preferred Securities, to the extent not paid by or on behalf of
the Trust Issuer (the "Guarantee Payments"), will be subject to the Guarantee:
(i) any accrued and unpaid Distributions required to be paid on the Preferred
Securities, to the extent that the Trust Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption, to the extent that the Trust Issuer has funds
on hand available therefor at such time, or (iii) upon a voluntary or
involuntary dissolution, winding up or termination of the Trust Issuer (unless
the Junior Subordinated Debentures are distributed to holders of the Preferred
Securities), the lesser of (a) the Liquidation Distribution, to the extent that
the Trust Issuer has funds available therefor at such time, and (b) the amount
of assets of the Trust Issuer remaining available for distribution to holders
of the Preferred Securities after satisfaction of liabilities to creditors of
the Trust Issuer as required by applicable law. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the Preferred Securities or by causing
the Trust Issuer to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust Issuer's obligations under the Preferred Securities, but will
apply only to the extent that the Trust Issuer has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Company does not make interest payments on the Junior
Subordinated Debentures held by the Trust Issuer, the Trust Issuer will not be
able to pay Distributions on the Preferred Securities and will not have funds
legally available therefor. The Guarantee will rank subordinate and junior in
right of payment to all Senior Debt of the Company. See "Description of the
Guarantee--Status of the Guarantee." Because the Company is a holding company,
the right of the Company 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 that subsidiary, except to the
extent the Company may itself be recognized as a creditor of that subsidiary.
Accordingly, the Company's obligations under the Guarantee will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder. The Guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of the Company, including Senior Debt, whether
under the Indenture, any other indenture that the Company may enter into in the
future, or otherwise. The Company may from time to time to incur indebtedness
constituting Senior Indebtedness.
The Company and the Trust Issuer believe that the Company has, through
the Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the
Indenture and the Expense Agreement, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust Issuer's obligations under the
Preferred Securities, on a subordinated basis. 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 Issuer's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures, the Expense Agreement and the Guarantee."
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STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company in the same manner as the Junior Subordinated
Debentures.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust Issuer or upon
distribution to the holders of the Preferred Securities of the Junior
Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Preferred Securities (in which case no vote
will be required), the Guarantee may not be amended without the prior approval
of the holders of not less than a majority of the aggregate Liquidation Amount
of such outstanding Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of the Preferred
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees
and agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payments or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and
continuance of a default by the Company in the performance of the Guarantee,
undertakes 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
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conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of the Preferred Securities unless
it is offered reasonable indemnity by such holder against the costs, expenses
and liabilities that might be incurred thereby. The Guarantee 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 Guarantee Trustee reasonably
believes repayment or adequate indemnity is not reasonably assured to it.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect
upon (a) full payment of the Redemption Price of the Preferred Securities, (b)
full payment of the amounts payable upon liquidation of the Trust Issuer, or
(c) distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange therefor. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Preferred Securities must restore payment of any sums paid under the
Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of laws principles
thereof.
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Company under
the Trust Agreement (the "Expense Agreement"), the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Trust Issuer
becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Trust Issuer, other than obligations of the Trust Issuer to
pay to the holders of the Preferred Securities the amounts due such holders
pursuant to the terms of the Preferred Securities. Third party creditors of the
Trust Issuer may proceed directly against the Company under the Expense
Agreement, regardless of whether such creditors had notice of the Expense
Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES, THE EXPENSE
AGREEMENT AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust Issuer has funds available for the payment
of such Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee." The Company and the
Trust Issuer believe that, taken together, the Company's obligations under
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the Junior Subordinated Debentures, the Indenture, the Trust Agreement, the
Expense Agreement and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and other
amounts due on the Preferred Securities, on a subordinated basis. 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 Issuer's obligations under the Preferred
Securities. If and to the extent that the Company does not make payments on the
Junior Subordinated Debentures, the Trust Issuer will not pay Distributions or
other amounts due on its Preferred Securities. The Guarantee does not cover
payment of Distributions when the Trust Issuer does not have sufficient funds
to pay such Distributions. In such event, the remedy of a holder of the
Preferred Securities is to institute a Direct Action against the Company for
enforcement of payment of such Distributions to such holder. The obligations of
the Company under the Guarantee are subordinate and junior in right of payment
to all Senior Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior
Subordinated Debentures will be equal to the sum of the aggregate stated
Liquidation Amount of the Preferred Securities and Common Securities; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Preferred Securities; (iii) the Company shall pay for all and any
costs, expenses and liabilities of the Trust Issuer except the Trust Issuer's
obligations to holders of its Preferred Securities; and (iv) the Trust
Agreement further provides that the Trust Issuer will not engage in any
activity that is not consistent with the limited purposes of the Trust Issuer.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of making such payment, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE PREFERRED SECURITIES
A holder of a Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust
Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Company
would not constitute a default or event of default under the Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Debt of the Company, the subordination provisions of the Indenture provide that
no payments may be made in respect of the Junior Subordinated
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Debentures until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Debentures would constitute an event of default under the
Indenture.
LIMITED PURPOSE OF THE TRUST ISSUER
The Preferred Securities evidence a preferred undivided beneficial
interest in the Trust Issuer, and the Trust Issuer exists for the sole purpose
of issuing its Preferred Securities and Common Securities and investing the
proceeds thereof in Junior Subordinated Debentures. A principal difference
between the rights of a holder of a Preferred Security and a holder of a
Subordinated Debenture is that a holder of a Subordinated Debenture is entitled
to receive from the Company the principal amount of and interest accrued on
Junior Subordinated Debentures held, while a holder of the Preferred Securities
is entitled to receive Distributions from the Trust Issuer (or from the Company
under the Guarantee) if, and to the extent, the Trust Issuer has funds
available for the payment of such Distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or
liquidation of the Trust Issuer involving the liquidation of the Junior
Subordinated Debentures, after satisfaction of liabilities to creditors of the
Trust Issuer, if any, as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Trust Issuer, the Liquidation Distribution in cash. See "Description of the
Preferred Securities-Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Property
Trustee, as holder of the Junior Subordinated Debentures, would be a
subordinated creditor of the Company, subordinated in right of payment to all
Senior Debt as set forth in the Indenture, but entitled to receive payment in
full of principal and interest, before any stockholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust Issuer (other than the Trust Issuer's obligations to the holders of its
Preferred Securities), the positions of a holder of such Preferred Securities
and a holder of the Junior Subordinated Debentures relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities. This summary addresses only the tax consequences to a
person that acquires Preferred Securities on their original issue at the stated
offering price and does not address the tax consequences to persons that may be
subject to special treatment under United States federal income tax law, such
as banks, insurance companies, thrift institutions, regulated investment
companies, real estate investment trusts, employee benefit plans, tax-exempt
organizations, dealers in securities or
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currencies, persons that will hold Preferred Securities as part of a position
in a "straddle" or as part of a "hedging", "conversion" or other integrated
investment transaction for federal income tax purposes, persons whose
functional currency is not the United States dollar or persons that do not hold
Preferred Securities as capital assets.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Elias, Matz, Tiernan & Herrick L.L.P. ("Elias Matz"),
special tax counsel to the Company and the Trust Issuer. This summary is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change at any time. Such
changes may be applied retroactively in a manner that could cause the tax
consequences to vary substantially from the consequences described below,
possibly adversely affecting a beneficial owner of the Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the United States federal
income tax treatment of the purchase, ownership and disposition of the
Preferred Securities may differ from the treatment described below.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING ON A
HOLDER'S PARTICULAR SITUATION. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT
WITH THEIR OWN TAX ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS
TO THE UNITED STATES FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE,
LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE TRUST ISSUER
In the opinion of Elias Matz, under current law, the Trust Issuer will
not be classified as an association taxable as a corporation for United States
federal income tax purposes. As a result, for United States federal income tax
purposes, each beneficial owner of Preferred Securities (a "Securityholder")
will be treated as owning an undivided beneficial interest in the Junior
Subordinated Debentures, and thus, will be required to include in its gross
income its pro rata share of the interest (or accrued original issue discount)
in addition to any interest and other income (if any) with respect to the
Junior Subordinated Debentures. See "--Interest Income and Original Issue
Discount." No amount included in income with respect to the Preferred
Securities will be eligible for the dividends-received deduction.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the classification of the Junior Subordinated
Debentures, Elias, Matz is of the opinion that such securities will be
classified for United States federal income tax purposes as indebtedness of the
Company under current law, and thus the payments designated as interest under
the terms of the Junior Subordinated Debentures will be deductible by the
114
<PAGE> 122
Company for federal income tax purposes. No assurance can be given, however,
that the Internal Revenue Service will not challenge such classification.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, currently Section 1.1275-2(h)
(the "Regulations"), if the terms and conditions of a debt instrument make the
likelihood that stated interest will not be timely paid a "remote" contingency,
such contingency will be ignored in determining whether the debt instrument is
issued with original issue discount ("OID"). The Company believes that the
likelihood of its exercising its option to defer payments of interest on the
Junior Subordinated Debentures is remote, since exercising that option would
prevent it from declaring dividends on any class of its stock. Based on the
foregoing, the Company intends to take the position that the Junior
Subordinated Debentures were not issued with OID and, accordingly, a
Securityholder purchasing the Preferred Securities at the stated price should
be required to include in gross income only such Securityholder's pro rata
share of stated interest on the Junior Subordinated Debentures in accordance
with such Securityholder's method of tax accounting.
The Regulations have not yet been addressed in any rulings or other
published interpretations by the Internal Revenue Service (the "IRS"). In the
opinion of Elias Matz, it is not unreasonable for the Company to take the
position that the Junior Subordinated Debentures will not be issued with OID.
However, it is possible the IRS could take the position that the likelihood of
deferral was not a remote contingency within the meaning of the Regulations.
Under the Regulations, if the Company were to exercise its option to
defer payments of interest after treating the Junior Subordinated Debentures as
issued without OID, the Junior Subordinated Debentures would be treated as
re-issued with OID at that time, and all stated interest (and de minimis OID,
if any) on the Junior Subordinated Debentures would thereafter be treated as
OID as long as the Junior Subordinated Debentures remained outstanding. In such
event, all of a Securityholder's interest income with respect to the Junior
Subordinated Debentures would be accounted for as OID on an economic accrual
basis regardless of such Securityholder's method of tax accounting, and actual
distributions of stated interest related thereto would not be includable in
gross income. Consequently, a Securityholder would be required to include OID
in gross income even though the Company would not make and the Securityholder
would not receive any actual cash payments during an Extension Period.
A Securityholder that disposed of Preferred Securities prior to the
record date for the payment of Distributions following an Extension Period
would include OID in gross income but would not receive any cash related
thereto from the Trust Issuer. Any amount of OID included in a Securityholder's
gross income (whether or not during an Extension Period) would increase such
Securityholder's tax basis in its Preferred Securities, and the amount of
Distributions not includable in gross income would reduce such Securityholder's
tax basis in its Preferred Securities.
115
<PAGE> 123
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF THE PREFERRED
SECURITIES
Under current United States federal income tax law and provided that
the Trust Issuer is not treated as an association taxable as a corporation, a
distribution by the Trust Issuer of the Junior Subordinated Debentures as
described under the caption "Description of the Preferred
Securities-Liquidation of the Trust Issuer and Distribution of the Junior
Subordinated Debentures to Holders" will be nontaxable to the Securityholders
and will result in a Securityholder receiving its pro rata share of the Junior
Subordinated Debentures previously held indirectly through the Trust Issuer,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Preferred Securities before
such distribution. A Securityholder will account for interest in respect of the
Junior Subordinated Debentures received from the Trust Issuer in the manner
described above under "Certain Federal Income Tax Consequences--Interest Income
and Original Issue Discount," including any accrual of OID (if any) attributed
to the Junior Subordinated Debentures upon the distribution.
SALES OR REDEMPTION OF THE PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on the sale of
Preferred Securities (including a redemption for cash or other consideration)
in an amount equal to the difference between the amount realized on the sale
(or redemption) and the Securityholder's adjusted tax basis in the Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Preferred Securities held for more than one year will generally be taxable as
long-term capital gain or loss. Pursuant to the Taxpayer Relief Act of 1997,
Preferred Securities constituting a capital asset which are acquired by an
individual after July 28, 1997, and held for more than 18 months are accorded a
maximum United States federal capital gains tax rate of 20% (or a rate of 10%,
if the individual taxpayer is in the 15% tax bracket). Effective in 2001, the
20% rate drops to 18% (and the 10% rate drops to 8%) for capital assets
acquired after the year 2000 and held more than five years; however, the
requirement that the capital asset be acquired after the year 2000 does not
apply to the 8% rate. Preferred Securities held by an individual for more than
one year, but not more than 18 months, are accorded a United States federal
capital gains tax rate of 28%.
If the Company were to exercise its option to defer payments of
interest on the Junior Subordinated Debentures, the Preferred Securities might
trade at a price that did not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. A
Securityholder that disposed of its Preferred Securities between record dates
for payments of Distributions (and consequently did not receive a Distribution
from the Trust Issuer for the period prior to such disposition) would
nevertheless be required to include in income as ordinary income accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition and to add such amount to its adjusted tax basis in its Preferred
Securities disposed of. Such Securityholder would recognize a capital loss on
the disposition of its Preferred Securities to the extent the selling price
(which might not fully reflect the value of accrued but unpaid interest) was
less than the Securityholder's adjusted tax basis in the Preferred Securities
(which would include accrued but unpaid interest). Subject to certain limited
116
<PAGE> 124
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, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership or a non-resident fiduciary of a foreign estate or trust.
Under current United States federal income tax law: (i) payments by
the Trust Issuer or any of its paying agents to any Securityholder who or which
is a United States Alien Holder will not be subject to United States federal
withholding tax provided that (a) the Securityholder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the Securityholder is not
a controlled foreign corporation that is related to the Company through stock
ownership and (c) either (A) the Securityholder certifies to the Trust Issuer
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") certifies
to the Trust Issuer or its agent, under penalties of perjury, that such
statement has been received from the Securityholder by it or by a Financial
Institution holding such security for the Securityholder and furnishes the
Trust Issuer or its agent with a copy thereof, and (ii) a United States Alien
Holder of a Preferred Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of a
Preferred Security.
Proposed Treasury regulations (the "Proposed Regulations") would
provide alternative methods for satisfying the certification requirement
described in clause (i)(c) above. The Proposed Regulations also would require,
in the case of Preferred Securities held by a foreign partnership, that (x) the
certification described in clause (i)(c) above be provided by the partners
rather than by the foreign partnership and (y) the partnership provide certain
information, including a United States taxpayer identification number. A
look-through rule would apply in the case of tiered partnerships. The Proposed
Regulations are proposed to be effective for payments made after December 31,
1997. There can be no assurance that the Proposed Regulations will be adopted
or as to the provisions that they will include if and when adopted in temporary
or final form. The Trust Issuer will issue a Form 1042 or Form 1042-S, where
appropriate.
INFORMATION REPORTING TO SECURITYHOLDERS
Generally, income on the Preferred Securities will be reported to
Securityholders on Forms 1099-INT, which will be mailed to Securityholders by
January 31 following each calendar year.
117
<PAGE> 125
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the Securityholder
complies with certain certification requirements. Any withheld amounts will be
allowed as a credit against the Securityholder's United States federal income
tax, provided the required information is provided to the Internal Revenue
Service.
ERISA CONSIDERATIONS
The Company and certain affiliates of the Company may each 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. The purchase of the
Preferred Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section
4975(e)(1) of the Code and with respect to which the Company, or any affiliate
of the Company, 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 the Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or
other employee benefit plan proposing to acquire any Preferred Securities
should consult with its counsel.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") dated ________, 1998, among the Company, the Trust
Issuer and Ryan, Beck & Co. (the "Underwriter"), the Trust Issuer has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Trust Issuer, $10,000,000 aggregate Liquidation Amount of Preferred Securities
at the public offering price subject to the underwriting commissions set forth
on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the
Underwriter will purchase all of the Preferred Securities offered hereby if any
of such Preferred Securities are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Preferred Securities to the public and other dealers at
the public offering price set forth on the cover page of this Prospectus and
will share with certain dealers from its commission a concession not in excess
of $____ per Preferred Security. The Underwriter may allow, and such dealers
may reallow, a concession not in excess of $____ per Preferred Security to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriter.
118
<PAGE> 126
The Company has granted to the Underwriter an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to an
additional $1,500,000 aggregate Liquidation Amount of the Preferred Securities
at the public offering price plus accrued Distributions, if any, from ________,
1998. To the extent that the Underwriter exercises such option, the Company
will be obligated, pursuant to the option, to sell such Preferred Securities to
the Underwriter. The Underwriter may exercise such option only to cover
over-allotments made in connection with the sale of the Preferred Securities
offered hereby. If purchased, the Underwriter will offer such additional
Preferred Securities on the same terms as those on which the $10,000,000
aggregate Liquidation Amount of the Preferred Securities are being offered.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued
by the Company, the Underwriting Agreement provides that the Company will pay
as compensation for the Underwriter's arranging the investment therein of such
proceeds an amount of $____ per Preferred Security (or $_______ ($_______ if
the over-allotment option is exercised in full) in the aggregate). The Company
has also agreed to reimburse the Underwriter for its reasonable out-of-pocket
expenses, including legal fees and expenses relating to the Offering of the
Preferred Securities.
In connection with the offering of the Preferred Securities, the
Underwriter and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Securities
and Exchange Commission's Regulation M that are intended to stabilize, maintain
or otherwise affect the market price of the Preferred Securities. Such
transactions may include over-allotment transactions in which the Underwriter
creates a short position for its own account by selling more Preferred
Securities than it is committed to purchase from the Trust Issuer. In such a
case, to cover all or part of the short position, the Underwriter may exercise
the over-allotment option described above or may purchase Preferred Securities
in the open market following completion of the initial offering of the
Preferred Securities. The Underwriter also may engage in stabilizing
transactions in which it bids for, and purchases, shares of the Preferred
Securities at a level above that which might otherwise prevail in the open
market for the purpose of preventing or retarding a decline in the market price
of the Preferred Securities. The Underwriter also may reclaim any selling
concessions allowed to an Underwriter or dealer if the Underwriter repurchases
shares distributed by the Underwriter or dealer. Any of the foregoing
transactions may result in the maintenance of a price for the Preferred
Securities at a level above that which might otherwise prevail in the open
market. Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Preferred Securities. The
Underwriter is not required to engage in any of the foregoing transactions and,
if commenced, such transactions may be discontinued at any time without notice.
Because the National Association of Securities Dealers, Inc. ("NASD")
is expected to view the Preferred Securities as interests in a direct
participation program, the offering of the Preferred Securities is being made
in compliance with the applicable provisions of Rule 2810 of the NASD's Conduct
Rules.
119
<PAGE> 127
The Preferred Securities are a new issue of securities with no
established trading market. The Company and the Trust Issuer have been advised
by the Underwriter that it intends to make a market in the Preferred
Securities. However, the Underwriter is not obligated to do so and such market
making may be interrupted or discontinued at any time without notice at the
sole discretion of the Underwriter. Application has been made by the Company to
list the Preferred Securities on the Nasdaq National Market, but one of the
requirements for listing and continuing listing is the presence of two market
makers for the Preferred Securities, and the presence of a second market maker
cannot be assured. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Preferred Securities.
The Company and the Trust Issuer have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act.
The Underwriter has in the past and may in the future perform various
services for the Company, including investment banking services, for which it
has and will receive customary fees for such services.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the
creation of the Trust Issuer will be passed upon by Richards, Layton & Finger,
special Delaware counsel to the Company and the Trust Issuer. The validity of
the Guarantee and the Junior Subordinated Debentures will be passed upon for
the Company by Elias, Matz, Tiernan & Herrick L.L.P. Certain legal matters will
be passed upon for the Underwriter by Silver, Freedman & Taff, L.L.P. Certain
matters relating to the United States federal income tax considerations will be
passed upon for the Company by Elias, Matz, Tiernan & Herrick L.L.P.
EXPERTS
The consolidated financial statements of the Company and subsidiaries
at September 30, 1997 and 1996, and for each of the three years ended September
30, 1997, appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing elsewhere herein
and are included in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
120
<PAGE> 128
PITTSBURGH HOME FINANCIAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors..............................................
Audited Consolidated Financial Statement:
Consolidated Statements of Financial Condition............................
Consolidated Statements of Operations.....................................
Consolidated Statements of Changes in Shareholders' Equity................
Consolidated Statements of Cash Flows.....................................
Notes to Consolidated Financial Statements................................
F-1
<PAGE> 129
[ERNST & YOUNG LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Pittsburgh Home Financial Corp.
We have audited the accompanying consolidated statements of financial condition
of Pittsburgh Home Financial Corp. and its subsidiary as of September 30, 1997
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1997. These financial statements are the responsibility of
Pittsburgh Home Financial Corp.'s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying financial statements referred to above present
fairly, in all material respects, the consolidated financial condition of
Pittsburgh Home Financial Corp. and its subsidiary at September 30, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 30, 1997, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
October 29, 1997
F-2
<PAGE> 130
PITTSBURGH HOME FINANCIAL CORP.
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
SEPTEMBER 30
-----------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 1,844,534 $ 915,326
Interest-bearing deposits 3,379,240 6,646,384
- ------------------------------------------------------------------------------------------------------
5,223,774 7,561,710
Investment securities trading (cost of $904,875) 955,587 --
Investment securities available for sale (cost of $63,483,368 in 1997
and $46,381,706 in 1996) 64,387,368 46,305,705
Investment securities held to maturity (fair value of $10,054,039) 10,017,166 --
Loans receivable, net of allowance of $1,419,196 in 1997 and
$1,128,279 in 1996 181,338,949 135,551,534
Accrued interest receivable 2,026,718 1,243,462
Premises and equipment, net 2,699,396 1,900,149
Goodwill 302,632 --
Federal Home Loan Bank stock--at cost 5,110,000 1,875,000
Deferred income taxes 142,119 523,632
Foreclosed real estate 907,398 133,256
Other assets 192,673 235,317
- ------------------------------------------------------------------------------------------------------
Total assets $273,303,780 $195,329,765
- ------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits $138,730,862 $124,341,573
Advances from Federal Home Loan Bank 101,700,000 36,500,000
Advances by borrowers for taxes and insurance 1,649,312 1,847,815
Accrued income taxes payable 275,749 496,029
Other liabilities 2,133,472 1,772,332
- ------------------------------------------------------------------------------------------------------
Total liabilities 244,489,395 164,957,749
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized, none
issued -- --
Common stock $.01 par value, 10,000,000 shares authorized (2,182,125
shares issued and outstanding in 1997 and 1996) 21,821 21,821
Additional paid-in capital 21,017,411 20,958,806
Treasury stock--at cost, 212,756 shares (2,948,004) --
Unearned shares of ESOP (1,669,498) (1,831,720)
Unearned shares of Recognition and Retention Plan (868,250) --
Net unrealized gain (loss) on securities available for sale, net of
tax 597,000 (50,000)
Retained earnings (substantially restricted) 12,663,905 11,273,109
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 28,814,385 30,372,016
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $273,303,780 $195,329,765
- ------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 131
PITTSBURGH HOME FINANCIAL CORP.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans receivable $13,176,737 $ 9,600,096 $ 6,810,497
Investment securities:
Taxable 4,180,561 2,742,092 2,997,988
Tax-exempt 318,919 183,968 --
Interest-bearing deposits 288,290 406,650 189,362
- --------------------------------------------------------------------------------------------------------
Total interest income 17,964,507 12,932,806 9,997,847
Interest expense:
Deposits 6,436,932 5,372,817 4,806,047
Advances from Federal Home Loan Bank and other 4,371,324 2,118,983 1,030,213
- --------------------------------------------------------------------------------------------------------
Total interest expense 10,808,256 7,491,800 5,836,260
- --------------------------------------------------------------------------------------------------------
Net interest income 7,156,251 5,441,006 4,161,587
Provision for loan losses 360,000 300,000 304,000
- --------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 6,796,251 5,141,006 3,857,587
Noninterest income (loss):
Service charges and other fees 388,892 340,625 314,404
Gain on trading account securities 310,071 -- --
Loss on sale of foreclosed real estate (11,222) -- --
Other income 41,966 28,246 18,161
- --------------------------------------------------------------------------------------------------------
Total noninterest income 729,707 368,871 332,565
Noninterest expense:
Compensation and employee benefits 2,550,712 1,915,520 1,519,970
Premises and occupancy costs 466,119 458,379 373,409
Amortization of goodwill 27,512 -- --
Federal insurance premium 66,143 288,551 257,384
SAIF assessment -- 738,961 --
Marketing 178,943 154,636 154,068
Data processing costs 287,761 149,703 144,490
Other expenses 887,172 589,808 482,331
- --------------------------------------------------------------------------------------------------------
Total noninterest expense 4,464,362 4,295,558 2,931,652
- --------------------------------------------------------------------------------------------------------
Income before income taxes 3,061,596 1,214,319 1,258,500
Income taxes 1,078,300 441,941 554,000
- --------------------------------------------------------------------------------------------------------
Net income $ 1,983,296 $ 772,378 $ 704,500
- --------------------------------------------------------------------------------------------------------
Beginning April 1, 1996
Earnings per share $ 1.04 $ .15 N/A
Dividends per share $ .29 $ .05 N/A
Average shares outstanding 1,903,542 2,011,919 N/A
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 132
PITTSBURGH HOME FINANCIAL CORP.
Consolidated Statements of Changes in Stockholders' Equity
Years ended September 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
(LOSS) ON
ADDITIONAL UNEARNED UNEARNED SECURITIES TOTAL
COMMON PAID-IN TREASURY SHARES SHARES AVAILABLE RETAINED STOCKHOLDERS'
STOCK CAPITAL STOCK OF ESOP OF RRP FOR SALE EARNINGS EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
October 1, 1994 $ -- $ -- $ -- $ -- $ -- $ -- $ 9,905,336 $ 9,905,336
Net income -- -- -- -- -- -- 704,500 704,500
- ---------------------------------------------------------------------------------------------------------------------------------
September 30, 1995 -- -- -- -- -- -- 10,609,836 10,609,836
Issuance of stock
April 1, 1996 21,821 20,959,429 -- -- -- -- -- 20,981,250
Stock acquired
by ESOP -- -- -- (1,928,082) -- -- -- (1,928,082)
ESOP shares
released -- (623) -- 96,362 -- -- -- 95,739
Change in
unrealized loss
on investment
securities
available
for sale,
net of taxes -- -- -- -- -- (50,000) -- (50,000)
Net income -- -- -- -- -- -- 772,378 772,378
Cash dividends
declared on
common stock
of $.05
per share -- -- -- -- -- -- (109,105) (109,105)
- ---------------------------------------------------------------------------------------------------------------------------------
September 30, 1996 21,821 20,958,806 -- (1,831,720) -- (50,000) 11,273,109 30,372,016
Treasury stock
purchased -- -- (2,948,004) -- -- -- -- (2,948,004)
Stock acquired
for the RRP -- -- -- -- (1,063,170) -- -- (1,063,170)
ESOP shares
released -- 58,605 -- 162,222 -- -- -- 220,827
RRP amortization -- -- -- -- 194,920 -- -- 194,920
Change in
unrealized gain
on investment
securities
available for
sale, net
of taxes -- -- -- -- -- 647,000 -- 647,000
Net income -- -- -- -- -- -- 1,983,296 1,983,296
Cash dividends
declared on
common stock
of $.29
per share -- -- -- -- -- -- (592,500) (592,500)
- ---------------------------------------------------------------------------------------------------------------------------------
September 30, 1997 $21,821 $21,017,411 $(2,948,004) $(1,669,498) $ (868,250) $597,000 $12,663,905 $28,814,385
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 133
PITTSBURGH HOME FINANCIAL CORP.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,983,296 $ 772,378 $ 704,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and goodwill amortization 205,664 172,083 132,279
Amortization and accretion of premiums and discounts on assets
and deferred loan fees 1,250,836 149,762 (135,716)
Amortization of ESOP 162,222 -- --
Amortization of RRP 194,920 -- --
Provision for loan losses 360,000 300,000 304,000
Purchase of equity securities, trading (4,327,987) -- --
Sale of equity securities, trading 3,423,112 -- --
Release of ESOP shares 58,605 95,739 --
Deferred tax benefit 40,514 (310,868) (52,763)
Other, net (507,965) 1,498,550 534,771
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,843,217 2,677,644 1,487,071
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (81,963,200) (65,962,930) (58,691,649)
Loan principal repayments 40,085,559 31,099,129 17,995,368
Proceeds from loan sales 617,700 1,935,500 3,009,250
Purchases of:
Available-for-sale securities (36,627,877) (18,656,078) (5,152,989)
Held-to-maturity securities (10,000,000) -- (6,306,741)
Proceeds from sales, maturities and principal repayments of:
Available-for-sale securities 9,802,735 17,955,731 7,814,500
Held-to-maturity securities -- -- 4,622,964
Purchases of premises and equipment (825,980) (153,070) (183,670)
Proceeds from branch deposit acquisition 10,547,750 -- --
Other, net (1,255,705) (167,257) --
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (69,619,018) (33,948,975) (36,892,967)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in checking, passbook, and money market
deposit accounts (2,867,790) (2,223,204) (12,771,943)
Net increase in certificates of deposit 6,709,329 11,067,579 17,874,967
Increase in advances from the Federal Home Loan Bank 65,200,000 7,500,000 20,500,000
Proceeds from issuance of stock, net of shares acquired by ESOP -- 19,053,168 --
Cash dividends paid to stockholders (592,500) (109,105) --
Purchase of RRP shares (1,063,170) -- --
Purchase of treasury stock (2,948,004) -- --
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 64,437,865 35,288,438 25,603,024
- --------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (2,337,936) 4,017,107 (9,802,872)
Cash and cash equivalents at beginning of year 7,561,710 3,544,603 13,347,475
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,223,774 $ 7,561,710 $ 3,544,603
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (includes interest credited on deposits of $5,780,308,
$5,006,336, and $3,552,250 in 1997, 1996, and 1995,
respectively) $ 10,129,159 $ 7,300,703 $ 5,702,391
Income taxes 1,237,534 393,016 405,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Foreclosed mortgage loans transferred to real estate owned $ 911,072 $ 133,256 $ 124,821
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 134
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements
September 30, 1997
1. BASIS OF PRESENTATION AND ORGANIZATION
The consolidated financial statements include the accounts of Pittsburgh Home
Financial Corp. (the Company) and its wholly owned subsidiary, Pittsburgh Home
Savings Bank (the Bank). All significant intercompany balances and transactions
have been eliminated in consolidation.
The Bank is a state-chartered stock savings bank headquartered in Pittsburgh,
Pennsylvania, and conducts business from seven offices in Allegheny and Butler
counties. The Bank is primarily engaged in attracting retail deposits from the
general public and using such deposits to originate loans. The Company and Bank
are subject to the regulations of certain federal and state agencies and
periodic examinations by certain regulatory authorities.
In September 1995, the Bank formed Pittsburgh Home Financial Corp. to acquire
100% of the capital stock of the Bank upon its conversion from the mutual to
stock form of ownership. The Bank's conversion and the Company's common stock
offering were completed on April 1, 1996, with the sale of 2,182,125 shares of
$.01 par value common stock at $10 per share. The Company received proceeds of
$20,981,250 (net of $840,000 of organization and stock offering costs). In
conjunction with the conversion and offering, the Company established an
Employee Stock Ownership Plan (ESOP) (see Note 9) which acquired 8% of the
shares issued, or 174,570 shares for $1,928,082.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expense during the reported period. Actual
results could differ from those estimates.
CASH AND NONINTEREST-EARNING DEPOSITS
The Bank is required by the Federal Reserve Bank to maintain cash and reserve
balances. The reserve calculation is 0% of the first $4.4 million of checking
deposits, 3% of the next $44.9 million of checking deposits and 10% of total
checking deposits over $49.3 million. These required reserves, net of allowable
credits, amounted to $408,000 at September 30, 1997.
INVESTMENT SECURITIES TRADING
Trading securities, comprised primarily of bank and thrift equities held
principally for resale in the near term, are classified as trading account
securities and recorded at their fair values based on quoted market prices.
Unrealized gains and losses on trading account securities are included in
earnings during the period.
INVESTMENT SECURITIES AVAILABLE FOR SALE
Fair values for investment securities available for sale are based upon quoted
market prices. Unrealized holding gains and losses, net of tax, on available for
sale securities are reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses on the sale of available
for sale securities are determined using the specific-identification method.
Declines in the fair value of individual available for sale securities below
their cost that are other than temporary will result in write-downs of the
individual securities to their fair value. Any related write-downs will be
included in earnings as realized losses.
INVESTMENT SECURITIES HELD TO MATURITY
Securities for which the Company has the positive intent and ability to hold to
maturity are reported at cost, adjusted for premiums and discounts that are
recognized in interest income using the interest method over the period to
maturity. Declines in the fair value of individual held-to-maturity securities
below their amortized cost that are other than temporary will result in
write-downs of the individual securities to their fair value. Any related
write-downs will be included in earnings as realized losses.
F-7
<PAGE> 135
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS RECEIVABLE, NET
Loans are reported at their outstanding principal adjusted for any chargeoffs,
the allowance for loan losses, and any deferred fees or costs on originated
loans. Loan origination and commitment fees and certain direct origination costs
have been deferred and recognized as an adjustment of the yield of the related
loan, adjusted for anticipated loan prepayments.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due or when
the loan becomes more than 90 days past due. A reserve for the loss of accrued
but uncollected interest is established at the time the interest accrual is
discontinued. Interest ultimately collected is credited to income in the period
of recovery.
Impaired loans consist of nonhomogeneous loans in which management has
determined, based on the evaluation of current information and events, that it
is probable that the Bank will not be able to collect all of the amounts due on
these loans in accordance with the contractual terms of the loan agreements.
Nonaccrual, substandard and doubtful commercial and other real estate loans are
evaluated for impairment and have been included in management's assessment of
the adequacy of the allowance.
The allowance for loan losses is increased by charges to income and decreased by
chargeoffs (net of recoveries). Management's periodic evaluation of the adequacy
of the allowance is based on the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
FORECLOSED REAL ESTATE
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are recorded at the lower of the carrying amount of the loan or fair
value of the property less cost to sell. After foreclosure, valuations are
periodically performed by management and a valuation allowance is established
for any declines in the fair value less cost to sell below the property's
carrying amount. Revenues and expenses and changes in the valuation allowance
are included in the statement of operations. Gains and losses upon disposition
are reflected in earnings as realized.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated on the straight-line method with asset lives ranging
from three to thirty years. Maintenance and repairs are charged to expense as
incurred.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include cash,
certificates of deposit and interest-bearing deposits.
EARNINGS PER SHARE
The Company completed its initial stock offering on April 1, 1996, and
accordingly, earnings per share for 1996 is computed on net income and common
stock outstanding from that date. Earnings per share (EPS) is calculated by
dividing net income by the number of weighted average common shares outstanding
and common stock equivalent shares outstanding. As discussed in Note 9, the
Company accounts for the 174,570 shares acquired by its ESOP in accordance with
Statement of Position 93-6; shares controlled by the ESOP are not considered in
the weighted average shares outstanding until the shares are committed for
allocation to an employee's individual account. The weighted average number of
common and common equivalent shares outstanding for the period April 1 through
September 30, 1996 was 2,011,919, and for the year ended September 30, 1997 was
1,903,542.
F-8
<PAGE> 136
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TREASURY STOCK
The acquisition of treasury stock is recorded under the cost method. At the date
of subsequent reissue, the treasury stock account is reduced by the cost of such
stock on the average cost basis, with any excess proceeds being credited to
additional paid-in capital. Two stock repurchase programs were commenced during
fiscal year 1997 and each permitted up to 5% of outstanding stock to be
repurchased. As of September 30, 1997, the Company had completed both repurchase
programs and had repurchased 212,756 shares which represented 10% of the
outstanding stock at an average cost of $13.86 per share.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board (FASB) issued FAS No.
123, "Accounting for Stock-Based Compensation," which is effective for the
Company's fiscal year ending September 30, 1997. FAS No. 123 defines a fair
value-based method of accounting for stock-based employee compensation plans.
Under the fair value-based method, compensation cost is measured at the grant
date based upon the value of the award and is recognized over the service
period. The standard encourages all entities to adopt this method of accounting
for all employee stock compensation plans. However, it also allows an entity to
continue to measure compensation costs for its plans as prescribed in Accounting
Principles Board Opinion (Opinion) No. 25, "Accounting for Stock Issued to
Employees." Since the Company has elected to use the accounting in Opinion No.
25, pro forma disclosures of net income and earnings per share are made as if
the fair value method of accounting, as defined by FAS No. 123 had been applied
(see Note 9).
GOODWILL AMORTIZATION
Amortization of goodwill related to a branch acquisition is computed using the
straight-line method over ten years.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1996, the FASB issued FAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." FAS No. 125
provides new accounting and reporting standards for sales, securitizations and
servicing of receivables and other financial assets, for certain secured
borrowing and collateral transactions, and extinguishments of liabilities. FAS
No. 125, as amended by FAS No. 127, "Deferral of Effective Date of Certain
Provisions of FAS No. 125," is generally to be applied to transactions occurring
after December 31, 1996, with certain provisions having been delayed until 1998.
FAS No. 125 has not materially impacted the Company's financial position or
results of operations as a result of adoption.
In February 1997, the FASB issued FAS No. 128, "Earnings per Share," which
supersedes APB 15, "Earnings per Share," in order to simplify the standards for
computing EPS. FAS No. 128 replaces the presentation of primary and fully
diluted EPS with presentation of basic and diluted EPS and requires retroactive
restatement for all periods presented. This standard is effective for periods
ending after December 15, 1997. The effect of FAS No. 128 on the Company's EPS
is not significant.
In February 1997, the FASB issued FAS No. 129, "Disclosure of Information about
Capital Structure," which consolidates existing guidance relating to capital
structure. This standard is also effective for reporting periods ending after
December 15, 1997. The standard is not expected to significantly change the
current presentation regarding capital structure.
In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive Income,"
which establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The standard is also effective for fiscal years beginning after December 15,
1997. The impact of adoption is not expected to be significant based on
conditions in existence at September 30, 1997.
F-9
<PAGE> 137
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT SECURITIES
Securities classified by type at September 30, 1997 and 1996, respectively, are
summarized below by scheduled maturity. Mortgage-backed securities scheduled
maturities are based on the estimated payment patterns of the underlying
collateral.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
---------------------------------------------------------
SEPTEMBER 30, 1997
---------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agency obligations due:
Within 12 months $ 1,499,844 $ 3,949 $ -- $ 1,503,793
Beyond 12 months but within 5 years 8,233,521 19,382 8,703 8,244,200
Beyond 5 years but within 10 years 8,314,181 80,226 8,055 8,386,352
Beyond 10 years 6,556,338 198,700 12,421 6,742,617
Corporate obligations due:
Within 12 months 499,843 1,922 -- 501,765
Beyond 12 months but within 5 years -- -- -- --
- -------------------------------------------------------------------------------------------------------------
25,103,727 304,179 29,179 25,378,727
Mortgage-backed securities:
Government National Mortgage Association:
Within 12 months -- -- -- --
Beyond 12 months but within 5 years 7,864 265 -- 8,129
Beyond 5 years but within 10 years 831,834 27,363 -- 859,197
Beyond 10 years 18,686,822 291,974 2,777 18,976,019
Federal National Mortgage Association:
Within 12 months -- -- --
Beyond 12 months but within 5 years 13,248 455 -- 13,703
Beyond 5 years but within 10 years -- -- -- --
Beyond 10 years 9,639,373 124,996 10,436 9,753,933
Federal Home Loan Mortgage Corporation:
Within 12 months 505,153 -- 2,382 502,771
Beyond 12 months but within 5 years 620,593 11,351 -- 631,944
Beyond 5 years but within 10 years 65,185 2,463 -- 67,648
Beyond 10 years 7,330,507 94,099 22,371 7,402,235
- -------------------------------------------------------------------------------------------------------------
37,700,579 552,966 37,966 38,215,579
Equity securities 679,062 114,000 -- 793,062
Total investment securities $63,483,368 $ 971,145 $ 67,145 $64,387,368
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
------------------------------------------------------
SEPTEMBER 30, 1997
------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal National Mortgage Association:
Beyond 5 years but within 10 years $10,017,166 $ 36,873 $ -- $10,054,039
- -----------------------------------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE> 138
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
---------------------------------------------------------
SEPTEMBER 30, 1996
---------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agency obligations due:
Within 12 months $ 4,522,607 $ 1,948 $ 6,883 $ 4,517,672
Beyond 12 months but within 5 years 8,658,939 17,484 69,367 8,607,056
Beyond 5 years but within 10 years 3,663,422 11,093 55,906 3,618,609
Beyond 10 years 5,058,622 18,630 47,079 5,030,173
Corporate obligations due:
Within 12 months -- -- -- --
Beyond 12 months but within 5 years 498,901 9,067 -- 507,968
- -------------------------------------------------------------------------------------------------------------
22,402,491 58,222 179,235 22,281,478
Mortgage-backed securities:
Government National Mortgage Association
Within 12 months -- -- -- --
Beyond 12 months but within 5 years 12,325 356 -- 12,681
Beyond 5 years but within 10 years 487,294 14,226 -- 501,520
Beyond 10 years 11,381,676 77,710 44,565 11,414,821
Federal National Mortgage Association
Within 12 months -- -- -- --
Beyond 12 months but within 5 years -- -- -- --
Beyond 5 years but within 10 years 48,464 199 -- 48,660
Beyond 10 years 4,738,538 44,340 50,438 4,732,443
Federal Home Loan Mortgage Corporation
Within 12 months -- -- -- --
Beyond 12 months but within 5 years 854,091 1,816 22,445 833,462
Beyond 5 years but within 10 years 653,171 1,196 827 653,540
Beyond 10 years 5,624,293 46,512 43,080 5,627,725
- -------------------------------------------------------------------------------------------------------------
23,799,852 186,355 161,355 23,824,852
Equity securities 179,363 20,012 -- 199,375
- -------------------------------------------------------------------------------------------------------------
Total investment securities $46,381,706 $ 264,589 $ 340,590 $46,305,705
- -------------------------------------------------------------------------------------------------------------
</TABLE>
U.S. Government obligations carried at approximately $1,000,000 at September 30,
1997 were pledged to secure deposits and for other purposes required or
permitted by law.
Proceeds from sales of trading securities were $3,423,112 for the year ended
September 30, 1997. Gross gains of $259,359 were realized on those sales.
Additionally, proceeds from sales of mortgage-backed securities available for
sale were $659,743 for the year ended September 30, 1997. Net gain of $857 was
realized on those sales. There were no sales of securities in 1996 or 1995.
F-11
<PAGE> 139
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
4. LOANS RECEIVABLE, NET
Loans receivable, net at September 30, 1997 and 1996 are summarized below:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage loans:
Secured by 1-4 family residence $177,214,669 $133,575,713
Other 2,596,036 2,592,566
----------------------------------------------------------------------------------------------
$179,810,705 $136,168,279
Less loans in process 10,003,493 7,745,464
Deferred loan costs (43,292) (14,502)
----------------------------------------------------------------------------------------------
Total first mortgage loans 169,850,504 128,437,317
Home equity loans and lines 8,820,868 5,311,682
Other loans 4,086,773 2,930,814
Less allowance for loan losses (1,419,196) (1,128,279)
----------------------------------------------------------------------------------------------
$181,338,949 $135,551,534
----------------------------------------------------------------------------------------------
</TABLE>
Activity in the allowance for loan losses is summarized as follows for the years
ended September 30:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $1,128,279 $ 920,685 $711,212
Provision charged to income 360,000 300,000 304,000
Chargeoffs (76,317) (113,347) (103,837)
Recoveries 7,234 20,941 9,310
------------------------------------------------------------------------------------------------
Balance at end of year $1,419,196 $1,128,279 $920,685
------------------------------------------------------------------------------------------------
</TABLE>
Real estate loans in arrears three months or more or in process of foreclosure
at September 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER % OF REAL
OF LOANS AMOUNT ESTATE LOANS
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 70 $3,268,866 2.11%
1996 65 $1,796,003 1.49%
</TABLE>
The Bank had outstanding loan origination commitments of $9,216,350 and
$9,203,459, including $2,243,863 and $1,863,967 available on lines of credit, at
September 30, 1997 and 1996, respectively. There were no loans committed to be
sold at September 30, 1997. Included in loans receivable at September 30, 1996
are $283,350 of FHA and VA loans which the Bank committed to sell at par.
The Bank utilizes established loan underwriting procedures which generally
require the taking of collateral to secure loans and does not believe it has a
significant concentration of credit risk to any one borrower but does estimate
that essentially all of its loans are located within and around Allegheny and
Butler counties and surrounding counties in Pennsylvania.
F-12
<PAGE> 140
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
5. PREMISES AND EQUIPMENT
Premises and equipment and the related accumulated depreciation at September 30,
1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 996,558 $ 517,573
Buildings and improvements 1,703,577 1,611,803
Furniture and equipment 1,373,807 1,118,586
Construction in progress 151,418 --
---------------------------------------------------------------------------------------
4,225,360 3,247,962
Less accumulated depreciation (1,525,964) (1,347,813)
---------------------------------------------------------------------------------------
$ 2,699,396 $ 1,900,149
---------------------------------------------------------------------------------------
</TABLE>
The Bank leases office space under noncancelable operating leases. Future
minimum lease commitments under these operating lease agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30
------------------------------------------------------------------------------------
<S> <C>
1998 $ 66,300
1999 68,415
2000 70,636
2001 50,968
2002 51,416
2003 and thereafter 149,786
------------------------------------------------------------------------------------
Total minimum payments $457,521
------------------------------------------------------------------------------------
</TABLE>
Total rental expense for these leases charged to earnings was $64,286, $62,367,
and $36,540 for the years ended September 30, 1997, 1996, and 1995,
respectively.
6. DEPOSITS
Deposits at September 30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
BALANCES BY INTEREST RATE AMOUNT PERCENT AMOUNT PERCENT
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Savings accounts:
Regular checking $ 2,371,840 1.7% $ 2,807,808 2.3%
Interest checking 7,233,769 5.2 6,795,122 5.5
Passbook 26,065,424 18.8 26,041,017 20.9
Variable money market 5,130,329 3.7 3,345,539 2.7
-----------------------------------------------------------------------------------------------------
40,801,362 29.4 38,989,486 31.4
Certificate accounts:
0%-3.49% -- -- 2,246 --
3.50%-4.49% 253,904 0.2 68,500 0.1
4.50%-5.49% 32,185,036 23.2 38,658,993 31.1
5.50%-6.49% 46,734,056 33.7 36,978,137 29.7
6.50%-7.49% 17,988,704 13.0 9,434,554 7.6
7.50%-8.49% 650,600 0.4 209,657 0.1
8.50%-9.49% 117,200 0.1 -- --
-----------------------------------------------------------------------------------------------------
97,929,500 70.6 85,352,087 68.6
-----------------------------------------------------------------------------------------------------
$138,730,862 100.0% $124,341,573 100.0%
-----------------------------------------------------------------------------------------------------
</TABLE>
Individual retirement accounts totaled $13,040,158 and $11,698,433 at September
30, 1997 and 1996, respectively.
F-13
<PAGE> 141
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
6. DEPOSITS (CONTINUED)
Accrued interest payable on deposits included in other liabilities was $582,822
and $275,153 at September 30, 1997 and 1996, respectively.
The contractual maturity of certificate accounts are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1997 1996
--------------------------------------------------------------------------------------
<S> <C> <C>
Less than one year $64,680,940 $53,021,739
One to two years 16,066,946 17,425,218
Two to three years 4,553,434 3,954,565
Three to four years 2,272,106 3,457,260
Thereafter 10,356,074 7,493,305
--------------------------------------------------------------------------------------
$97,929,500 $85,352,087
--------------------------------------------------------------------------------------
</TABLE>
Certificate accounts of $100,000 or more at September 30, 1997 and 1996 were
$12,475,142 and $8,381,679, respectively.
The weighted average interest rates for all deposits at September 30, 1997 and
1996 was 4.81% and 4.67%, respectively.
The following schedule sets forth interest expense by fiscal year by type of
deposit:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Checking and money market accounts $ 225,973 $ 192,839 $ 220,105
Passbook accounts 873,895 791,561 976,135
Certificates 5,337,064 4,388,417 3,609,807
------------------------------------------------------------------------------------------------
$6,436,932 $5,372,817 $4,806,047
------------------------------------------------------------------------------------------------
</TABLE>
7. ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB)
The Bank is a member of the Federal Home Loan Bank System. As a member, the Bank
has the ability to borrow "advances" which are collateralized by certain
mortgages and securities. The Bank is also required to maintain an investment in
the capital stock of the Federal Home Loan Bank of Pittsburgh in an amount not
less than 1% of its outstanding residential loans or 5% of its outstanding
advances (whichever is greater), if any, payable to the Federal Home Loan Bank
of Pittsburgh as calculated at December 31 of each year.
Advances from the FHLB consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------ -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RATE AMOUNT RATE AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than 12 months 5.84% $ 9,250,000 5.50% $ 8,000,000
One to two years 6.42% 12,700,000 6.27% 1,750,000
Two to three years 6.18% 20,000,000 6.46% 7,700,000
Three to four years 6.78% 4,500,000 7.09% 2,800,000
Thereafter 6.03% 55,250,000 6.71% 16,250,000
------------------------------------------------------------------------------------------------------
6.12% $101,700,000 6.40% $36,500,000
------------------------------------------------------------------------------------------------------
</TABLE>
Approximately $49,500,000 of the outstanding FHLB advances are adjustable rate
notes with a weighted average yield of 5.88% at September 30, 1997. Advances
from the Federal Home Loan Bank of Pittsburgh are secured by the Bank's stock in
the Federal Home Loan Bank of Pittsburgh, qualifying residential mortgage loans,
U.S. Government securities, U.S. agency securities, and mortgage-backed
securities issued or guaranteed by GNMA, FHLMC, and FNMA to the extent that the
defined statutory value must be at least equal to the advances outstanding. The
maximum remaining borrowing capacity at
F-14
<PAGE> 142
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
7. ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB) (CONTINUED)
September 30, 1997 is approximately $81,222,000. The advances are subject to
restrictions or penalties in the event of prepayment.
8. INCOME TAXES
Income tax expense in the consolidated statements of income for the years ended
September 30, 1997, 1996, and 1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 847,556 $ 697,035 $ 561,305
Deferred 40,514 (310,868) (52,763)
State:
Current 190,230 55,774 45,458
----------------------------------------------------------------------------------------
$1,078,300 $ 441,941 $ 554,000
----------------------------------------------------------------------------------------
</TABLE>
A reconciliation from the expected federal statutory income tax provision to the
effective tax provision expressed as a percentage of pretax income is as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PRETAX
INCOME
--------------------------
YEAR ENDED SEPTEMBER 30
--------------------------
1997 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected federal tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal income tax effect 4.1 3.0 3.6
Tax-exempt interest income (2.9) (4.1) --
Other, net -- 3.5 6.4
-------------------------------------------------------------------------------------
Actual effective tax rate 35.2% 36.4% 44.0%
-------------------------------------------------------------------------------------
</TABLE>
Deferred federal income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for income tax purposes. Significant
components of deferred federal income tax assets and liabilities as of September
30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C>
Deferred federal income tax assets:
Allowance for loan losses $537,433 $415,032
Accrued insurance fund assessment -- 251,246
Unrealized loss on securities available for sale -- 26,000
Other 65,460 (1,686)
-------------------------------------------------------------------------------------
Total deferred federal income tax assets 602,893 690,592
Deferred federal income tax liabilities:
Tax-based bad debt reserve in excess of base year 139,055 166,960
Unrealized gain on securities available for sale 307,000 --
Other 14,719 --
-------------------------------------------------------------------------------------
Total deferred federal income tax liabilities 460,774 166,960
-------------------------------------------------------------------------------------
Net deferred federal income tax assets $142,119 $523,632
-------------------------------------------------------------------------------------
</TABLE>
Retained earnings at September 30, 1996 include financial statement tax bad debt
reserves of $3,385,000. The Small Business Job Protection Act of 1996 passed on
August 20, 1996 eliminated the special bad debt deduction previously granted
solely to thrifts. This results in the recapture of past taxes for permanent
deductions arising from the "applicable excess reserve," which is the total
amount of the Bank's reserve over its base year reserve as of September 30,
1987. The
F-15
<PAGE> 143
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
recapture tax is to be paid in six equal annual installments beginning after
September 30, 1996. However, deferral of these payments will be permitted for up
to two years, contingent upon the Bank satisfying a specified mortgage
origination test for 1996 and/or 1997. At September 30, 1996, the Bank had
$409,000 in excess of the base year reserves, and subject to prevailing
corporate tax rates, the Bank will owe $139,000 in federal taxes, which is
reflected as a deferred tax liability. No provision is required to be made for
the $2,894,000 of base year reserves.
The Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax which is
calculated at 11.5% of earnings based on generally accepted accounting
principles with certain adjustments.
9. EMPLOYEE COMPENSATION PLANS
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Company has an Employee Stock Ownership Plan for the benefit of employees
who meet eligibility requirements which include having completed one year of
service with the Bank and having attained age 21. The ESOP Trust purchased
174,570 shares of common stock in connection with the Company's initial public
offering with the proceeds from a loan from the Company. The Company makes cash
contributions to the ESOP on an annual basis sufficient to enable the ESOP to
make required loan payments to the Company.
The ESOP note bears a fixed rate of interest equal to 8.5%, with equal payments
of interest and principal payable quarterly over ten years. The loan is secured
by the shares of stock purchased.
The Company accounts for its ESOP in accordance with Statement of Position 93-6.
As the debt is repaid, shares are released from collateral and allocated to
qualified employees based on the proportion of debt service paid in the year.
Accordingly, the shares pledged as collateral are reported as deferred ESOP
shares in the statement of financial position. As shares are released from
collateral, the Company reports compensation expense equal to the current market
price of the shares, and the shares become outstanding for earnings per share
computations. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of debt.
Compensation expense for the ESOP was $220,827 and $95,379 for the years ended
September 30, 1997 and 1996, respectively. The following summarizes the status
of the ESOP shares at September 30:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------------------------------
<S> <C> <C>
Allocated shares -- --
Shares released for allocation 23,421 8,728
Shares distributed -- --
Unreleased shares 151,149 165,842
--------------------------------------------------------------------------------------
Total ESOP shares 174,570 174,570
--------------------------------------------------------------------------------------
Fair value of unreleased shares at September 30 $2,890,725 $1,969,373
--------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLAN
At a special meeting of the stockholders held on October 15, 1996, the Company's
stockholders adopted a Stock Option Plan which is designed to provide directors,
officers, and key employees with a proprietary interest in the Company as an
incentive to contribute to its success. A total of 218,212 shares of common
stock has been reserved for issuance pursuant to the plan, which represents 10%
of the common stock issued in connection with the Company's public offering. All
options granted to participants under the plan shall become vested and
exercisable at the rate of 20% per year on each annual anniversary date.
F-16
<PAGE> 144
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
9. EMPLOYEE COMPENSATION PLAN (CONTINUED)
STOCK OPTION PLAN (CONTINUED)
The grant price of all options is equal to the fair market value of the
Company's common stock at the grant date. The following table summarizes the
changes in stock options outstanding at September 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
EXERCISE PRICE PER SHARE $11.625 $13.000 $14.075 $15.000 TOTAL PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at October 1, 1996 -- -- -- -- -- --
Granted 152,737 9,000 17,456 5,500 184,693 12.02
Exercised -- -- -- -- -- --
Forfeited (8,182) -- -- -- (8,182) (11.63)
- -------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 1997 144,555 9,000 17,456 5,500 176,511 12.04
- -------------------------------------------------------------------------------------------------------------------
Exercisable at September 30, 1997 -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company accounts for stock options in accordance with Opinion No. 25. The
following pro forma information regarding net income and earnings per share
assumes the adoption of Statement No. 123 for stock options granted during the
year ended September 30, 1997. The estimated fair value of the options is
amortized to expense over the option and vesting period. The fair value was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions: risk-free interest rates of 6.0% and
a dividend yield of 1.3%; volatility factors of the expected market price of the
Company's common stock of .203 and a weighted-average expected life of seven
years.
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------------------
<S> <C>
Net income before stock options $1,983,296
Compensation expense (tax effected) from stock options 76,929
----------------------------------------------------------------------------
Pro forma net income $1,906,367
----------------------------------------------------------------------------
Pro forma earnings per share $ 1.00
----------------------------------------------------------------------------
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
RECOGNITION AND RETENTION PLAN AND TRUST
At a special meeting of the stockholders held on October 15, 1996, the
stockholders of the Company approved and established a Recognition and Retention
Plan and Trust, the objective of which is to retain qualified personnel in key
positions of the Company. Directors, officers, and key employees will be
eligible to receive benefits under the plan. During the year ended September 30,
1997, the Company contributed $1,063,170 to the trust to purchase 87,285 shares
of common stock in connection with the Company's public offering necessary to
establish the plan. Shares awarded under the Recognition and Retention Plan
(RRP) shall become vested and exercisable at the rate of 20% per year over five
years on each annual anniversary date. The Company is amortizing the prepaid
compensation and recording additions to stockholders' equity as the shares vest.
Compensation expense attributable to the plan amounted to $194,920 in 1997.
F-17
<PAGE> 145
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
THRIFT PLAN
Effective October 1, 1995, the Bank provided eligible employees participation in
a 401(k) contributory defined contribution plan. The Bank matches 50% of an
employee's contribution up to 6% of an employee's compensation. The Bank
contributed $87,300 and $86,700 to the 401(k) for the years ended September 30,
1997 and 1996, respectively.
The Bank participates in the Financial Institutions Retirement Fund (the Plan),
a multiemployer pension plan administrator. The Plan provides defined pension
benefits to substantially all of the Bank's employees. The Bank charged $60,000
to pension expense for each of the years ended September 30, 1997, 1996, and
1995, respectively.
10. STOCKHOLDERS' EQUITY
Under federal regulations, the Bank is required to maintain specific amounts of
capital. The following table sets forth certain information concerning the
Bank's regulatory capital:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------------------ ------------------------------------
TIER I TIER I TOTAL TIER I TIER I TOTAL
LEVERAGE RISK-BASED RISK-BASED LEVERAGE RISK-BASED RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL CAPITAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(000S) (000s)
Equity capital (1) $ 23,828 $ 23,828 $ 23,828 $ 21,817 $ 21,817 $ 21,817
Plus general valuation allowances (2) -- -- 1,419 -- -- 1,123
- ----------------------------------------------------------------------------------------------------------------------
Total regulatory capital 23,828 23,828 25,247 21,817 21,817 22,940
Minimum required capital 10,834 5,039 5,039 7,553 3,586 7,173
- ----------------------------------------------------------------------------------------------------------------------
Excess regulatory capital $ 12,994 $ 18,789 $ 20,208 $ 14,264 $ 18,231 $ 15,767
- ----------------------------------------------------------------------------------------------------------------------
Adjusted total assets $270,859 $ 125,979 $ 125,979 $188,832 $ 89,671 $ 89,671
- ----------------------------------------------------------------------------------------------------------------------
Regulatory capital as a percentage 8.80% 18.91% 20.04% 11.55% 24.33% 25.58%
Minimum capital required as a
percentage 4.00 4.00 8.00 4.00 4.00 8.00
- ----------------------------------------------------------------------------------------------------------------------
Excess regulatory capital as a
percentage 4.80% 14.91% 12.04% 7.55% 20.33% 17.58%
- ----------------------------------------------------------------------------------------------------------------------
Well capitalized requirement 5.00% 6.00% 10.00% 5.00% 6.00% 10.00%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents equity capital of the Bank as reported to the Pennsylvania
Department of Banking and the Federal Deposit Insurance Corporation.
(2) Limited to 1.25% of risk-adjusted total assets.
The Bank is also subject to more stringent Pennsylvania Department of Banking
capital guidelines. Although not adopted in regulation form, the Department
utilizes capital standards requiring a minimum of 6% leverage capital and 10%
risk-based capital.
In connection with the Bank's stock conversion, the Bank segregated and
restricted $11,167,000 of retained earnings, the amount of its regulatory
capital at that date, in a liquidation account for the benefit of eligible
savings account holders who continue to maintain their accounts at the Bank
after conversion. In the event of a complete liquidation of the Bank subsequent
to conversion, each eligible account holder will be entitled to receive a
distribution from the liquidation account in the amount proportionate to the
current adjusted balances of all qualifying deposits then held before any
liquidation distribution may be made with respect to the stockholders. Except
for the repurchase of stock and payment of dividends, the existence of the
liquidation account will not restrict the use or application of such capital.
Subsequent to the conversion, neither the Bank nor the Company may declare or
pay cash dividends on any of their shares of common stock if the effect would be
to reduce stockholders' equity below applicable regulatory capital requirements
or if such declaration and payment would otherwise violate regulatory
requirements.
F-18
<PAGE> 146
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
11. LOANS TO RELATED PARTIES
The Bank has granted loans to certain directors and officers of the Bank and to
their affiliates. Such loans are made in the ordinary course of business at the
Bank's normal credit terms and do not represent more than normal risk of
collection. These loans aggregated approximately $48,480, $51,880 and $277,563
at September 30, 1997, 1996 and 1995, respectively. There were $3,500 in new
loans granted and repayments approximated $6,900 in fiscal 1997.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of FAS No. 107, "Disclosures about Fair Value of Financial
Instruments," requires that the Company disclose estimated fair values for its
financial instruments. The market value of investments and mortgage-backed
securities, as presented in Note 3, are based primarily upon quoted market
prices. For substantially all other financial instruments, the fair values are
management's estimates of the values at which the instruments could be exchanged
in a transaction between willing parties. In accordance with FAS No. 107, fair
values are based on estimates using present value and other valuation techniques
in instances where quoted prices are not available. These techniques are
significantly affected by the assumptions used, including discount rates and
estimates of future cash flows. As such, the derived fair value estimates cannot
be substantiated by comparison to independent markets, and further, may not be
realizable in an immediate settlement of the instruments. FAS No. 107 also
excludes certain items from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent, and should not be
construed to represent, the underlying value of the Company.
Fair value estimates, methods, and assumptions are set forth below for the
Company's financial instruments:
Cash and interest-bearing deposits in financial institutions: The carrying
amounts reported in the balance sheet for cash and interest-bearing
deposits approximate those assets' fair value.
Investment securities, including mortgage-backed securities and equity
securities: Fair values are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
prices of comparable instruments (see Note 3).
Loans receivable: For variable rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying
values. The fair values for all other loans are estimated using discounted
cash flow analysis, using comparable interest rates offered for loans with
similar terms to borrowers of similar credit quality.
Deposit liabilities: The fair values disclosed for interest checking, money
market, and savings deposits are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts).
Fair values for certificates of deposit are estimated using a discounted
cash flow analysis, applying a comparable Federal Home Loan Bank advance
rate to the aggregated weighted average maturity on time deposits.
Borrowings: Fair values for the Company's variable rate FHLB advances and
other borrowings are deemed to equal carrying value. Fair values for fixed
rate borrowings are estimated using a discounted cash flow analysis similar
to that used in valuing fixed rate deposit liabilities.
F-19
<PAGE> 147
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
Off-balance sheet instruments: Fair values for the Company's commitments to
extend credit are based on their carrying value, taking into account the
remaining terms and conditions of the agreements.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and interest-bearing deposits $ 5,223,774 $ 5,223,774 $ 7,561,710 $ 7,561,710
Investment securities available for sale 64,387,368 64,387,368 46,305,705 46,305,705
Investments securities held to maturity 10,017,166 10,054,039 -- --
Trading securities 955,587 955,587 -- --
Loans receivable, net 181,338,949 185,012,000 135,551,534 137,780,005
Federal Home Loan Bank stock 5,110,000 5,110,000 1,875,000 1,875,000
LIABILITIES
Deposits 138,730,862 138,538,000 124,341,573 124,429,486
Advances from Federal Home Loan Bank 101,700,000 102,114,000 36,500,000 36,209,000
Advance payments by borrowers 1,649,312 1,649,312 1,847,815 1,847,815
</TABLE>
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly consolidated statements of income are as follows (dollar amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR THREE MONTHS ENDED YEAR
----------------------------------------- ENDED ----------------------------------------- ENDED
DECEMBER MARCH JUNE SEPTEMBER SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER SEPTEMBER
1996 1997 1997 1997 1997 1995 1996 1996 1996 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
interest
income $3,930 $4,328 $4,679 $ 5,027 $17,964 $2,986 $3,090 $3,255 $ 3,602 $12,933
Total
interest
expense 2,284 2,547 2,829 3,148 10,808 1,886 1,863 1,781 1,962 7,492
- --------------------------------------------------------------------------------------------------------------------------------
Net interest
income 1,646 1,781 1,850 1,879 7,156 1,100 1,227 1,474 1,640 5,441
Provision
for loan
losses 75 75 105 105 360 60 60 90 90 300
- --------------------------------------------------------------------------------------------------------------------------------
Net interest
income
after
provision
for loan
losses 1,571 1,706 1,745 1,774 6,796 1,040 1,167 1,384 1,550 5,141
Total
noninterest
income 110 88 227 304 729 93 87 90 98 368
Total
noninterest
expense 996 1,165 1,098 1,205 4,464 779 869 908 1,739 4,295
- --------------------------------------------------------------------------------------------------------------------------------
Income
(loss)
before
income
taxes 685 629 874 873 3,061 354 385 566 (91) 1,214
Income
taxes 242 206 327 303 1,078 134 143 197 (32) 442
- --------------------------------------------------------------------------------------------------------------------------------
Net income
(loss) $ 443 $ 423 $ 547 $ 570 $ 1,983 $ 220 $ 242 $ 369 $ (59) $ 772
- --------------------------------------------------------------------------------------------------------------------------------
Net
income
(loss)
per
share(1) $ .22 $ .23 $ .30 $ .30 $ 1.04 N/A N/A $ .18 $ (.03) $ .15
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Quarterly per share amounts do not add to total for the year ended September
1997, due to rounding.
F-20
<PAGE> 148
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
14. CONSOLIDATED FINANCIAL INFORMATION OF PITTSBURGH HOME FINANCIAL CORP.
(PARENT ONLY)
Pittsburgh Home Financial Corp. was organized in September 1995 and began
operations on April 1, 1996. The Company's balance sheets as of September 30,
1997 and 1996 and related statements of income and cash flows are as follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 708,992 $ 5,400,097
Investment securities available for sale 2,795,721 3,190,632
Investment securities trading 955,587 --
Investment in Pittsburgh Home Savings Bank 24,343,750 21,752,396
Other assets 51,335 40,566
- ------------------------------------------------------------------------------------------------------
Total assets $28,855,385 $30,383,691
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities $ 41,000 $ 11,675
Total stockholders' equity 28,814,385 30,372,016
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $28,855,385 $30,383,691
- ------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 277,902 $ 237,131
Noninterest income 310,071 --
Noninterest expense (612,731) (151,814)
- ------------------------------------------------------------------------------------------------------
(Loss) income before income taxes and equity in earnings of subsidiary (24,758) 85,317
Income tax expense 2,300 29,875
- ------------------------------------------------------------------------------------------------------
(Loss) income before equity in earnings of subsidiary (27,058) 55,442
Equity in earnings of Pittsburgh Home Savings Bank 2,010,354 255,326
- ------------------------------------------------------------------------------------------------------
Net income $ 1,983,296 $ 310,768
- ------------------------------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE> 149
PITTSBURGH HOME FINANCIAL CORP.
Notes to Consolidated Financial Statements (continued)
14. CONSOLIDATED FINANCIAL INFORMATION OF PITTSBURGH HOME FINANCIAL CORP.
(PARENT ONLY) (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,983,296 $ 310,768
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Equity in earnings of Pittsburgh Home Savings Bank (2,010,354) (255,326)
Amortization of ESOP and RRP shares 415,747 95,739
Net investment security trading purchases and sales (955,587) --
Change in other assets and liabilities (20,533) (28,891)
- ------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (587,431) 122,290
INVESTING ACTIVITIES
Investment in Pittsburgh Home Savings Bank -- (10,425,624)
Purchases of investment securities (500,000) (3,240,632)
Proceeds from sales of investment securities 1,000,000 --
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 500,000 (13,666,256)
FINANCING ACTIVITIES
Proceeds from sale of common stock -- 19,053,168
Cash dividend on common stock (592,500) (109,105)
Purchase of stock for Treasury and RRP (4,011,174) --
- ------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (4,603,674) 18,944,063
- ------------------------------------------------------------------------------------------------------
(Decrease) increase in cash (4,691,105) 5,400,097
Cash at beginning of year 5,400,097 --
- ------------------------------------------------------------------------------------------------------
Ending cash and cash equivalents $ 708,992 $ 5,400,097
- ------------------------------------------------------------------------------------------------------
</TABLE>
F-22
<PAGE> 150
=================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST
ISSUER OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information....................................
Summary ................................................
Selected Consolidated Financial
and Other Data of the Company..........................
Risk Factors.............................................
Use of Proceeds..........................................
Market for the Preferred Securities......................
Accounting Treatment.....................................
Ratio of Earnings to Fixed Charges.......................
Capitalization...........................................
Management's Discussion and Analysis of Financial
Condition and Results of Operation.....................
Business ................................................
Regulation...............................................
Management...............................................
Description of the Preferred Securities..................
Description of the Junior Subordinated
Debentures.............................................
Description of the Guarantee.............................
Relationship Among the Preferred
Securities, the Junior Subordinated
Debentures, the Expense Agreement
and the Guarantee......................................
Certain Federal Income Tax Consequences..................
ERISA Considerations.....................................
Underwriting.............................................
Validity of Securities...................................
Experts..................................................
Index to Financial Statements............................
</TABLE>
=================================================================
=================================================================
$10,000,000
PITTSBURGH HOME CAPITAL
TRUST I
____% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$10 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
PITTSBURGH HOME
FINANCIAL CORP.
------------------------------------
PROSPECTUS
------------------------------------
RYAN, BECK & CO.
_________________, 1998
=================================================================
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee.......................................... $ 3,392.50
NASD fee...................................................... 1,650.00
Nasdaq fees................................................... 10,750.00
Trustees' fees and expenses................................... 5,000.00
Legal fees and expenses....................................... 80,000.00*
Accounting fees and expenses.................................. 35,000.00*
Printing expenses............................................. 40,000.00
Underwriters expenses......................................... 70,000.00*
Miscellaneous expenses........................................ 4,207,00*
-----------
Total................................................ $250,000.00*
===========
- ------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the Pennsylvania Business Corporation Act, Article
9 of the Pittsburgh Home Financial Corp. (the "Corporation") Amended and
Restated Articles of Incorporation provides as follows:
ARTICLE 9. INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS.
A. PERSONAL LIABILITY OF DIRECTORS AND OFFICERS. The personal
liability of the directors and officers of the Corporation for monetary damages
for conduct in their capacities as such shall be eliminated to the fullest
extent permitted by the BCL as it exists on the effective date of these Amended
and Restated Articles of Incorporation or as such law may be thereafter in
effect. No amendment, modification or repeal of Section A of this Article 9,
nor the adoption of any provision of these Amended and Restated Articles of
Incorporation inconsistent with Section A of this Article 9, shall adversely
affect the rights provided hereby with respect to any claim, issue or matter in
any proceeding that is based in any respect on any alleged action or failure to
act prior to such amendment, modification, repeal or adoption.
B. INDEMNIFICATION. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal,
II-1
<PAGE> 152
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under Pennsylvania law.
C. ADVANCEMENT OF EXPENSES. Reasonable expenses incurred by an
officer, director, employee or agent of the Corporation in defending a civil or
criminal action, suit or proceeding described in Section B of this Article 9
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined that the
person is not entitled to be indemnified by the Corporation.
D. OTHER RIGHTS. The indemnification and advancement of expenses
provided by or pursuant to this Article 9 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
E. INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article 9.
F. SECURITY FUND; INDEMNITY AGREEMENTS. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Corporation
may create and fund a trust fund or fund of any nature, and may enter into
agreements with its officers, directors, employees and agents for the purpose
of securing or insuring in any manner its obligation to indemnify or advance
expenses provided for in this Article 9.
G. MODIFICATION. The duties of the Corporation to indemnify and to
advance expenses to any person as provided in this Article 9 shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 9, and no amendment or
termination of any trust or other fund created pursuant to Section F of this
Article 9, shall alter to the detriment of such person the right of such person
to the advance of expenses or indemnification related to a claim based on an
act or failure to act which took place prior to such amendment, repeal or
termination.
II-2
<PAGE> 153
H. PROCEEDINGS INITIATED BY INDEMNIFIED PERSONS. Notwithstanding any
other provision of this Article 9, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated by (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of
or participation in the action, suit or proceeding is authorized, either before
or after its commencement, by the affirmative vote of a majority of the
directors in office.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not Applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
EXHIBIT NO. DESCRIPTION
- ------------------------------------------
1 Form of Underwriting Agreement
4.1 Indenture of the Corporation relating to the Junior Subordinated
Debentures
4.2 Form of Certificate of Junior Subordinated Debenture (included as
Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Pittsburgh Home Capital Trust I
4.4 Amended and Restated Trust Agreement of Pittsburgh Home Capital Trust I
4.5 Form of Trust Preferred Security Certificate for Pittsburgh Home
Capital Trust I
4.6 Form of Guarantee of the Corporation relating to the Trust Preferred
Securities
5.1 Opinion and consent of Elias, Matz, Tiernan & Herrick L.L.P. as to
legality of the Junior Subordinated Debentures and the Guarantee to be
issued by the Corporation
5.2 Opinion and consent of Richards, Layton & Finger, P.A., as to legality
of the Trust Preferred Securities to be issued by Pittsburgh Home
Capital Trust I
8 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. as to certain federal
income tax matters
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in Exhibit
5.1)
23.3 Consent of Richard, Layton & Finger, P.A. (included in Exhibit 5.2)
24 Power of Attorney of certain officers and directors of the Corporation
(located on the signature page to Form S-1)
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Declaration of Trust of Pittsburgh Home Capital
Trust I
25.3 Form T-1 Statement of Eligibility of The Bank of New York under the
Guarantee for the benefit of the holders of the Trust Preferred
Securities
II-3
<PAGE> 154
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required
under the rules of Regulation S-X.
ITEM 17. UNDERTAKINGS.
Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
Prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities
II-4
<PAGE> 155
(other than the payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Pittsburgh, Commonwealth of Pennsylvania, on the 18th day of December 1997.
PITTSBURGH HOME FINANCIAL CORP.
By: ______________________________
J. Ardie Dillen
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers of
Pittsburgh Home Financial Corp., whose signature appears below hereby appoints
J. Ardie Dillen and Michael J. Kirk, and each of them severally, as his or her
attorney-in-fact to sign in his or her name and behalf, in any and all
capacities stated below and to file with the Securities and Exchange Commission
any and all amendments to this Registration Statement on Form S-1, making such
changes in the Registration Statement as appropriate, and generally to do all
such things in their behalf in their capacities as directors and/or officers to
enable Pittsburgh Home Financial Corp. to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
Name Title Date
- --------------------------------------- -------------------------------------- ------------------------------
<S> <C> <C>
Chairman of the Board, December 18, 1997
- ------------------------------------ President and Chief Executive
J. Ardie Dillen Officer
(principal executive officer)
Senior Vice President and Chief December 18, 1997
- ------------------------------------ Financial Officer
Michael J. Kirk (principal financial and
accounting officer)
Director and Corporate Secretary December 18, 1997
- ------------------------------------
Gregory G. Maxcy
</TABLE>
II-6
<PAGE> 157
<TABLE>
<S> <C> <C>
- ------------------------------------ Director December 18, 1997
Jess B. Mellor
- ------------------------------------ Director December 18, 1997
Joseph G. Lang
- ------------------------------------ Director December 18, 1997
Richard F. Lerach
- ------------------------------------ Director December 18, 1997
Kenneth F. Maxcy, Jr.
- ------------------------------------ Director December 18, 1997
Stephen Spolar
- ------------------------------------ Director December 18, 1997
Charles A. Topnick
- ------------------------------------ Director December 18, 1997
Kenneth R. Rieger
</TABLE>
II-7
<PAGE> 158
Pursuant to the requirements of the Securities Act of 1933, Pittsburgh
Home Capital Trust I has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Pittsburgh, Commonwealth of Pennsylvania, on the 18th day of December 1997.
Each of the administrative trustees of Pittsburgh Home Capital Trust I whose
signature appears below hereby appoints J. Ardie Dillen and Michael J. Kirk,
and each of them severally, as his or her attorney-in-fact to sign in his or
her name and behalf, in any and all capacities stated below and to file with
the Securities and Exchange Commission any and all amendments to this
Registration Statement on Form S-1, making such changes in the Registration
Statement as appropriate, and generally to do all such things in their behalf
in their capacities as administrative trustees to enable Pittsburgh Home
Capital Trust I to comply with the provisions of the Securities Act of 1933,
and all requirements of the Securities and Exchange Commission.
PITTSBURGH HOME CAPITAL TRUST I
By: __________________________
J. Ardie Dillen
Administrative Trustee
By: __________________________
Michael J. Kirk
Administrative Trustee
By: __________________________
Gregory G. Maxcy
Administrative Trustee
II-8
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Pittsburgh, Commonwealth of Pennsylvania, on the 18th day of December 1997.
PITTSBURGH HOME FINANCIAL CORP.
By: /s/ J. ARDIE DILLEN
--------------------------------
J. Ardie Dillen
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers of
Pittsburgh Home Financial Corp., whose signature appears below hereby appoints
J. Ardie Dillen and Michael J. Kirk, and each of them severally, as his or her
attorney-in-fact to sign in his or her name and behalf, in any and all
capacities stated below and to file with the Securities and Exchange Commission
any and all amendments to this Registration Statement on Form S-1, making such
changes in the Registration Statement as appropriate, and generally to do all
such things in their behalf in their capacities as directors and/or officers to
enable Pittsburgh Home Financial Corp. to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
Name Title Date
- --------------------------------------- ------------------------------------------- ------------------------------
<S> <C> <C>
/s/ J. ARDIE DILLEN Chairman of the Board, December 18, 1997
- ------------------------------ President and Chief Executive
J. Ardie Dillen Officer
(principal executive officer)
/s/ MICHAEL J. KIRK Senior Vice President and Chief December 18, 1997
- ------------------------------ Financial Officer
Michael J. Kirk (principal financial and
accounting officer)
/s/ GREGORY G. MAXCY Director and Corporate Secretary December 18, 1997
- ------------------------------
Gregory G. Maxcy
/s/ JESS B. MELLOR Director December 18, 1997
- ------------------------------
Jess B. Mellor
</TABLE>
II-9
<PAGE> 160
<TABLE>
<S> <C> <C>
/s/ JOSEPH G. LANG Director December 18, 1997
- ------------------------------
Joseph G. Lang
/s/ RICHARD F. LERACH Director December 18, 1997
- ------------------------------
Richard F. Lerach
/s/ KENNETH F. MAXCY, JR. Director December 18, 1997
- ------------------------------
Kenneth F. Maxcy, Jr.
/s/ STEPHEN SPOLAR Director December 18, 1997
Stephen Spolar
/s/ CHARLES A. TOPNICK Director December 18, 1997
- -----------------------------
Charles A. Topnick
/s/ KENNETH R. RIEGER Director December 18, 1997
- ------------------------------
Kenneth R. Rieger
</TABLE>
II-10
<PAGE> 161
Pursuant to the requirements of the Securities Act of 1933, Pittsburgh
Home Capital Trust I has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Pittsburgh, Commonwealth of Pennsylvania, on the 18th day of December 1997.
Each of the administrative trustees of Pittsburgh Home Capital Trust I whose
signature appears below hereby appoints J. Ardie Dillen and Michael J. Kirk,
and each of them severally, as his or her attorney-in-fact to sign in his or
her name and behalf, in any and all capacities stated below and to file with
the Securities and Exchange Commission any and all amendments to this
Registration Statement on Form S-1, making such changes in the Registration
Statement as appropriate, and generally to do all such things in their behalf
in their capacities as administrative trustees to enable Pittsburgh Home
Capital Trust I to comply with the provisions of the Securities Act of 1933,
and all requirements of the Securities and Exchange Commission.
PITTSBURGH HOME CAPITAL TRUST I
By: /s/ J. ARDIE DILLEN
---------------------------
J. Ardie Dillen
Administrative Trustee
By: /s/ MICHAEL J. KIRK
---------------------------
Michael J. Kirk
Administrative Trustee
By: /s/ GREGORY G. MAXCY
---------------------------
Gregory G. Maxcy
Administrative Trustee
II-11
<PAGE> 1
EXHIBIT 1
PITTSBURGH HOME CAPITAL TRUST I
(a Delaware business trust)
1,000,000 Preferred Securities
[___]% Cumulative Trust Preferred Securities
(Liquidation Amount $10 per Preferred Security)
UNDERWRITING AGREEMENT
----------------------
January [___], 1998
Ryan, Beck & Co., Inc.
220 South Orange Avenue
Livingston, New Jersey 07039
Ladies and Gentlemen:
Pittsburgh Home Capital Trust I (the "Trust"), a statutory
business trust organized under the Business Trust Act (the "Delaware Act") of
the State of Delaware (Chapter 38, Title 12, of the Delaware Business Code, 12
Del. C. Section 3801 et seq.), and Pittsburgh Home Financial Corp., a
Pennsylvania corporation (the "Company"), as depositor of the Trust and as
guarantor (hereafter the Trust and the Company are referred to collectively as
the "Offerors"), hereby confirm their agreement (the "Agreement") with Ryan
Beck & Co., Inc. ("You" or the "Underwriter"), with respect to the issue and
sale by the Trust and the purchase by the Underwriter of 1,000,000 (the
"Initial Securities") of the Trust's _____% Cumulative Trust Preferred
Securities (the "Preferred Securities"). The Trust and the Company also propose
to issue and sell to the Underwriter, at the Underwriter's option, up to an
additional 150,000 Preferred Securities (the "Option Securities") as set forth
herein. The term "Preferred Securities" as used herein, unless indicated
otherwise, shall mean the Initial Securities and the Option Securities.
The Preferred Securities and the Common Securities (as
defined herein) are to be issued pursuant to the terms of an Amended and
Restated Trust Agreement dated as of the Closing Time (as hereinafter defined)
(the "Trust Agreement"), among the Offerors, The Bank of New York ("Trust
Company"), a New York banking corporation, as property trustee ("Property
Trustee"), and
<PAGE> 2
The Bank of New York (Delaware), as Delaware trustee ("Delaware Trustee"), and
J. Ardie Dillen, Michael J. Kirk and Gregory C. Maxcy (the "Administrative
Trustees" and, together with the Property Trustee and the Delaware Trustee,
(the "Trustees") and the holders from time to time of undivided interests in
the assets of the Trust. The Preferred Securities will be guaranteed by the
Company, on a subordinated basis and subject to certain limitations, with
respect to distributions and payments upon liquidation, redemption or otherwise
(the "Guarantee") pursuant to the Guarantee Agreement dated as of the Closing
Time (the "Guarantee Agreement"), between the Company and the Trust Company, as
guarantee trustee (the "Guarantee Trustee"). The Company will guarantee the
full payment of any costs, expenses or liabilities of the Trust, other than
obligations of the Trust to pay to the holders of Preferred Securities the
amounts due to such holders, pursuant to the Agreement as to Expenses and
Liabilities dated as of the Closing Time between the Trust and the Company
("Expense Agreement"). The assets of the Trust will consist of [____]% junior
subordinated debentures due [_________], 2028 (the "Junior Subordinated
Debentures") of the Company which will be issued under the Indenture dated as
of the Closing Time (the "Indenture"), between the Company and the Trust
Company, as trustee (the "Indenture Trustee"). Under certain circumstances, the
Junior Subordinated Debentures will be distributable to the holders of
undivided beneficial interests in the assets of the Trust. The entire proceeds
from the sale of the Preferred Securities will be combined with the entire
proceeds from the sale by the Trust to the Company of the Trust's common
securities (the "Common Securities"), and will be used by the Trust to purchase
an equivalent amount of the Junior Subordinated Debentures.
The initial public offering price for the Preferred
Securities, the purchase price to be paid by the Underwriter for the Preferred
Securities, the commission per Preferred Security to be paid by the Company to
the Underwriters and the rate of interest to be paid on the Preferred
Securities shall be agreed upon by the Company and the Underwriter, and such
agreement shall be set forth in a separate written instrument substantially in
the form of Exhibit A hereto (the "Price Determination Agreement"). The Price
Determination Agreement may take the form of an exchange of any standard form
of written telecommunication between the Company and the Underwriter and shall
specify such applicable information as is indicated in Exhibit A hereto. Such
Price Determination Agreement shall be executed no later than 5:30 p.m. on the
first business day following the date hereof. The offering of the Preferred
Securities will be governed by this Agreement, as supplemented by the Price
Determination Agreement. From and after the date of the execution and delivery
of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and all references herein to "this Agreement" shall be deemed to
include, the Price Determination Agreement.
The Offerors have prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File Nos. 333-[_____] and 333-[______]- 01) for the registration of the
Preferred Securities, the Guarantee and the Junior Subordinated Debentures
under the Securities Act of 1933, as amended (the "1933 Act"), including the
related preliminary prospectus or prospectuses, and, if such registration
statement has not become effective, the Company will prepare and file, prior to
the effective date of such registration statement, an
2
<PAGE> 3
amendment to such registration statement, including a final prospectus. Each
prospectus used before the time such registration statement becomes effective
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and the documents incorporated by reference
therein pursuant to Item 12 of Form S-1 under the 1933 Act, at the time it
becomes effective, is herein called the "Registration Statement," and the
prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-1 under the 1933 Act, included in the Registration
Statement at the time it becomes effective is herein called the "Prospectus"
except that, if any revised prospectus provided to the Underwriter by the
Company for use in connection with the offering of the Preferred Securities
differs from the prospectus included in the Registration Statement at the time
it becomes effective (whether or not such prospectus is required to be filed
pursuant to Rule 424(b)), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first furnished to the Underwriter for
such use.
The Company understands that the Underwriter proposes to make
a public offering of the Preferred Securities (the "Offering") as soon as
possible after the Registration Statement becomes effective. The Underwriter
may assemble and manage a selling group of broker-dealers that are members of
the National Association of Securities Dealers, Inc. ("NASD") to participate in
the solicitation of purchase orders for the Preferred Securities under the form
of a master selected dealer agreement or similar form of dealer agreement,
which the Underwriter has entered into with such broker dealers.
Section 1. Representations and Warranties.
(a) The Offerors jointly and severally represent and warrant
to and agree with the Underwriter that:
(i) The Company meets the requirements for use of Form S-1
under the 1933 Act and when the Registration Statement on such form
shall become effective and at the Closing Time referred to below and,
with respect to Option Securities, on the Date of Delivery referred to
below, (A) the Registration Statement and any amendments and
supplements thereto will comply in all material respects with the
requirements of the 1933 Act and the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"); (B)
neither the Registration Statement nor any amendment or supplement
thereto will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading; and (C) neither the Prospectus nor any
amendment or supplement thereto will include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that none of the
representations and warranties in this Section 1(a)(i)(B) & (C) shall
apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Offerors by
the Underwriter expressly for use in the Registration Statement or the
3
<PAGE> 4
Prospectus, [or any information contained in any Form T-1 which is an
exhibit to the Registration Statement.] The statements contained under
the caption "Underwriting" in the Registration Statement or the
Prospectus constitute the only information furnished to the Offerors
in writing by the Underwriter expressly for use in the Registration
Statement or the Prospectus.
(ii) The documents incorporated by reference in the
Prospectus pursuant to Item 12 of Form S-1 under the 1933 Act, at the
time they were filed with the Commission, complied in all material
respects with the requirements of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations") and, when read
together and with the other information in the Prospectus, at the time
the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, in each case after excluding any statement
that does not constitute a part of the Registration Statement or the
Prospectus pursuant to Rule 412 of the 1933 Act Regulations.
(iii) Ernst & Young LLP, who are reporting upon the audited
financial statements included or incorporated by reference in the
Registration Statement, are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) This Agreement has been duly authorized, executed and
delivered by the Offerors and, when duly executed by the Underwriter,
will constitute the valid and binding agreement of the Offerors
enforceable against the Offerors in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, or
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles. The Guarantee Agreement, the Junior Subordinated
Debentures, the Trust Agreement and the Indenture have each been duly
authorized by the Company and when validly executed and delivered by
the Company and, in the case of the Guarantee, by the Guarantee
Trustee, in the case of the Trust Agreement, by the Trustees, and in
the case of the Indenture, by the Indenture Trustee, will constitute
valid and legally binding obligations of the Company enforceable in
accordance with their respective terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, or reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or general equitable principles; the Junior
Subordinated Debentures are entitled to the benefits of the Indenture;
and the Guarantee Agreement, the Junior Subordinated Debentures, the
Trust Agreement and the Indenture conform, in all material respects,
to the descriptions thereof in the Prospectus. The Trust Agreement,
the Guarantee Agreement, and the Indenture have been duly qualified
under the Trust Indenture Act of 1939, amended (the "TIA").
4
<PAGE> 5
(v) The consolidated financial statements, audited and
unaudited (including the Notes thereto), included or incorporated by
reference in the Registration Statement present fairly the
consolidated financial position of the Company and its subsidiaries as
of the dates indicated therein and the consolidated statements of
income and cash flows of the Company and its subsidiaries for the
periods specified therein. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except
as otherwise stated therein. The financial statement schedules, if
any, included in the Registration Statement present fairly the
information required to be stated therein. The selected financial, pro
forma and statistical data included in the Prospectus are accurate in
all material respects and present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
consolidated financial statements included or incorporated by
reference in the Registration Statement.
(vi) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Pennsylvania with
corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectus. The Company is duly qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction
in which it owns or leases property of a nature, or transacts business
of a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs, assets or business prospects
of the Company and its subsidiaries, considered as one enterprise.
(vii) The Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended
("BHCA"); each subsidiary of the Company that conducts business as a
bank is duly authorized to conduct such business in each jurisdiction
in which such business is currently conducted, except to the extent
that the failure to be so authorized would not have a material adverse
effect on the Company and its subsidiaries, considered as one
enterprise; and the deposit accounts of Pittsburgh Home Savings Bank
(the "Bank") are insured by the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation ("FDIC") up to the maximum
allowable limits thereof. The Offerors have all such power, authority,
authorization, approvals and orders as may be required to enter into
this Agreement, to carry out the provisions and conditions hereof and
to issue and sell the Preferred Securities.
(viii) The Bank is a Pennsylvania chartered stock savings
bank duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania with corporate power and
authority under such laws to own, lease and operate its properties and
conduct its business; the Bank is duly qualified to transact business
as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification
5
<PAGE> 6
necessary, except to the extent that the failure to so qualify or be
in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise. All of the outstanding shares of capital stock of
the Bank have been duly authorized and validly issued and are fully
paid and non-assessable and are owned by the Company directly, free
and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind.
(ix) Except for the Bank and the Trust, the Company does not
have any "significant subsidiaries" as defined in Rule 1-02 of
Regulation S-X under the 1933 Act.
(x) The Company had at the date indicated a duly authorized
and outstanding capitalization as set forth in the Prospectus under
the caption "Capitalization"; the capital stock of the Company, and
the Subordinated Debentures conform in all material respects to the
description thereof contained or incorporated by reference in the
Prospectus and such description conforms to the rights set forth in
the instruments defining the same.
(xi) The Preferred Securities have been duly and validly
authorized by the Trust for issuance and sale to the Underwriter
pursuant to this Agreement and, when executed and authenticated in
accordance with the terms of the Trust Agreement and delivered by the
Trust to the Underwriter pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued and fully
paid and non-assessable. The Trust Agreement has been duly authorized
by the Trust and, when executed by the Property Trustee and the
Administrative Trustees of the Trust and delivered by the Trust, will
have been duly executed and delivered by the Trust and will constitute
the valid and legally binding instrument of the Trust, enforceable in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting enforcement of creditors' rights
generally or by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law). The
Preferred Securities conform, in all material respects, to the
statements relating thereto contained in the Prospectus and such
description conforms, in all material respects, to the rights set
forth in the instruments defining the same; the holders of the
Preferred Securities (the "Security holders") will be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General
Corporation Law of the State of Delaware; and the issuance of the
Preferred Securities is not subject to the preemptive or other similar
rights of any security holder of the Company.
(xii) The Common Securities have been duly and validly
authorized by the Trust and upon delivery by the Trust to the Company
against payment therefor as described in the Prospectus, will be duly
and validly issued and fully paid undivided beneficial interests in
the assets of the Trust and will conform, in all material respects, to
the description thereof contained in the Prospectus and such
description conforms, in all material respects, to the
6
<PAGE> 7
rights set forth in the instruments defining the same; the issuance of
the Common Securities is not subject to preemptive or other similar
rights; and at the Closing Time, all of the issued and outstanding
Common Securities of the Trust will be directly owned by the Company
free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(xiii) The Trust has been duly created and is validly
existing as a statutory business trust in good standing under the
Delaware Act with the power and authority to own, lease and operate
its properties and conduct its business as described in the
Prospectus, and the Trust has conducted no business to date, and it
will conduct no business in the future that would be inconsistent with
the description of the Trust set forth in the Prospectus; the Trust is
not a party to or bound by any agreement or instrument other than this
Agreement, the Trust Agreement and the agreements and instruments
contemplated by the Trust Agreement or described in the Prospectus;
the Trust has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement and the Trust
Agreement and described in the Prospectus; and the Trust is not a
party to or subject to any action, suit or proceeding of any nature.
(xiv) The issuance and sale of the Preferred Securities and
the Common Securities by the Trust, the compliance by the Trust with
all of the provisions of this Agreement, the purchase of the Junior
Subordinated Debentures by the Trust, and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, loan agreement, mortgage, deed of trust or other
agreement or instrument to which the Trust is a party or by which the
Trust is bound or to which any of the property or assets of the Trust
is subject, nor will such action result in any violation by the Trust
of the provisions of the Trust Agreement or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Trust or any of its properties, except in any
case for such conflicts, breaches, defaults or violations that would
not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs, assets or business prospects
of the Company and its subsidiaries, considered as one enterprise; and
no consent, approval, authorization, order, license, certificate,
permit, registration or qualification of or with any such court or
other governmental agency or body is required to be obtained by the
Trust for the issue and sale of the Preferred Securities and the
Common Securities by the Trust, the purchase of the Junior
Subordinated Debentures by the Trust or the consummation by the Trust
of the transactions contemplated by this Agreement and the Trust
Agreement, except for such consents, approvals, authorizations,
licenses, certificates, permits, registrations or qualifications as
have already been obtained, or as may be required under the 1933 Act
or the 1933 Act Regulations, 1934 Act or 1934 Act Regulations, state
securities laws or under the TIA.
The issuance by the Company of the Guarantee and the Junior
Subordinated Debentures, the compliance by the Company with all of the
provisions of this Agreement,
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<PAGE> 8
the execution, delivery and performance by the Company of the Trust
Agreement, the Junior Subordinated Debentures, the Guarantee Agreement
and the Indenture, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any material indenture, loan agreement, mortgage, deed
of trust, or other material agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of
the property or assets of the Company is subject, nor will such action
result in any violation by the Company of the provisions of the
Certificate of Incorporation or by-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its properties,
except in any case for such conflicts, breaches, defaults or
violations that would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise; and no consent, approval, authorization, order,
license, certificate, permit, registration or qualification of or with
any such court or other governmental agency or body is required to be
obtained by the Company for the issue of the Guarantee and the Junior
Subordinated Debentures or the consummation by the Company of the
other transactions contemplated by this Agreement, except for such
consents, approvals, authorizations, licenses, certificates, permits,
registrations or qualifications as have already been obtained, or as
may be required under the 1933 Act or the 1933 Act Regulations, 1934
Act or 1934 Act Regulations, state securities laws or under the TIA.
(xv) The Trust is not, and after giving effect to the
offering and sale of the Preferred Securities will not be, an
"investment company," or an entity "controlled" by an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
(xvi) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable, and none of the outstanding shares of capital
stock was issued in violation of the preemptive rights of any
stockholder of the Company.
(xvii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not been (A) any material adverse
change in the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, (B) any transaction entered into by
the Company or any subsidiary, other than in the ordinary course of
business, that is material to the Company and its subsidiaries,
considered as one enterprise, or (C) any dividend or distribution of
any kind declared, paid or made by the Company on its capital stock,
excluding the regular quarterly dividend paid on its common stock.
Neither the
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<PAGE> 9
Company nor the Bank has any material liability of any nature,
contingent or otherwise, except as set forth in the Prospectus.
(xviii) Neither the Company nor the Bank is in violation of
any provision of its charter or by-laws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is
a party or by which it may be bound or to which any of its properties
may be subject, except for such defaults that would not have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs, assets or business prospects of the
Company and its subsidiaries, considered as one enterprise.
(xix) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against the Company or the Bank
that is required to be disclosed in the Prospectus or that could
reasonably be expected to result in any material adverse change in the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise, or that could reasonably be expected to materially
and adversely affect the properties or assets of the Company and its
subsidiaries, considered as one enterprise, or that could reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement; all pending legal or
governmental proceedings to which the Company or the Bank is a party
that are not described in the Prospectus, including ordinary routine
litigation incidental to its business, if decided in a manner adverse
to the Company, would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as
one enterprise.
(xx) There are no material contracts or documents of a
character required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration
Statement that are not described and filed as required.
(xxi) The Company and the Bank each has good and marketable
title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as (A) are described in the Prospectus or
(B) are neither material in amount nor materially significant in
relation to the business of the Company and its subsidiaries,
considered as one enterprise; all of the leases and subleases material
to the business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or the Bank holds properties
described in the Prospectus, are in full force and effect, and neither
the Company nor the Bank has any notice of any material claim that has
been asserted by anyone adverse to the rights of the Company or the
Bank under any of the leases or subleases mentioned above, or
affecting or questioning the rights
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<PAGE> 10
of such corporation to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xxii) Each of the Company and the Bank owns, possesses or
has obtained all material governmental licenses, permits,
certificates, consents, orders, approvals and other authorizations
necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as presently conducted, and
neither the Company nor the Bank has received any notice of any
restriction upon, or any notice of proceedings relating to revocation
or modification of, any such licenses, permits, certificates,
consents, orders, approvals or authorizations.
(xxiii) Except as disclosed in the Prospectus, no labor
problem exists with the employees of the Company or with employees of
the Bank or, to the best knowledge of the Company, is imminent that
could, materially adversely affect the Company and its subsidiaries,
considered as one enterprise, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or the Bank's principal suppliers, contractors or customers that could
reasonably be expected to materially adversely affect the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one
enterprise.
(xxiv) There are no persons with registration or other
similar rights to have any securities of the Company registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(xxv) Except as disclosed in the Prospectus, the Company and
the Bank own or possess all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets or other
unpatented and/or unpatentable proprietary or confidential information
systems or procedures), trademarks, servicemarks and tradenames
(collectively, "patent and proprietary rights") currently employed by
them in connection with the business now operated by them except where
the failure to so own, possess or acquire such patent and proprietary
rights would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs, assets or
business prospects of the Company and its subsidiaries considered as
one enterprise, and neither the Company nor the Bank has received any
notice nor is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any patent or proprietary
rights, and which infringement or conflict (if the subject of any
unfavorable decision, rule and refinement, singly or in the aggregate)
could reasonably be expected to result in any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries considered as one enterprise.
(xxvi) The Company and each subsidiary of the Company have
filed all Federal, state and local income, franchise or other tax
returns required to be filed and have made
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<PAGE> 11
timely payments of all taxes due and payable indicated by such returns
and no material deficiency has been asserted with respect thereto by
any taxing authority.
(xxvii) The Company has filed with NASD all documents and
notices required by NASD of companies that have issued securities that
are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market of the Nasdaq Stock Market,
Inc. ("Nasdaq Stock Market").
(xxviii) Neither the Trust nor the Company or any Subsidiary
has taken or will take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation, under
the Exchange Act or otherwise, of the price of the Preferred
Securities.
(xxix) Neither the Company nor the Bank is or has been (by
virtue of any action, omission to act, contract to which it is a party
or by which it is bound, or any occurrence or state of facts
whatsoever) in violation of any applicable Federal, state, municipal,
or local statutes, laws, ordinances, rules, regulations and/or orders
issued pursuant to foreign, federal, state, municipal, or local
statutes, laws, ordinances, rules, or regulations (including those
relating to any aspect of banking, bank holding companies,
environmental protection, occupational safety and health, and equal
employment practices) heretofore or currently in effect, except such
violation that has been fully cured or satisfied without recourse or
that is not reasonably likely to have a material adverse effect on the
Company or the Bank.
(xxx) The Company and the Bank have no agreement or
understanding with any entity concerning the future acquisition by the
Company or the Bank of a controlling interest in any entity that is
required by the 1933 Act or the 1933 Act Regulations to be disclosed
by the Company that is not disclosed in the Prospectus; the Company
and the Bank have no agreement or understanding with any entity
concerning the future acquisition of a controlling interest in the
Company or the Bank by any entity that is required by the 1933 Act or
the 1933 Act Regulations to be disclosed by the Company that is not
disclosed in the Prospectus.
(b) Any certificate signed by any authorized officer of the
Company or the Bank and delivered to the Underwriter or to counsel for the
Underwriter pursuant to this Agreement shall be deemed a representation and
warranty by the Company to the Underwriter as to the matters covered thereby.
Section 2. Sale and Delivery to the Underwriter; Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Trust
agrees to sell to the Underwriter, and the Underwriter agrees to purchase from
the Trust 1,000,000 Initial Securities at the purchase price and terms set
forth herein and in the Price Determination Agreement.
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<PAGE> 12
In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Trust hereby grants an option to the Underwriter to purchase up to
150,000 Option Securities in accordance with the terms set forth herein and in
the Price Determination Agreement. The option hereby granted will expire at
5:00 p.m. on the 30th day after the date the Registration Statement is declared
effective by the Commission (or at 5:00 p.m. on the next business day if such
30th day is not a business day) and may be exercised, on one occasion only,
solely for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial Securities upon
notice by you to the Company setting forth the number of Option Securities as
to which the Underwriter is exercising the option and the time, date and place
of payment and delivery for the Option Securities. Such time and date of
delivery (the "Option Closing Date") shall be determined by the Underwriter but
shall not be later than five full business days after the date on which the
notice of the exercise of the option shall have been given, nor in any event
prior to Closing Time, as hereinafter defined, nor earlier than the second
business day after the date on which the notice of the exercise of the option
shall have been given.
(b) Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Elias,
Matz, Tiernan & Herrick, LLP, or at such other place as shall be agreed upon by
the Company and the Underwriter, at 9:30 a.m. on the third full business day
after the effective date of the Registration Statement, or at such other time
not more than seven full business days thereafter as you and the Company shall
determine (such date and time of payment and delivery being herein called the
"Closing Time"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriter, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above-mentioned office of Elias, Matz, Tiernan & Herrick, LLP, or at such other
place as shall be agreed upon by the Company and the Underwriter, on the Option
Closing Date as specified in the notice from the Underwriter to the Company.
Payment for the Initial Securities and the Option Securities, if any, shall be
made to the Company by wire transfer of immediately available funds, against
delivery to the Underwriter for the account of the Underwriter of Preferred
Securities to be purchased by it.
(c) The Initial Securities shall be issued in the form of one
or more fully registered global securities (the "Global Securities") in
book-entry form in such denominations and registered in the name of the nominee
of The Depository Trust Company (the "DTC") or in such names as the Underwriter
may request in writing at least two business days before the Closing Date or
the Option Closing Date, as the case may be. The Global Securities representing
the Initial Securities or the Option Securities to be purchased will be made
available in Washington, D.C. for examination by the Underwriter and counsel to
the Underwriter not later than 10:00 A.M. on the business day prior to the
Closing Time or the Option Closing Date, as the case may be.
Section 3. Certain Covenants of the Offerors. Each of the
Offerors covenants jointly and severally with the Underwriter as follows:
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<PAGE> 13
(a) The Offerors will use their best efforts to cause the
Registration Statement to become effective and will notify the Underwriter
immediately, and confirm the notice in writing, (i) when the Registration
Statement, or any post-effective amendment to the Registration Statement, shall
have become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission (iii) of any request of the Commission to amend the Registration
Statement or amend or supplement the Prospectus or for additional information
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Preferred Securities or capital stock, for offering or
sale in any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes. The Offerors will use every reasonable
effort to prevent the issuance of any such stop order or of any order
preventing or suspending such use and, if any such order is issued, to obtain
the lifting thereof at the earliest possible moment.
(b) The Offerors will not at any time file or make any
amendment to the Registration Statement, or any amendment or supplement, if the
Offerors have elected to rely upon Rule 430A, to the Prospectus (including
documents incorporated by reference into such prospectus or to the Prospectus)
of which the Underwriter shall not have previously been advised and have
previously been furnished a copy, or to which the Underwriter or counsel for
the Underwriter shall reasonably object.
(c) The Offerors have furnished or will furnish to you as
many signed and conformed copies of the Registration Statement as originally
filed and of each amendment thereto, whether filed before or after the
Registration Statement becomes effective, copies of all exhibits and documents
filed therewith (including documents incorporated by reference into the
Prospectus pursuant to Item 12 of Form S-1 under the 1933 Act) and signed
copies of all consents and certificates of experts as you may reasonably
request.
(d) The Offerors will deliver or cause to be delivered to the
Underwriter, without charge, from time to time until the effective date of the
Registration Statement, as many copies of each preliminary prospectus as the
Underwriter may reasonably request, and the Offerors hereby consent to the use
of such copies for purposes permitted by the 1933 Act. The Offerors will
deliver or cause to be delivered to the Underwriter, without charge, as soon as
the Registration Statement shall have become effective (or, if the Offerors
have elected to rely upon Rule 430A, as soon as practicable after the Price
Determination Agreement has been executed and delivered) and thereafter from
time to time as requested during the period when the Prospectus is required to
be delivered under the 1933 Act, such number of copies of the Prospectus (as
supplemented or amended) as the Underwriter may reasonably request.
(e) The Company will comply to the best of its ability with
the 1933 Act and the 1933 Act Regulations, and the 1934 Act and the 1934 Act
Regulations, so as to permit the completion of the distribution of the
Preferred Securities as contemplated in this Agreement and in
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<PAGE> 14
the Prospectus. If, at any time when a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Preferred Securities, any event
shall occur or condition exist as a result of which it is necessary, in the
reasonable opinion of counsel for the Underwriter or counsel for the Offerors,
to amend the Registration Statement or amend or supplement the Prospectus in
order that the Prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the time
it is delivered to a purchaser, or if it shall be necessary, in the reasonable
opinion of either such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement or the Prospectus comply with
such requirements.
(f) The Offerors will use their best efforts, in cooperation
with the Underwriter, to qualify the Preferred Securities and the Junior
Subordinated Debentures for offering and sale under the applicable securities
laws of such states and other jurisdictions as the Underwriter may designate in
writing and to maintain such qualifications in effect for a period of not less
than one year from the effective date of the Registration Statement; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will file such statements and reports
as may be required by the laws of each jurisdiction in which the Preferred
Securities have been qualified as above provided.
(g) The Company will make generally available (within the
meaning of Rule 158) as soon as practible, but not later than the Availability
Date (as defined below) to its security holders, the Underwriter and the
Security holders an earnings statement (which need not be audited) of the
Company and its subsidiary (in form complying with the provisions of Rule 158
of the 1933 Act Regulations) covering a period of at least 12 months beginning
after the effective date of the Registration Statement. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such effective
date, except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter.
(h) The Trust shall apply the proceeds from its sale of the
Preferred Securities, combined with the entire proceeds from the issuance by
the Trust to the Company of the Trust's Common Securities, to purchase an
equivalent amount of Junior Subordinated Debentures. The Company and the Bank
will use the net proceeds received by them from the sale of the Junior
Subordinated Debentures in the manner specified in the Prospectus under the
caption "Use of Proceeds."
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<PAGE> 15
(i) The Offerors, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13 or 14 of the
1934 Act subsequent to the time the Registration Statement becomes effective.
(j) For a period of five years after the Closing Time, the
Company will furnish to the Underwriter, copies of all annual reports,
quarterly reports and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports, Proxy Statements, and
information as shall be furnished by the Company to its stockholders generally.
(k) The Offerors will cause the Preferred Securities to be
listed and will file with the Nasdaq Stock Market all documents and notices
required by the Nasdaq Stock Market of companies that have issued securities
that are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq Stock Market.
(l) The Company shall pay for the legal fees and related
filing fees to your counsel to prepare one or more "blue sky" surveys (each, a
"Blue Sky Survey") for use in connection with the offering of the Preferred
Securities as contemplated by the Prospectus and a copy of such Blue Sky Survey
or surveys shall be delivered to each of the Company and the Underwriter.
(m) If, at the time the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A of the 1933 Act Regulations, then the Offerors will prepare, and file
or transmit for filing with the Commission in accordance with such Rule 430A
and Rule 424(b), copies of an amended Prospectus, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted.
(n) The Company will, at its expense, subsequent to the
issuance of the Preferred Securities, prepare and distribute to each of the
Underwriter and counsel to the Underwriter, copies of all the documents used in
connection with the issuance of the Preferred Securities in the form of a
Closing Bound Volume.
(o) The Offerors will not, prior to the Option Closing Date
or thirty (30) days after the date of this Agreement, whichever occurs first,
incur any material liability or obligation, direct or contingent, or enter into
any material transaction, other than in the ordinary course of business, or any
transaction with a related party which is required to be disclosed in the
Prospectus pursuant to Item 404 of Regulation S-K under the Securities Act,
except as contemplated by the Prospectus.
(p) During a period of ten days from the date of the
Prospectus, neither the Trust nor the Company will, without the prior written
consent of the Underwriter, directly or indirectly, offer, sell, offer to sell,
or otherwise dispose of any Preferred Securities, any other beneficial
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<PAGE> 16
interests in the assets of the Trust, or any preferred securities or other
securities of the Trust or the Company which are substantially similar to the
Preferred Securities, including any guarantee of such securities. The foregoing
sentence shall not apply to any of the Preferred Securities to be sold
hereunder.
Section 4. Payment of Expenses and Advisory Fee.
(a) The Company will pay and bear all costs and expenses
incident to the performance of its and the Trust's obligations under this
Agreement, including (a) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits), as
originally filed and as amended, the preliminary prospectuses and the
Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriter, (b) the preparation, printing and
distribution of this Agreement, the Preferred Securities and the Blue Sky
Survey, (c) the issuance and delivery of the Preferred Securities to the
Underwriter, including any transfer taxes payable upon the sale of the
Preferred Securities to the Underwriter, (d) the fees and disbursements of the
Company's counsel and accountants, (e) NASD filing fees, (f) fees and
disbursements of counsel in connection with the Blue Sky Survey, (g) the
qualification of the Preferred Securities under the applicable securities laws
in accordance with Section 3(f) and any filing fee for review of the offering
with the NASD, (h) the legal fees and expenses of the Underwriter's counsel
(such counsel's fees shall not exceed $55,000 (exclusive of out-of-pocket
expenses of counsel) and general out-of-pocket expenses of the Underwriter not
to exceed [$5,000], (i) the fees and expenses of the Indenture Trustee,
including the fees and disbursements of counsel for the Indenture Trustee, in
connection with the Indenture and the Junior Subordinated Debentures; (j) the
fees and expenses of the Property Trustee and Delaware Trustee, including the
fees and disbursements of counsel for the Property Trustee and the Delaware
Trustee, in connection with the Trust Agreement and the Certificate of Trust,
and (k) all other costs incident to the performance of the Offerors'
obligations hereunder.
If (i) the Closing Time does not occur on or before
[__________ __], 1998, (ii) the Company abandons or terminates the Offering, or
(iii) this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 5 or 9(a), the Company shall reimburse the Underwriter
for all its reasonable out-of-pocket expenses, as set forth in this Section 4,
including the reasonable fees and disbursements of counsel for the Underwriter.
Section 5. Conditions of Underwriter's Obligations. The
obligations of the Underwriter to purchase and pay for the Preferred Securities
that it has agreed to purchase pursuant to this Agreement are subject to the
accuracy of the representations and warranties of the Offerors contained herein
or in certificates of the officers or trustees of the Offerors or any
subsidiary delivered pursuant to the provisions hereof, to the execution of the
Price Determination Agreement no later than 5:30 p.m. on the first business day
following the date hereof, or at such later time as you may agree in writing
(in your sole discretion), to the performance by the Offerors of their
obligations hereunder and to the following further conditions:
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<PAGE> 17
(a) The Registration Statement shall have become effective
not later than 5:30 P.M. on the date of this Agreement or, with your consent,
at a later time and date not later, however, than 5:30 P.M. on the first
business day following the date hereof, or at such later time or on such later
date as you may agree to in writing; at the Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act and no proceedings for that purpose shall have been
instituted or shall be pending or, to the Underwriter's knowledge or the
knowledge of the Offerors shall be contemplated by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the satisfaction of counsel for the Underwriter. If the
Offerors have elected to rely upon Rule 430A, a prospectus containing the Rule
430A Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements of
Rule 430A).
(b) At the Closing Time, you shall have received:
(i) The favorable opinion, dated as of Closing Time, of
Elias, Matz, Tiernan & Herrick, LLP, counsel for the Company, in form
and substance reasonably satisfactory to counsel for the Underwriter,
substantially in the form set forth in Exhibit B.
(ii) The favorable opinion, dated as of Closing Time, of
Richards, Layton & Finger, special Delaware counsel for the Offerors,
in form and substance satisfactory to counsel for the Underwriter,
substantially in the form set forth in Exhibit C.
(iii) The favorable opinion, dated as of Closing Time, of
Emmet, Marvin & Martin, LLP, counsel for the Indenture Trustee and the
Delaware Trustee, in form and substance satisfactory to counsel for
the Underwriter, substantially in the form set forth in Exhibit D.
(iv) The favorable opinion, dated as of Closing Time, of
Silver, Freedman & Taff, L.L.P., counsel for the Underwriter, in form
and substance satisfactory to the Underwriter.
In giving such opinion, such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the federal law of the
United States, upon opinions of other counsel, who shall be counsel
satisfactory to counsel for the Underwriter (the Underwriter agrees and
acknowledges that, Elias, Matz, Tiernan & Herrick, LLP and Silver, Freedman &
Taff, L.L.P. will rely on the opinion of Richards, Layton & Finger with respect
to matters of Delaware law), in which case the opinion shall state that counsel
believes that you and your counsel are entitled to so rely. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company, the Bank and the Trust and certificates of public officials.
(c) At the Closing Time and again at the Option Closing Date,
(i) the Registration Statement and the Prospectus, as they may then be amended
or supplemented, shall contain all statements that are required to be stated
therein under the 1933 Act and the 1933 Act Regulations
17
<PAGE> 18
and in all material respects shall conform to the requirements of the 1933 Act
and the 1933 Act Regulations, the Offerors shall have complied in all material
respects with Rule 430A (if they shall have elected to rely thereon) and
neither the Registration Statement nor the Prospectus, as they may then be
amended or supplemented, shall contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) there shall not have been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition (financial or
otherwise), earnings, business affairs, assets or business prospects of the
Company and its subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business, (iii) no action, suit or proceeding
at law or in equity shall be pending or, to the knowledge of the Offerors,
threatened against the Company or any subsidiary or the Trust that would be
required to be set forth in the Prospectus other than as set forth therein and
no proceedings shall be pending or, to the knowledge of the Offerors,
threatened against the Offerors or any subsidiary before or by any federal,
state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding could reasonably be expected to
materially adversely affect the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise, other than as set forth in the
Prospectus, (iv) each of the Offerors shall have complied, in all material
respects, with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Time, (v) the other
representations and warranties of the Offerors set forth in Section l(a) shall
be accurate in all material respects as though expressly made at and as of the
Closing Time, and (vi) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose been initiated or to the best knowledge of the Offerors threatened by
the Commission. At the Closing Time, the Underwriter shall have received a
certificate of the Chairman or the President, and the Chief Financial Officer
or Controller, of the Company, dated as of the Closing Time, to such effect.
(d) At the time that this Agreement is executed by the
Company, you shall have received from Ernst & Young LLP a letter or letters,
dated such date, in form and substance satisfactory to you, confirming that
they are independent certified public accountants with respect to the Company
within the meaning of the 1933 Act and the published 1933 Act Regulations, and
stating in effect that:
With respect to the Company:
(i) in their opinion, the consolidated financial statements
as of September 30, 1997 and 1996, and for each of the years in the
three year period ended December 31, 1997 and the related financial
statement schedules, if any, included or incorporated by reference in
the Registration Statement and the Prospectus and covered by their
opinions included therein comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
published 1933 Act Regulations;
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<PAGE> 19
(ii) on the basis of a reading of the minutes of all meetings
of the stockholders of the Company and the Bank, of the Board of
Directors of the Company and the Bank and of the Audit and Executive
Committees of the Board of Directors of the Bank since September 30,
1997, inquiries of certain officials of the Company and its
subsidiaries responsible for financial and accounting matters, and
such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe
that:
(A) at a specified date not more than three days
prior to the date of this Agreement, there was any increase
in other borrowings or real estate owned, or any decrease in
allowance for loan losses of the Company and its consolidated
subsidiaries or any decrease in total assets, total deposits
or stockholders' equity of the Company and its consolidated
subsidiaries or any increase in the number of outstanding
shares of capital stock of the Company and its consolidated
subsidiaries, in each case as compared with amounts shown in
the financial statements at September 30, 1997 in the
Registration Statement, except in each case, for changes,
increases or decreases that the Prospectus discloses have
occurred or which are described in such letter; or
(B) for the period from September 30, 1997 to a
specified date not more than three days prior to the date of
this Agreement, there was any decrease in consolidated net
interest income, non-interest income or net income or the
total or fully diluted per share amounts of net income or any
increase in the consolidated provision for loan losses, in
each case as compared with the comparable period in the
preceding year, except in each case, for changes, increases
or decreases that the Prospectus discloses have occurred or
which are described in such letter.
(iii) in addition to the procedures referred to in clause
(ii) above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing or incorporated by
reference in the Registration Statement (including the Selected
Consolidated Financial Data) (having compared such items with, and
have found such items to be in agreement with, the financial
statements of the Company or general accounting records of the
Company, as applicable, which are subject to the Company's internal
accounting controls or other data and schedules prepared by the
Company from such records).
19
<PAGE> 20
(iv) on the basis of a review of schedules provided to them by
the Company, nothing came to their attention that caused them to
believe that the pro forma information, set forth in the Prospectus
under the headings "Capitalization" on page [______] had not been
correctly calculated on the basis described therein.
(e) At the Closing Time, the Underwriter shall have received
from Ernst & Young LLP letters, in form and substance satisfactory to the
Underwriter and dated as of the Closing Time, to the effect that they reaffirm
the statements made in the letter(s) furnished pursuant to Section 5(d), except
that the inquiries specified in Section 5(d) shall be made based upon the
latest available unaudited interim consolidated financial statements and the
specified date referred to shall be a date not more than three days prior to
the Closing Time.
(f) At the Closing Time, counsel for the Underwriter shall
have been furnished with all such documents, certificates and opinions as they
may request for the purpose of enabling them to pass upon the issuance and sale
of the Preferred Securities as contemplated in this Agreement and the matters
referred to in Section 5(c) and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Offerors, the performance of any of the covenants of the Offerors, or the
fulfillment of any of the conditions herein contained; all proceedings taken by
the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Preferred Securities and the Junior
Subordinated Debentures as contemplated in this Agreement shall be satisfactory
in form and substance to the Underwriter and to counsel for the Underwriter.
(g) Between the date of this Agreement and the Closing Time,
(i) no downgrading shall have occurred in the rating accorded any securities of
the Company or any deposit instruments of the Bank by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act and (ii) no such
organization shall have given any notice of any intended or potential
downgrading or of any surveillance or review, with possible negative
implications, of its rating of any of the Company's securities or any deposit
instruments of the Bank.
(h) The Company shall have paid, or made arrangements
satisfactory to the Underwriter for the payment of, all such expenses as may be
required by Section 4 hereof.
(i) In the event the Underwriter exercises its option
provided in Section 2 hereof to purchase all or any portion of the Option
Securities, the obligations of the Underwriter to purchase the Option
Securities that it has agreed to purchase shall be subject to the accuracy of
the representations and warranties of the Offerors contained herein and of the
statements in any certificates furnished by the Offerors hereunder as of such
Option Closing Date (as if made on such date), to the performance by the
Offerors of their obligations hereunder and to the receipt by you on the Option
Closing Date of:
20
<PAGE> 21
(1) A certificate, dated the Option Closing Date, of
the Chairman or the President and the Chief Financial Officer
or Controller of the Company confirming that the certificate
delivered on the Closing Time pursuant to Section 5(c) hereof
remains true as of the Option Closing Date;
(2) The favorable opinion of Elias, Matz, Tiernan &
Herrick, LLP, counsel for the Company, addressed to you and
dated the Option Closing Date, in form satisfactory to
Silver, Freedman & Taff L.L.P., your counsel, relating to the
Option Securities and otherwise to the same effect as the
opinion required by Section 5(b) hereof;
(3) The favorable opinion of Richards, Layton &
Finger, special Delaware counsel for the Offerors, addressed
to you and dated the Option Closing Date, in form
satisfactory to Silver, Freedman & Taff, L.L.P., your
counsel, relating to the Option Securities and otherwise to
the same effect as the opinion required by Section 5(b)
hereof;
(4) The favorable opinion of Emmet, Marvin & Martin,
LLP, counsel for the Indenture Trustee and the Delaware
Trustee, addressed to you and dated the Option Closing Date,
relating to the Option Securities and otherwise to the same
effect as the opinion required by Section 5(e) hereof;
(5) The favorable opinion of Silver, Freedman &
Taff, L.L.P., dated the Option Closing Date, relating to the
Option Shares and otherwise to the same effect as the opinion
required by Section 5(b) hereof; and
(6) Letters from Ernst & Young LLP addressed to the
Underwriter and dated the Option Closing Date, in form and
substance satisfactory to the Underwriter and substantially
the same in form and substance as the letters furnished to
the Underwriter pursuant to Section 5(e) hereof.
(j) The Preferred Securities, the Guarantee and the Junior
Subordinated Debentures shall have been qualified or registered for sale, or
subject to an available exemption from such qualification or registration,
under the Blue Sky Laws of such jurisdictions as shall have been reasonably
specified by the Underwriter and the offering contemplated by this Agreement
shall have been cleared by the NASD.
If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement may be terminated by the Underwriter on notice to the Offerors
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other Party, except as provided in
Section 4. Notwithstanding any such termination, the provisions of Sections 6,
7, 10 and 12 shall remain in effect.
21
<PAGE> 22
Section 5A. Conditions of Offeror's Obligations. The obligations of
the Offerors to sell and deliver the portion of the Preferred Securities
required to be delivered as and when specified in this Agreement are subject to
the conditions that the Registration Statement shall have become effective and
that as of the Closing Time (or the Option Closing Date with respect to the
Option Securities) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened, and there shall have been no change in the
Internal Revenue Code of 1986 or the regulations promulgated thereunder that
reasonably would be expected to adversely effect the ability of the Company to
deduct the interest paid by it under the Junior Subordinated Debentures.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, officers, directors and employees of the Underwriter, and each
person, if any, who controls the Underwriter within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act, against any loss, liability,
claim, damage, and expense whatsoever (which shall include, but not be limited
to amounts incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim or investigation whatsoever
and any and all amounts paid in settlement of any claim or litigation), as and
when incurred, arising out of, based upon, or in connection with (i) any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, contained in (A) any
Preliminary Prospectus, the Registration Statement, or the Prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto
or in any document incorporated by reference therein or required to be
delivered with any Preliminary Prospectus or the Prospectus or (B) in any
application or other document or communication (collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Preferred Securities under the "blue sky" or securities
laws thereof or filed with the Commission or any securities exchange; unless
such statement or omission or alleged statement or omission was made in
reliance upon and in conformity with written information concerning the
Underwriter, the Underwriting Agreement or the compensation of the Underwriter
furnished to the Company by or on behalf of the Underwriter expressly for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach of any representation, warranty, covenant,
or agreement of the Company contained in the Underwriting Agreement. The
foregoing indemnification with respect to any Preliminary Prospectus shall not
inure to the benefit of the Underwriter (or its directors, officers, employees
and controlling persons within the meaning of the federal securities laws) if
the person asserting any such losses, claims, damages or liabilities against
the Underwriter (or such other persons) purchased Preferred Securities and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of the Underwriter to such person in connection with the written
confirmation of the sale of such Preferred Securities
22
<PAGE> 23
to such person and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability, provided
that the Company delivered the Prospectus, as amended or supplemented, to the
Underwriter on a timely basis to permit such delivery or sending. For purposes
of this section, the term "expense" shall include, but not be limited to,
counsel fees and costs, court costs, out-of-pocket costs and compensation for
the time spent by the Underwriter's directors, officers, employees and counsel
according to his or her normal hourly billing rates. The indemnification
provisions shall also extend to all affiliates of the Underwriter, its
respective directors, officers, employees and controlling persons within the
meaning of the federal securities laws. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have to the
Underwriter or the persons entitled to the benefit of these indemnification
provisions.
(b) The Underwriter agrees to indemnify and hold harmless the
Offerors, their directors, officers who signed the Registration Statement, and
each person, if any, who controls the Offerors within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) above, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any Preliminary Prospectus
or the Prospectus (or any amendment or supplement thereto) or any application
in reliance upon and in conformity with written information about the
Underwriter, the Underwriting Agreement, or the compensation of the
Underwriter, furnished to either of the Offerors by the Underwriter expressly
for use in the Registration Statement (or any amendment thereto) or such
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) or in any application.
(c) An indemnified party shall give prompt notice to the
indemnifying party if any action, suit, proceeding or investigation is
commenced in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve the indemnifying party from
its obligations to indemnify hereunder, except to the extent that the
indemnifying party has been prejudiced in any material respect by such failure.
If it so elects within a reasonable time after receipt of such notice, an
indemnifying party may assume the defense of such action, including the
employment of counsel satisfactory to the indemnified parties and payment of
all expenses of the indemnified party in connection with such action. Such
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action or the indemnifying party shall not
have promptly employed counsel satisfactory to such indemnified party or
parties or such indemnified party or parties shall have reasonably concluded
that there may be one or more legal defenses available to it or them or to
other indemnified parties which are different from or additional to those
available to one or more of the indemnifying parties, in any of which events
such fees and expenses shall be borne by the indemnifying party and the
indemnifying party shall not have the right to direct the defense of such
23
<PAGE> 24
action on behalf of the indemnified party or parties; it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (except in the event of a conflict or potential conflict of interest
between or among indemnified parties and in addition to any local counsel)
separate from their own counsel at any time and for all such indemnified
parties and controlling persons, which firm shall be designated in writing by
the indemnified party. The Company shall be liable for any settlement of any
claim against the Underwriter (or its directors, officers, employees,
affiliates or controlling persons), made with the Company's written consent,
which consent shall not be unreasonably withheld. The Company shall not,
without the written consent of the Underwriter, settle or compromise any claim
against it based upon circumstances giving rise to an indemnification claim
against the Company hereunder unless such settlement or compromise provides
that the Underwriter and the other indemnified parties shall be unconditionally
and irrevocably released from all liability in respect to such claim.
(d) In order to provide for just and equitable contribution,
if a claim for indemnification pursuant to these indemnification provisions is
made but it is found in a final judgment by a court that such indemnification
may not be enforced in such case, even though the express provisions hereof
provide for indemnification in such case, then the Company, on the one hand,
and the Underwriter, on the other hand, shall contribute to the amount paid or
payable by such indemnified persons as a result of such loss, liability, claim,
damage and expense in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the underwriting, and also the relative fault of the Company,
on the one hand, and the Underwriter, on the other hand, in connection with the
statements, acts or omissions which resulted in such loss, liability, claim,
damage and expense, and any other relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation or
omission shall be entitled to contribution from any person who is not also
found liable for such fraudulent misrepresentation or omission. Notwithstanding
the foregoing, the Underwriter shall not be obligated to contribute any amount
hereunder that exceeds the amount of the underwriting commission paid by the
Company to the Underwriter with respect to the Preferred Securities purchased
by the Underwriter.
(e) The indemnity and contribution agreements contained
herein are in addition to any liability which the Company may otherwise have to
the Underwriter.
(f) Neither termination nor completion of the engagement of
the Underwriter nor any investigation made by or on behalf of the Underwriter
shall affect the indemnification obligations of the Company or the Underwriter
hereunder, which shall remain and continue to be operative and in full force
and effect.
24
<PAGE> 25
Section 7. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Offerors or its officers or trustees set forth in or
made pursuant to this Agreement will remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Offerors or
the Underwriter or any controlling person and will survive delivery of and
payment for the Preferred Securities.
Section 8. Offering by the Underwriter. The Trust and the
Company are advised by the Underwriter that the Underwriter proposes to make a
public offering of the Preferred Securities, on the terms and conditions set
forth in the Registration Statement from time to time as and when the
Underwriter deems advisable after the Registration Statement becomes effective.
Because the NASD is expected to view the Preferred Securities as interests in a
direct participation program, the offering of the Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
Section 9. Termination of Agreement.
(a) You may terminate this Agreement, by notice to the
Offerors, at any time at or prior to the Closing Time (i) if there has been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
its subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any outbreak or
escalation of existing hostilities or other national or international calamity
or crisis the effect of which on the financial markets of the United States is
such as to make it, in the Underwriter's reasonable judgment, impracticable to
market the Preferred Securities or enforce contracts for the sale of the
Preferred Securities, or (iii) if trading in any securities of the Company has
been suspended by the Commission or the National Association of Securities
Dealers, Inc., or if trading generally on the New York Stock Exchange or in the
over-the-counter market has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by such exchange or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority
with appropriate jurisdiction over such matters, or (iv) if a banking
moratorium has been declared by federal, Pennsylvania or New York authorities,
or (v) if there shall have been such material and substantial change in the
market for securities in general or in political, financial or economic
conditions as in your reasonable judgment makes it inadvisable to proceed with
the Offering, sale and delivery of the Preferred Securities on the terms
contemplated by the Prospectus, (vi) if you reasonably determine (which
determination shall be in good faith) that there has not been satisfactory
disclosure of all relevant financial information relating to the Offerors in
the Offerors' disclosure documents and that the sale of the Preferred
Securities is unreasonable given such disclosures or (vii) if the Price
Determination Agreement has not been executed by all the parties hereto prior
to 5:30 p.m. on the first business day following the date of this Agreement.
25
<PAGE> 26
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6 and 7 shall remain in effect.
Section 10. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered, mailed or transmitted by any standard form of
telecommunication. Notices shall be addressed as follows:
If to the Underwriter:
Ryan, Beck & Co., Inc.
220 South Orange Avenue
Livingston, New Jersey 07039
Attention: Erik N. van Nispen
Senior Vice President
with a copy to:
James S. Fleischer, P.C.
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005-3934
If to the Company or the Trust:
Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
Attention: J. Ardie Dillen
President and Chief Executive Officer
with a copy to:
Norman B. Antin, Esq.
Elias, Matz, Tiernan & Herrick, LLP
734 15th Street, N.W., 8th Floor
Washington, D.C. 20005
Section 11. Parties. This Agreement is made solely for the
benefit of the Underwriter, and the officers, directors and employees of the
Underwriter specified in Section 6, the Trust and the Company and, to the
extent expressed, any person controlling the Trust, the Company or the
26
<PAGE> 27
Underwriter, and the directors of the Company, or Administrative Trustees of
the Trust, their respective officers who have signed the Registration
Statement, and their respective executors, Administrative Trustees, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser, as such purchaser, from the Underwriter of the Preferred
Securities.
Section 12. Arbitration. Any claims, controversies, demands,
disputes or differences between or among the parties hereto or any persons
bound hereby arising out of, or by virtue of, or in connection with, or
otherwise relating to this Agreement shall be submitted to and settled by
arbitration conducted in Pennsylvania before one or three arbitrators, each of
whom shall be knowledgeable in the field of securities law and investment
banking. Such arbitration shall otherwise be conducted in accordance with the
rules then obtaining of the American Arbitration Association. The parties
hereto agree to share equally the responsibility for all fees of the
arbitrators, abide by any decision rendered as final and binding, and waive the
right to appeal the decision or otherwise submit the dispute to a court of law
for a jury or non-jury trial. The parties hereto specifically agree that
neither party may appeal or subject the award or decision of any such
arbitrator to appeal or review in any court of law or in equity or in any other
tribunal, arbitration system or otherwise. Judgment upon any award granted by
such arbitrator may be enforced in any court having jurisdiction thereof.
Section 13. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New Jersey. Specified times of the day
refer to Washington, D.C. time.
Section 14. Counterparts. This Agreement may be executed in
one or more counterparts, and when a counterpart has been executed by each
party, all such counterparts taken together shall constitute one and the same
agreement.
<PAGE> 28
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company, the Trust
and the Underwriter in accordance with its terms.
Very truly yours,
PITTSBURGH HOME CAPITAL TRUST I
By: PITTSBURGH HOME FINANCIAL CORP.
By:
---------------------------------------------
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
PITTSBURGH HOME FINANCIAL CORP.
By: ---------------------------------------------
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
Confirmed and accepted as of the date first above written:
RYAN, BECK & CO., INC.
By:
----------------------------
Name: Eric N. Van Nispen
Title: Senior Vice President
<PAGE> 29
EXHIBIT A
PITTSBURGH HOME CAPITAL TRUST I
(a Delaware business trust)
1,000,000 Preferred Securities
[_____]% Cumulative Trust Preferred Securities
(Liquidation Amount $10 per Preferred Security)
PRICE DETERMINATION AGREEMENT
January [__], 1998
Ryan, Beck & Co., Inc.
220 South Orange Avenue
Livingston, New Jersey 07039
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date hereof
(the "Underwriting Agreement") among Pittsburgh Home Capital Trust I, a
Delaware business trust, (the "Trust"), Pittsburgh Home Financial Corp. (the
"Company" and together with the Trust, the "Offerors") and the Underwriter
named above (the "Underwriter"). The Underwriting Agreement provides for the
purchase by the Underwriter from the Trust, subject to the terms and conditions
set forth therein, of 1,000,000 shares, subject to a 150,000 adjustment (to
cover over-allotments, if any), of the [_____]% Cumulative Trust Preferred
Securities of the Trust (the "Preferred Securities"). This Agreement is the
Price Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 2 of the Underwriting Agreement, the Offerors
agree with the Underwriter as follows:
1. The public offering price per Preferred Security shall be
$10.
2. The purchase price for the Preferred Securities to be paid
by the Underwriter shall be $10 per Preferred Security.
3. The commission per Preferred Security to be paid by the
Company to the Underwriter for their commitments hereunder shall be
$[_____] per Preferred Security.
<PAGE> 30
4. The interest rate on the Preferred Securities shall be
[_____]% per annum.
The Offerors represent and warrant to the Underwriter that the
representations and warranties of the Offerors set forth in Section 1(a) of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
If the foregoing is in accordance with the understanding of the
Underwriter of the agreement between the Underwriter and the Offerors, please
sign and return to the Company a counterpart hereof, whereupon this instrument,
along with all counterparts and together with the Underwriting Agreement, shall
be a binding agreement between the Underwriter and the Offerors in accordance
with its terms and the terms of the Underwriting Agreement.
Very truly yours,
PITTSBURGH HOME CAPITAL TRUST I
By:
-----------------------------------------
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
PITTSBURGH HOME FINANCIAL CORP.
By:
-----------------------------------------
J. Ardie Dillen
President and Chief Executive Officer
Confirmed and accepted as of the date first above written:
RYAN, BECK & CO., INC.
By:
-----------------------------
Erik N. Van Nispen
Senior Vice President
<PAGE> 31
EXHIBIT B
1. The Underwriting Agreement has been duly authorized, executed and
delivered by the Trust and the Corporation.
2. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Trust Act.
3. The Trust Agreement has been duly authorized, executed and
delivered by the Corporation and the Administrative Trustees and is a valid and
binding obligation of each of the Corporation and the Administrative Trustees,
enforceable against the Company and the Administrative Trustees in accordance
with its terms except as rights to indemnity and contribution thereunder may be
limited under applicable law, subject to the qualifications that (i) that
enforcement of the Trust Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws (including the laws of fraudulent
conveyance) or judicial decisions affecting the enforcement of creditors'
rights generally and (ii) the enforceability of the Corporation's and the
Administrative Trustees' obligations under the Trust Agreement is subject to
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and to the effect of certain
laws and judicial decisions upon the availability and enforcement of certain
remedies, including the remedies of specific performance and self-help.
4. The Preferred Securities have been duly authorized for issuance by
the Trust; and the Preferred Securities, when executed and authenticated in
accordance with the Trust Agreement and delivered and paid for in accordance
with the Underwriting Agreement, will be validly issued, fully paid and
nonassessable, representing undivided beneficial ownership interests in the
assets of the Trust; and the holders of such Preferred Securities will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We bring to your attention, however, that the holders
of Preferred Securities may be obligated, pursuant to the Trust Agreement, to
(i) provide indemnity and/or securities in connection with and pay taxes or
governmental charges arising from transfers of Preferred Securities and (ii)
provide security and indemnity in connection with the requests of or directions
to the Property Trustee to exercise its rights and powers under the Trust
Agreement.
5. The Guarantee has been duly authorized, executed and delivered by
the Corporation and constitutes a valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms,
except as rights to indemnity and contribution thereunder may be limited under
applicable law, subject to the qualifications that (i) enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other laws
(including the laws of fraudulent conveyance) or judicial decisions affecting
the enforcement of creditors' rights generally and (ii) the enforceability of
the Corporation's obligations under the Guarantee is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and to the effect of certain laws and judicial
decisions upon the availability and enforcement of certain remedies, including
the remedies of specific performance and self help.
6. The Indenture has been duly authorized, executed and delivered by
the Corporation and constitutes a valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms,
except as rights to indemnity and contribution thereunder may be limited under
<PAGE> 32
applicable law, subject to the qualifications that (i) enforcement of the
Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium,
or other laws (including the laws of fraudulent conveyance) or judicial
decisions affecting the enforcement of creditors' rights generally and (ii) the
enforceability of the Corporation's obligations under the Indenture is subject
to general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and to the effect of certain
laws and judicial decisions upon the availability and enforcement of certain
remedies, including the remedies of specific performance and self help.
7. The issuance and sale of the Subordinated Debentures has been duly
authorized by the Corporation and, when duly executed, authenticated and issued
in accordance with the Indenture and paid for in accordance with the Debenture
Subscription Agreement, will constitute valid and binding obligations of the
Corporation entitled to the benefits of the Indenture and enforceable against
the Corporation in accordance with their terms, except as rights to indemnity
and contribution thereunder may be limited under applicable law, subject to the
qualifications that (i) enforcement of the Subordinated Debentures may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other laws
(including the laws of fraudulent conveyance) or judicial decisions affecting
the enforcement of creditors' rights generally and (ii) the enforceability of
the Corporation's obligations under the Subordinated Debentures is subject to
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and to the effect of certain
laws and judicial decisions upon the availability and enforcement of certain
remedies, including the remedies of specific performance and self help.
8. At the time the Registration Statement became effective, the
Registration Statement (except for the financial statements, notes to financial
statements, schedules and other financial or statistical information and data
included therein, as to which we express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
During the course of preparation of the Prospectus, we reviewed the
Prospectus and participated in discussions with officers of the Corporation and
the Bank, and their advisors. We did not participate in the preparation of the
Operative Documents, but have, however, reviewed such documents and discussed
the business and affairs of the Corporation with officers and representatives
of the Corporation. Although we have not undertaken to determine independently,
and are not passing upon or assuming any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Prospectus or the
Registration Statement, on the basis of such review and discussions, nothing
has come to our attention that caused us to believe that the Registration
Statement (other than the financial statements, notes to financial statements,
schedules and other financial and statistical information and data included
therein or omitted therefrom, as to which we express no opinion), at the time
it became effective or the date hereof contained or contains an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein, or necessary to make the statements therein, not misleading or
that the Prospectus (other than the financial statements, notes to financial
statements, schedules and other financial and statistical information and data
included therein or omitted therefrom, as to which we express no opinion), as
of its date or the date hereof contained or contains an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
<PAGE> 33
In rendering this opinion letter, we do not express any opinion
concerning any law other than the law of the Commonwealth of Pennsylvania, the
law of the State of Delaware concerning the treatment of Delaware business
trusts, the corporate law of the State of Delaware and the federal law of the
United States of America and we do not express any opinion concerning the
application of the "doing business" laws or the securities laws of any
jurisdiction other than the federal securities laws of the United States. In
addition, we do not express any opinion on any issue not expressly addressed
above.
<PAGE> 34
EXHIBIT C
The opinion of counsel, as special Delaware counsel to the Company and the
Trust to be delivered pursuant to Section 5(b)(ii) of the Underwriting
Agreement shall be substantially to the effect that:
1. The Trust has been duly created and is validly existing in good standing as
a business trust under the Delaware Business Trust Act, 12 Del. C. Section 3801
et seq. (the "Delaware Act"), and all filings required under the laws of the
State of Delaware with respect to the creation and valid existence of the Trust
as a business trust have been made.
2. Under the Delaware Act and the Trust Agreement the Trust has the trust power
and authority to own its property and to conduct its business, all as described
in the Prospectus.
3. The Trust Agreement constitutes a valid and binding obligation of the
Company and the Property Trustee and the Delaware Trustee, and is enforceable
against the Company and the Trustees, in accordance with its terms.
4. Under the Delaware Act and the Trust Agreement, the Trust has the trust
power and authority to execute and deliver, and to perform its obligations
under, the Underwriting Agreement and to issue and perform its obligations
under the Preferred Securities and the Common Securities.
5. Under the Delaware Act and the Trust Agreement, the execution and delivery
by the Trust of the Underwriting Agreement, and the performance by the Trust of
its obligations thereunder, have been duly authorized by all necessary trust
action on the part of the Trust.
6. The Preferred Securities have been duly authorized by the Trust Agreement
and are duly and validly issued and, subject to the qualifications set forth
herein, fully paid and nonassessable undivided beneficial interests in the
assets of the Trust and are entitled to the benefits of the Trust Agreement.
The Holders, as beneficial owners of the Trust, will be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware. We note that the Holders may be obligated pursuant to the
Trust Agreement, (i) to provide indemnity and/or security in connection with
and pay taxes or governmental charges arising from transfers or exchanges of
Preferred Securities Certificates and the issuance of replacement Preferred
Securities Certificates, and (ii) to provide security or indemnity in
connection with requests of or directions to the Property Trustee to exercise
its rights and powers under the Trust Agreement.
7. Under the Delaware Act and the Trust Agreement, the issuance of the
Preferred Securities and Common Securities is not subject to preemptive rights.
8. The Common Securities have been duly authorized by the Trust Agreement and
are duly and validly issued undivided beneficial interests in the assets of the
Trust and are entitled to the benefits of the Trust Agreement.
<PAGE> 35
9. The issuance and sale by the Trust of the Preferred Securities and Common
Securities, the purchase by the Trust of the Subordinated Debentures, the
execution, delivery and performance by the Trust of the Underwriting Agreement,
the consummation by the Trust of the transactions contemplated by the
Underwriting Agreement and the compliance by the Trust with its obligations
thereunder will not violate (i) any of the provisions of the Certificate of
Trust or the Trust Agreement or (ii) any applicable Delaware law or
administrative regulation.
10. The Delaware Trustee is duly incorporated and is validly existing in good
standing as a banking corporation with trust powers under the laws of the State
of Delaware.
11. The Delaware Trustee has the corporate power to act as trustee of a
Delaware business trust under the laws of the State of Delaware.
<PAGE> 36
EXHIBIT D
The opinion of counsel to Trust Company and Delaware Trustee to be delivered
pursuant to Section 5(b)(iii) of the Underwriting Agreement shall be
substantially to the effect that:
1. The Trust Company is duly incorporated and is validly existing in good
standing as a banking corporation with trust powers under the laws of the State
of New York.
2. The Indenture Trustee has the requisite power and authority to execute,
deliver and perform its obligations under the Indenture, and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of the Indenture.
3. The Guarantee Trustee has the requisite power and authority to execute,
deliver and perform its obligations under the Guarantee Agreement, and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of the Guarantee Agreement.
4. The Property Trustee has the requisite power and authority to execute and
deliver the Trust Agreement, and has taken all necessary corporate action to
authorize the execution and delivery of the Trust Agreement.
5. Each of the Indenture and the Guarantee Agreement has been duly executed and
delivered by the Indenture Trustee and the Guarantee Trustee, respectively, and
constitutes a legal, valid and binding obligation of the Indenture Trustee and
the Guarantee Trustee, respectively, enforceable against the Indenture Trustee
and the Guarantee Trustee, respectively, in accordance with its respective
terms, except that certain payment obligations may be enforceable solely
against the assets of the Trust and except that such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and transfer or other similar laws affecting the enforcement of
creditors' rights generally, and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether such enforceability, is considered in a
proceeding in equity or at law), and by the affect of applicable public policy
on the enforceability of provisions relating to indemnification or
contribution.
6. The Subordinated Debentures delivered on the date hereof have been duly
authenticated by the Indenture Trustee in accordance with the terms of the
Indenture.
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PITTSBURGH HOME FINANCIAL CORP.
AND
THE BANK OF NEW YORK,
AS TRUSTEE
INDENTURE
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE JANUARY ___, 2028
DATED AS OF JANUARY ___, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
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<TABLE>
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<S> <C> <C>
ARTICLE I DEFINITIONS 2
Section 1.1 Definitions of Terms 2
ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS 10
REGISTRATION AND EXCHANGE OF THE DEBENTURES
Section 2.1 Designation And Principal Amount 10
Section 2.2 Maturity 10
Section 2.3 Form And Payment 10
Section 2.4 Interest 11
Section 2.5 Execution And Authentications 12
Section 2.6 Registration of Transfer And Exchange 12
Section 2.7 Temporary Debentures 14
Section 2.7A Global Securities 14
Section 2.8 Mutilated, Destroyed, Lost or Stolen Debentures 15
Section 2.9 Cancellation 16
Section 2.10 Benefit of Indenture 17
Section 2.11 Authentication Agent 17
Section 2.12 Right of Set-off 17
Section 2.13 CUSIP Numbers 18
ARTICLE III REDEMPTION OF DEBENTURES 18
Section 3.1 Redemption 18
Section 3.2 Special Event Redemption 18
Section 3.3 Optional Redemption by Company 19
Section 3.4 Notice of Redemption 19
Section 3.5 Payment Upon Redemption 20
Section 3.6 No Sinking Fund 21
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD 21
Section 4.1 Extension of Interest Payment Period 21
Section 4.2 Notice of Extension 21
Section 4.3 Limitation on Transactions 22
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY 23
Section 5.1 Payment of Principal And Interest 23
Section 5.2 Maintenance of Agency 23
Section 5.3 Paying Agents 23
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
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<S> <C> <C>
Section 5.4 Appointment to Fill Vacancy in Office of Trustee 24
Section 5.5 Compliance With Consolidation Provisions 24
Section 5.6 Limitation on Transactions 25
Section 5.7 Covenants as to The Trust 25
Section 5.8 Covenants as to Purchases 26
ARTICLE VI DEBENTURE HOLDERS' LISTS AND REPORTS BY THE 26
COMPANY AND THE TRUSTEES
Section 6.1 Company to Furnish Trustee Names And Addresses of 26
Debenturesholders
Section 6.2 Preservation of Information Communications With Debenture 26
Holders
Section 6.3 Reports by The Company 27
Section 6.4 Reports by The Trustee 27
Section 6.5 Statements As to Default 28
ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTURE 28
HOLDERS ON EVENT OF DEFAULT
Section 7.1 Events of Default 28
Section 7.2 Collection of Indebtedness And Suits For Enforcement by Trustee 30
Section 7.3 Application of Moneys Collected 31
Section 7.4 Limitation on Suits 32
Section 7.5 Rights And Remedies Cumulative; Delay or Omission Not Waiver 33
Section 7.6 Control by Debenture Holders 33
Section 7.7 Undertaking to Pay Costs 34
Section 7.8 Direct Action by Holders of Preferred Securities 34
ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE 35
Section 8.1 Form of Debenture 35
Section 8.2 Original Issue of Debentures 35
ARTICLE IX CONCERNING THE TRUSTEE 35
Section 9.1 Certain Duties And Responsibilities 35
Section 9.2 Notice of Defaults 36
Section 9.3 Certain Rights of Trustee 37
Section 9.4 Trustee Not Responsible For Recitals, Etc. 38
Section 9.5 May Hold Debentures 38
Section 9.6 Moneys Held in Trust 38
Section 9.7 Compensation And Reimbursement 39
</TABLE>
<PAGE> 4
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<TABLE>
<CAPTION>
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<S> <C> <C>
Section 9.8 Reliance on Officers' Certificate 39
Section 9.9 Disqualification: Conflicting Interests 40
Section 9.10 Corporate Trustee Required Eligibility 40
Section 9.11 Resignation And Removal; Appointment of Successor 40
Section 9.12 Acceptance of Appointment by Successor 42
Section 9.13 Merger, Conversion, Consolidation or Succession to Business 42
Section 9.14 Preferential Collection of Claims Against The Company 43
ARTICLE X CONCERNING THE DEBENTURE HOLDERS 43
Section 10.1 Evidence of Action by Holders 43
Section 10.2 Proof of Execution by Debenture Holders 43
Section 10.3 Who May Be Deemed Owners 44
Section 10.4 Certain Debentures Owned by Company Disregarded 44
Section 10.5 Actions Binding on Future Debenture Holders 45
ARTICLE XI SUPPLEMENTAL INDENTURES 45
Section 11.1 Supplemental Indentures Without The Consent of Debenture 45
Holders
Section 11.2 Supplemental Indentures With Consent of Debenture Holders 46
Section 11.3 Effect of Supplemental Indentures 47
Section 11.4 Debentures Affected by Supplemental Indentures 47
Section 11.5 Execution of Supplemental Indentures 47
ARTICLE XII SUCCESSOR CORPORATION 48
Section 12.1 Company May Consolidate, Etc. 48
Section 12.2 Successor Corporation Substituted 49
Section 12.3 Evidence of Consolidation, Etc. to Trustee 49
ARTICLE XIII SATISFACTION AND DISCHARGE 49
Section 13.1 Satisfaction And Discharge of Indenture 49
Section 13.2 Discharge of Obligations 50
Section 13.3 Deposited Money to Be Held in Trust 50
Section 13.4 Payment of Monies Held by Paying Agents 51
Section 13.5 Repayment to Company 51
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, 51
OFFICERS AND DIRECTORS
Section 14.1 No Recourse 51
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ARTICLE XV MISCELLANEOUS PROVISIONS 52
Section 15.1 Effect on Successors And Assigns 52
Section 15.2 Actions by Successor 52
Section 15.3 Surrender of Company Powers 52
Section 15.4 Notices 52
Section 15.5 Governing Law 53
Section 15.6 Treatment of Debentures as Debt 53
Section 15.7 Compliance Certificates And Opinions 53
Section 15.8 Payments on Business Days 53
Section 15.9 Conflict With Trust Indenture Act 54
Section 15.10 Counterparts 54
Section 15.11 Separability 54
Section 15.12 Assignment 54
Section 15.13 Acknowledgment of Rights 54
ARTICLE XVI SUBORDINATION OF DEBENTURES 55
Section 16.1 Agreement to Subordinate 55
Section 16.2 Default on Senior Debt or Subordinated Debt 55
Section 16.3 Liquidation; Dissolution; Bankruptcy 55
Section 16.4 Subrogation 57
Section 16.5 Trustee to Effectuate Subordination 58
Section 16.6 Notice by The Company 58
Section 16.7 Rights of The Trustee; Holders of Senior Indebtedness 59
Section 16.8 Subordination May Not Be Impaired 59
</TABLE>
<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
<S> <C>
310(a) 9.10
310(b) 9.9
9.11
310(c) N/A
311(a) 9.14
311(b) 9.14
311(c) N/A
312(a) 6.1
6.2(a)
312(b) 6.2(c)
312(c) 6.2(c)
313(a) 6.4(a)
313(b) 6.4(b)
313(c) 6.4(a)
6.4(b)
313(d) 6.4(c)
314(a) 6.3(a)
314(b) N/A
314(c) 15.7
314(d) N/A
314(e) 15.7
314(f) N/A
315(a) 9.1(a)
9.3
315(b) 9.2
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Section of Trust Indenture Act of 1939, as amended Section of Indenture
<S> <C>
315(c) 9.1(a)
315(d) 9.1(b)
315(e) 7.7
316(a) 1.1
7.6
316(b) 7.4(b)
316(c) 10.1(b)
317(a) 7.2
317(b) 5.3
318(a) 15.9
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Indenture
and shall not affect the interpretation of any of its terms or
provisions.
vi
<PAGE> 8
INDENTURE
INDENTURE, dated as of January __, 1998, between PITTSBURGH HOME
FINANCIAL CORP., a Pennsylvania corporation (the "Company"), and THE BANK OF NEW
YORK, a New York banking corporation (the "Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured securities to be known as its ______% Junior Subordinated
Deferrable Interest Debentures due January __, 2028 (hereinafter referred to as
the "Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in this Indenture;
and
WHEREAS, Pittsburgh Home Capital Trust I, a Delaware statutory business
trust (the "Trust"), has offered to the public $__________ aggregate liquidation
amount of its Preferred Securities (as defined herein) and proposes to invest
the proceeds from such offering, together with the proceeds of the issuance and
sale by the Trust to the Company of $_______ aggregate liquidation amount of its
Common Securities (as defined herein), in $__________ aggregate principal amount
of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects, and
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures and
intending to be legally bound hereby:
<PAGE> 9
ARTICLE I
DEFINITIONS
SECTION 1. 1 DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section 1.1 and shall include the
plural as well as the singular. All other terms used in this Indenture that are
defined in the Trust Indenture Act, or that are by reference in the Trust
Indenture Act defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires), shall have the
meanings assigned to such terms in the Trust Indenture Act and in the Securities
Act as in force at the date of the execution of this instrument. All accounting
terms used herein and not expressly defined shall have the meanings assigned to
such terms in accordance with Generally Accepted Accounting Principles as in
effect at the time of computation.
"Additional Interest" shall have the meaning set forth in Section 2.4.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an executive officer, director or general partner.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Global Security, in each case to
the extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means an authenticating agent with respect to
the Debentures appointed by the Trustee pursuant to Section 2.11.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
2
<PAGE> 10
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means, with respect to the Debentures, any day other
than a Saturday or a Sunday or a day on which federal or state banking
institutions in the Borough of Manhattan, The City of New York, or the State of
Delaware are authorized or required by law, executive order or regulation to
close, or a day on which the Corporate Trust Office of the Trustee or the
Property Trustee is closed for business.
"Capital Treatment Event" means the receipt by the Trust of an Opinion
of Counsel to the effect that, as a result of any amendment to, or change
(including any proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such proposed change pronouncement, action or decision is
announced on or after the date of original issuance of the Preferred Securities
under the Trust Agreement, there is more than an insubstantial risk that the
Preferred Securities would not constitute "Tier 1 Capital" (or the then
equivalent thereof) applied as if the Company (or its successor) were a bank
holding company for purposes of the capital adequacy guidelines of the Federal
Reserve (or any successor regulatory authority with jurisdiction over bank
holding companies), or any capital adequacy guidelines as then in effect and
applicable to the Company.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Company. The Certificate need not comply
with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with the Preferred Securities; provided,
however, that upon the occurrence of an Event of Default, the rights of holders
of Common Securities to payment in respect of (i) distributions and (ii)
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Company" means Pittsburgh Home Financial Corp., a corporation duly
organized and existing under the laws of the Commonwealth of Pennsylvania, and,
subject to the provisions of Article XII, shall also include its successors and
assigns.
3
<PAGE> 11
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at 101 Barclay Street,
Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee
Administration.
"Coupon Rate" shall have the meaning set forth in Section 2.4.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or
other similar term, means the Person or Persons in whose name or names a
particular Debenture shall be registered on the books of the Company or the
Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section
2.6(b).
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person, whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options, swaps and similar arrangements; (vii) every obligation of the type
referred to in clauses (i) through (v) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
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"Depositary" means, with respect to the Debentures issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depositary by the Company pursuant to Section 2.3. The initial
Depositary shall be The DTC.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Trust Agreement.
"DTC" shall mean The Depository Trust Company.
"Event of Default" means, with respect to the Debentures, any event
specified in Section 7.1, which has continued for the period of time, if any,
and after the giving of the notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor statute, in each case as amended from time to time.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Generally Accepted Accounting Principles" means such accounting
principles as are generally accepted at the time of any computation required
hereunder.
"Global Security" means a Debenture evidencing all or part of the
Debentures, issued to the Depositary or its nominee, and registered in the name
of such Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
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"Herein," "hereof," and "hereunder," and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Debentures, means the date specified in the Debenture or in a
Board Resolution or in an indenture supplemental hereto with respect to the
Debentures as the fixed date on which an installment of interest with respect to
the Debentures is due and payable.
"Investment Company Act" means the Investment Company Act of 1940, and
any statute successor thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Trust of an Opinion
of Counsel, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the Trust is or shall be considered an "investment
company" that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Interest,
if any as set forth in Section 2.2.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary
to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
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(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of independent legal
counsel experienced in such matters as being opined upon, that is delivered to
the Trustee in accordance with the terms hereof.
"Outstanding" when used with reference to the Debentures, means,
subject to the provisions of Section 10.4, as of any particular time, all
Debentures theretofore authenticated and delivered by the Trustee under this
Indenture, except (a) Debentures theretofore canceled by the Trustee or any
paying agent, or delivered to the Trustee or any paying agent for cancellation
or that have previously been canceled; (b) Debentures or portions thereof for
the payment or redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited in trust with the Trustee or with any
paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent); provided, however, that if such Debentures or portions of such
Debentures are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in Article III or provision
satisfactory to the Trustee shall have been made for giving such notice; (c)
Debentures in lieu of or in substitution for which other Debentures shall have
been authenticated and delivered pursuant to the terms of Section 2.6 and (d)
Debentures paid pursuant to Section 2.8.
"Person" means any individual, corporation, partnership,
joint-venture, trust, joint-stock company, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment" means the place or places where the principal of and
interest on the Debentures are payable in accordance with the terms of this
Indenture.
"Predecessor Debenture" means every previous Debenture evidencing all
or a portion of the same debt as that evidenced by such particular Debenture;
and, for the purposes of this definition, any Debenture authenticated and
delivered under Section 2.8 in lieu of a lost, destroyed or stolen Debenture
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means the Preferred Securities
Guarantee, as amended from time to time, by and between the Company, as
guarantor, and the Trustee, executed and delivered for the benefit of the
Holders of the Preferred Securities.
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"Property Trustee" has the meaning set forth in the Trust Agreement.
"Responsible Officer" when used with respect to the Trustee means any
vice president, any assistant vice president, any assistant secretary, any
assistant treasurer, any corporate trust officer or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means January ___, 2028.
"Securities Act" means the Securities Act of 1933, or any successor
statute, in each case as amended from time to time.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company which when
incurred and without respect to any election under Section 1111 (b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to the
Company; (ii) any Debt of the Company to any of its subsidiaries; and (iii) any
Debt to any employee of the Company.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Debentures), except that
Subordinated Debt shall not include debentures sold by the Company to the Trust.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; (ii) any general
partnership, joint venture, trust or similar entity, at least a majority of
whose
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outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries; and (iii) any limited partnership of which such Person or
any of its Subsidiaries is a general partner.
"'Tax Event" means the receipt by the Trust of an Opinion of Counsel,
to the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of issuance of the Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Trust is, or shall be
within 90 days after the date of such Opinion of Counsel, subject to United
States federal income tax with respect to income received or accrued on the
Debentures; (ii) interest payable by the Company on the Debentures is not, or
within 90 days after the date of such Opinion of Counsel, shall not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes; or (iii) the Trust is, or shall be within 90 days after the date
of such Opinion of Counsel, subject to more than a de minimis amount of other
taxes, duties, assessments or other governmental charges. The Trust or the
Company shall request and receive such Opinion of Counsel with regard to such
matters within a reasonable period of time after the Trust or the Company shall
have become aware of the possible occurrence of any of the events described in
clauses (i) through (iii) above.
"Trust" means Pittsburgh Home Capital Trust I, a Delaware statutory
business trust created by the Trust Agreement.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
January ___, 1998, of the Trust, as amended, modified or supplemented in
accordance with the applicable provisions thereof, among the trustees of the
trust named therein, the Company, as depositor, and the holders from time to
time of undivided beneficial ownership interests in the assets of the Trust,
including all exhibits thereto, including, for all purposes of the Trust
Agreement, and any such modification, amendment or supplement, the provisions of
the Trust Indenture Act that are deemed to be a part of and govern the Trust
Agreement and any such modification, amendment or supplement, respectively.
"Trustee" means The Bank of New York and, subject to the provisions of
Article IX, shall also include its successors and assigns, and, if at any time
there is more than one Person acting in such capacity hereunder, "Trustee"
shall mean each such Person.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1 and any
statute successor thereto, in each case as amended from time to time.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
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"Voting Stock" as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION
AND EXCHANGE OF THE DEBENTURES
SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "______% Junior
Subordinated Deferrable Interest Debentures due January ___, 2028," limited in
aggregate principal amount to $__________ which amount shall be as set forth in
any written order of the Company for the authentication and delivery of
Debentures pursuant to Section 2.5.
SECTION 2.2 MATURITY.
The Maturity Date shall be the Scheduled Maturity Date.
SECTION 2.3 FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated form
without interest coupons. Principal and interest on the Debentures issued in
certificated form shall be payable, the transfer of such Debentures shall be
registrable and such Debentures shall be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the holder at such address as shall appear in the Debenture
Register or by wire transfer to an account maintained by the holder as specified
in the Debenture Register, provided that the holder provides proper wire
transfer instructions by the regular record date. Notwithstanding the foregoing,
so long as the holder of any Debentures is the Property Trustee, the payment of
the principal of and interest (including Compounded Interest and Additional
Interest, if any) on such Debentures held by the Property Trustee shall be made
at such place and to such account as may be designated by the Property Trustee.
Debentures shall be issuable in whole or in part in the form of one or
more Global Securities and, in such case, the Depositary for such Global
Securities shall be DTC.
SECTION 2.4 INTEREST.
(a) Each Debenture shall bear interest at the rate of _____% per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and
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on any overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
Coupon Rate, compounded quarterly, payable (subject to the provisions of Article
IV) quarterly in arrears on March 1, June 1, September 1 and December 1 of each
year (each, an "Interest Payment Date," commencing on March 1, 1998), to the
Person in whose name such Debenture or any Predecessor Debenture is registered,
at the close of business on the regular record date for such interest
installment, next preceding such Interest Payment Date.
(b) The amount of interest payable for any period shall be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, shall be computed on the
basis of the actual number of days elapsed in such period. In the event that any
date on which interest is payable on the Debentures is not a Business Day, then
payment of interest payable on such date shall 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 is 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.
(c) If, at any time while the Property Trustee is the holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Company shall pay as additional interest ("Additional
Interest") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other governmental charges been imposed.
SECTION 2.5 EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Company by its
Chief Executive Officer, President or one of its Vice Presidents, under its
corporate seal attested by its Secretary or one of its Assistant Secretaries.
Signatures may be in the form of a manual or facsimile signature. The Company
may use the facsimile signature of any Person who shall have been a Chief
Executive Officer, President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof, notwithstanding the
fact that at the time the Debentures shall be authenticated and delivered or
disposed of such Person shall have ceased to be the Chief Executive Officer,
President or a Vice President, or the Secretary or an Assistant Secretary, of
the Company. The seal of the Company may be in the form of a facsimile of such
seal and may be impressed, affixed, imprinted or otherwise reproduced on the
Debentures. The Debentures may contain such notations, legends or endorsements
required by law, stock exchange rule or usage. Each Debenture shall be dated the
date of its authentication by the Trustee.
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(b) A Debenture shall not be valid until authenticated manually by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a written order of the Company for
the authentication and delivery of such Debentures signed by its Chief Executive
Officer, President or any Vice President and its Secretary or any Assistant
Secretary, and the Trustee in accordance with such written order shall
authenticate and make available for delivery such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 9.1) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
(e) The Trustee shall not be required to authenticate such Debentures
if the issue of such Debentures pursuant to this Indenture shall affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at the office
or agency of the Company designated for such purpose, for other Debentures and
for a like aggregate principal amount, upon payment of a sum sufficient to cover
any tax or other governmental charge in relation thereto, all as provided in
this Section 2.6. In respect of any Debentures so surrendered for exchange, the
Company shall execute, the Trustee shall authenticate and such office or agency
shall deliver in exchange therefor the Debenture or Debentures that the
Debenture holder making the exchange shall be entitled to receive, bearing
numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or such other location designated by the
Company a register or registers (herein referred to as the "Debenture Register")
in which, subject to such reasonable regulations as it may prescribe, the
Company shall register the Debentures and the transfers of Debentures as in this
Article II provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of registering
Debentures and transfer of Debentures as herein provided shall be appointed as
authorized by Board Resolution (the "Debenture Registrar"). Upon surrender for
transfer of any Debenture at the office or agency of the Company designated for
such purpose, the Company shall execute, the Trustee shall authenticate and such
office or agency shall make available for delivery in the name of the transferee
or transferees a new Debenture
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or Debentures for a like aggregate principal amount. All Debentures presented or
surrendered for exchange or registration of transfer, as provided in this
Section 2.6, shall be accompanied (if so required by the Company or the
Debenture Registrar) by a written instrument or instruments of transfer, in form
satisfactory to the Company or the Debenture Registrar, duly executed by the
registered holder or by such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration of
transfer of Debentures, or issue of new Debentures in case of partial
redemption, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge in relation thereto, other than exchanges
pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not involving any
transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
less than all the Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of or exchange any
Debentures or portions thereof called for redemption.
(e) Notwithstanding any other provision of this Indenture, transfers
and exchanges of Debentures and beneficial interests in a Global Security shall
be made only in accordance with this Section 2.6(e).
(i) A Debenture that is not a Global Security may be
transferred, in whole or in part, to a Person who takes
delivery in the form of another Debenture that is not a Global
Security as provided in this Section 2.6.
(ii) A beneficial interest in a Global Security may be
exchanged for a Debenture that is not a Global Security as
provided in Section 2.7A.
SECTION 2.7 TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company may
execute, and the Trustee shall authenticate and deliver, temporary Debentures
(printed, lithographed, or typewritten). Such temporary Debentures shall be
substantially in the form of the definitive Debentures in lieu of which they are
issued, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every
temporary Debenture shall be executed by the Company and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Debentures. Without unnecessary delay the Company
shall execute and shall furnish definitive Debentures and thereupon any or all
temporary Debentures may be surrendered in exchange therefor (without charge to
the holders), at the office or agency of the Company designated for such
purpose, and the Trustee shall authenticate and such office or agency shall
deliver in exchange for such temporary Debentures an equal aggregate principal
amount of definitive Debentures, unless the Company advises the Trustee to the
effect that definitive
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Debentures need not be executed and furnished until further notice from the
Company. Until so exchanged, the temporary Debentures shall be entitled to the
same benefits under this Indenture as definitive Debentures authenticated and
delivered hereunder.
SECTION 2.7A GLOBAL SECURITIES.
(a) Each Global Security issued under this Indenture shall be
registered in the name of the Depositary designated by the Company for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Debentures registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Company is unable to locate a qualified successor, (ii) the Company executes and
delivers to the Trustee a Company Order stating that the Company elects to
terminate the book-entry system through the Depositary, or (iii) there shall
have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other Debentures or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article II. If any Global Security is to be exchanged for other
Debentures or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article II or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the principal amount of such Debenture to be
so exchanged for a beneficial interest therein, as the case may be, by means of
an appropriate adjustment made on the records of the Securities Registrar,
whereupon the Trustee, in accordance with Applicable Procedures, shall instruct
the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Security by the Depositary, accompanied by registration instructions, the
Trustee shall, subject to Section 2.6 and as otherwise provided in this Article
II, authenticate and make available for delivery any Debentures issuable in
exchange for such Global Security (or any portion thereof) in accordance with
the instructions of the Depositary. The Trustee shall not be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be fully protected in relying on, such instructions.
(d) Every Debenture authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article II, Section 3.5 or Article IX or
otherwise, shall be authenticated and delivered in the form
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of, and shall be, a Global Security, unless such Debenture is registered in the
name of a Person other than the Depositary for such Global Security or a nominee
thereof.
(e) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Debenture, and owners of beneficial interests in a Global
Security shall hold such interests pursuant to Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security shall be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or agent. Neither the
Trustee nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company (subject to the next
succeeding sentence) shall execute, and upon the Company's request the Trustee
(subject as aforesaid) shall authenticate and make available for delivery, a new
Debenture bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in substitution for
the Debenture so destroyed, lost or stolen. In every case the applicant for a
substituted Debenture shall furnish to the Company and the Trustee such security
or indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the ownership thereof. The
Trustee may authenticate any such substituted Debenture and make available for
delivery the same upon the written request or authorization of any officer of
the Company. Upon the issuance of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith. In case any Debenture
that has matured or is about to mature shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Debenture, pay
or authorize the payment of the same (without surrender thereof except in the
case of a mutilated Debenture) if the applicant for such payment shall furnish
to the Company and the Trustee such security or indemnity as they may require to
save them harmless, and, in case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Trustee of the destruction, loss or theft of
such Debenture and of the ownership thereof.
(b) Every replacement Debenture issued pursuant to the provisions of
this Section 2.8 shall constitute an additional contractual obligation of the
Company whether or not the mutilated, destroyed, lost or stolen Debenture shall
be found at any time, or be enforceable by anyone, and shall be entitled to all
the benefits of this Indenture equally and proportionately with any and all
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other Debentures duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.9 CANCELLATION.
All Debentures surrendered for the purpose of payment, redemption,
exchange or registration of transfer shall, if surrendered to the Company or any
paying agent, be delivered to the Trustee for cancellation, or, if surrendered
to the Trustee, shall be canceled by it, and no Debentures shall be issued in
lieu thereof except as expressly required or permitted by any of the provisions
of this Indenture. On request of the Company at the time of such surrender, the
Trustee shall deliver to the Company canceled Debentures held by the Trustee. In
the absence of such request the Trustee may dispose of canceled Debentures in
accordance with its standard procedures. If the Company shall otherwise acquire
any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.10 BENEFIT OF INDENTURE.
Nothing in this Indenture or in the Debentures, express or implied,
shall give or be construed to give to any Person, other than the parties hereto
and the holders of the Debentures (and, with respect to the provisions of
Article XVI, the holders of Senior Indebtedness) any legal or equitable right,
remedy or claim under or in respect of this Indenture, or under any covenant,
condition or provision herein contained; all such covenants, conditions, and
provisions being for the sole benefit of the parties hereto and of the holders
of the Debentures (and, with respect to the provisions of Article XVI, the
holders of Senior Indebtedness).
SECTION 2.11 AUTHENTICATION AGENT.
(a) So long as any of the Debentures remain Outstanding there may be an
Authenticating Agent for any or all such Debentures, which the Trustee shall
have the right to appoint. Said Authenticating Agent shall be authorized to act
on behalf of the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and Debentures so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent. Each Authenticating
Agent shall be acceptable to the Company and shall be a corporation that has a
combined capital and surplus, as most recently reported or determined by it,
sufficient under the laws of any jurisdiction under which it is organized or in
which it is doing business to conduct a trust business, and that is otherwise
authorized under such laws to conduct such business and is subject to
supervision or examination
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by federal or state authorities. If at any time any Authenticating Agent shall
cease to be eligible in accordance with these provisions, it shall resign
immediately.
(b) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
SECTION 2.12 RIGHT OF SET-OFF.
With respect to the Debentures initially issued to the Trust,
notwithstanding anything to the contrary herein, the Company shall have the
right to set-off any payment it is otherwise required to make in respect of any
such Debenture to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Debenture or to a holder of Preferred
Securities pursuant to an action undertaken under Section 7.8 of this Indenture.
SECTION 2.13 CUSIP NUMBERS.
The Company in issuing the Debentures may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Debentureholders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission or such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1 REDEMPTION.
Subject to the Company having received prior regulatory approval, if
then required under applicable capital guidelines or regulatory policies, the
Company may redeem the Debentures issued hereunder on and after the dates set
forth in and in accordance with the terms of this Article III.
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SECTION 3.2 SPECIAL EVENT REDEMPTION.
Subject to the Company having received prior regulatory approval, if
then required under applicable capital guidelines or regulatory policies, if a
Special Event has occurred and is continuing, then, notwithstanding Section 3.3,
the Company shall have the right upon not less than 30 days nor more than 60
days notice to the holders of the Debentures to redeem the Debentures, in whole
but not in part, for cash within 180 days following the occurrence of such
Special Event (the "180-Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest thereon to
the date of such redemption (the "Redemption Price"), provided that if at the
time there is available to the Company the opportunity to eliminate, within the
180-Day Period, a Tax Event by taking some ministerial action (a "Ministerial
Action"), such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on the Company, the Trust
or the holders of the Trust Securities issued by the Trust, the Company shall
pursue such Ministerial Action in lieu of redemption, and, provided further,
that the Company shall have no right to redeem the Debentures while the Trust is
pursuing any Ministerial Action pursuant to its obligations under the Trust
Agreement. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.
SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY.
Except as otherwise may be specified in this Indenture, the Company
shall have the right to redeem the Debentures, in whole or in part, from time to
time, on or after January __, 2003, at a Redemption Price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest thereon to
the date of such redemption. Any redemption pursuant to this Section 3.3 shall
be made upon not less than 30 days nor more than 60 days notice to the holder of
the Debentures, at the Redemption Price. If the Debentures are only partially
redeemed pursuant to this Section 3.3, the Debentures shall be redeemed pro rata
or by lot or in such other manner as the Trustee shall deem appropriate and fair
in its discretion. The Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or at such earlier time as the Company
determines provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.
SECTION 3.4 NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to redeem
all or a portion of the Debentures in accordance with the right reserved so to
do, the Company shall, or shall cause the Trustee to, upon receipt of 45 days
written notice from the Company, give notice of such redemption to holders of
the Debentures to be redeemed by mailing, first class postage prepaid, a notice
of such redemption not less than 30 days and not more than 60 days before the
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date fixed for redemption to such holders at their last addresses as they shall
appear upon the Debenture Register unless a shorter period is specified in the
Debentures to be redeemed. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the registered holder receives the notice. In any case, failure duly to give
such notice to the holder of any Debenture designated for redemption in whole or
in part, or any defect in the notice, shall not affect the validity of the
proceedings for the redemption of any other Debentures. In the case of any
redemption of Debentures prior to the expiration of any restriction on such
redemption provided in the terms of such Debentures or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with any such restriction. Each such notice of redemption
shall identify the Debenture to be redeemed (including CUSIP numbers, if any)
and shall specify the date fixed for redemption and the Redemption Price and
shall state that payment of the Redemption Price shall be made at the office or
agency of the Company or at the Corporate Trust Office, upon presentation and
surrender of such Debentures, that interest accrued to the date fixed for
redemption shall be paid as specified in said notice and that from and after
said date interest shall cease to accrue. If less than all the Debentures are to
be redeemed, the notice to the holders of the Debentures shall specify the
particular Debentures to be redeemed. If the Debentures are to be redeemed in
part only, the notice shall state the portion of the principal amount thereof to
be redeemed and shall state that on and after the redemption date, upon
surrender of such Debenture, a new Debenture or Debentures in principal amount
equal to the unredeemed portion thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the Company
shall give the Trustee at least 45 days notice in advance of the date fixed for
redemption as to the aggregate principal amount of Debentures to be redeemed,
and thereupon the Trustee shall select, by lot or in such other manner as it
shall deem appropriate and fair in its discretion, the portion or portions
(equal to $10 or any integral multiple thereof) of the Debentures to be redeemed
and shall thereafter promptly notify the Company in writing of the numbers of
the Debentures to be redeemed, in whole or in part. The Company may, if and
whenever it shall so elect pursuant to the terms hereof, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the
Debentures for redemption and to give notice of redemption in the manner set
forth in this Section 3.4, such notice to be in the name of the Company or its
own name as the Trustee or such paying agent may deem advisable. In any case in
which notice of redemption is to be given by the Trustee or any such paying
agent, the Company shall deliver or cause to be delivered to, or permit to
remain with, the Trustee or such paying agent, as the case may be, such
Debenture Register, transfer books or other records, or suitable copies or
extracts therefrom, sufficient to enable the Trustee or such paying agent to
give any notice by mail that may be required under the provisions of this
Section 3.4.
SECTION 3.5 PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as
above provided, the Debentures or portions of Debentures to be redeemed
specified in such notice shall become
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due and payable on the date and at the place stated in such notice at the
applicable Redemption Price, and interest on such Debentures or portions of
Debentures shall cease to accrue on and after the date fixed for redemption,
unless the Company shall default in the payment of such Redemption Price with
respect to any such Debenture or portion thereof. On presentation and surrender
of such Debentures on or after the date fixed for redemption at the place of
payment specified in the notice, said Debentures shall be paid and redeemed at
the Redemption Price (but if the date fixed for redemption is an interest
payment date, the interest installment payable on such date shall be payable to
the registered holder at the close of business on the applicable record date
pursuant to Section 2.4).
(b) Upon presentation of any Debenture that is to be redeemed in part
only, the Company shall execute and the Trustee shall authenticate and the
office or agency where the Debenture is presented shall make available for
delivery to the holder thereof, at the expense of the Company, a new Debenture
of authorized denomination in principal amount equal to the unredeemed portion
of the Debenture so presented.
SECTION 3.6 NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Debentures, to defer payments of interest by extending the interest
payment period of such Debentures for a period not exceeding 20 consecutive
quarters (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
Extended Interest Payment Period may extend beyond the Maturity Date. Interest,
which has been deferred because of the extension of the interest payment period
pursuant to this Section 4.1, shall bear interest thereon at the rate of _____%
per annum, compounded quarterly during the Extended Interest Payment Period (the
"Compounded Interest"). At the end of the Extended Interest Payment Period, the
Company shall calculate (and deliver such calculation to the Trustee) and pay
all interest accrued and unpaid on the Debentures, including any Additional
Interest and Compounded Interest (together, "Deferred Interest") that shall be
payable to the holders of the Debentures in whose names the Debentures are
registered in the Debenture Register on the first record date after the end of
the Extended Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters, or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extended Interest Payment Period and
upon the payment of all Deferred Interest then due, the
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Company may commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable during an Extended
Interest Payment Period, except at the end thereof, but the Company may prepay
at any time all or any portion of the interest accrued during an Extended
Interest Payment Period.
SECTION 4.2 NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Administrative Trustees, the
Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period one Business Day before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by the Trust are
payable; or (ii) the date the Trust is required to give notice of the record
date or the date such Distributions are payable to The Nasdaq Stock Market's
National Market of other applicable self-regulatory organization or to holders
of the Preferred Securities issued by the Trust, but in any event at least one
Business Day before such record date.
(b) If the Property Trustee is not the only holder of the Debentures at
the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least one Business Day
before the earlier of (i) the next succeeding Interest Payment Date; or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to The Nasdaq Stock Market's National Market or other
applicable self-regulatory organization or to holders of the Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs (a)
or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted
in the Minimum Extended Interest Payment Period permitted under Section 4.1.
SECTION 4.3 LIMITATION ON TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment of
interest as provided in Section 4.1; (ii) there shall have occurred any Event of
Default; or (iii) the Company is in default with respect to its obligations
under the Preferred Securities Guarantee, then (a) the Company will not, and
will not permit any Subsidiary to, declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (other than (1) the reclassification of any
class of the Company's capital stock into another class of its capital stock;
(2) dividends or distributions payable in any class of the Company's common
stock, (3) any declaration of a dividend in connection with the implementation
of a shareholder 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,
(4) payments under the Preferred Securities Guarantee and (5) purchases of the
Company's common stock related to the rights under any of the Company's benefit
plans for its or its subsidiaries' directors, officers or employees); (b) the
Company will not, and will not permit any Subsidiary to, make any
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payment of interest, principal or premium, if any, or repay, repurchase or
redeem any debt securities issued by the Company which rank pari passu with or
junior to the Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any Subsidiary of the Company
if such guarantee ranks pari passu with or junior to the Debentures; provided,
however, that notwithstanding the foregoing the Company may make payments
pursuant to its obligations under the Preferred Securities Guarantee; and (c)
the Company shall not redeem, purchase or acquire less than all of the
outstanding Debentures or any of the Preferred Securities.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall duly and punctually pay or cause to be paid the
principal of and interest on the Debentures at the time and place and in the
manner provided herein.
SECTION 5.2 MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the Company shall
maintain an office or agency in the Place of Payment where (i) Debentures may be
presented for payment; (ii) Debentures may be presented as hereinabove
authorized for registration of transfer and exchange; and (iii) notice and
demands to or upon the Company in respect of the Debentures and this Indenture
may be given or served, such designation to continue with respect to such office
or agency until the Company shall, by written notice signed by its President or
a Vice President and delivered to the Trustee, designate some other office or
agency for such purposes or any of them. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
notices and demands. In addition to any such office or agency, the Company may
from time to time designate one or more offices or agencies where the Debentures
may be presented for registration or transfer and for exchange in the manner
provided herein, and the Company may from time to time rescind such designation
as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain any such office or agency in the Place of Payment for
such purposes. The Company shall give the Trustee prompt written notice of any
such designation or rescission thereof.
SECTION 5.3 PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents for the
Debentures, other than the Trustee, the Company shall cause each such paying
agent to execute and deliver to the
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Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent for
the payment of the principal of or interest on the Debentures
(whether such sums have been paid to it by the Company or by
any other obligor of such Debentures) in trust for the benefit
of the Persons entitled thereto;
(ii) that it shall give the Trustee prompt written notice of
any failure by the Company (or by any other obligor of such
Debentures) to make any payment of the principal of or
interest on the Debentures when the same shall be due and
payable;
(iii) that it shall, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such paying agent; and
(iv) that it shall perform all other duties of paying agent as
set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect to
the Debentures, it shall on or before each due date of the principal of or
interest on such Debentures, set aside, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay such principal
or interest so becoming due on Debentures until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall promptly notify
the Trustee of such action, or any failure (by it or any other obligor on such
Debentures) to take such action. Whenever the Company shall have one or more
paying agents for the Debentures, it shall, prior to each due date of the
principal of or interest on any Debentures, deposit with the paying agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest,
and (unless such paying agent is the Trustee) the Company shall promptly notify
the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary, (i)
the agreement to hold sums in trust as provided in this Section 5.3 is subject
to the provisions of Section 13.3 and 13.4; and (ii) the Company may at any
time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or direct any paying agent to pay, to
the Trustee all sums held in trust by the Company or such paying agent, such
sums to be held by the Trustee upon the same terms and conditions as those upon
which such sums were held by the Company or such paying agent; and, upon such
payment by any paying agent to the Trustee, such paying agent shall be released
from all further liability with respect to such money.
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SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, shall appoint, in the manner provided in Section 9.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Company shall not, while any of the Debentures remain outstanding,
consolidate with, or merge into, or merge into itself, or convey, transfer or
lease all or substantially all of its property and assets to any other entity
and no entity shall consolidate with or merge into the Company or convey,
transfer or lease substantially all of its properties and assets to the Company,
unless the provisions of Article XII hereof are complied with.
SECTION 5.6 LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the Trust in
connection with the issuance of Trust Securities by the Trust and (i) there
shall have occurred any event that would constitute an Event of Default; (ii)
the Company shall be in default with respect to its payment of any obligations
under the Preferred Securities Guarantee relating to the Trust; or (iii) the
Company shall have given notice of its election to defer payments of interest on
such Debentures by extending the interest payment period as provided in this
Indenture and such period, or any extension thereof, shall be continuing, then
(a) the Company may not, and may not permit any Subsidiary to, declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (1) the reclassification of any class of the Company's capital stock
into another class of capital stock, (2) dividends or distributions payable in
any class of the Company's common stock, (3) any declaration of a dividend in
connection with the implementation of a shareholder 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, (4) payments under the Preferred Securities
Guarantee and (5) purchases of the Company's common stock related to the rights
under any of the Company's benefit plans for its or its subsidiaries' directors,
officers or employees); (b) the Company shall not make any payment of interest,
principal or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the Debentures;
provided, however, that the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the outstanding Debentures or
any of the Preferred Securities.
SECTION 5.7 COVENANTS AS TO THE TRUST.
For so long as such Trust Securities of the Trust remain outstanding,
the Company shall (i) maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of the
Company under this Indenture may succeed to the Company's ownership of the
Common Securities; (ii) not voluntarily terminate, wind up or
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liquidate the Trust, except upon prior regulatory approval if then so required
under applicable capital guidelines or regulatory policies and use its
reasonable efforts to cause the Trust (a) to remain a business trust, except in
connection with a distribution of Debentures, the redemption of all of the Trust
Securities of the Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement; and (b) to otherwise continue not to
be treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the distribution of
the Debentures to the holders of the Preferred Securities issued by the Trust
upon a Dissolution Event, the Company shall use its best efforts to list such
Debentures on The Nasdaq Stock Market's National Market or on such other
exchange as the Preferred Securities are then listed.
SECTION 5.8 COVENANTS AS TO PURCHASES.
Prior to January ___, 2003, the Company shall not purchase any
Debentures, in whole or in part, from the Trust.
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
DEBENTURE HOLDERS
The Company shall furnish or cause to be furnished to the Trustee (a)
within one Business Day after January and June 30th of each year a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
holders of the Debentures as of such regular record date, provided that the
Company shall not be obligated to furnish or cause to furnish such list at any
time that the list shall not differ in any respect from the most recent list
furnished to the Trustee by the Company; and (b) at such other times as the
Trustee may request in writing within 30 days after the receipt by the Company
of any such request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished; provided, however, that,
in either case, no such list need be furnished if the Trustee shall be the
Debenture Registrar.
SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of holders of Debentures received
by the Trustee in its capacity as registrar for the Debentures (if acting in
such capacity).
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(b) The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b) of
the Trust Indenture Act with other Debentureholders with respect to their rights
under this Indenture or under the Debentures.
SECTION 6.3 REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the Trustee, within
15 days after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) that the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company is not required to file information,
documents or reports pursuant to either of such Sections, then to file with the
Trustee and the Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be required pursuant to
Section 13 of the Exchange Act in respect of a security listed and registered on
a national securities exchange as may be prescribed from time to time in such
rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from to time
by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail, first class
postage prepaid, or reputable over-night delivery service that provides for
evidence of receipt, to the Debentureholders, as their names and addresses
appear upon the Debenture Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of this Section
6.3 and delivered to Debenture holders or the Company's stockholders as may be
required by rules and regulations prescribed from time to time by the
Commission.
(d) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 6.4 REPORTS BY THE TRUSTEE.
(a) The Trustee shall transmit to Debentureholders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within sixty days after each May 15 following the date of this
Indenture deliver to Debentureholders a brief report, dated as of such May 15,
which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Debentureholders, be filed by the Trustee with each stock exchange, if any,
upon which the Debentures are listed with the Commission and with the Company
will promptly notify the Trustee when any Debentures become listed on any stock
exchange.
SECTION 6.5 STATEMENTS AS TO DEFAULT.
(a) The Company will deliver to the Trustee annually, within 120 days
after the end of each of its fiscal years, a certificate, from its principal
executive officer, principal financial officer or principal accounting officer,
stating whether or not to the best knowledge of the signer thereof the Company
is in compliance (without regard to periods of grace or notice requirements)
with all conditions and covenants under this Indenture, and if the Company shall
not be in compliance, specifying such non-compliance and the nature and status
thereof of which such signer may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of the occurrence
of any Event of Default or an event which, with notice or the lapse of time or
both, would constitute an Event of Default, an Officers' Certificate setting
forth the details of such Event of Default or Default and the action which the
Company proposes to take with respect thereto.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that has occurred and is
continuing:
(i) the Company defaults in the payment of any installment of
interest (including Additional Interest or Compounded
Interest, if any) upon any of the Debentures, as and when the
same shall become due and payable, and continuance of such
default for a period of 30 days; provided, however, that a
valid extension
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of an interest payment period by the Company in accordance
with the terms of this Indenture shall not constitute a
default in the payment of interest for this purpose;
(ii) the Company defaults in the payment of the principal on
the Debentures as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration
of acceleration of maturity or otherwise;
(iii) the Company fails to observe or perform any other of its
covenants or agreements with respect to the Debentures for a
period of 90 days after the date on which written notice of
such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall
have been given to the Company by the Trustee, by registered
or certified mail, or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the
Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii) consents
to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its
property; or (iv) makes a general assignment for the benefit
of its creditors;
(v) a court of competent jurisdiction enters an order under
any Bankruptcy Law that (i) is for relief against the Company
in an involuntary case; (ii) appoints a Custodian of the
Company for all or substantially all of its property; or (iii)
orders the liquidation of the Company, and the order or decree
remains unstayed and in effect for 60 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its
existence except in connection with (i) the distribution of
Debentures to holders of Trust Securities in liquidation of
their interests in the Trust; (ii) the redemption of all of
the outstanding Trust Securities of the Trust; or (iii)
certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debentures
then Outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by such Debentureholders) may declare the principal of all the
Debentures to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, notwithstanding
anything contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have been
so declared due and payable, and before any judgment or decree for the payment
of the moneys due shall have
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been obtained or entered as hereinafter provided, the holders of a majority in
aggregate principal amount of the Debentures then Outstanding hereunder, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if: (i) the Company has paid or deposited with
the Trustee a sum sufficient to pay all matured installments of interest
(including Additional Interest and Compounded Interest, if any) upon all the
Debentures and the principal of any and all Debentures that shall have become
due otherwise than by acceleration (with interest upon such principal, and upon
overdue installments of interest, at the rate per annum expressed in the
Debentures to the date of such payment or deposit) and the amount payable to the
Trustee under Section 9.6; and (ii) any and all Events of Default under this
Indenture, other than the nonpayment of principal on Debentures that shall not
have become due by their terms, shall have been remedied or waived as provided
in Section 7.6. No such rescission and annulment shall extend to or shall affect
any subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Debentures under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee, then and in
every such case the Company and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company and the Trustee shall continue as though no such proceedings had
been taken.
SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (1) in case it shall default in the
payment of any installment of interest (including Additional Interest and
Compounded Interest) on any of the Debentures, and such default shall have
continued for a period of 90 Business Days; or (2) in case it shall default in
the payment of the principal of any of the Debentures when the same shall have
become due and payable, whether upon maturity of the Debentures or upon
redemption or upon declaration or otherwise, then, upon demand of the Trustee,
the Company shall pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have been become due and payable on
all such Debentures for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (if the Debentures are held by the Trust
or a trustee of the Trust, without duplication of any other amounts paid by the
Trust or trustee in respect thereof) upon overdue installments of interest at
the rate per annum expressed in the Debentures; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, and the amount payable to the Trustee and its counsel under Section
9.7.
(b) If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the
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Debentures and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or other obligor upon
the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affecting the Company or the creditors or property of either, the Trustee shall
have power to intervene in such proceedings and take any action therein that may
be permitted by the court and shall (except as may be otherwise provided by law)
be entitled to file such proofs of claim and other papers and documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
holders of the Debentures allowed for the entire amount due and payable by the
Company under this Indenture at the date of institution of such proceedings and
for any additional amount that may become due and payable by the Company after
such date, and to collect and receive any moneys or other property payable or
deliverable on any such claim, and to distribute the same after the deduction of
the amount payable to the Trustee and its counsel under Section 9.7; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the holders of the Debentures to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to such Debentureholders, to pay to the Trustee any amount due
it under Section 9.7.
(d) All rights of action and of asserting claims under this Indenture,
or under any of the terms established with respect to Debentures, may be
enforced by the Trustee without the possession of any of such Debentures, or the
production thereof at any trial or other proceeding relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for payment to the Trustee of any amounts due under Section 9.7, be
for the ratable benefit of the holders of the Debentures. In case of an Event of
Default hereunder, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either at law or in equity or in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law. Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Debentureholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Debentureholder in
any such proceeding.
SECTION 7.3 APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article VII with
respect to the Debentures shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such moneys on
account of principal or interest, upon presentation of the Debentures, and
notation thereon the payment, if only partially paid, and upon surrender thereof
if fully paid:
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FIRST: To the payment of costs and expenses of collection and
of all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon
the Debentures for principal and interest, in respect of which
or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according
to the amounts due and payable on such Debentures for
principal and interest, respectively.
FOURTH: Any remaining balance to the Company.
SECTION 7.4 LIMITATION ON SUITS.
(a) No holder of any Debenture shall have any right by virtue or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless (i) such holder previously shall have given to the Trustee
written notice of an Event of Default and of the continuance thereof with
respect to the Debentures specifying such Event of Default, as hereinbefore
provided; (ii) the holders of not less than 25% in aggregate principal amount of
the Debentures then Outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as trustee
hereunder; (iii) such holder or holders shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby; and (iv) the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
failed to institute any such action, suit or proceeding; and (v) during such 60
day period, the holders of a majority in principal amount of the Debentures do
not give the Trustee a direction inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or any
other provisions of this Indenture, the right of any holder of the Debentures to
receive payment of the principal of and interest on the Debentures, as therein
provided, on or after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to institute suit for the
enforcement of any such payment on or after such respective dates or redemption
date, shall not be impaired or affected without the consent of such holder and
by accepting a Debenture hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Debenture with every other such
taker and holder and the Trustee, that no one or more holders of Debentures
shall have any right in any manner whatsoever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Debentures. For the protection
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and enforcement of the provisions of this Section 7.4, each and every
Debentureholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) Except as otherwise provided in Section 2.8, all powers and
remedies given by this Article VII to the Trustee or to the Debentureholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of the
Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or the Debentureholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Debentureholders.
SECTION 7.6 CONTROL BY DEBENTUREHOLDERS.
The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, determined in accordance with Section 10.4,
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided, however, that such direction shall not
be in conflict with any rule of law or with this Indenture. Subject to the
provisions of Section 9.1, the Trustee shall have the right to decline to follow
any such direction if the Trustee in good faith shall, by a Responsible Officer
or Officers of the Trustee, determine that the proceeding so directed would
involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Debentures at the time Outstanding affected
thereby, determined in accordance with Section 10.4, may on behalf of the
holders of all of the Debentures waive any past default in the performance of
any of the covenants contained herein and its consequences, except (i) a default
in the payment of the principal of or interest on, any of the Debentures as and
when the same shall become due by the terms of such Debentures otherwise than by
acceleration (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal has been deposited with the
Trustee (in accordance with Section 7.1(c)); (ii) a default in the covenants
contained in Section 5.6; or (iii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the holder of each
Outstanding Debenture affected; provided, however, that if the Debentures are
held by the Trust or a trustee of the Trust, such waiver or modification to such
waiver shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such waiver
or modification to such waiver; provided further, that if the consent of the
holder of each Outstanding Debenture is required, such waiver shall not be
effective until each holder of the Trust Securities of the Trust shall have
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consented to such waiver. Upon any such waiver, the default covered thereby
shall be deemed to be cured for all purposes of this Indenture and the Company,
the Trustee and the holders of the Debentures shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 7.7 UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any Debentures
by such holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 7.7 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders holding more than 10% in aggregate principal amount of the
Outstanding Debentures, or to any suit instituted by any Debentureholder for the
enforcement of the payment of the principal of or interest on the Debentures, on
or after the respective due dates expressed in such Debenture or established
pursuant to this Indenture.
SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.
Any registered holder of the Preferred Securities issued by the Trust
shall have the right, upon the occurrence of an Event of Default described in
Section 7.1(a)(i) or 7.1(a)(ii), to institute a suit directly against the
Company for enforcement of payment to such holder of principal of and (subject
to Sections 2.4 and 4.1) interest (including any Additional Interest) on the
Debentures having a principal amount equal to the aggregate Liquidation Amount
(as defined in the Trust Agreement) of such Preferred Securities held by such
holder. The Company may not amend this Indenture to remove this right to
institute a suit directly against the Company without the prior consent of the
holders of all the Preferred Securities.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1 FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the forms contained as Exhibit A
attached hereto and incorporated herein by reference.
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SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of up to $__________ may,
upon execution of this Indenture, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
make available for delivery said Debentures to or upon the written order of the
Company, signed by its Chairman, its Vice Chairman, its President, or any Vice
President and its Treasurer or an Assistant Treasurer, without any further
action by the Company.
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Debentures such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
shall be read into this Indenture against the Trustee. In case an Event of
Default has occurred that has not been cured or waived, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default that may have occurred:
(i) the duties and obligations of the Trustee shall, with respect
to the Debentures, be determined solely by the express provisions
of this Indenture, and the Trustee shall not be liable with respect
to the Debentures except for the performance of such duties and
obligations as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may with respect to the Debentures conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a
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duty to examine the same to determine whether or not they conform
to the requirements of this Indenture;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal
amount of the Debentures at the time outstanding relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Indenture with respect to the Debentures; and
(4) none of the provisions contained in this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or adequate
indemnity against such risk is not reasonably assured to it.
SECTION 9.2 NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Debentures, the Trustee shall transmit by mail to all holders of the Debentures,
as their names and addresses appear in the Debenture Register, notice of such
default, unless such default shall have been cured or waived; provided, however,
that, except in the case of any default in the payment of the principal or
interest (including Additional Interest and Compounded Interest, if any) on any
Debenture, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
the directors and/or Responsible Officers of the Trustee determines in good
faith that the withholding of such notice is in the interests of the holders of
such Debentures; and provided, further, that in the case of any default of the
character specified in Section 7.1(a)(iii), no such notice to holders of
Debentures need be sent until at least 30 days after the occurrence thereof. For
the purposes of this Section 9.2, the term "default" means any event which is,
or after notice or lapse of time or both, would become, an Event of Default with
respect to the Debentures.
SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request,
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consent, order, approval, bond, security or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Board Resolution or an instrument
signed in the name of the Company by the President or any Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer thereof (unless other evidence in respect thereof is specifically
prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a default or
an Event of Default, other than an Event of Default specified in Section
7.1(a)(i) or (ii), unless and until it receives notification of such Event of
Default from the Company or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
(f) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security, or
other papers or documents, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney; and
(h) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures, except the
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Company of any of the Debentures or of the proceeds of such Debentures, or
for the use or application of any moneys paid over by the Trustee in accordance
with any provision of this Indenture, or for the use or application of any
moneys received by any paying agent other than the Trustee.
SECTION 9.5 MAY HOLD DEBENTURES.
The Trustee or any paying agent or registrar for the Debentures, in its
individual or any other capacity, may become the owner or pledgee of Debentures
and, subject to Sections 9.9 and 9.14, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, paying agent or Debenture
Registrar.
SECTION 9.6 MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree in writing with the Company to pay thereon.
SECTION 9.7 COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
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(3) to indemnify each of the Trustee or any predecessor Trustee and
their agents for, and to hold them harmless against, any and all loss, damage,
claims, liability or expense, including taxes (other than taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith.
The Trustee shall have a lien prior to the Debentures as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 9.7, except with respect to funds
held in trust for the benefit of the holders of particular Debentures. When the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or 7.1(a)(vi), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting to take any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken,
suffered or omitted to be taken by it under the provisions of this Indenture
upon the faith thereof.
SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
SECTION 9.10 CORPORATE TRUSTEE REQUIRED ELIGIBILITY.
There shall at all times be a Trustee with respect to the Debentures
issued hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by federal, state,
territorial, or District
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of Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 9.10,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 9.10, the Trustee shall resign
immediately in the manner and with the effect specified in Section 9.11.
SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any time
resign by giving written notice thereof to the Company and by transmitting
notice of resignation by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee with respect to Debentures by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition at the expense of the Company
any court of competent jurisdiction for the appointment of a successor trustee
with respect to Debentures, or any Debentureholder who has been a bona fide
holder of a Debenture or Debentures for at least six months may, subject to the
provisions of Section 9.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon after such notice, if any, as it may deem proper,
appoint a successor trustee.
(b) In case at any time any one of the following shall occur
(i) the Trustee shall fail to comply with the provisions of Section
9.9 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 9.10 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall
be appointed or consented to, or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then,
in any such case, the Company may remove the Trustee with respect
to all Debentures and appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the
Trustee
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so removed and one copy to the successor trustee, or, subject to
the provisions of Section 9.9, unless the Trustee's duty to resign
is stayed as provided herein, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six
months may, on behalf of that holder and all others similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee.
Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the consent of the Company. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after such notification, the
Trustee may petition at the expense of the Company any court of competent
jurisdiction for the appointment of a successor trustee with respect to
Debentures, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions
of Section 9.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
appoint a successor trustee.
(d) No resignation or removal of the Trustee and no appointment of a
successor trustee with respect to the Debentures pursuant to any of the
provisions of this Section 9.11 shall become effective until acceptance of
appointment by the successor trustee as provided in Section 9.12.
SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor trustee with
respect to the Debentures, every successor trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
trustee all the rights, powers, and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor trustee all property and
money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor trustee all such rights, powers and trusts referred to in
paragraph (a) of this Section 9.12.
(c) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article IX.
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(d) Upon acceptance of appointment by a successor trustee as provided
in this Section 9.12, the Company shall transmit notice of the succession of
such trustee hereunder by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
such corporation shall be qualified under the provisions of Section 9.9 and
eligible under the provisions of Section 9.10, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. In case any Debentures shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Debentures so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Debentures.
SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 31l(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the holders of a
majority or specified percentage in aggregate principal amount of the Debentures
may take any action (including the making of any demand or request, the giving
of any notice, consent or waiver or the taking of any other action), the fact
that at the time of taking any such action the holders of such majority or
specified percentage have joined therein may be evidenced by any instrument or
any number of instruments of similar tenor executed by such holders of
Debentures in Person or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of
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Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Debentureholders of record at the
close of business on the record date shall be computed to be Debentureholders
for the purposes of determining whether Debentureholders of the requisite
proportion of Outstanding Debentures have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the Outstanding Debentures shall be computed as of
the record date; provided, however, that no such authorization, agreement or
consent by such Debentureholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.
SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the execution of any
instrument by a Debentureholder (such proof shall not require notarization) or
his agent or proxy and proof of the holding by any Person of any of the
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the Debenture Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
SECTION 10.3 WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of any
Debenture, the Company, the Trustee, any paying agent, any Authenticating Agent
and any Debenture Registrar may deem and treat the Person in whose name such
Debenture shall be registered upon the books of the Company as the absolute
owner of such Debenture (whether or not such Debenture shall be overdue and
notwithstanding any notice of ownership or writing thereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal of and interest on such Debenture (subject to Section
2.3) and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any Authenticating Agent nor any Debenture Registrar shall be
affected by any notice to the contrary.
SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.
In determining whether the holders of the requisite aggregate principal
amount of Debentures have concurred in any direction, consent or waiver under
this Indenture, the
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Debentures that are owned by the Company or any other obligor on the Debentures
or by any Person directly or indirectly controlling or controlled by, or under
common control with the Company or any other obligor on the Debentures shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
Debentures that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded. The Debentures so owned that have been pledged in good
faith may be regarded as Outstanding for the purposes of this Section 10.4, if
the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Debentures and that the pledgee is not a
Person directly or indirectly, controlling or controlled by, or under direct or
indirect common control with the Company or any such other obligor. In case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee.
SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 10.1, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Debentures specified
in this Indenture in connection with such action, any holder of a Debenture that
is shown by the evidence to be included in the Debentures the holders of which
have consented to such action may, by filing written notice with the Trustee,
and upon proof of holding as provided in Section 10.2, revoke such action so far
as concerns such Debenture. Except as aforesaid any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor, on registration of transfer thereof or in place
thereof, irrespective of whether or not any notation in regard thereto is made
upon such Debenture. Any action taken by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, in the
Debentures;
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(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to or in place
of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any right or power
herein conferred upon the Company;
(e) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company herein
and in the Debentures contained;
(f) to convey, transfer, assign, mortgage or pledge to or with the
Trustee any property or assets which the Company may desire to convey, transfer,
assign, mortgage or pledge;
(g) to add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Debentures, as herein set forth;
(h) to make any change that does not adversely affect the rights of any
Debentureholder in any material respect;
(i) to provide for the issuance of and establish the form and terms and
conditions of the Debentures, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or of the
Debentures, or to add to the rights of the holders of the Debentures; or
(j) to qualify or maintain the qualification of this Indenture under
the Trust Indenture Act.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise. Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time Outstanding, notwithstanding
any of the provisions of Section 11.2.
SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of the holders
of not less than a majority in aggregate principal amount of the Debentures at
the time Outstanding, the Company, when authorized by Board Resolutions, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
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to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon (other than the Company's right to defer interest pursuant to this
Indenture), without the consent of the holder of each Debenture so affected; or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided further, that
if the Debentures are held by the Trust or a trustee of the Trust, such
supplemental indenture shall not be effective until the holders of a majority in
liquidation preference of Trust Securities of the Trust shall have consented to
such supplemental indenture; provided further, that if the consent of the holder
of each Outstanding Debenture is required, such supplemental indenture shall not
be effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture. It shall not be necessary for the
consent of the Debentureholders affected thereby under this Section 11.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.
SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article XI, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debentures shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture, authenticated and
delivered after the execution of such supplemental indenture pursuant to the
provisions of this Article XI, may bear a notation in form approved by the
Company, provided such form meets the requirements of any exchange upon which
the Debentures may be listed, as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Debentures so modified as to
conform, in the opinion of the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared by the Company, authenticated by the Trustee and delivered in
exchange for the Debentures then Outstanding.
SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Company, accompanied by their Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Debentureholders
required to consent thereto as aforesaid, the Trustee shall join with the
Company in the execution of such supplemental indenture unless
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such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture. The Trustee, subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article XI is authorized or permitted by, and conforms
to, the terms of this Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution thereof.
(b) Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 11.5, the
Trustee shall transmit by mail, first class postage prepaid, a notice, setting
forth in general terms the substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the Debenture
Register. Any failure of the Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
ARTICLE XII
SUCCESSOR CORPORATION
SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the Debentures shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company, as the
case may be), or successive consolidations or mergers in which the Company, as
the case may be, or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance, transfer or other disposition of the
property of the Company, as the case may be, or its successor or successors as
an entirety, or substantially as an entirety, to any other corporation (whether
or not affiliated with the Company, as the case may be, or its successor or
successors) authorized to acquire and operate the same; provided, however, the
Company hereby covenants and agrees that, (i) upon any such consolidation,
merger, sale, conveyance, transfer or other disposition, the due and punctual
payment, in the case of the Company, of the principal of and interest on all of
the Debentures, according to their tenor and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be kept
or performed by the Company as the case may be, shall be expressly assumed, by
supplemental indenture (which shall conform to the provisions of the Trust
Indenture Act, as then in effect) satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Company, as the case may be, shall have been merged, or by the entity
which shall have acquired such property; (ii) in case the Company consolidates
with or merges into another Person or conveys or transfers its properties and
assets substantially then 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 (iii) immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing.
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SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of, in the case of the Company, the due
and punctual payment of the principal of and interest on all of the Debentures
Outstanding and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, as the case may be,
such successor corporation shall succeed to and be substituted for the Company,
with the same effect as if it had been named as the Company herein, and
thereupon the predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Debentures thereafter to be issued as may be
appropriate.
(c) Nothing contained in this Indenture or in any of the Debentures
shall prevent the Company from merging into itself or acquiring by purchase or
otherwise all or any part of the property of any other Person (whether or not
affiliated with the Company).
SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1, may receive an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE
SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company shall have delivered to the Trustee for
cancellation all Debentures theretofore authenticated (other than any Debentures
that shall have been destroyed, lost or stolen and that shall have been replaced
or paid as provided in Section 2.8) and Debentures for whose payment money or
Governmental Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the Company or
discharged from such trust, as provided in Section 13.5); or (b) all such
Debentures not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in moneys or Governmental Obligations sufficient or a
combination thereof, sufficient in the opinion of a nationally recognized firm
of independent public accountants expressed in written certification thereof
delivered to the Trustee, to pay at maturity
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or upon redemption all Debentures not theretofore delivered to the Trustee for
cancellation, including principal and interest due or to become due to such date
of maturity or date fixed for redemption, as the case may be, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company; then this Indenture shall thereupon cease to be of further effect
except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3 and 9.10,
that shall survive until the date of maturity or redemption date, as the case
may be, and Sections 9.7 and 13.5, that shall survive to such date and
thereafter, and the Trustee, on demand of the Company and at the cost and
expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
SECTION 13.2 DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the Trustee
for cancellation or that have not become due and payable as described in Section
13.1 shall have been paid by the Company by depositing irrevocably with the
Trustee as trust funds moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all Debentures not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due to such date of maturity or date fixed for redemption, as the
case may be, and if the Company shall also pay or cause to be paid all other
sums payable hereunder by the Company, then after the date such moneys or
Governmental Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to be of further
effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3, 9.7,
9.10 and 13.5 hereof that shall survive until such Debentures shall mature and
be paid. Thereafter, Sections 9.7 and 13.5 shall survive.
SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the Trustee
pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available
for payment as due, either directly or through any paying agent (including the
Company acting as its own paying agent), to the holders of the Debentures for
the payment or redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 13.1 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the holders of Outstanding Debentures.
SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this Indenture,
all moneys or Governmental Obligations then held by any paying agent under the
provisions of this Indenture shall, upon demand of the Company, be paid to the
Trustee and thereupon such paying agent shall be released from all further
liability with respect to such moneys or Governmental Obligations.
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SECTION 13.5 REPAYMENT TO COMPANY.
Any monies or Governmental Obligations deposited with any paying agent
or the Trustee, or then held by the Company in trust, for payment of principal
of or interest on the Debentures that are not applied but remain unclaimed by
the holders of such Debentures for at least two years after the date upon which
the principal of or interest on such Debentures shall have respectively become
due and payable, shall be repaid to the Company, as the case may be, on May 31
of each year or (if then held by the Company) shall be discharged from such
trust; and thereupon the paying agent and the Trustee shall be released from all
further liability, with respect to such money's or Governmental Obligations, and
the holder of any of the Debentures entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company for the
payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 14.1 NO RECOURSE.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of the Debentures, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Debentures.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company shall bind their respective
successors and assigns, whether so expressed or not.
SECTION 15.2 ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
corresponding board, committee or officer of any corporation that shall at the
time be the lawful sole successor of the Company.
SECTION 15.3 SURRENDER OF COMPANY POWERS.
The Company by instrument in writing executed by appropriate authority
of its Board of Directors and delivered to the Trustee may surrender any of the
powers reserved to the Company, and thereupon such power so surrendered shall
terminate both as to the Company, as the case may be, and as to any successor
corporation.
SECTION 15.4 NOTICES.
Except as otherwise expressly provided herein any notice or demand that
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Debentures to or on the Company may
be given or served by being deposited first class postage prepaid in a
post-office letter box addressed (until another address is filed in writing by
the Company with the Trustee), as follows: Pittsburgh Home Financial Corp., 438
Wood Street, Pittsburgh, Pennsylvania 15222, Attention: President. Any notice,
election, request or demand by the Company or any Debentureholder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
SECTION 15.5 GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a contract made
under the internal laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without regard to conflicts
of law principles.
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SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as indebtedness and
not as equity for federal income tax purposes. The provisions of this Indenture
shall be interpreted to further this intention.
SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
(b) Each certificate or opinion of the Company provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant in this Indenture shall include (1) a statement that the
Person making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as, in the opinion of such
Person, is necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and (4) a statement as
to whether or not, in the opinion of such Person, such condition or covenant has
been complied with.
SECTION 15.8 PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or principal of any
Debenture or the date of redemption of any Debenture shall not be a Business
Day, then payment of interest or principal may (subject to Section 2.4) be made
on the next succeeding Business Day with the same force and effect as if made on
the nominal date of maturity or redemption, and no interest shall accrue for the
period after such nominal date.
SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
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SECTION 15.10 COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 15.11 SEPARABILITY.
In case any one or more of the provisions contained in this Indenture
or in the Debentures shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Debentures,
but this Indenture and the Debentures shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 15.12 ASSIGNMENT.
The Company shall have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Company, provided that, in the event of any such
assignment, the Company shall remain liable for all such obligations. Subject to
the foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties hereto.
SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS.
The Company acknowledges that, with respect to any Debentures held by
the Trust or a trustee of the Trust, if the Property Trustee fails to enforce
its rights under this Indenture as the holder of the Debentures held as the
assets of the Trust, any holder of Preferred Securities may institute legal
proceedings directly against the Company to enforce such Property Trustee's
rights under this Indenture without first instituting any legal proceedings
against such Property Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Debentures on the date such interest or principal is otherwise payable (or
in the case of redemption, on the redemption date), the Company acknowledges
that a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Debentures.
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ARTICLE XVI
SUBORDINATION OF DEBENTURES
SECTION 16.1 AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each holder of Debentures issued
hereunder by such holder's acceptance thereof likewise covenants and agrees,
that all Debentures shall be issued subject to the provisions of this Article
XVI; and each holder of a Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of and interest on all
Debentures issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and junior in right of payment to the prior payment
in full of all Senior Debt and Subordinated Debt (collectively, "Senior
Indebtedness") to the extent provided herein, whether outstanding at the date of
this Indenture or thereafter incurred. No provision of this Article XVI shall
prevent the occurrence of any default or Event of Default hereunder.
SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT.
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default,
then, in either case, no payment shall be made by the Company with respect to
the principal (including redemption payments) of or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be received
by the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Company or the Trustee in writing within 90 days of such payment of
the amounts then due and owing on the Senior Indebtedness and only the amounts
specified in such notice to the Trustee shall be paid to the holders of Senior
Indebtedness.
SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution or 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 Company, all amounts due upon all
Senior Indebtedness of the Company shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company on account of the principal or interest on the
Debentures; and upon any such liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, marshaling of assets,
any payment by the
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Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Debentures
or the Trustee would be entitled to receive from the Company, except for the
provisions of this Article XVI, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the holders of the Debentures or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders, as calculated by
the Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay such Senior Indebtedness in full, in
money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the holders of Debentures or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness of the
Company, as the case may be, remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full in money in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XVI with respect
to the Debentures to the payment of all Senior Indebtedness of the Company, as
the case may be, that may at the time be outstanding, provided that (i) such
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any such reorganization or readjustment; and (ii) the rights of the holders of
such Senior Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment. The consolidation of the Company with,
or the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 16.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 9.7.
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SECTION 16.4 SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness of the
Company, the rights of the holders of the Debentures shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company, as the case may
be, applicable to such Senior Indebtedness until the principal of and interest
on the Debentures shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the holders of the
Debentures or the Trustee would be entitled except for the provisions of this
Article XVI, and no payment over pursuant to the provisions of this Article XVI
to or for the benefit of the holders of such Senior Indebtedness by holders of
the Debentures or the Trustee, shall, as between the Company, its creditors
other than holders of Senior Indebtedness of the Company, and the holders of the
Debentures, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article XVI
are and are intended solely for the purposes of defining the relative rights of
the holders of the Debentures, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness of the
Company), and the holders of the Debentures, the obligation of the Company,
which is absolute and unconditional, to pay to the holders of the Debentures the
principal of and interest on the Debentures as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the holders of the Debentures and creditors of the
Company, as the case may be, other than the holders of Senior Indebtedness of
the Company, nor shall anything herein or therein prevent the Trustee or the
holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article XVI of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Company, as the case may be, received upon
the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company referred
to in this Article XVI, the Trustee, subject to the provisions of Article IX,
and the holders of the Debentures shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XVI.
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SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof
authorizes and directs the Trustee on such holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article XVI and appoints the Trustee such holder's attorney-in-fact for any
and all such purposes.
SECTION 16.6 NOTICE BY THE COMPANY.
(a) The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI. Notwithstanding the
provisions of this Article XVI or any other provisions of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article XVI, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder or holders of Senior Indebtedness or
from any trustee therefor, and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall not be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 16.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness of the Company
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of such Senior Indebtedness or a trustee on behalf of any such
holder or holders. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of such Senior Indebtedness to participate in any payment or distribution
pursuant to this Article XVI, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XVI, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XVI in respect of any Senior Indebtedness at
any time held by it, to the same extent
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as any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder. The Trustee's right to
compensation and reimbursement of expenses as set forth in Section 9.7 shall not
be subject to the subordination provisions of this Article XVI.
(b) With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XVI, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to have any fiduciary duty to the holders of such Senior Indebtedness
and, subject to the provisions of Section 9.1, the Trustee shall not be liable
to any holder of such Senior Indebtedness if it shall in good faith mistakenly
pay over or deliver to holders of Debentures, the Company or any other Person
money or assets to which any holder of such Senior Indebtedness shall be
entitled by virtue of this Article XVI or otherwise.
SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior Indebtedness
of the Company to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Company may, at any time
and from time to time, without the consent of or notice to the Trustee or the
holders of the Debentures, without incurring responsibility to the holders of
the Debentures and without impairing or releasing the subordination provided in
this Article XVI or the obligations hereunder of the holders of the Debentures
to the holders of such Senior Indebtedness, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, such Senior Indebtedness, or otherwise amend or
supplement in any manner such Senior Indebtedness or any instrument evidencing
the same or any agreement under which such Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing such Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of such Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against the Company and any
other Person.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
PITTSBURGH HOME FINANCIAL CORP.
By: _______________________________
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
THE BANK OF NEW YORK, AS TRUSTEE
By: _______________________________
Name: _______________________________
Title: _______________________________
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EXHIBIT A
FACE OF DEBENTURE
NO. ___ $__________
CUSIP NO. ___________
PITTSBURGH HOME FINANCIAL CORP.
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JANUARY ___, 2028
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
PITTSBURGH HOME FINANCIAL CORP., a Pennsylvania corporation (the
"Company," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The Bank
of New York, as Property Trustee for Pittsburgh Home Capital Trust I, or
registered assigns, the principal sum of_______________________________________
__________________________________________________________ ($__________) on
January __, 2028 (the "Stated Maturity"), and to pay interest on said principal
sum from March 1, 1998, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
March 1, June 1, September 1 and December 1 of each year commencing March 1,
1998, at the rate of _____% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and (without duplication)
on any overdue installment of interest at the rate of _____% per annum
compounded quarterly. The amount of interest payable on any Interest Payment
Date shall 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 this Debenture is not
a business day, then payment of interest payable on such date shall 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 business day
is in the next succeeding calendar year, such payment shall be made on the
preceding business day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually, paid or duly
provided for, on any Interest Payment Date shall, as provided in the Indenture,
be paid to the person in whose name this Debenture (or one or more Predecessor
Debentures, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
close of business on the business day next preceding such Interest Payment Date
unless otherwise provided in the Indenture. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
registered holders on such regular record date and may be paid to the Person in
whose name this Debenture (or one or more Predecessor Debentures) is registered
at the close of business on a special record date
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to be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered holders of the Debentures not less than
10 days prior to such special record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
principal of and the interest on this Debenture shall be payable at the office
or agency of the Trustee maintained for that purpose in any coin or currency of
the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of the Company by check mailed to the registered
holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the holder of this Debenture is the
Property Trustee, the payment of the principal of and interest on this Debenture
shall be made at such place and to such account as may be designated by the
Trustee.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Debenture is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
This Debenture shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance with
the laws of New York without regard to conflicts of laws principles.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
2
<PAGE> 68
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
PITTSBURGH HOME FINANCIAL CORP.
By: _______________________________
Name: _______________________________
Title: _______________________________
Attest: ________________________
By: ________________________
Name: ________________________
Title: ________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned
Indenture.
Dated:
THE BANK OF NEW YORK as Trustee or Authentication Agent
By: __________________________ By: ___________________
Authorized Signatory
3
<PAGE> 69
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security
certificate to:
________________________________________________________________________________
________________________________________________________________________________
(Insert assignees social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________________________agent to transfer
this Security certificate on the books of the Company. The agent may substitute
another to act for him or her.
Date:______________________________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:____________________________________________________________
___________________________
Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities and Exchange Act of 1934, as
amended.
4
<PAGE> 70
REVERSE OF DEBENTURE
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
(CONTINUED )
This Debenture is one of the subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), specified in the Indenture,
all issued or to be issued under and pursuant to an Indenture dated as of
January ___, 1998 (the "Indenture") duly executed and delivered between the
Company and The Bank of New York, as Trustee (the "Trustee"), to which Indenture
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Debentures. The Debentures are limited in aggregate principal
amount as specified in the Indenture.
The Company has the right to redeem this Debenture at the option of the
Company, without premium or penalty (i) at any time on or after January __, 2003
in whole or in part, or (ii) at any time in certain circumstances in whole (but
not in part) upon the occurrence of a Special Event, in each case at a
Redemption Price equal to 100% of the principal amount plus any accrued but
unpaid interest, to the date of such redemption (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time, on
the date of such redemption or at such earlier time as the Company determines.
Any redemption pursuant to this paragraph shall be made upon not less than 30
days nor more than 60 days notice, at the Redemption Price. If the Debentures
are only partially redeemed by the Company, the Debentures shall be redeemed pro
rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, as defined
in the Indenture, to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of the Debentures
except as provided in the Indenture, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (except for
deferrals of interest as described below), without the consent of the holder of
each Debenture so affected; or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of each Debenture
then outstanding and affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Debentures
<PAGE> 71
at the time outstanding, on behalf of all of the holders of the Debentures, to
waive any past default in the performance of any of the covenants contained in
the Indenture, or established pursuant to the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any of the
Debentures. Any such consent or waiver by the registered holder of this
Debenture (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this
Debenture and of any Debenture issued in exchange therefor or in place thereof
(whether by registration of transfer or otherwise or whether any notation of
such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right at any time during the term of the Debentures and
from time to time to extend the interest payment period of such Debentures for
up to 20 consecutive quarters (each, an "Extended Interest Payment Period"), at
the end of which period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Debentures
to the extent that payment of such interest is enforceable under applicable
law). Before the termination of any such Extended Interest Payment Period, the
Company may further extend such Extended Interest Payment Period, provided that
such Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any such
Extended Interest Payment Period and upon the payment of all accrued and unpaid
interest and any additional amounts then due, the Company may commence a new
Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge shall be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Company nor the
2
<PAGE> 72
Trustee nor any paying agent nor any Debenture Registrar shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect of the Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Company or any predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Note is unsecured by any collateral, including the assets of the
Company or any of its subsidiaries or other affiliates.
3
<PAGE> 1
EXHIBIT 4.2
FACE OF DEBENTURE
NO. ___ $__________
CUSIP NO. ___________
PITTSBURGH HOME FINANCIAL CORP.
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JANUARY ___, 2028
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
PITTSBURGH HOME FINANCIAL CORP., a Pennsylvania corporation (the
"Company," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The
Bank of New York, as Property Trustee for Pittsburgh Home Capital Trust I, or
registered assigns, the principal sum of
- ----------------------------------------------------------------- ($----------)
on January ___, 2028 (the "Stated Maturity"), and to pay interest on said
principal sum from January __, 1998, or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, quarterly (subject to deferral as set forth herein)
in arrears on March 1, June 1, September 1 and December 1 of each year
commencing March 1, 1998, at the rate of _____% per annum until the principal
hereof shall have become due and payable, and on any overdue principal and
(without duplication) on any overdue installment of interest at the rate of
_____% per annum compounded quarterly. The amount of interest payable on any
Interest Payment Date shall 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 this Debenture is not a business day, then payment of interest payable on
such date shall 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 business day is in the next succeeding calendar year, such
payment shall be made on the preceding business day, in each case with the same
force and effect as if made on such date. The interest installment so payable,
and punctually, paid or duly provided for, on any Interest Payment Date shall,
as provided in the Indenture, be paid to the person in whose name this
Debenture (or one or more Predecessor Debentures, as defined in said Indenture)
is registered at the close of business on the regular record date for such
interest installment, which shall be the close of business on the business day
next preceding such Interest Payment Date unless otherwise provided in the
Indenture. Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holders on such
regular record date and may be paid to the Person in whose name this Debenture
(or one or more Predecessor Debentures) is registered at the close of
<PAGE> 2
business on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered
holders of the Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The principal of and the interest on this
Debenture shall be payable at the office or agency of the Trustee maintained
for that purpose in any coin or currency of the United States of America that
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the registered holder at such address as shall
appear in the Debenture Register. Notwithstanding the foregoing, so long as the
holder of this Debenture is the Property Trustee, the payment of the principal
of and interest on this Debenture shall be made at such place and to such
account as may be designated by the Trustee.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided; and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
This Debenture shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance
with the laws of New York without regard to conflicts of laws principles.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
PITTSBURGH HOME FINANCIAL CORP.
By: _______________________________
Name: _______________________________
Title: _______________________________
Attest: ________________________
By: ________________________
Name: ________________________
Title: ________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned
Indenture.
Dated:
THE BANK OF NEW YORK as Trustee or Authentication Agent
By: __________________________ By: ___________________
Authorized Signatory
3
<PAGE> 4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security
certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignees social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------agent to transfer this Security
certificate on the books of the Company. The agent may substitute another to
act for him or her.
Date:__________________________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature
Guarantee:____________________________________________________________
- --------------------
Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities and Exchange Act of 1934, as
amended.
4
<PAGE> 5
REVERSE OF DEBENTURE
8.625% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), specified in the Indenture,
all issued or to be issued under and pursuant to an Indenture dated as of
January ___, 1998 (the "Indenture") duly executed and delivered between the
Company and The Bank of New York, as Trustee (the "Trustee"), to which
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. The Debentures are limited in
aggregate principal amount as specified in the Indenture.
The Company has the right to redeem this Debenture at the option of
the Company, without premium or penalty (i) at any time on or after January
___, 2003 in whole or in part, or (ii) at any time in certain circumstances in
whole (but not in part) upon the occurrence of a Special Event, in each case at
a Redemption Price equal to 100% of the principal amount plus any accrued but
unpaid interest, to the date of such redemption (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time, on
the date of such redemption or at such earlier time as the Company determines.
Any redemption pursuant to this paragraph shall be made upon not less than 30
days nor more than 60 days notice, at the Redemption Price. If the Debentures
are only partially redeemed by the Company, the Debentures shall be redeemed
pro rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in
the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Debentures; provided, however, that
no such supplemental indenture shall (i) extend the fixed maturity of the
Debentures except as provided in the Indenture, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
(except for deferrals of interest as described below), without the consent of
the holder of each Debenture so affected; or (ii) reduce the aforesaid
percentage of Debentures, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each
Debenture then outstanding and affected thereby. The Indenture also contains
<PAGE> 6
provisions permitting the holders of a majority in aggregate principal amount
of the Debentures at the time outstanding, on behalf of all of the holders of
the Debentures, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any of the Debentures. Any such consent or waiver by the registered
holder of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Debenture and of any Debenture issued in exchange therefor or in place
thereof (whether by registration of transfer or otherwise or whether any
notation of such consent or waiver is made upon this Debenture).
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal and interest
on this Debenture at the time and place and at the rate and in the money herein
prescribed.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right at any time during the term of the Debentures and
from time to time to extend the interest payment period of such Debentures for
up to 20 consecutive quarters (each, an "Extended Interest Payment Period"), at
the end of which period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Debentures
to the extent that payment of such interest is enforceable under applicable
law). Before the termination of any such Extended Interest Payment Period, the
Company may further extend such Extended Interest Payment Period, provided that
such Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any
such Extended Interest Payment Period and upon the payment of all accrued and
unpaid interest and any additional amounts then due, the Company may commence a
new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Debenture Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Trustee
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Debentures of authorized denominations and for the same aggregate
principal amount shall be issued to the designated transferee or transferees.
No service charge shall be made for any such transfer, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and the Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal
2
<PAGE> 7
hereof and interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any paying agent nor any Debenture Registrar shall
be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect of the Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Company or any predecessor
or successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $10 and any integral multiple thereof.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Note is unsecured by any collateral, including the assets of the
Company or any of its subsidiaries or other affiliates.
3
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
PITTSBURGH HOME CAPITAL TRUST I
THIS Certificate of Trust of Pittsburgh Home Capital Trust I (the
"Trust"), dated as of December 19, 1997, is being duly executed and filed by
the undersigned, as trustees, to form a business trust under the Delaware
Business Trust Act (12 Del. C. Section 3801, et seq.).
1. Name. The name of the business trust formed hereby is Pittsburgh
Home Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee
of the Trust with a principal place of business in the State of
Delaware is The Bank of New York (Delaware), White Clay Center,
Route 273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective
upon filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first-above written.
THE BANK OF NEW YORK (DELAWARE), not in its individual
capacity but solely as trustee of the Trust
By: ____________________________________
Name:
Title:
J. ARDIE DILLEN, not in his individual
capacity but solely as trustee of the Trust
___________________________________________
MICHAEL J. KIRK, not in his individual
capacity but solely as trustee of the Trust
___________________________________________
GREGORY C. MAXCY, not in his individual
capacity but solely as trustee of the Trust
___________________________________________
<PAGE> 1
EXHIBIT 4.4
AMENDED AND RESTATED TRUST AGREEMENT
AMONG
PITTSBURGH HOME FINANCIAL CORP., AS DEPOSITOR
THE BANK OF NEW YORK, AS PROPERTY TRUSTEE
THE BANK OF NEW YORK (DELAWARE), AS DELAWARE TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF JANUARY ___, 1998
PITTSBURGH HOME CAPITAL TRUST I
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I DEFINED TERMS
Section 101. Definitions................................................................... 2
ARTICLE II ESTABLISHMENT OF THE TRUST
Section 201. Name.......................................................................... 10
Section 202. Office of The Delaware Trustee; Principal Place of Business................... 11
Section 203. Initial Contribution of Trust Property; Organizational Expenses............... 11
Section 204. Issuance of The Preferred Securities.......................................... 11
Section 205. Issuance of The Common Securities; Subscription And Purchase of
Debentures.................................................................... 11
Section 206. Declaration of Trust.......................................................... 12
Section 207. Authorization to Enter Into Certain Transactions.............................. 12
Section 208. Assets of Trust............................................................... 16
Section 209. Title to Trust Property....................................................... 16
ARTICLE III PAYMENT ACCOUNT
Section 301. Payment Account............................................................... 16
ARTICLE IV DISTRIBUTIONS; REDEMPTION
Section 401. Distributions................................................................. 17
Section 402. Redemption.................................................................... 18
Section 403. Subordination of Common Securities............................................ 20
Section 404. Payment Procedures............................................................ 21
Section 405. Tax Returns And Reports....................................................... 21
Section 406. Payment of Taxes, Duties, Etc. of The Trust................................... 21
Section 407. Payments Under Indenture...................................................... 21
ARTICLE V TRUST SECURITIES CERTIFICATES
Section 501. Initial Ownership............................................................. 22
Section 502. The Trust Securities Certificates............................................. 22
Section 503. Execution And Delivery of Trust Securities Certificates....................... 22
Section 503a. Global Preferred Securities................................................... 23
Section 504. Registration of Transfer And Exchange of Preferred Securities
Certificates.................................................................. 25
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates............ 26
Section 506. Persons Deemed Securityholders................................................ 27
</TABLE>
-i-
<PAGE> 3
<TABLE>
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<S> <C> <C>
Section 507. Access to List of Securityholders' Names And Addresses........................ 27
Section 508. Maintenance of Office or Agency............................................... 27
Section 509. Appointment of Paying Agent................................................... 28
Section 510. Ownership of Common Securities by Depositor................................... 28
Section 511. Notices to Clearing Agency.................................................... 28
Section 511a. Definitive Preferred Securities Certificate and Temporary Preferred
Securities.................................................................... 29
Section 512. Rights of Securityholders..................................................... 29
Section 513. CUSIP Numbers................................................................. 32
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 601. Limitations on Voting Rights.................................................. 32
Section 602. Notice of Meetings............................................................ 33
Section 603. Meetings of Preferred Securityholders......................................... 33
Section 604. Voting Rights................................................................. 34
Section 605. Proxies, Etc.................................................................. 34
Section 606. Securityholder Action by Written Consent...................................... 34
Section 607. Record Date For Voting And Other Purposes..................................... 34
Section 608. Acts of Securityholders....................................................... 34
Section 609. Inspection of Records......................................................... 35
ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 701. Representations And Warranties of The Property Trustee And The
Delaware Trustee.............................................................. 36
Section 702. Representations And Warranties of Depositor................................... 37
ARTICLE VIII TRUSTEES
Section 801. Certain Duties And Responsibilities........................................... 37
Section 802. Certain Notices............................................................... 39
Section 803. Certain Rights of Property Trustee............................................ 39
Section 804. Not Responsible For Recitals or Issuance of Securities........................ 41
Section 805. May Hold Securities........................................................... 41
Section 806. Compensation; Indemnity; Fees................................................. 42
Section 807. Corporate Property Trustee Required; Eligibility of Trustees.................. 43
Section 808. Conflicting Interests......................................................... 43
Section 809. Co-trustees And Separate Trustee.............................................. 43
Section 810. Resignation And Removal; Appointment of Successor............................. 45
Section 811. Acceptance of Appointment by Successor........................................ 46
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 812. Merger, Conversion, Consolidation or Succession to Business................... 47
Section 813. Preferential Collection of Claims Against Depositor or Trust.................. 47
Section 814. Reports by Property Trustee................................................... 47
Section 815. Reports to The Property Trustee............................................... 48
Section 816. Evidence of Compliance With Conditions Precedent.............................. 48
Section 817. Number of Trustees............................................................ 48
Section 818. Delegation of Power........................................................... 49
Section 819. Voting........................................................................ 49
ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER
Section 901. Dissolution Upon Expiration Date.............................................. 49
Section 902. Early Dissolution............................................................. 49
Section 903. Termination................................................................... 50
Section 904. Liquidation................................................................... 50
Section 905. Mergers, Consolidations, Amalgamations or Replacements of The
Trust......................................................................... 52
ARTICLE X MISCELLANEOUS PROVISIONS
Section 1001. Limitation of Rights of Securityholders....................................... 53
Section 1002. Amendment..................................................................... 53
Section 1003. Separability.................................................................. 54
Section 1004. Governing Law................................................................. 54
Section 1005. Payments Due on Non-business Day.............................................. 54
Section 1006. Successors.................................................................... 55
Section 1007. Headings...................................................................... 55
Section 1008. Reports, Notices And Demands.................................................. 55
Section 1009. Agreement Not to Petition..................................................... 55
Section 1010. Trust Indenture Act; Conflict With Trust Indenture Act........................ 56
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee And
Indenture..................................................................... 56
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
Signatures.................................................................... 57
</TABLE>
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<PAGE> 5
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
------------------- ---------------
<S> <C>
310(a)(1) 807
310(a)(2) 807
310(a)(3) 807
310(a)(4) 207(a)(ii)
310(b) 808
311(a) 813
311(b) 813
312(a) 507
312(b) 507
312(c) 507
313(a) 814(a)
313(a)(4) 814(b)
313(b) 814(b)
313(c) 1008
313(d) 814(c)
314(a) 815
314(b) Not Applicable
314(c)(1) 816
314(c)(2) 816
314(c)(3) Not Applicable
314(d) Not Applicable
314(e) 101,816
315(a) 801(a), 803(a)
315(b) 802, 1008
315(c) 801(a)
315(d) 801, 803
316(a)(2) Not Applicable
316(b) Not Applicable
316(c) 607
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Agreement
and shall not affect any interpretation of any of its terms or
provisions.
-iv-
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January __, 1998,
among (i) Pittsburgh Home Financial Corp., a Pennsylvania corporation (including
any successors or assigns, the "Depositor"), (ii) The Bank of New York, a New
York banking corporation, as property trustee (in such capacity, the "Property
Trustee" and, in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank"), (iii) The Bank of New York (Delaware), a Delaware
banking corporation, as Delaware Trustee (the "Delaware Trustee"), (iv) J. Ardie
Dillen, an individual, Michael J. Kirk, an individual, and Gregory C. Maxcy, an
individual, each of whose address is c/o Pittsburgh Home Financial Corp., 438
Wood Street, Pittsburgh, Pennsylvania 15222 (each an "Administrative Trustee"
and collectively the "Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees referred to collectively as the
"Trustees"), and (v) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor and certain of the Trustees have heretofore duly
declared and established a business trust, Pittsburgh Home Capital Trust I,
pursuant to the Delaware Business Trust Act by the entering into of that certain
Trust Agreement, dated as of December __, 1997 (the "Original Trust Agreement"),
and by the execution and filing by the Delaware Trustee, the Depositor and the
Administrative Trustees with the Secretary of State of the State of Delaware of
the Certificate of Trust, filed on December __, 1997, the form of which is
attached as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities (as defined
herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and
sale of the Preferred Securities (as defined herein) by the Trust pursuant to
the Underwriting Agreement (as defined herein); and (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures (as defined herein).
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein)
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows.
<PAGE> 7
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust formed and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an executive officer, director or general partner.
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<PAGE> 8
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Preferred Security or beneficial interest
therein, the rules and procedures of the Depositary for such Preferred Security,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in respect
of such Person under the United States Bankruptcy Code of 1978, as amended, or
any other similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of 90 days; or the
commencement of an involuntary case under the United States Bankruptcy Code of
1978, as amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case; or the
entry of a decree or order of a court having jurisdiction in the premises for
the appointment on the ground of insolvency or bankruptcy of a receiver,
custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such
Person or of its property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated and unstayed for
a period of 60 days; or
(b) the institution by such Person of proceedings to be adjudicated a
voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy
proceeding against it, or the filing by such Person of a petition or answer or
consent seeking liquidation or reorganization under the United States Bankruptcy
Code of 1978, as amended, or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to the
appointment on the ground of insolvency or bankruptcy of a receiver or custodian
or liquidator or trustee or assignee in bankruptcy or insolvency of such Person
or of its property, or shall make a general assignment for the benefit of
creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a day on
which banking institutions in the Borough of Manhattan, The City of New York, or
the State of Delaware are authorized or required by law, executive order or
regulation to remain closed, or a day on which the Property Trustee's Corporate
Trust Office or the Corporate Trust Office of the Debenture Trustee is closed
for business.
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<PAGE> 9
"Capital Treatment Event" has the meaning specified in Section 1.1 of
the Indenture.
"Certificate Depositary Agreement" means the agreement among the Trust,
the Depositor and DTC, as the initial Clearing Agency, dated as of the Closing
Date, substantially in the form attached as Exhibit B, as the same may be
amended and supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. DTC shall be the initial
Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, or any successor
statute, in each case as amended from time to time.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein. Common Securities rank pari
passu with the Preferred Securities; provided, however, that upon the occurrence
of an Event of Default, the right of holders of Common Securities to payment in
respect of (i) distributions, and (ii) payments upon liquidation, redemption and
otherwise are subordinated to the right of holders of Preferred Securities.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal corporate trust office of the Property Trustee
located in New York, New York, and (ii) when used with respect to the Debenture
Trustee, the principal corporate trust office of the Debenture Trustee located
in New York, New York.
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<PAGE> 10
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1
of the Indenture.
"Debenture Trustee" means The Bank of New York, a banking corporation
organized under the laws of the State of New York, and any successor thereto, as
trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's
_____% Junior Subordinated Deferrable Interest Debentures due 2028, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the Preferred
Securities Certificates issued in certificated, fully registered form
(non-global) as provided in Section 503A.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from
time to time.
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust and not in its individual capacity, or its
successor in interest in such capacity, or any successor Trustee appointed as
herein provided.
"Depositor" has the meaning specified in the Preamble to this Trust
Agreement.
"Depositary" means with respect any Global Preferred Security issuable
or issued in whole or in part in the form of one or more Global Preferred
Security, the Person designated as Depositary by the Depositor.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401(b).
"DTC" means The Depository Trust Company.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
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<PAGE> 11
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such default
for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (b) or (c), above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Trustee or Trustees by the
Holders of at least 25% in aggregate liquidation preference of the Outstanding
Preferred Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor statute, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified in Section
4.1 of the Indenture.
"Global Preferred Securities Certificate" means a Preferred Securities
Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 503a.
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor, as guarantor, and The Bank of New York, as
Preferred Guarantee Trustee, contemporaneously with the execution and delivery
of this Trust Agreement, for the benefit of the Holders of the Preferred
Securities, as amended from time to time.
-6-
<PAGE> 12
"Indenture" means the Indenture, dated as of January __, 1998 between
the Depositor and the Debenture Trustee, as trustee, as amended or supplemented
from time to time.
"Investment Company Act," means the Investment Company Act of 1940, or
any successor statute, in each case as amended from time to time.
"Investment Company Event" has the meaning specified in Section 1.1 of
the Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture and the proceeds of which shall be used to pay the Redemption Price of
such Trust Securities; and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a termination or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
Each Debenture distributed pursuant to clause (b) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debentures.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer, President or a Vice President and by the
Chief Financial Officer, the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 816
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
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<PAGE> 13
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be counsel for the Trust, the Property Trustee, or the Depositor, but not an
employee of any thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Preferred Securities; provided that, if
such Preferred Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or in
lieu of which other Preferred Securities have been executed and delivered
pursuant to Sections 504, 505 and 511a; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the Outstanding
Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Preferred Securities owned by the
Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in determining
whether any Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Preferred Securities
that such Trustee actually knows to be so owned shall be so disregarded and (b)
the foregoing shall not apply at any time when all of the outstanding Preferred
Securities are owned by the Depositor, one or more of the Trustees and/or any
such Affiliate. Preferred Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Administrative Trustees the pledgee's right so to act with
respect to such Preferred Securities and that the pledgee is not the Depositor
or any Affiliate of the Depositor.
"Owners" means each Person who is the beneficial owner of a beneficial
interest in a Global Preferred Security as reflected in the records of the
Clearing Agency or, if a Clearing
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<PAGE> 14
Agency participant is not the Owner, then as reflected in the records of a
Person maintaining an account with such Clearing Agency (directly or indirectly,
in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures shall be held and from which the Property Trustee
shall make payments to the Securityholders in accordance with Sections 401 and
402.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $10 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the Person identified as the "Property
Trustee," in the Preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust and not in its individual capacity, or its
successor in interest in such capacity, or any successor property trustee
appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, paid by the Depositor upon the concurrent
redemption of a Like Amount of Debentures, allocated on a pro rata basis (based
on Liquidation Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
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<PAGE> 15
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means Pittsburgh Home Capital Trust I, a Delaware business
trust created and continued hereby.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) any cash on deposit in,
or owing to, the Payment Account; and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
January ___, 1998, including exhibits, among the Trust, the Depositor and the
Underwriter named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as "Pittsburgh
Home Capital Trust I," as such name may be modified from time to time by the
Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the
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<PAGE> 16
Trustees may engage in the transactions contemplated hereby, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is c/o The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711, Attention: Corporate Trust Department, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o Pittsburgh Home Financial Corp., 438 Wood Street, Pittsburgh,
Pennsylvania 15222.
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10.00, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
The Depositor on behalf of the Trust and pursuant to the Original Trust
Agreement, executed and delivered the Underwriting Agreement. Contemporaneously
with the execution and delivery of this Trust Agreement, an Administrative
Trustee, on behalf of the Trust, shall execute in accordance with Section 502
and deliver in accordance with the Underwriting Agreement, Preferred Securities
Certificates, registered in the name of the Persons entitled thereto, in an
aggregate amount of 1,000,000 Preferred Securities having an aggregate
Liquidation Amount of $10,000,000 against receipt of the aggregate purchase
price of such Preferred Securities of $10,000,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee. If the
underwriters exercise their Option and there is an Option Closing Date (as such
terms are defined in the Underwriting Agreement), then an Administrative
Trustee, on behalf of the Trust, shall execute in accordance with Section 502
and deliver in accordance with the Underwriting Agreement, additional Preferred
Securities Certificates, registered in the name of the Persons entitled thereto,
in an aggregate amount of up to 150,000 Preferred Securities having an aggregate
Liquidation Amount of up to $1,500,000 against receipt of the aggregate purchase
price of such Preferred Securities of $1,500,000, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF
DEBENTURES.
(a) Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502 and
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<PAGE> 17
deliver to the Depositor, Common Securities Certificates, registered in the name
of the Depositor in an aggregate amount of Common Securities having an aggregate
Liquidation Amount of $_______ against payment by the Depositor of such amount,
which amount such Administrative Trustee shall promptly deliver to the Property
Trustee. Contemporaneously therewith, an Administrative Trustee on behalf of the
Trust, shall subscribe to and purchase from the Depositor corresponding amounts
of Debentures, registered in the name of the Property Trustee on behalf of the
Trust and having an aggregate principal amount equal to $__________ (being the
sum of the amounts delivered to the Property Trustee pursuant to (i) the second
sentence of Section 204; and (ii) the first sentence of Section 205(a)), and, in
satisfaction of the purchase price for such Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the sum of $__________.
(b) If the underwriters exercise the Option and there is an Option
Closing Date (as such terms are defined in the Underwriting Agreement), then an
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 502 and deliver to the Depositor, Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of Common
Securities having an aggregate Liquidation Amount of up to $_______ against
payment by the Depositor of such amount. Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the Depositor corresponding amounts of Debentures, registered in the name
of the Trust and having an aggregate principal amount of up to $_______, and, in
satisfaction of the purchase price of such Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the amount received from one
of the Administrative Trustees pursuant to the last sentence of Section 204
(being the sum of the amounts delivered to the Property Trustee pursuant to (i)
the third sentence of Section 204; and (ii) the first sentence of this Section
205(b)).
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures; and (b) to engage in those activities necessary, convenient or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it shall hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall be one of the Trustees of the
Trust for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Delaware Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section 207
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and Article VIII, and in accordance with the following provisions (i) and (ii),
the Administrative Trustees shall have the authority to enter into all
transactions and agreements determined by the Administrative Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Administrative Trustees under this Trust Agreement, and to perform all
acts in furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense
Agreement, Certificate Depositary Agreement and such other
agreements or documents as may be necessary or desirable in
connection with the purposes and function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and
under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture
under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National Market or
such securities exchange or exchanges as shall be determined
by the Depositor and the registration of the Preferred
Securities under the Exchange Act, and the preparation and
filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust
Securities and the Debentures to the Securityholders in
accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust
Agreement;
(G) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the
Trust and the preparation, execution and filing of the
certificate of cancellation with the Secretary of State of
the State of Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges
as a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such
existence is necessary to
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protect the limited liability of the Holders of the
Preferred Securities or to enable the Trust to effect the
purposes for which the Trust was created;
(I) assisting in the registration or listing of the
Preferred Securities with DTC or upon such other trading
facilities or exchanges as shall be determined by the
Depositor and the preparation and filing of all periodic and
other reports and other documents pursuant to the foregoing;
and
(J) the taking of any action incidental to the
foregoing as the Administrative Trustees may from time to
time determine is necessary or advisable to give effect to
the terms of this Trust Agreement for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with this
Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the
Trust and the execution of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the Property Trustee
may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement and protect
and
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conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any
of the Trust Property or interests therein, including to Securityholders, except
as expressly provided herein; (iii) take any action that would cause the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or issue any
other debt; or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issuance and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred
Securities and the Debentures, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or part of the
Preferred Securities and to do any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and advise
the Trustees of actions they must take on behalf of the Trust, and
prepare for execution and filing any documents to be executed and filed
by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such States;
(iii) the preparation for filing by the Trust and execution
on behalf of the Trust of an application to The Nasdaq Stock Market's
National Market or a national stock exchange or other organizations for
listing upon notice of issuance of any Preferred Securities and to file
or cause an Administrative Trustee to file thereafter with such
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exchange or organization such notifications and documents as may be
necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable
to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust shall not be deemed to be an "investment
company" required to be registered under the Investment Company Act, shall be
classified as a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that each of the
Depositor and the Administrative Trustees determines in their discretion to be
necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Securityholders in accordance with
this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making
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deposits and withdrawals from the Payment Account in accordance with this Trust
Agreement. All monies and other property deposited or held from time to time in
the Payment Account shall be held by the Property Trustee in the Payment Account
for the exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including Additional Amounts) will be made on
the Trust Securities at the rate and on the dates that payments of interest
(including of Additional Interest, as defined in the Indenture) are made on the
Debentures. Accordingly:
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from January __, 1998,
and, except during any Extended Interest Payment Period with respect to the
Debentures, shall be payable quarterly in arrears on March 1, June 1, September
1 and December 1 each year, commencing on March 1, 1998. If any date on which a
Distribution is otherwise payable on the Trust Securities is not a Business Day,
then the payment of such Distribution shall 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 Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date (each date on which distributions are payable in accordance with
this Section 401(a), a "Distribution Date").
(b) Assuming payments of interest on the Debentures are made when due
(and before giving effect to Additional Amounts, if applicable), Distributions
on the Trust Securities shall be payable at a rate of _____% per annum of the
Liquidation Amount of the Trust Securities. The amount of Distributions payable
for any full period shall be computed on the basis of a 360 day year of twelve
30-day months. The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360 day year of twelve
30 day months. During any Extended Interest Payment Period with respect to the
Debentures, Distributions on the Preferred Securities shall be deferred for a
period equal to the Extended Interest Payment
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Period. The amount of Distributions payable for any period shall include the
Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available in the Payment Account for the payment of such
Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be 15th day of the preceding month in which the Distribution is payable.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee in the
name of and at the expense of the Trust by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date to
each Holder of Trust Securities to be redeemed, at such Holder's address
appearing in the Securities Register. The Property Trustee shall have no
responsibility for the accuracy of any CUSIP number contained in such notice.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the aggregate Liquidation Amount
of the particular Trust Securities to be redeemed;
(v) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon shall cease to accumulate on and after said
date with respect to each such Trust Security; and
(vi) the place or places where the Trust Securities are to
be surrendered for the payment of the Redemption Price.
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(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has immediately available funds then on hand and available in the
Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 10:00 a.m., New York City time, on the
Redemption Date, subject to Section 402(c), the Property Trustee will, so long
as the Preferred Securities are in book-entry-only form, irrevocably deposit
with the Clearing Agency for the Preferred Securities funds sufficient to pay
the applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
If the Preferred Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 402(c), will provide the Paying Agent with
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust 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
Securityholders holding Trust Securities so called for redemption shall cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest,
and such Securities shall cease to be Outstanding. In the event that any date on
which any Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date shall 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 Business Day falls in the next calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case, with the same force and effect as if made on such date. In the event
that payment of the Redemption Price in respect of any Trust Securities called
for redemption is improperly withheld or refused and not paid either by the
Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust
Securities shall continue to accumulate, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date shall be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the record holders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, in the event that
the Preferred Securities do not remain in book-entry form, the relevant record
date shall be the date 15 days prior to the relevant Redemption Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the
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Common Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Property Trustee from the Outstanding Preferred
Securities not previously called for redemption, by such method (including,
without limitation, by lot) as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $10 or an integral multiple of $10 in excess thereof), of the
Liquidation Amount of Preferred Securities of a denomination larger than $10.
The Property Trustee shall promptly notify the Securities Registrar in writing
of the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities which has been or is to be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities, provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Preferred
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities shall be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities shall have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
Holders of the Preferred Securities and not the Holder of the Common Securities,
and only the Holders of the Preferred Securities shall have the right to direct
the Property Trustee to act on their behalf.
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SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which will credit the relevant accounts on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
furnished to such Securityholder or the information required to be provided on
such form. The Administrative Trustees shall provide the Depositor with a copy
of all such returns and reports promptly after such filing or furnishing. The
Property Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest, the Property
Trustee, at the written direction of an Administrative Trustee or the Depositor,
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United States
or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder (or any
related Owner) has directly received under the Indenture pursuant to Section
512(b) or (c) hereof.
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ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 203 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
(a) The Preferred Securities Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual, facsimile or
imprinted signature of at least one Administrative Trustee and the Property
Trustee shall authenticate and register the Preferred Securities Certificates,
except as provided in Section 503. Trust Securities Certificates bearing the
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Trust Securities Certificates or did not hold such offices at
the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 504 and 511a.
(b) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of one or more fully registered Global Preferred
Securities Certificates which will be deposited with or on behalf of the
Depositary and registered in the name of the Depositary's nominee. Unless and
until it is exchangeable in whole or in part for the Preferred Securities in
definitive form, a global security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date and on the date on which the Underwriters exercise
the option to purchase additional Preferred Securities, as applicable (the
"Option Closing Date"), the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation
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Amount as provided in Sections 204 and 205, to be executed by manual, facsimile
or imprinted signature on behalf of the Trust by at least one of the
Administrative Trustees and delivered to the Property Trustee and upon such
delivery, the Property Trustee shall authenticate and register the Preferred
Securities Certificates and make available for delivery such Preferred
Securities Certificates upon the written order of the Depositor, executed by its
Chairman of the Board, Chief Executive Officer or President or any Vice
President and the Chief Financial Officer, Treasurer or an Assistant Treasurer
or Secretary or Assistant Secretary without further corporate action by the
Depositor, in authorized denominations.
SECTION 503a. GLOBAL PREFERRED SECURITIES.
(a) Each Global Preferred Security issued under this Trust Agreement
shall be registered in the name of the Clearing Agency designated by the
Depositor for the related Global Preferred Securities or a nominee thereof and
delivered to such Clearing Agency or a nominee thereof or custodian therefor.
(b) Notwithstanding any other provision in this Trust Agreement, no
Global Preferred Securities may be exchanged in whole or in part for Preferred
Securities registered, and no transfer of Global Preferred Securities in whole
or in part may be registered, in the name of any Person other than the Clearing
Agency for such Global Preferred Securities or a nominee thereof unless (a) the
Clearing Agency advises the Property Trustee in writing that the Clearing Agency
is no longer willing or able to properly discharge its responsibilities with
respect to the Global Preferred Securities, and the Administrative Trustees are
unable to locate a qualified successor, (b) the Trust at its option advises the
Clearing Agency in writing that it elects to eliminate the global system through
the Clearing Agency, (c) after the occurrence of a Debenture Event of Default or
(d) pursuant to the following sentence. All or any portion of a Global Preferred
Security may be exchanged for a Preferred Security that has a like aggregate
principal amount and is not a Global Preferred Security upon 20 days' prior
written request made by the Clearing Agency or its authorized representative to
the Property Trustee; provided, however that no Definitive Preferred Securities
Certificate shall be issued in an amount representing less than $100,000 in
Aggregate Liquidation Amount of Preferred Securities. Upon the occurrence of any
event specified in clause (a), (b) or (c) above, the Administrative Trustees
shall notify the Clearing Agency and the Clearing Agency shall notify all Owners
of beneficial interests in Global Preferred Securities, the Delaware Trustee,
the Property Trustee and the Administrative Trustees of the occurrence of such
event and of the availability of the Definitive Preferred Securities to such
Owners requesting the same; provided, however, that no Definitive Preferred
Securities shall be issued in an amount representing less than $10 in aggregate
Liquidation Amount of Preferred Securities. Upon surrender to the Administrative
Trustees of the typewritten Preferred Securities Certificate or certificates
representing the Global Preferred Securities held by the Clearing Agency,
accompanied by registration instructions, the Administrative Trustees, or any
one of them, shall execute a Definitive Preferred Securities Certificate in
accordance with the instructions of the Clearing Agency. Neither the Securities
Registrar nor the Trustees shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of the Definitive Preferred Securities
Certificate,
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the Trustees shall recognize the Holder of a Definitive Preferred Securities
Certificate as a Securityholder. Definitive Preferred Securities Certificates
shall be printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Administrative Trustees, as evidenced
by the execution thereof by the Administrative Trustees or any one of them.
(c) If any Global Preferred Security is to be exchanged for Definitive
Preferred Securities Certificates or cancelled in part, or if Definitive
Preferred Securities Certificates are to be exchanged in whole or in part for a
Global Preferred Security, then either (i) such Global Preferred Security shall
be so surrendered for exchange or cancellation as provided in this Article V or
(ii) the aggregate Liquidation Amount represented by such Global Preferred
Security shall be reduced, subject to Section 502, or increased, by an amount
equal to the Liquidation Amount represented by that portion of the Global
Preferred Security to be so exchanged or cancelled, or equal to the Liquidation
Amount represented by such Definitive Preferred Securities Certificates to be so
exchanged for beneficial interests in the Global Preferred Security represented
thereby, as the case may be, by means of an appropriate adjustment made on the
records of the Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency or
its authorized representative to make a corresponding adjustment to its records.
Upon surrender to the Administrative Trustees or the Securities Registrar of the
Global Preferred Security by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them, shall execute the
Definitive Preferred Securities Certificates in accordance with the instructions
of the Clearing Agency and Section 502 hereof; provided, however, that no
Definitive Preferred Securities Certificates shall be issued in an amount
representing less than $100,000 in Aggregate Liquidation Amount of Preferred
Securities. None of the Securities Registrar, the Trustees or the Administrative
Trustees shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Preferred Securities Certificates, the Trustees
and Administrative Trustees shall recognize the Holders of the Definitive
Preferred Securities Certificates as Securityholders. The Definitive Preferred
Securities Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees, as evidenced by the execution thereof by the Administrative Trustees
or any one of them.
(d) Every Definitive Preferred Securities Certificate executed and
delivered upon registration of, transfer of, or in exchange for or in lieu of, a
Global Preferred Security or any portion thereof, whether pursuant to this
Article V or Article IV or otherwise, shall be executed and delivered in the
form of, and shall be, a Global Preferred Security, unless such Definitive
Preferred Securities Certificate is registered in the name of a Person other
than the Clearing Agency for such Global Preferred Security or a nominee
thereof.
(e) The Clearing Agency or its nominee, as registered owner of a Global
Preferred Security, shall be the Holder of such Global Preferred Security for
all purposes under this Trust Agreement and the Global Preferred Security, and
Owners with respect to a Global Preferred Security shall hold such interests
pursuant to the Applicable Procedures. The Securities Registrar
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and the Trustees shall be entitled to deal with the Clearing Agency for all
purposes of this Trust Agreement relating to the Global Preferred Securities
(including the payment of the Liquidation Amount of and Distributions on the
beneficial interests in Global Preferred Securities represented thereby and the
giving of instructions or directions to Owners of Global Preferred Securities
represented thereby) as the sole Holder of the Global Preferred Securities
represented thereby and shall have no obligations to the Owners thereof. Neither
the Property Trustee nor the Securities Registrar shall have any liability in
respect of any transfers effected by the Clearing Agency.
The rights of the Owners of the Global Preferred Securities shall be
exercised only through the Clearing Agency and shall be limited to those
established by law, the Applicable Procedures and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Preferred
Securities Certificate are issued pursuant to Section 503a, the initial Clearing
Agency will make global transfers among the Clearing Agency Participants and
receive and transmit payments on the Preferred Securities to such Clearing
Agency Participants.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES
CERTIFICATES
(a) The Property Trustee shall keep or cause to be kept, at the office
or agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and exchanges
of Preferred Securities Certificates (herein referred to as the "Securities
Register") in which the registrar and transfer agent (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Preferred Securities Certificates and Common
Securities Certificates (subject to Section 510 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of
Preferred Securities Certificates as herein provided. The Property Trustee shall
be the initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 508, the
Administrative Trustees or any one of them shall execute and the Property
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Preferred Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
dated the date of execution by such Administrative Trustee or Trustees. The
Securities Registrar shall not be required to register the transfer of any
Preferred Securities that have been called for redemption. At the option of a
Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 508.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Property Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer
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or exchange shall be canceled and subsequently disposed of by the Property
Trustee in accordance with its customary practice. The Trust shall not be
required to (i) issue, register the transfer of, or exchange any Preferred
Securities during a period beginning at the opening of business 15 calendar days
before the date of mailing of a notice of redemption of any Preferred Securities
called for redemption and ending at the close of business on the day of such
mailing; or (ii) register the transfer of or exchange of any Preferred
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
(b) Trust Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Trust Agreement. To
the fullest extent permitted by law, any transfer or purported transfer of any
Trust Security not made in accordance with this Trust Agreement shall be null
and void.
(i) A Trust Security that is not a Global Preferred Security
may be transferred, in whole or in part, to a Person who takes delivery
in the form of another Trust Security that is not a Global Security as
provided in Section 504(a).
(ii) Subject to this Section 504, Preferred Securities shall
be freely transferable.
(iii) A beneficial interest in Global Preferred Security may
be exchanged for a Preferred Security that is not a Global Preferred
Security as provided in Section 503a.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate, and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute by manual, facsimile or imprinted signature and the Property
Trustee in the case of a Preferred Securities Certificate shall authenticate and
make available for delivery, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities
Certificate of like class, tenor and denomination. In connection with the
issuance of any new Trust Securities Certificate under this Section 505, the
Administrative Trustees or the Securities Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Trust Securities Certificate issued
pursuant to this Section
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505 shall constitute conclusive evidence of an undivided beneficial interest in
the assets of the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Trust Securities Certificate shall be found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent, the Securities Registrar and Depositor
shall treat any Persons in whose name any Trust Securities are issued as the
owner of such Trust Securities for the purpose of receiving Distributions and
for all other purposes whatsoever, and neither the Trust, the Trustees, the
Administrative Trustees, the Paying Agent, the Securities Registrar nor the
Depositor shall be bound by any notice to the contrary.
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent record date (a) within one Business Day
after January 1 and June 30 of each year; and (b) promptly after receipt by any
Administrative Trustee or the Depositor of a request therefor from the Property
Trustee in order to enable the Property Trustee to discharge its obligations
under this Trust Agreement, in each case to the extent such information is in
the possession or control of the Administrative Trustees or the Depositor and is
not identical to a previously supplied list or has not otherwise been received
by the Property Trustee in its capacity as Securities Registrar. The rights of
Securityholders to communicate with other Securityholders with respect to their
rights under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the Trust Indenture
Act. Each Holder and each Owner shall be deemed to have agreed not to hold the
Depositor, the Property Trustee or the Administrative Trustees accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Property Trustee shall designate, with the consent of the
Administrative Trustees, which consent shall not be unreasonably withheld, an
office or offices or agency or agencies where Preferred Securities Certificates
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Trustees in respect of the Trust Securities
Certificates may be served. The Property Trustee initially designates its
corporate trust office at 101 Barclay Street, Floor 21 West, New York, New York
Attn: Corporate Trust Trustee Administration, as the principal corporate trust
office for such purposes. The Property Trustee shall give prompt written notice
to the Depositor, the Administrative Trustees and to the Securityholders of any
change in the location of the Securities Register or any such office or agency.
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SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Property Trustee may revoke
such power and remove the Paying Agent if such Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligation
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to an Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustee and the
Property Trustee. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act be
revoked, the Property Trustee shall appoint a successor that is reasonably
acceptable to the Administrative Trustees to act as Paying Agent to execute and
deliver to the Trustees an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustees that as Paying Agent, such
successor Paying Agent or additional Paying Agent shall hold all sums, if any,
held by it for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall
also return all funds in its possession to the Property Trustee. The provisions
of Sections 801, 803 and 806 shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Trust Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, any attempted transfer of the Common Securities (other than a transfer
pursuant to Section 12.1 of the Indenture) shall be void. The Administrative
Trustees shall cause each Common Securities Certificate issued to the Depositor
to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A
SUCCESSOR IN INTEREST TO THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND
SECTION 510 OF THIS TRUST AGREEMENT."
SECTION 511. NOTICES TO CLEARING AGENCY.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as Preferred Securities are
represented by a Global Preferred Securities Certificate, the Trustees shall
give all such notices and communications specified herein to be given to the
Clearing Agency, and shall have no obligations to the Owners.
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SECTION 511a. DEFINITIVE PREFERRED SECURITIES CERTIFICATE AND TEMPORARY
PREFERRED SECURITIES.
(a) If (a) the Clearing Agency advises the Trustees in writing that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities with respect to the Preferred Security, and the Depositor is
unable to locate a qualified successor, (b) the Trust at its option advises the
Trustees in writing that it elects to terminate the book-entry system through
the Clearing Agency or (c) after the occurrence of a Debenture Event of Default,
Holders of a beneficial interest in Preferred Security representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Administrative Trustees in writing that the continuation of a book-entry system
though the Clearing Agency is no longer in the best interest of the Holders of
Preferred Securities, then the Administrative Trustees shall notify the Clearing
Agency and the Clearing Agency shall notify the Holders of Preferred Securities
and the other Trustees of the occurrence of such event and of the availability
of a Definitive Preferred Security to Holders of such class requesting the same.
(b) Pending the preparation of permanent Definitive Preferred
Securities Certificates, an Administrative Trustee may cause to be executed and
delivered on behalf of the Trust temporary Preferred Securities (the "Temporary
Preferred Securities"), which Temporary Preferred Securities are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the Definitive Preferred Securities
Certificates in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations of the officers
executing such Temporary Preferred Securities may determine, as evidenced by
their execution thereof.
If Temporary Preferred Securities are issued, an Administrative Trustee
will cause Definitive Preferred Securities Certificates to be prepared without
unreasonable delay. After the preparation of the Definitive Preferred Securities
Certificates, the Temporary Preferred Securities shall be exchangeable for
Definitive Preferred Securities Certificates upon surrender of the Temporary
Preferred Securities at any office or agency of the Depositor designated herein,
without charge to the Holder. Upon surrender for cancellation of any one or more
Temporary Preferred Securities, the Depositor shall execute and an
Administrative Trustee shall execute by manual, facsimile or imprinted signature
and the Property Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount of Definitive Preferred Securities
Certificates of authorized denominations. Until so exchanged the Temporary
Preferred Securities shall in all respects be entitled to the same benefits as
Definitive Preferred Securities Certificates.
SECTION 512. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
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division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Trust Securities against payment of the purchase price therefor, the
Trust Securities shall be fully paid and nonassessable, undivided beneficial
interests in the assets of the Trust. The Holders of the Trust Securities, in
their capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right to make such declaration by a
notice in writing to the Depositor, the Property Trustee and the Debenture
Trustee; and upon any such declaration such principal amount of and the accrued
interest on all of the Debentures shall become immediately due and payable,
provided that the payment of principal and interest on such Debentures shall
remain subordinated to the extent provided in the Indenture.
At any time after such declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of
the Debentures,
(B) any accrued Additional Interest on all of the
Debentures,
(C) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such
declaration of acceleration and interest and Additional
Interest thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture
Trustee and the Property Trustee, their agents and counsel;
and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as
provided in the Indenture.
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If the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a majority in Liquidation Amount of the
Preferred Securities shall also have the right to rescind and annul such
declaration and its consequences by written notice to the Depositor, the
Property Trustee and the Debenture Trustee, subject to the satisfaction of the
conditions set forth in clause (i) and (ii) of this Section 512.
The Holders of at least a majority in Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal and interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default 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
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which is represented by Global Preferred
Securities, a record date shall be established for determining Holders of
Outstanding Preferred Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided, that, unless such
declaration of acceleration, or rescission or annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after the record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be
cancelled and of no further effect. Nothing in this paragraph shall prevent a
Holder, or a proxy of a Holder, from giving, after expiration of such 90-day
period, a new written notice of declaration of acceleration, or rescission and
annulment thereof, as the case may be, that is identical to a written notice
which has been cancelled pursuant to the proviso to the preceding sentence, in
which event a new record date shall be established pursuant to the provisions of
this Section 512.
(c) For so long as any Preferred Securities remain Outstanding, upon a
Debenture Event of Default arising from the failure to pay interest or principal
on the Debentures, any Holders of Preferred Securities then Outstanding shall,
to the fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, have the right to institute a proceeding directly
against the Depositor for enforcement of payment to such Holder of principal of
or interest on the Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities of such Holder.
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SECTION 513. CUSIP NUMBERS.
The Depositor in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Depositor will promptly notify
the Property Trustee of any change in the CUSIP numbers.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 512, 810 and
1002 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a subsequent vote of
the Holders of the Outstanding Preferred Securities. The Property Trustee shall
notify each Holder of Outstanding Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In addition
to obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Administrative Trustees shall
provide to the Property Trustee, at the expense of the Depositor, an Opinion of
Counsel to the effect that the Trust shall continue to be classified as a
grantor trust
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and not as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise; or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class shall be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. No amendment to this Trust
Agreement may be made if, as a result of such amendment, the Trust would cease
to be classified as a grantor trust or would be classified as an association
taxable as a corporation for United States federal income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of 25% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation Amount)
and the Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Preferred Securityholders to vote on any
matters as to which the Preferred Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation Amount), present in
person or by proposal shall constitute a quorum at any meeting of
Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders unless this Trust Agreement requires a greater number of
affirmative votes.
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SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $10 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
When Trust Securities are held jointly by several Persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Securities,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Trust Securities.
A proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and, the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing (based upon their aggregate Liquidation Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of any Distribution or other action as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Securityholders may be embodied in and evidenced by one
or more instruments of substantially
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similar tenor signed by such Securityholders in person or by an agent duly
appointed in writing, and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to an Administrative Trustee. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
801) conclusive in favor of the Trustees, if made in the manner provided in this
Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of every
Trust Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder
to take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of such Liquidation
Amount.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection and copying by
Securityholders and their authorized representatives during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND THE
DELAWARE TRUSTEE.
The Property Trustee and the Delaware Trustee, each severally on behalf
of and as to itself, as of the date hereof, hereby represents and warrants for
the benefit of the Depositor and the Securityholders that:
(a) the Property Trustee is a New York banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
New York;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware banking corporation, duly
organized, validly existing and in good standing in the State of Delaware;
(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and constitutes the
valid and legally binding agreement of the Property Trustee and the Delaware
Trustee enforceable against each of them in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors rights
and to general equity principles;
(f) the execution, delivery and performance by the Property Trustee and
the Delaware Trustee of this Trust Agreement has been duly authorized by all
necessary corporate or other action on the part of the Property Trustee and
Delaware Trustee and does not require any approval of stockholders of the
Property Trustee or the Delaware Trustee and such execution delivery and
performance shall not (i) violate the charter or by-laws of the Property Trustee
or the Delaware Trustee; (ii) violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of any indenture, mortgage, credit agreement, license
or other agreement or instrument to which the Property Trustee or the Delaware
Trustee is a party or by which it is bound; or (iii) violate any law,
governmental rule or regulation of the State of New York or the State of
Delaware, as the case may be, governing
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the banking or trust powers of the Property Trustee or the Delaware Trustee (as
appropriate in context) or any order, judgment or decree applicable to the
Property Trustee or the Delaware Trustee;
(g) neither the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee
contemplated herein or therein requires the consent or approval of, the giving
of notice to, the registration with or the taking of any other action with
respect to any governmental authority or agency under any existing New York or
Delaware law governing the banking or trust powers of the Property Trustee or
the Delaware Trustee, as the case may be; and
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Property Trustee
or the Delaware Trustee, as the case may be, to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date or the
Option Closing Date (as defined in the Underwriting Agreement), if applicable,
on behalf of the Trust have been duly authorized and, shall have been, duly and
validly executed, issued and delivered by the Administrative Trustees pursuant
to the terms and provisions of, and in accordance with the requirements of, this
Trust Agreement and the Securityholders shall be, as of such date, entitled to
the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank or the Property Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding
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the foregoing, no provision of this Trust Agreement shall require the Trustees
to expend or risk their own funds or otherwise incur any financial liability in
the performance of any of their duties hereunder, or in the exercise of any of
their rights or powers, if they shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. No Administrative Trustee shall be liable for its
act or omissions hereunder except as a result of its own gross negligence or bad
faith or willful misconduct. The Property Trustee's liability shall be
determined under the Trust Indenture Act. Whether or not therein expressly so
provided, every provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustees shall be
subject to the provisions of this Section 801. To the extent that, at law or in
equity, an Administrative Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Securityholders, such
Administrative Trustee shall not be liable to the Trust or to any Securityholder
for such Trustee's good faith reliance on the provisions of this Trust
Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of the Administrative Trustees otherwise
existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the
Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. With respect
to the relationship of each Securityholder and the Trustees, each
Securityholder, by its acceptance of a Trust Security, agrees that it shall look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 801(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
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(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Depositor and money held by the Property Trustee
need not be segregated from other funds held by it except in relation
to the Payment Account maintained by the Property Trustee pursuant to
Section 301 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the negligence, default or
misconduct of the Administrative Trustees or the Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within 90 days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 1008, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
(b) The Administrative Trustees shall transmit, to the Securityholders
and the Property Trustee in the manner and to the extent provided in Section
1008, notice of the Depositor's election to begin or further extend an Extended
Interest Payment Period on the Debentures (unless such election shall have been
revoked) within the time specified for transmitting such notice to the holders
of the Debentures pursuant to the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may conclusively rely and shall be protected
in acting or refraining from acting in good faith upon any resolution, Opinion
of Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the
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provisions of this Trust Agreement the Property Trustee finds the same ambiguous
or inconsistent with other provisions contained herein; or (iii) the Property
Trustee is unsure of the application of any provision of this Trust Agreement,
then, except as to any matter as to which the Preferred Securityholders are
entitled to vote under the terms of this Trust Agreement, the Property Trustee
shall deliver a notice to the Depositor requesting written instructions of the
Depositor as to the course of action to be taken and the Property Trustee shall
take such action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by the
Depositor, provided, however, that if the Property Trustee does not receive such
instructions of the Depositor within 10 Business Days after it has delivered
such notice, or such reasonably shorter period of time set forth in such notice
(which to the extent practicable shall not be less than 2 Business Days), it
may, but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement as it shall deem advisable and in the
best interests of the Securityholders, in which event the Property Trustee shall
have no liability except for its own bad faith, negligence or willful
misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement) or any filing under tax or securities laws or any
re-recording, refiling, or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice (which
counsel may be counsel to the Depositor or any of its Affiliates) and the advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon and in accordance with such advice, the Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice,
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request, consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do so by
one or more Securityholders, but the Property Trustee may make such further
inquiry or investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request written instructions from the Holders of the Trust
Securities which written instructions may only be given by the Holders of the
same proportion in Liquidation Amount of the Trust Securities as would be
entitled to direct the Property Trustee under the terms of the Trust Securities
in respect of such remedy, right or action; (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received; and (iii) shall be protected in acting in accordance with such written
instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement. No provision of this
Trust Agreement shall be deemed to impose any duty or obligation on the Property
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The Recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813 and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
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SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time such compensation as the
Trustees and the Depositor may agree in writing for all services rendered by
them hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee for,
and to hold the Trustees harmless against, any and all loss, damage, claim,
liability, penalty or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or administration of
this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the acceptance, exercise or
performance of any of its powers or duties hereunder, except any such expense,
disbursement or advance as may be attributable to such Trustee's negligence, bad
faith or willful misconduct (or, in the case of the Administrative Trustees, any
such expense, disbursement or advance as may be attributable to its, his or her
gross negligence, bad faith or willful misconduct).
The provisions of this Section 806 shall survive the termination of
this Trust Agreement or the earlier resignations or removal of any Trustee.
No Trustee may claim any Lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 7.1(a)(iv), Section 7.1(a)(v) or
7.1(a)(vi) of the Indenture, the expenses (including reasonable charges and
expenses of its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Bankruptcy Law.
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SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
807, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware; or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more Persons authorized to bind such entity.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) 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
Property may at the time be located, the Depositor shall have power to appoint,
and upon the written request of the Property Trustee, the Depositor shall for
such purpose join with the Property Trustee in the execution, delivery and
performance of any instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law 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 the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 809. If the
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Depositor does not join in such appointment within 15 days after the receipt by
it of a request so to do, or in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section 809 shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States; or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
Persons authorized to bind such entity.
(b) Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified
hereunder, shall be exercised, solely by such Trustees and not by such
co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall
be incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed
by such co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section 809, and, in case a Debenture
Event of Default has occurred and is continuing, the Property Trustee
shall have the power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the
Depositor. Upon the written request of the Property Trustee, the
Depositor shall join with the Property Trustee in the execution,
delivery and performance of all instruments necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee
or separate trustee so resigned or removed may be appointed in the
manner provided in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other Trustee hereunder.
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(v) The Property Trustee shall not be liable by reason of
any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article VIII shall
become effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Depositor,
any court of competent jurisdiction for the appointment of a successor Relevant
Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time. In no event will the
Holders of the Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustees, which voting rights are vested exclusively
in the Common Securityholder. If an instrument of acceptance by a successor
Trustee required by Section 8.11 shall have not been delivered to the Relevant
Trustee within 30 days after the giving of such notice of removal, the Relevant
Trustee may petition, at the expense of the Depositor, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee with respect to
the Trust Securities.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee or the Delaware Trustee, as the case may be, shall resign, be
removed or become incapable of continuing to act as the Property Trustee at a
time when a Debenture Event of Default shall have occurred and is continuing,
the Preferred Securityholders, by Act of the
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Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Relevant Trustee or Trustees with respect to the Trust
Securities and the Trust, and such successor Trustee shall comply with the
applicable requirements of Section 811. If an Administrative Trustee shall
resign, be removed or become incapable of acting as Administrative Trustee, at a
time when a Debenture Event of Default shall have occurred and be continuing,
the Common Securityholder, by Act of the Common Securityholder delivered to an
Administrative Trustee, shall promptly appoint a successor Administrative
Trustee or Administrative Trustees with respect to the Trust Securities and the
Trust, and such successor Administrative Trustee or Administrative Trustees
shall comply with the applicable requirements of Section 811. If no successor
Relevant Trustee with respect to the Trust Securities shall have been so
appointed by the Common Securityholder or the Preferred Securityholders and
accepted appointment in the manner required by Section 811, any Securityholder
who has been a Securityholder of Trust Securities on behalf of himself and all
others similarly situated may petition a court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Trust Securities.
(e) The Administrative Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee who is a natural person dies
or becomes, in the opinion of the Depositor, incompetent or incapacitated, the
vacancy created by such death, incompetence or incapacity may be filled by (a)
the unanimous act of the remaining Administrative Trustees if there are at least
two of them; or (b) otherwise by the Depositor (with the successor in each case
being a Person who satisfies the eligibility requirement for Administrative
Trustees as forth in Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and, upon the execution and delivery of such instrument, the
resignation or removal of the retiring Relevant Trustee shall become effective
to the extent provided therein and each such successor Relevant Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust, but, on request of the Trust or any successor
Relevant Trustee such retiring Relevant Trustee shall upon payment of its
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charges hereunder, duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment unless
at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such Person shall be
otherwise qualified and eligible under this Article VIII, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
If and when the Property Trustee shall be or become a creditor of the
Depositor or the Trust (or any other obligor upon the Debentures or the Trust
Securities), the Property Trustee shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Securityholders such reports
concerning the Property Trustee and its actions under this Trust Agreement as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Property Trustee shall, within sixty days after each May 15
following the date of the Trust Agreement, deliver to Securityholders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with The Nasdaq Stock Market's
National Market, and each national securities exchange or other organization
upon which the Trust Securities are listed, and also with
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the Commission so long as the Preferred Securities are registered under the
Securities Exchange Act and the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form in
the manner and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Property
Trustee is for information purposes only and the Property Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Depositor's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 817(a), or if the
number of Trustees is increased pursuant to Section 817(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 810, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative
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Trustees and shall discharge all the duties imposed upon the Administrative
Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
207(a); and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of the Trust, as set forth herein.
SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 901. DISSOLUTION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically dissolve on
December 31, 2027 (the "Expiration Date") subject to distribution of the Trust
Property in accordance with Section 904.
SECTION 902. EARLY DISSOLUTION.
The first to occur of any of the following events is an "Early
Termination Event" upon the occurrence of which the Trust shall be dissolved:
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to Securityholders in exchange for the Preferred Securities in accordance with
Section 904;
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(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been entered by a
court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 904, or upon the
redemption of all of the Trust Securities pursuant to Section 402, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge
of all administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by the
Administrative Trustees under the Delaware Business Trust Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b), or (d)
of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 904(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities shall no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange shall be
deemed to represent a Like Amount of Debentures;
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 904(d) applies, receive a Liquidation
Distribution, as the Administrative Trustees shall deem appropriate;
(iv) state the CUSIP number; and
(v) state the office or agency of the Trust where
Securities should be surrendered.
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(b) Except where Section 902(c) or 904(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
Outstanding; (ii) certificates representing a Like Amount of Debentures shall be
issued to holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange; (iii)
the Depositor shall use its reasonable efforts to have the Debentures listed on
The Nasdaq Stock Market's National Market or SmallCap Market or on such other
securities exchange or other organization as the Preferred Securities are then
listed or traded; (iv) any Trust Securities Certificates not so surrendered for
exchange shall be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on which a Distribution was made on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal shall be made to holders of
Trust Securities Certificates with respect to such Debentures): and (v) all
rights of Securityholders holding Trust Securities shall cease, except the right
of such Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 904, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Administrative Trustees not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
wound-up or terminated, by the Property Trustee in such manner as the Property
Trustee determines. In such event, Securityholders shall be entitled to receive
out of the assets of the Trust available for distribution to Securityholders,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, an amount equal to the Liquidation Amount per Trust Security
plus accumulated and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If, upon any such winding-up or
termination, the Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). The Holder of the Common Securities shall be entitled
to receive Liquidation Distributions upon any such winding-up or termination pro
rata (determined as aforesaid) with Holders of Preferred Securities, except
that, if a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
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SECTION 905. 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
substantially as an entirety to any Person, except pursuant to this Section 905
or Section 904. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety 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 Preferred Securities; or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise; (ii) the Depositor expressly
appoints a trustee of such successor entity possessing substantially the same
powers and duties as the Property Trustee as the holder of the Debentures; (iii)
the Successor Securities are registered or listed, or any Successor Securities
shall be registered or listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then registered or listed (including, if applicable, the Nasdaq Stock Market's
National Market), if any; (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect; (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel 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 Preferred
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 shall be required
to register as an "investment company" under the Investment Company Act, and
(viii) the Depositor 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
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death, incapacity, dissolution, bankruptcy or termination of any
Person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Trust Agreement, nor dissolve, terminate or annul
the Trust, nor entitle the legal representatives or heirs of such Person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall 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 shall not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Securityholder, and any such amendments of
this Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Trust Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment shall not affect the Trust's status
as a grantor trust for United Status federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement 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
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date; or (ii) restrict the right of a Securityholder to institute suit for the
enforcement of any such payment on or after such date; notwithstanding any other
provision herein, without the unanimous consent of the Securityholders (such
consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(f) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day which is a Business Day (except as
otherwise provided in Sections 401(a) and 402(d)), with the same force and
effect as though made on the date fixed for such payment, and no distribution
shall accumulate thereon for the period after such date.
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SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s),
including any successor by operation of law. Except as contemplated by Article
XII of the Indenture and pursuant to which the assignee agrees in writing to
perform the Depositor's obligations hereunder, the Depositor shall not assign
its obligations hereunder.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Pittsburgh Home
Financial Corp., Attention: President, facsimile no.: (412) 281-3750. Such
notice, demand or other communication to or upon a Securityholder shall be
deemed to have been sufficiently given or made, for all purposes, upon hand
delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect to the Property Trustee to The Bank
of New York, 101 Barclay Street, 21W, New York, New York 10286, Attention:
Corporate Trust Trustee Administration; (b) with respect to the Delaware
Trustee, to The Bank of New York (Delaware), c/o The Bank of New York, 101
Barclay Street, Floor 21 West, New York, New York 10286; and (c) with respect to
the Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Administrative Trustees of Pittsburgh Home Capital
Trust I." Such notice, demand or other communication to or upon the Trust or the
Property Trustee shall be deemed to have been sufficiently given or made only
upon actual receipt of the writing by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been dissolved in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States
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Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws" or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 1009, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor (which expense shall be paid prior to the
filing), it shall file an answer with the bankruptcy court or otherwise properly
contest the filing of such petition by the Depositor against the Trust or the
commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be stopped and precluded
therefrom. The provisions of this Section 1009 shall survive the termination of
this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS AMONG THE TRUST AND SUCH
SECURITYHOLDER AND SUCH OTHERS.
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PITTSBURGH HOME FINANCIAL CORP., AS DEPOSITOR
By:__________________________________________
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
THE BANK OF NEW YORK, AS PROPERTY TRUSTEE
By:__________________________________________
Name: __________________________
Title: _________________________
THE BANK OF NEW YORK (DELAWARE),
AS DELAWARE TRUSTEE
By:__________________________________________
Name: __________________________
Title: _________________________
ADMINISTRATIVE TRUSTEES
By:__________________________________________
Name: J. Ardie Dillen
Title: As Administrative Trustee
By:__________________________________________
Name: Michael J. Kirk
Title: As Administrative Trustee
By:__________________________________________
Name: Gregory C. Maxcy
Title: As Administrative Trustee
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EXHIBIT 4.5
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT IN COMPLIANCE WITH
APPLICABLE LAW AND SECTION 510
OF THE TRUST AGREEMENT.
CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES
C-____ (__________)
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
PITTSBURGH HOME CAPITAL TRUST I
TRUST COMMON SECURITIES
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
Pittsburgh Home Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Pittsburgh Home Financial Corp. (the "Holder") is the registered owner of
_____________________________________________ (______) common securities of the
Trust, representing beneficial interests of the Trust and designated the Trust
Common Securities (liquidation amount $10 per Common Security) (the "Common
Securities"). Except as provided in Section 510 of the Trust Agreement (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and the Common Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Trust Agreement of the Trust dated as of January __, 1998,
as the same may be amended from time to time (the "Trust Agreement"), including
the designation of the terms of the Common Securities as set forth therein. The
Trust will furnish a copy of the Trust Agreement to the Holder without charge
upon written request to the Trust at its principal place of business or
registered office.
By receipt and acceptance of this certificate, the Holder agrees to be
bound by the Trust Agreement and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this _____ day of January, 1998.
PITTSBURGH HOME CAPITAL TRUST I
By:
------------------------------------------
Name: J. Ardie Dillen
Title: Administrative Trustee
<PAGE> 2
Certificate Number Number of Preferred Securities
P-___ _________
CUSIP NO. ___________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
PITTSBURGH CAPITAL TRUST I
______% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
Pittsburgh Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
___________________ (the "Holder") is the registered owner of _________
preferred securities of the Trust representing an undivided beneficial interest
in the assets of the Trust and designated the Pittsburgh Home Capital Trust I
_____% Cumulative Trust Preferred Securities (liquidation amount $10 per
Preferred Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in Section 504 of the Trust Agreement (as
defined below). The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities are set forth in,
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Trust Agreement of the Trust dated as of January ___, 1998, as the same may be
amended from time to time (the "Trust Agreement"), including the designation of
the terms of Preferred Securities as set forth therein. The Holder is entitled
to the benefits of the Guarantee Agreement, as amended, entered into by
Pittsburgh Home Financial Corp., a Pennsylvania corporation, and The Bank of
New York, as guarantee trustee, dated as of January __, 1998 (the "Guarantee"),
to the extent provided therein. The Trust will furnish a copy of the Trust
Agreement and the Guarantee to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
<PAGE> 3
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this ___ day of January, 1998.
PITTSBURGH HOME CAPITAL TRUST I
By:
----------------------------------------
Name: J. Ardie Dillen
Title: Administrative Trustee
This is one of the Preferred Securities referred to in the Trust
Agreement.
Dated: THE BANK OF NEW YORK
as Trustee
By:
----------------------------------------
Authorized Signatory
<PAGE> 4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security
certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignees social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------agent to transfer this Security certificate on the
books of the Company. The agent may substitute another to act for him or her.
Date:
-------------------------------
Signature:
----------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
- -----------------------------
Signature must be guaranteed by an "eligible guarantor institution" that
is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities and Exchange Act of 1934, as
amended.
<PAGE> 1
EXHIBIT 4.6
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
PITTSBURGH HOME FINANCIAL CORP.
AND
THE BANK OF NEW YORK
JANUARY ___, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION 1
Section 1.1 Definitions and Interpretation 1
ARTICLE II TRUST INDENTURE ACT 5
Section 2.1 Trust Indenture Act; Application 5
Section 2.2 Lists of Holders of Securities 5
Section 2.3 Reports by the Preferred Guarantee Trustee 6
Section 2.4 Periodic Reports to Preferred Guarantee Trustee 6
Section 2.5 Evidence of Compliance with Conditions Precedent 6
Section 2.6 Events of Default; Waiver 6
Section 2.7 Event of Default; Notice 7
Section 2.8 Conflicting Interests 7
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED
GUARANTEE TRUSTEE 7
Section 3.1 Powers And Duties of The Preferred Guarantee Trustee
7
Section 3.2 Certain Rights of Preferred Guarantee Trustee 9
Section 3.3 Not Responsible For Recitals or Issuance of Guarantee
11
ARTICLE IV PREFERRED GUARANTEE TRUSTEE 11
Section 4.1 Preferred Guarantee Trustee; Eligibility 11
Section 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees 12
ARTICLE V GUARANTEE 13
Section 5.1 Guarantee 13
Section 5.2 Waiver of Notice and Demand 13
Section 5.3 Obligations Not Affected 13
Section 5.4 Rights of Holders 15
Section 5.5 Guarantee of Payment 15
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Section 5.6 Subrogation 15
Section 5.7 Independent Obligations 15
ARTICLE VI LIMITATION OF TRANSACTIONS;
SUBORDINATION 16
Section 6.1 Limitation of Transactions 16
Section 6.2 Ranking 16
ARTICLE VII TERMINATION 16
Section 7.1 Termination 16
ARTICLE VIII INDEMNIFICATION 17
Section 8.1 Exculpation 17
Section 8.2 Indemnification 17
ARTICLE IX MISCELLANEOUS 18
Section 9.1 Successors and Assigns 18
Section 9.2 Amendments 18
Section 9.3 Notices 18
Section 9.4 Benefit 19
Section 9.5 Governing Law 19
</TABLE>
-ii-
<PAGE> 4
CROSS REFERENCE TABLE
<TABLE>
<S> <C>
SECTION OF TRUST INDENTURE SECTION OF GUARANTEE AGREEMENT
ACT OF 1939, AS AMENDED
310(a) 4.1(a)
310(b) 4.1(a), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1, 2.5,3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
</TABLE>
Note: This Cross-Reference Table does not constitute part of this Agreement
and shall not affect the interpretation of any of its terms or
provisions
<PAGE> 5
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of January ___, 1998, is executed and delivered
by PITTSBURGH HOME FINANCIAL CORP., a Pennsylvania corporation (the
"Guarantor"), and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Pittsburgh Home Capital Trust I, a Delaware statutory business trust
(the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of January ___, 1998, among the trustees of the
Trust named herein, the Guarantor, as depositor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof preferred securities, having an aggregate liquidation
amount of $10, designated the _____% Cumulative Trust Preferred Securities (the
"Preferred Securities") representing undivided beneficial ownership interests in
the assets of the Trust and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, will be used to purchase the _____% Junior Subordinated
Deferrable Interest Debentures due 2028 (the "Junior Subordinated Debentures")
of the Guarantor which will be deposited with The Bank of New York, as Property
Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
<PAGE> 6
(b) terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when used
in this Preferred Securities Guarantee unless otherwise defined herein;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state
banking institutions in the Borough of Manhattan, The City of New York, or the
State of Delaware are authorized or required by law, executive order or
regulation to close or a day on which the Corporate Trust Office of the
Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at The Bank of New York, 101
Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Trustee Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the ______% Junior Subordinated Debentures due 2028,
of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Debt" means with respect to any person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Persons evidenced by bonds, debentures, notes or
-2-
<PAGE> 7
other similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v) every capital lease
obligation of such Person; (vi) all indebtedness of such person whether incurred
on or prior to the date of the Indenture or thereafter incurred, for claims in
respect of derivative products, including interest rate, foreign exchange rate
and commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payments of which, in
either case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor or otherwise.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantor" means Pittsburgh Home Financial Corp., a Pennsylvania
corporation.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions (as defined
in the Trust Agreement) that are required to be paid on such Preferred
Securities, to the extent the Trust shall have funds available therefor, (ii)
the redemption price, including all accrued and unpaid Distributions to the date
of redemption (the "Redemption Price"), to the extent the Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement or a redemption of all
of the Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Trust shall have funds available therefor
(the "Liquidation Distribution"), and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of January ___, 1998, among
the Debenture Issuer and The Bank of New York, as trustee, and any supplemental
indenture thereto pursuant
-3-
<PAGE> 8
to which certain subordinated debt securities of the Debenture Issuer are to be
issued to the Property Trustee of the Trust.
"Junior Subordinated Debentures" shall have the meaning set forth in
the Recitals hereto.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments. "Majority in liquidation amount of the
Preferred Securities" means the holders of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer of the Preferred Guarantee Trustee, including any
vice-president, any assistant vice-president, any
-4-
<PAGE> 9
assistant secretary, any assistant treasurer or other officer customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officers
knowledge of and familiarity with the particular subject.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1
of the Indenture.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within one Business Day after January 1 and June
30 of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
15 days before such List of Holders is given to the Preferred Guarantee Trustee;
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
-5-
<PAGE> 10
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
The Preferred Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with
the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act. Delivery of such reports, information and documents to the
Preferred Guarantee Trustee is for informational purposes only and the Preferred
Guarantee Trustee's receipt of such shall not constitute constructive notice of
any information contained therein or determinable from information contained
herein, including the Guarantor's compliance with any of its covenants hereunder
(as to which the Preferred Guarantee Trustee is entitled to rely exclusively on
Officer's Certificates).
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c) may be given in
the form of an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, that the Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith
-6-
<PAGE> 11
determines that the withholding of such notice is in the interest of the
Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge.
SECTION 2.8 CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise
-7-
<PAGE> 12
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities
Guarantee, and the Preferred Guarantee Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed herein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof
are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in
good faith in accordance with the written direction of the
Holders of not less than a Majority in liquidation amount of
the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to
the Preferred Guarantee Trustee, or exercising any trust or
power conferred upon the Preferred Guarantee Trustee under
this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur
-8-
<PAGE> 13
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if
the Preferred Guarantee Trustee shall have reasonable grounds
for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Preferred
Securities Guarantee or indemnity, reasonably satisfactory to
the Preferred Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or
any rerecording, refiring or reregistration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel
of its situation, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions
concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at
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<PAGE> 14
the request or direction of any Holder, unless such Holder
shall have provided to the Preferred Guarantee Trustee such
security and indemnity, reasonably satisfactory to the
Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of
the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Preferred
Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default,
of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper
or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians
or attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective
to perform any such action. No third party shall be required
to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
written instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may
refrain from enforcing such remedy or right or taking such
other action until such written instructions are received, and
(iii) shall be protected in conclusively relying on or acting
in accordance with such instructions.
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<PAGE> 15
(b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or
a corporation or Person permitted by the Securities
and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least
$50,000,000, and subject to supervision or
examination by Federal, State, Territorial or
District of Columbia authority. If such corporation
publishes reports of condition at least annually,
pursuant to law or to the requirements of the
supervising or examining authority referred to above,
then, for the purposes of this Section 4.1 (a)(ii),
the combined capital and surplus of such corporation
shall be deemed to be its combined capital and
surplus as set forth in its most recent report of
condition as published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1 (a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
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<PAGE> 16
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(c), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor except during an
Event of Default.
(b) The Preferred Guarantee Trustee may be removed for cause at any
time by Act (within the meaning of Section 608 of the Trust Agreement) of the
Holders of at least a Majority in liquidation amount of the Preferred
Securities, delivered to the Preferred Guarantee Trustee.
(c) The Preferred Guarantee Trustee shall not be removed in accordance
with Sections 4.2(a) and 4.2(b) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(d) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(e) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of resignation, the resigning Preferred
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Preferred Guarantee Trustee.
(f) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(g) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.
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<PAGE> 17
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Trust), as and when due, regardless of any defense, right of set-off
or counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Junior Subordinated Debentures);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
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<PAGE> 18
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
regulatory approval required in connection with the redemption of the Preferred
Securities;
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Guarantor expressly acknowledges that: (i) this Guarantee will
be deposited with the Preferred Guarantee Trustee to be held for the benefit of
the Holder; (ii) the Preferred Guarantee Trustee has the right to enforce this
Preferred Securities Guarantee; and (iii) Holders of a Majority in liquidation
amount of the Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
SECTION 5.5 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and
not of collection. This Preferred Securities Guarantee will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).
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<PAGE> 19
SECTION 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default under this Preferred Securities Guarantee, an
Event of Default under the Trust Agreement or during an Extended Interest
Payment Period (as defined in the Indenture), then (a) the Guarantor shall not,
and shall not permit any Subsidiary to, declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
the reclassification of any class of the Company's capital stock into another
class of capital stock, (ii) dividends or distributions payable in any class of
the Company's common stock, (iii) any declaration of a dividend in connection
with the implementation of a shareholder 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 and (iv) purchases of the Company's common stock related
to the rights under any of the Company's benefit plans for its or its
subsidiaries' directors, officers or employees), and (b) the Guarantor shall
not, and shall not permit any Subsidiary to, make any payment of interest or
principal on or repay, repurchase or redeem any debt securities issued by the
Guarantor which rank pari passu with or junior to the Junior Subordinated
Debentures; and (c) the Guarantor shall not redeem, purchase or acquire less
than all of the outstanding Debentures or any of the Preferred Securities.
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<PAGE> 20
SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other Senior Indebtedness of the Guarantor, (ii) pari passu with
the most senior preferred securities or preference stock now or hereafter issued
by the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect to any preferred securities or preference stock of any
Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) upon full
payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Trust, or (iii) upon distribution of the Junior Subordinated
Debentures to the Holders of the Preferred Securities. Notwithstanding the
foregoing, this Preferred Securities Guarantee shall continue to be effective or
shall be reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, reasonable or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
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<PAGE> 21
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability or
expense, including taxes (other than taxes based on the income of the Guarantee
Trustee) incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee. The provisions
of this Section shall survive the termination of the Guarantee Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding, except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article XII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantees obligations hereunder, and any purported
assignment that is not in accordance with these provisions shall be void.
SECTION 9.2 AMENDMENTS.
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of at least a Majority in liquidation amount of
the Preferred Securities. The provisions of Article VI of the Trust Agreement
with respect to meetings of Holders of the Preferred Securities apply to the
giving of such approval.
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<PAGE> 22
SECTION 9.3 NOTICES.
All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first-class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile No. (212) 815-5915
Attention: Corporate Trust Trustee Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
Facsimile No. (412) 281-3750
Attention: President
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
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<PAGE> 23
SECTION 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This Preferred Securities Guarantee is executed as of the day and year
first above written.
PITTSBURGH HOME FINANCIAL CORP., AS
GUARANTOR
By: _______________________________
Name: J. Ardie Dillen
Title: President and Chief Executive Officer
THE BANK OF NEW YORK, AS
PREFERRED GUARANTEE TRUSTEE
By: _______________________________
Name: _______________________________
Title: _______________________________
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<PAGE> 1
EXHIBIT 5.1
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Telephone (202) 347-0300
December 22, 1997
Board of Directors
Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended (the "Act"), of up to $11,500,000 aggregate principal amount of
Junior Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") of Pittsburgh Home Financial Corp., a Pennsylvania corporation
(the "Corporation"), up to $11,500,000 aggregate liquidation amount of
Cumulative Trust Preferred Securities (the "Trust Preferred Securities") of
Pittsburgh Home Capital Trust I, a business trust created under the laws of the
State of Delaware (the "Issuer"), and the Guarantee with respect to the Trust
Preferred Securities (the "Guarantee") to be executed and delivered by the
Corporation for the benefit of the holders from time to time of the Trust
Preferred Securities, we, as your counsel, have examined such corporate
records, certificates and other documents, and such questions of law, as we
have considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, when:
(i) the Registration Statement relating to the Junior
Subordinated Debentures, the Trust Preferred Securities and the
Guarantee has become effective under the Act;
(ii) the Guarantee Agreement relating to the Guarantee with
respect to the Trust Preferred Securities of the Issuer has been duly
executed and delivered;
(iii) the Junior Subordinated Debentures have been duly executed
and authenticated in accordance with the Indenture and issued and
delivered as contemplated in the Registration Statement; and
<PAGE> 2
Board of Directors
December 22, 1997
Page 2
(iv) the Trust Preferred Securities have been duly executed in
accordance with the Amended and Restated Trust Agreement of the Issuer
and issued and delivered as contemplated in the Registration Statement,
the Junior Subordinated Debentures and the Guarantee relating to the Trust
Preferred Securities of the Issuer will constitute valid and legally binding
obligations of the Corporation, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
We understand that you have received an opinion regarding the Trust
Preferred Securities from Richards, Layton & Finger, P.A., special Delaware
counsel for the Corporation and the Issuer. We are expressing no opinion with
respect to the matters contained in such opinion.
Also, we have relied as to certain matters on information obtained from
public officials, officers of the Corporation and other sources believed by us
to be responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Validity
of Securities" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P
By: /s/ NORMAN B. ANTIN
---------------------------
Norman B. Antin, a Partner
<PAGE> 1
Exhibit 5.2
[Letterhead of Richards, Layton & Finger]
December 23, 1997
Pittsburgh Home Capital Trust I
c/o Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
Re: Pittsburgh Home Capital Trust I
-------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Pittsburgh Home
Financial Corp., a Pennsylvania corporation (the "Company"), and Pittsburgh
Home Capital Trust I, a Delaware business trust (the "Trust"), in connection
with the matters set forth herein. At your request, this opinion is being
furnished to you.
For purposes of giving the opinions hereinafter set forth,
our examination of documents has been limited to the examination of originals
or copies of the following:
(a) The Certificate of Trust of the Trust, dated as of
December 19, 1997 (the "Certificate"), as filed in the office of the Secretary
of State of the State of Delaware (the "Secretary of State") on December 19,
1997;
(b) The Trust Agreement of the Trust, dated as of December
19, 1997, among the Company and the trustees of the Trust named therein;
(c) The Co-Trustee Agreement, dated as of December 19, 1997,
between The Bank of New York and The Bank of New York (Delaware);
(d) The Registration Statement (the "Registration Statement")
on Form S-1, including a preliminary prospectus (the "Prospectus"), relating
to the __% Cumulative Trust Preferred Securities of the Trust representing
preferred undivided beneficial interests in the assets of the Trust (each,
a "Preferred Security" and collectively, the "Preferred Securities"), as
proposed to be filed by the Company and the Trust with the Securities and
Exchange Commission on or about December 23, 1997;
<PAGE> 2
Pittsburgh Home Capital Trust I
December 23, 1997
Page 2
(e) A form of Amended and Restated Trust Agreement of the
Trust, to be entered into among the Company, as Depositor, the trustees of the
Trust named therein, and the holders, from time to time, of undivided
beneficial interests in the assets of the Trust (including Exhibits A, C and E
thereto) (the "Trust Agreement"), attached as an exhibit to the Registration
Statement; and
(f) A Certificate of Good Standing for the Trust, dated
December 23, 1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (f) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (f) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that
is inconsistent with the opinions stated herein. We have conducted no
independent factual investigation of our own but rather have relied solely upon
the foregoing documents, the statements and information set forth therein and
the additional matters recited or assumed herein, all of which we have assumed
to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Trust Agreement and the Certificate are in full force and effect and have not
been amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) the due authorization, execution and
delivery by all parties thereto of all documents examined by us, (vi) the
receipt by each Person to whom a Preferred Security is to be issued by the
Trust (collectively, the "Preferred Security Holders") of a Preferred
Securities Certificate for such Preferred Security and the payment for the
Preferred Security acquired by it, in accordance with the Trust Agreement and
the Registration Statement, and (vii) that the Preferred Securities are issued
and sold to the Preferred Security Holders in accordance with the Trust
Agreement and the Registration Statement. We
<PAGE> 3
Pittsburgh Home Capital Trust I
December 23, 1997
Page 3
have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act.
2. The Preferred Securities will represent valid and, subject
to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of
the Trust, will be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. We note that the Preferred
Security Holders may be obligated to make payments as set forth in the Trust
Agreement.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. In
addition, we hereby consent to the use of our name under the heading "Validity
of Securities" in the Prospectus. In giving the foregoing consents, we do not
thereby admit that we come within the category of Persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Except as stated above, without our prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
BJK/BJ
<PAGE> 1
EXHIBIT 8
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Telephone (202) 347-0300
December 22, 1997
Board of Directors
Pittsburgh Home Financial Corp.
438 Wood Street
Pittsburgh, Pennsylvania 15222
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
As special federal tax counsel to Pittsburgh Home Capital Trust I (the
"Issuer") and Pittsburgh Home Financial Corp. in connection with the issuance
by the Issuer of up to $11,500,000 of its Cumulative Trust Preferred Securities
pursuant to the prospectus (the "Prospectus") contained in the Registration
Statement, and assuming the operative documents described in the Prospectus
will be performed in accordance with the terms described therein, we hereby
confirm to you our opinion as set forth under the heading "Certain Federal
Income Tax Consequences" in the Prospectus, subject to the limitations set
forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Certain
Federal Income Tax Consequences" in the Prospectus. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P
By: /s/ NORMAN B. ANTIN
-----------------------------------
Norman B. Antin, a Partner
<PAGE> 1
Exhibit 12
Computation of Consolidated Ratio of Earnings to Fixed Charges Excluding
Deposits Pittsburgh Home Financial Corp.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net income.................................. $1,983 $ 772 $ 705 $ 351 $ 925
Income tax expense.......................... 1,078 442 554 230 673
------ ------ ------ ------ ------
Pre-tax earnings............................ $3,061 $1,214 $1,259 $ 581 $1,598
===== ===== ===== ===== =====
Fixed charges:
Portion of rental expense which
approximates the interest factor............
Interest on borrowed funds.................. $4,313 $2,012 $ 981 $ 776 $ 546
----- ----- ----- ----- -----
Total fixed charges......................... $4,313 $2,012 $ 981 $ 776 $ 546
===== ===== ===== ===== =====
Earnings (for ratio calculation
excluding deposits)....................... $7,374 $3,226 $2,240 $1,357 $2,144
===== ===== ===== ===== =====
Ratio of earnings to fixed charges
(excludes deposits)....................... 1.71% 1.60% 2.28% 1.75% 3.93%
==== ==== ==== ==== ====
</TABLE>
Computation of Consolidated Ratio of Earnings to Fixed Charges Including
Deposits Pittsburgh Home Financial Corp.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net income.................................. $ 1,983 $ 772 $ 705 $ 351 $ 925
Income tax expense.......................... 1,078 442 554 230 673
------ ----- ----- ----- -----
Pre-tax earnings............................ $ 3,061 $1,214 $1,259 $ 581 $1,598
===== ===== ===== ===== =====
Fixed charges:
Portion of rental expense which
approximates the interest factor...........
Interest on deposits........................ $ 6,437 $5,373 $4,806 $4,093 $4,581
Interest on borrowed funds.................. 4,313 2,012 981 776 546
------ ----- ----- ----- -----
Total fixed charges......................... $10,750 $7,385 $5,787 $4,869 $5,127
====== ===== ===== ===== =====
Earnings (for ratio calculation
excluding deposits)....................... $13,811 $8,599 $7,046 $5,450 $6,725
====== ===== ===== ===== =====
Ratio of earnings to fixed charges
(excludes deposits)....................... 1.28% 1.16% 1.22% 1.12% 1.31%
==== ==== ==== ==== ====
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-1), and related Prospectus of Pittsburgh Home
Capital Trust I for the registration of up to 1,150,000 shares of its ____%
Cumulative Trust Preferred Securities and to the use of our report dated
October 29, 1997, with respect to the financial statements of Pittsburgh Home
Financial Corp. included in the Registration Statement on Form S-1 to be filed
with the Securities and Exchange Commission.
Ernst & Young LLP
Pittsburgh, Pennsylvania
December 22, 1997
<PAGE> 1
Exhibit 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
==============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
PITTSBURGH HOME FINANCIAL CORP.
(Exact name of obligor as specified in its charter)
Pennsylvania 25-1772349
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
438 Wood Street
Pittsburgh, Pennsylvania 15223
(Address of principal
executive offices) (Zip code)
----------------------
Junior Subordinated Deferrable Interest Debentures
(Title of the indenture securities)
===============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 19th day of December, 1997.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
-------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,352,045
LESS: Allowance for loan and
lease losses ..............625,042
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
-----------
Total assets ......................... $57,514,958
===========
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ......11,213,657
Interest-bearing .........15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing .........596,369
Interest-bearing .........15,737,901
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
-----------
Total liabilities .................... 52,937,421
-----------
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion adjustments .................. ( 12,272)
------------
Total equity capital ................ 4,577,537
-----------
Total liabilities and equity
capital ........................... $57,514,958
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi _ | Directors
<PAGE> 1
Exhibit 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
==============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
PITTSBURGH HOME FINANCIAL CORP.
(Exact name of obligor as specified in its charter)
Pennsylvania 25-1772349
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
438 Wood Street
Pittsburgh, Pennsylvania 15223
(Address of principal
executive offices) (Zip code)
----------------------
Guarantee of Trust Preferred Securities of
Pittsburgh Home Capital Trust I
(Title of the indenture securities)
===============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 19th day of December, 1997.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
-------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,352,045
LESS: Allowance for loan and
lease losses ..............625,042
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
-----------
Total assets ......................... $57,514,958
===========
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ......11,213,657
Interest-bearing .........15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing .........596,369
Interest-bearing .........15,737,901
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
-----------
Total liabilities .................... 52,937,421
-----------
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion adjustments .................. ( 12,272)
------------
Total equity capital ................ 4,577,537
-----------
Total liabilities and equity
capital ........................... $57,514,958
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi _ | Directors
<PAGE> 1
Exhibit 25.3
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
==============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
PITTSBURGH HOME CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Delaware Applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
438 Wood Street
Pittsburgh, Pennsylvania 15223
(Address of principal executive offices) (Zip code)
----------------------
Trust Preferred Securities
(Title of the indenture securities)
===============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 19th day of December, 1997.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
-------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,352,045
LESS: Allowance for loan and
lease losses ..............625,042
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
-----------
Total assets ......................... $57,514,958
===========
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ......11,213,657
Interest-bearing .........15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing .........596,369
Interest-bearing .........15,737,901
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
-----------
Total liabilities .................... 52,937,421
-----------
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion adjustments .................. ( 12,272)
------------
Total equity capital ................ 4,577,537
-----------
Total liabilities and equity
capital ........................... $57,514,958
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
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Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi _ | Directors
