FILED PURSUANT TO RULE 424(B)(3)
FILE NO. 333-27333
FILE NO. 333-27333-01
PROSPECTUS
DATED MAY 29, 1997
CRESTAR CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.16% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.16% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
CRESTAR FINANCIAL CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JULY 7, 1997, UNLESS EXTENDED.
Crestar Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus (as the same may be
amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $200,000,000 aggregate Liquidation Amount of its
8.16% Capital Securities (the "Exchange Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
8.16% Capital Securities (the "Old Capital Securities"), of which $200,000,000
aggregate Liquidation Amount is outstanding. Pursuant to the Exchange Offer,
Crestar Financial Corporation, a Virginia corporation (the "Company"), is also
offering to exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Old Capital Securities
(the "Old Guarantee") for a like guarantee in respect of the Exchange Capital
Securities (the "Guarantee") and (ii) all of its 8.16% Junior Subordinated
Deferrable Interest Debentures due December 15, 2026 (the "Old Junior
Subordinated Debentures") for a like aggregate principal amount of its 8.16%
Junior Subordinated Deferrable Interest Debentures due December 15, 2026 (the
"Exchange Debentures"), which Guarantee and Exchange Debentures also have been
registered under the Securities Act. The Old Capital Securities, the Old
Guarantee and the Old Junior Subordinated Debentures are collectively referred
to herein as the "Old Securities" and the Exchange Capital Securities, the
Guarantee and the Exchange Debentures are collectively referred to herein as the
"Exchange Securities."
The terms of the Exchange Securities are identical in all
material respects to the respective terms of the Old Securities, except that (i)
the Exchange Securities have been registered under the Securities Act and
therefore generally will not be subject to certain restrictions on transfer
applicable to the Old Securities, (ii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon, and (iii) the
Exchange Debentures will not provide for any increase in the interest rate
thereon. See "Description of Exchange Capital Securities" and "Description of
Old Securities." The Exchange Capital Securities are being offered for exchange
in order to satisfy certain obligations of the Company and the Trust under three
Registration Rights Agreements dated as of December 31, 1996 (the "Registration
Rights Agreement") among the Company, the Trust and the Initial Purchasers (as
defined herein). In the event that the Exchange Offer is consummated, any Old
Capital Securities which remain outstanding after consummation of the Exchange
Offer and the Exchange Capital Securities issued in the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Declaration.
This Prospectus and the Letter of Transmittal are first being
mailed to all holders of Capital Securities on June 5, 1997.
SEE "RISK FACTORS" FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL SECURITIES IN
THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 29, 1997.
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The Old Capital Securities and the Exchange Capital Securities
(together, the "Capital Securities") represent beneficial interests in Crestar
Capital Trust I, a trust created under the laws of the State of Delaware (the
"Trust"). Crestar Financial Corporation, a Virginia corporation (the "Company"),
is the owner of all of the beneficial interests represented by common securities
of the Trust (the "Common Securities" and, collectively with the Capital
Securities, the "Trust Securities"). The Chase Manhattan Bank is the Property
Trustee of the Trust. The Trust exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated Debentures,
and engaging in only those activities necessary, advisable or incidental
thereto. The Junior Subordinated Debentures will mature on December 15, 2026
(the "Stated Maturity"). The Capital Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of Exchange Securities -- Description of Exchange Capital
Securities -- Subordination of Common Securities."
Holders of Exchange Capital Securities will be entitled to
receive preferential cumulative cash distributions, and the holder of the Common
Securities will be entitled to receive cumulative cash distributions, arising
from the payment of interest on the Junior Subordinated Debentures accumulating
from December 15, 1996 and payable semi-annually in arrears on the fifteenth day
of June and December of each year, commencing June 15, 1997, at the annual rate
of 8.16% of the Liquidation Amount of $1,000 per Capital Security and at the
annual rate of 8.16% of the Liquidation Amount of $1,000 per Common Security
("Distributions"). The Company has the right to defer payments of interest on
the Junior Subordinated Debentures at any time or from time to time for a period
not exceeding 10 consecutive semi-annual periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may end
on a date other than an interest payment date or extend beyond the Stated
Maturity. Upon the termination of any such Extension Period and the payment of
all amounts then due, the Company 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 Trust Securities will
also be deferred and the Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to the Company's capital stock or to make any payment with respect to
debt securities of the Company that rank pari passu with or junior to the Junior
Subordinated Debentures. During an Extension Period, interest on the Junior
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Capital Securities are entitled will accumulate) at the
rate of 8.16% per annum, compounded semi-annually, and holders of Capital
Securities will be required to accrue interest income for United States federal
income tax purposes. See "Description of Junior Subordinated Debentures --
Option to Defer Interest Payments" and "Certain Federal Income Tax Consequences
- -- Interest Income and Original Issue Discount."
The Company has, through the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed on a subordinated basis all of the Trust's
obligations under the Capital Securities. See "Relationship Among the Exchange
Capital Securities, the Exchange Debentures and the Guarantee -- Full and
Unconditional Guarantee." The Old Guarantee of the Company guarantees, and the
Guarantee will guarantee, the payment of Distributions and payments on
liquidation or redemption of the Capital Securities, but only in each case to
the extent of funds available therefor held by the Trust, as described herein
(the "Guarantee"). See "Description of Guarantee." If the Company does not make
interest payments on the Junior Subordinated Debentures held by the Trust, the
Trust will have insufficient funds to pay Distributions on the Capital
Securities. The Old Guarantee and the Guarantee do not cover payment of
Distributions when the Trust does not have sufficient funds to pay such
Distributions. In the event of an Event of Default (as defined herein) under the
Indenture, a holder of Capital Securities may institute a legal proceeding
directly against the Company to enforce payment of such Distributions to such
holder. See "Description of Junior Subordinated Debentures -- Enforcement of
Certain Rights By Holders of Capital Securities." The obligations of the Company
under the Old Guarantee and the Guarantee and the Junior Subordinated Debentures
are unsecured and are subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of Junior Subordinated Debentures -
Subordination") of the Company. Senior Indebtedness of the Company includes
existing and future senior debt, senior subordinated debt and subordinated debt
of the Company. As of December 31, 1996, there was $6.9 billion of Senior
Indebtedness of the Company outstanding.
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The Capital Securities are subject to mandatory redemption (i) at
the Stated Maturity upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued interest on, the
Junior Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole
but not in part, contemporaneously with the prepayment of the Junior
Subordinated Debentures upon the occurrence and continuation of a Tax Event,
Investment Company Event or Capital Treatment Event (each as defined herein) at
a redemption price equal to the Event Prepayment Price (as defined below) (the
"Event Redemption Price") and (iii) in whole or in part on or after December 15,
2006 contemporaneously with the optional prepayment by the Company of the Junior
Subordinated Debentures at a redemption price equal to the Optional Prepayment
Price (as defined below) (the "Optional Redemption Price"). Any of the Maturity
Redemption Price, the Event Redemption Price and the Optional Redemption Price
may be referred to herein as the "Redemption Price." See "Capital Securities --
Redemption." Subject to the Company having received prior approval of the Board
of Governors of the Federal Reserve System (the "Federal Reserve") to do so if
then required under applicable capital guidelines or policies of the Federal
Reserve, the Junior Subordinated Debentures are prepayable prior to the Stated
Maturity at the option of the Company (i) on or after December 15, 2006, in
whole or in part at any time at a prepayment price (the "Optional Prepayment
Price") equal to 104.08% of the principal amount thereof on December 15, 2006,
declining ratably on each December 15 thereafter to 100% on or after December
15, 2016, plus accrued interest thereon to the date of prepayment, or (ii) at
any time, in whole but not in part, upon the occurrence and continuation of a
Tax Event, Investment Company Event or Capital Treatment Event (each as defined
herein), at a prepayment price (the "Event Prepayment Price") equal to the
greater of (a) 100% of the principal amount thereof or (b) as determined by a
Quotation Agent (as hereinafter defined), the sum of the present values of the
principal amount and premium that would be payable as part of the Redemption
Price with respect to an optional redemption of such Junior Subordinated
Debentures on December 15, 2006, together with the present values of scheduled
payments of interest from the prepayment date to December 15, 2006, in each case
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein), plus, in each case, accrued interest thereon to but excluding
the date of prepayment. However, if the Company prepays Junior Subordinated
Debentures as a result of a Tax Event, Investment Company Event or Capital
Treatment Event which occurs on or after December 15, 2006, then the Event
Prepayment Price shall be the Optional Prepayment Price that would be payable on
optional redemption of the Junior Subordinated Debentures on the date of
prepayment, which includes interest to the date of prepayment. Either of the
Optional Prepayment Price or the Event Prepayment Price may be referred to
herein as the "Prepayment Price." See "Description of Junior Subordinated
Debentures -- Optional Prepayment" and "-- Tax Event, Investment Company Event
and Capital Treatment Event Prepayment."
The Company will have the right upon the occurrence of a Tax
Event, Investment Company Event or Capital Treatment Event to terminate the
Trust and, after satisfaction of liabilities to creditors of the Trust as
required by applicable laws, cause the Junior Subordinated Debentures to be
distributed to the holders of the Capital Securities in liquidation of the
Trust, subject to the Company having received prior approval of the Federal
Reserve to do so, if then required under applicable capital guidelines or
policies of the Federal Reserve and subject to the Company having received an
opinion of counsel to the effect that such distribution will not be a taxable
event to holders of Capital Securities. See "Capital Securities -- Liquidation
of the Trust and Distribution of Junior Subordinated Debentures."
The Old Capital Securities were issued,and the Exchange Capital
Securities will be issued, and may be transferred, only in a block having a
Liquidation Amount of not less than $100,000 (100 Capital Securities). The
Distribution rate on the Trust Securities and the interest rate on the Junior
Subordinated Debentures are each subject to increase and such additional
Distributions and interest will be payable on the Distribution dates and
interest payment dates in certain circumstances.
The Exchange Capital Securities are eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkage ("PORTAL")
Market of the National Association of Securities Dealers, Inc. (the "NASD"). The
Company does not intend to apply for listing of the Exchange Capital Securities
on any securities exchange or for inclusion of the Exchange Capital Securities
on any automated quotation system.
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As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, as amended and supplemented from time to time, between the Company
and The Chase Manhattan Bank as trustee (the "Debenture Trustee"), (ii) the
"Trust Agreement" means the Amended and Restated Trust Agreement relating to the
Trust among the Company, as Depositor, The Chase Manhattan Bank as Property
Trustee (the "Property Trustee"), Chase Manhattan Bank Delaware as Delaware
Trustee (the "Delaware Trustee"), and the Administrators named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Guarantee Agreement" means the Guarantee Agreement
relating to the Guarantee between the Company and The Chase Manhattan Bank as
Trustee (the "Guarantee Trustee") and (iv) the "Expense Agreement" means the
Expense Agreement between the Company and the Trust. In addition, as the context
may require, unless expressly stated otherwise, (i) "Capital Securities"
includes the Exchange Capital Securities (as defined herein), (ii) "Junior
Subordinated Debentures" includes the Exchange Debentures (as defined herein)
and (iii) "Guarantee" includes the Guarantee (as defined herein).
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE,
COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY
UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
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No dealer, salesperson or other individual has been authorized to
give any information or to make any representations other than those contained
or incorporated by reference in this Prospectus in connection with the offer
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, the Trust or by the Initial Purchasers. Neither the delivery of this
Prospectus nor any sale made hereunder and thereunder shall under any
circumstance create an implication that there has been no change in the affairs
of the Company or the Trust since the date hereof. This Prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
The Trust is making the Exchange Offer of the Exchange Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission (the "Commission")
as set forth in certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Trust has sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Company and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred in
$100,000
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minimum principal amount by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Company or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Old Capital
Securities from the Trust for resale pursuant to Rule 144A under the Securities
Act ("Rule 144A") or any other available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of interpretive letters, (b)
will not be permitted or entitled to tender such Old Capital Securities in the
Exchange Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities (other than pursuant to the Exchange Offer)
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Capital Securities
acquires for its own account as a result of market-making or other trading
activities and exchanges such Old Capital Securities for Exchange Capital
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company or the
Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. In addition, the Company and the Trust may
require such holder, as a condition to such holder's eligibility to participate
in the Exchange Offer, to furnish to the Company and the Trust (or an agent
thereof) in writing information as to the number of "beneficial owners" (within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) on behalf of whom such holder holds the Old Capital
Securities to be exchanged in the Exchange Offer. Each broker-dealer that
receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Capital Securities for
its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the corporation
and the Trust believe that broker-dealers who acquired Old Capital Securities
for their own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the Exchange Capital Securities received
upon exchange of such Old Capital Securities (other than Old Capital Securities
which represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such Exchange Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
Exchange Capital Securities received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement, the Company and the Trust have agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker- Dealer in connection with resales of such Exchange Capital Securities
for a period ending 90-days after the Expiration Date (as defined herein)
(subject to extension under certain limited circumstances described below) or,
if earlier, when all such Exchange Capital Securities have been disposed of by
such Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of the Exchange Capital Securities received in exchange for Old
Capital Securities
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pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." Any Participating Broker-Dealer who is an "affiliate"
of the Company or the Trust may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities act in connection with any resale transaction. See "The Exchange
Offer -- Resales of Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders
Old Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal or by transmission of an
Agent's Message (as defined below) in lieu thereof, that, upon receipt of notice
from the Company or the Trust of the occurrence of any event or the discovery of
any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of the Exchange Capital Securities (or the
Exchange Debentures, as applicable) pursuant to this Prospectus until the
Company or the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
Prospectus to such Participating Broker-Dealer or the Company or the Trust has
given notice that the sale of the Exchange Capital Securities (or the Guarantee
or the Exchange Debentures, as applicable) may be resumed, as the case may be.
If the Company or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Guarantee or the Exchange Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice and including
the date when Participating Broker-Dealers shall have received copies of the
amended or supplemental Prospectus necessary to permit resales of the Exchange
Capital Securities or to and including the date on which the Company or the
Trust has given notice that the sale of Exchange Capital Securities (or the
Guarantee or the Exchange Debentures, as applicable) may be resumed, as the case
may be.
Prior to the Exchange Offer, there has been only a limited
secondary market and no public market for the Old Capital Securities. The
Exchange Capital Securities will be a new issue of securities for which there
currently is no market. Although the Initial Purchasers have informed the
Company and the Trust that they each currently intend to make a market in the
Exchange Capital Securities, they are not obligated to do so, and any such
market making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Exchange Capital Securities. The Company and the Trust currently do not intend
to apply for listing of the Exchange Capital Securities on any securities
exchange or for inclusion in the Nasdaq Stock Market, the electronic securities
market operated by the National Association of Securities Dealers, Inc.
("Nasdaq").
Any Old Capital Securities not tendered and accepted in the
Exchange Offer will remain outstanding and will be entitled to all the same
rights and will be subject to the same limitations applicable thereto under the
Trust Agreement (except for those rights which terminated upon consummation of
the Exchange Offer). Following consummation of the Exchange Offer, the holders
of Old Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk Factors
- -- Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
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PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior
to 5:00 p.m., New York City time, on July 7, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Company or the Trust (in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended). Tenders of
Old Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Company or the Trust and to the terms and provisions of the
Registration Rights Agreement. Old Capital Securities may be tendered in whole
or in part having an aggregate Liquidation Amount of not less than $100,000 (100
Capital Securities) or any integral multiple of $1,000 Liquidation Amount (one
Capital Security) in excess thereof. The Company has agreed to pay all expenses
of the Exchange Offer. See "The Exchange Offer -- Fees and Expenses." Holders of
the Old Capital Securities whose Old Capital Securities are accepted for
exchange will not receive Distributions on such Old Capital Securities and will
be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and after December 15, 1996. Accordingly,
holders of Exchange Capital Securities as of the record date for the payment of
Distributions on June 15, 1997 will be entitled to receive Distributions
accumulated from and including December 15, 1996.
Neither the Company nor the Trust will receive any cash proceeds
from the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
AVAILABLE INFORMATION................................................. 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 9
SUMMARY............................................................... 10
RISK FACTORS.......................................................... 17
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES...................... 23
USE OF PROCEEDS....................................................... 23
CRESTAR FINANCIAL CORPORATION......................................... 23
REGULATORY CAPITAL BENEFITS TO CRESTAR FINANCIAL CORPORATION.......... 25
CRESTAR CAPITAL TRUST I............................................... 25
OTHER COMPANY SECURITIES OFFERINGS.................................... 26
ACCOUNTING TREATMENT.................................................. 26
THE EXCHANGE OFFER.................................................... 26
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES............................ 36
DESCRIPTION OF EXCHANGE DEBENTURES.................................... 48
DESCRIPTION OF GUARANTEE.............................................. 58
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES,
THE EXCHANGE DEBENTURES AND THE GUARANTEE............................ 62
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................... 63
ERISA CONSIDERATIONS.................................................. 67
PLAN OF DISTRIBUTION.................................................. 69
VALIDITY OF NEW SECURITIES............................................ 69
EXPERTS............................................................... 70
8
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov.). In addition, such
reports, proxy statements and other information concerning the Company can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
No separate financial statements of the Trust have been included
herein. The Company and the Trust do not consider that such financial statements
would be material to holders of the Exchange Capital Securities because the
Trust is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated
Debentures and issuing the Trust Securities. See "Crestar Capital Trust I" and
"Description of Exchange Securities." In addition, the Company does not expect
that the Trust will file reports under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on
Form S-4 (the "Registration Statement") filed by the Company and the Trust with
the Commission under the Securities Act. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the Trust
and the Exchange Securities. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
are incorporated into this Prospectus by reference:
1. Annual Report on Form 10-K for the year ended December
31, 1996; and
2. Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the termination of the offering of the New Securities offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part of this Prospectus from the date of filing of such document. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
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<PAGE>
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Company will provide without charge to any person to whom this Prospectus is
delivered, on the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference herein (other than exhibits
not specifically incorporated by reference into the texts of such documents).
Requests for such documents should be directed to: Crestar Financial
Corporation, 919 Main Street, Richmond, Virginia 23219, Attention: Investor
Relations Department, Telephone 804/782-7152.
SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Offering Memorandum or
incorporated by reference herein.
CRESTAR FINANCIAL CORPORATION
Crestar Financial Corporation is the holding company for Crestar
Bank, a Virginia banking corporation (the "Bank"). At December 31, 1996, Crestar
Financial Corporation had approximately $22.9 billion in total assets, $15.7
billion in total deposits and $1.8 billion in total stockholders' equity.
In 1963, six Virginia banks combined to form United Virginia
Bankshares Incorporated ("UVB"), a bank holding company formed under the Bank
Holding Company Act of 1956 (the "BHCA"). UVB (parent company of United Virginia
Bank) extended its operations into the District of Columbia by acquiring NS&T
Bank, N.A. on December 27, 1985 and into Maryland by acquiring Bank of Bethesda
on April 1, 1986, and Loyola Federal Savings Bank, Baltimore, on December 31,
1995. On September 1, 1987, UVB was renamed Crestar Financial Corporation and
its bank subsidiaries adopted their present names. The Company's bank
subsidiaries were combined into a Virginia bank named Crestar Bank on November
14, 1996.
The Company serves customers through a network of 508 banking
offices and 496 automated teller machines (as of December 31, 1996). The Company
offers a broad range of banking services, including various types of deposit
accounts and instruments, commercial and consumer loans, trust and investment
management services, bank credit cards and international banking services. The
Company's subsidiary, Crestar Insurance Agency, Inc., offers a variety of
personal and business insurance products. Securities brokerage and investment
banking services are offered by Crestar Securities Corporation. Mortgage loan
origination, servicing and wholesale lending are offered by Crestar Mortgage
Corporation, and investment advisory services are offered by Capitoline
Investment Services Incorporated, both subsidiaries of Crestar Bank. These
various Company subsidiaries provide banking and non-banking services throughout
Virginia, Maryland and Washington, D.C. and as certain non-banking services to
customers in other states.
CRESTAR CAPITAL TRUST I
Crestar Capital Trust I is a statutory business trust, created
under Delaware law pursuant to the filing of a certificate of trust with the
Delaware Secretary of State on December 20, 1996, which will be governed by the
Trust Agreement executed by the Company, as Depositor, The Chase Manhattan Bank,
as Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee, and the
Administrators named therein. The Trust's business and affairs are conducted by
the Issuer Trustees: The Chase Manhattan Bank, as Property Trustee, Chase
Manhattan Bank Delaware, as Delaware Trustee, and three individual
Administrators who are employees or officers of or affiliated with the Company.
The Trust exists for the exclusive purposes of (i) issuing and selling the Trust
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<PAGE>
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by the Company, (iii)
exchanging the Junior Subordinated Debentures for Exchange Debentures in the
Exchange Offer pursuant to the Indenture, and (iv) engaging in only those other
activities necessary, advisable or incidental thereto (such as registering the
transfer of the Capital Securities). Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust, and payments by the Company
under the Junior Subordinated Debentures and the Expense Agreement will be the
sole revenues of the Trust. All of the Common Securities will be owned by the
Company.
THE EXCHANGE OFFER
THE EXCHANGE OFFER.......................... Up to $200,000,000 aggregate
Liquidation Amount of Exchange
Capital Securities are being
offered in exchange for a like
aggregate Liquidation Amount of
Old Capital Securities. Old
Capital Securities may be
tendered for exchange in whole or
in part in a Liquidation Amount
of $100,000 (100 Capital
Securities) or any
integralmultiple of $1,000 (1
Capital Security) in excess
thereof. The Company and the
Trust are making the Exchange
Offer in order to satisfy their
obligations under three
Registration Rights Agreements
relating to the Old Capital
Securities. For a description of
the procedures for tendering Old
Capital Securities, see "The
Exchange Offer-- Procedures for
Tendering Old Capital
Securities."
EXPIRATION DATE............................. 5:00 p.m., New York City time, on
July 7, 1997, unless the Exchange
Offer is extended by the Company
or the Trust (in which case the
Expiration Date will be the
latest date and time to which the
Exchange Offer is extended). See
"The Exchange Offer-- Terms of
the Exchange Offer."
CONDITIONS TO THE
EXCHANGE OFFER............................ The Exchange Offer is subject to
certain conditions, which may be
waived by the Company and the
Trust in their sole discretion.
The Exchange Offer is not
conditioned upon any minimum
Liquidation Amount of Old Capital
Securities being tendered. See
"The Exchange Offer-- Conditions
to the Exchange Offer."
OFFER....................................... The Company and the Trust reserve
the right in their sole and
absolute discretion, subject to
applicable law, at any time and
from time to time, to (i) delay
the acceptance of the Old Capital
Securities for exchange, (ii)
terminate the Exchange Offer if
certain specified conditions have
not been satisfied, (iii) extend
the Expiration Date of the
Exchange Offer and retain all Old
Capital Securities tendered
pursuant to the Exchange Offer,
subject, however, to the right of
holders of Old Capital Securities
to withdraw their tendered Old
Capital Securities, or (iv) to
waive any condition or otherwise
amend the terms of the Exchange
Offer in any respect. See "The
Exchange Offer-- Terms of the
Exchange Offer."
WITHDRAWAL RIGHTS........................... Tenders of Old Capital Securities
may be withdrawn at any time on
or prior to the Expiration Date
by delivering a written notice of
such
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<PAGE>
withdrawal to the Exchange Agent
in conformity with certain
procedures set forth below under
"The Exchange Offer -- Withdrawal
Rights."
PROCEDURES FOR TENDERING
OLD CAPITAL SECURITIES.................... Tendering holders of Old Capital
Securities must complete and sign
a Letter of Transmittal in
accordance with the instructions
contained therein and forward the
same by mail, facsimile or hand
delivery, together with any other
required documents and the Old
Capital Securities to be
tendered, to the Exchange Agent,
or must comply with the specified
procedures for guaranteed
delivery of Letters of
Transmittal and Old Capital
Securities. Certain brokers,
dealers, commercial banks, trust
companies and other nominees may
also effect tenders by book-entry
transfer, including an Agent's
Message in lieu of a Letter of
Transmittal. Holders of Old
Capital Securities registered in
the name of a broker, dealer,
commercial bank, trust company or
other nominee are urged to
contact such person promptly if
they wish to tender Old Capital
Securities pursuant to the
Exchange Offer. See "The
Exchange Offer-- Procedures for
Tendering Old Capital
Securities."
Letters of Transmittal and
certificates representing Old
Capital Securities should not be
sent to the Company or the Trust.
Such documents should only be
sent to the Exchange Agent.
RESALES OF NEW CAPITAL
SECURITIES................................ The Company and the Trust are
making the Exchange Offer in
reliance on the position of the
staff of the Division of
Corporation Finance of the
Commission as set forth in
certain interpretive letters
addressed to third parties in
other transactions. However,
neither the Company nor the Trust
has sought its own interpretive
letter and there can be no
assurance that the staff of the
Division of Corporation Finance
of the Commission would make a
similar determination with
respect to the Exchange Offer as
it has in such interpretive
letters to third parties. Based
on these interpretations by the
staff of the Division of
Corporation Finance of the
Commission, and subject to the
two immediately following
sentences, the Company and the
Trust believe that Exchange
Capital Securities issued
pursuant to this Exchange Offer
in exchange for Old Capital
Securities may be offered for
resale, resold and otherwise
transferred by a holder thereof
(other than a holder who is a
broker- dealer) without further
compliance with the registration
and prospectus delivery
requirements of the Securities
Act, provided that such Exchange
Capital Securities are acquired
in the ordinary course of such
holder's business and that such
holder is not participating, and
has no arrangement or
understanding with any person to
participate, in a distribution
(within the meaning of the
Securities Act) of such Exchange
Capital Securities. However, any
holder of Old Capital Securities
who is an "affiliate" of the
Company or the Trust or who
intends to participate in the
Exchange Offer for the purpose of
distributing the Exchange Capital
Securities, or any
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<PAGE>
broker-dealer who purchased the
Old Capital Securities from the
Trust for resale pursuant to Rule
144A or any other available
exemption under the Securities
Act, (a) will not be able to rely
on the interpretations of the
staff of the Division of
Corporation Finance of the
Commission set forth in the
above-mentioned interpretive
letters, (b) will not be
permitted or entitled to tender
such Old Capital Securities in
the Exchange Offer and (c) must
comply with the registration and
prospectus delivery requirements
of the Securities Act in
connection with any sale or other
transfer of such Old Capital
Securities unless such sale is
made pursuant to an exemption
from such requirements. In
addition, as described below, if
any broker-dealer holds Old
Capital Securities acquired for
its own account as a result of
market-making or other trading
activities and exchanges such Old
Capital Securities for Exchange
Capital Securities, then such
broker-dealer must deliver a
prospectus meeting the
requirements of the Securities
Act in connection with any
resales of such Exchange Capital
Securities.
Each holder of Old Capital
Securities who wishes to exchange
Old Capital Securities for
Exchange Capital Securities in
the Exchange Offer will be
required to represent in the
Letter of Transmittal or by
transmission of an Agent's
Message in lieu thereof that (i)
it is not an "affiliate" of the
Company or the Trust, (ii) any
Exchange Capital Securities to be
received by it are being acquired
in the ordinary course of its
business, (iii) it has no
arrangement or understanding with
any person to participate in a
distribution (within the meaning
of the Securities Act) of such
Exchange Capital Securities, and
(iv) if such holder is not a
broker-dealer, such holder is not
engaged in, and does not intend
to engage in, a distribution
(within the meaning of the
Securities Act) of such Exchange
Capital Securities. Each
broker-dealer that receives
Exchange Capital Securities for
its own account pursuant to the
Exchange Offer must acknowledge
that it acquired the Old Capital
Securities for its own account as
the result of market-making
activities or other trading
activities and must agree that it
will deliver a prospectus meeting
the requirements of the
Securities Act in connection with
any resale of such Exchange
Capital Securities. The Letter of
Transmittal states that, by so
acknowledging and by delivering a
prospectus, a broker-dealer will
not be deemed to admit that it is
an "underwriter" within the
meaning of the Securities Act.
Based on the position taken by
the staff of the Division of
Corporation Finance of the
Commission in the interpretive
letters referred to above, the
Company and the Trust believe
that Participating Broker-Dealers
who acquired Old Capital
Securities for their own accounts
as a result of market-making
activities or other trading
activities may fulfill their
prospectus delivery requirements
with respect to the Exchange
Capital Securities received upon
exchange of such Old Capital
Securities (other than Old
Capital Securities which
represent an unsold allotment
from the original sale of the Old
Capital Securities) with a
prospectus meeting the
requirements of the Securities
Act, which may be the prospectus
prepared for an exchange offer so
long as it contains a description
of the plan of distribution with
respect to
13
<PAGE>
the resale of such Exchange
Capital Securities. Accordingly,
this Prospectus, as it may be
amended or supplemented from time
to time, may be used by a
Participating Broker-Dealer in
connection with resales of
Exchange Capital Securities
received in exchange for Old
Capital Securities where such Old
Capital Securities were acquired
by such Participating
Broker-Dealer for its own account
as a result of market-making or
other trading activities. Subject
to certain provisions set forth
in the Registration Rights
Agreements and to the limitations
described below under "The
Exchange Offer -- Resales of
Exchange Capital Securities," the
Company and the Trust have agreed
that this Prospectus, as it may
be amended or supplemented from
time to time, may be used by a
Participating Broker-Dealer in
connection with resales of such
Exchange Capital Securities for a
period ending 90-days after the
Expiration Date (subject to
extension under certain limited
circumstances) or, if earlier,
when all such Exchange Capital
Securities have been disposed of
by such Participating
Broker-Dealer. See "Plan of
Distribution." Any Participating
Broker-Dealer who is an
"affiliate" of the Company or the
Trust may not rely on such
interpretive letters and must
comply with the registration and
prospectus delivery requirements
of the Securities Act in
connection with any resale
transaction. See "The Exchange
Offer -- Resales of New Capital
Securities."
EXCHANGE AGENT.............................. The exchange agent with respect
to the Exchange Offer is The
Chase Manhattan Bank (the
"Exchange Agent"). The
applicable addresses, and
telephone and facsimile numbers,
of the Exchange Agent are set
forth in "The Exchange Offer--
Exchange Agent" and in the Letter
of Transmittal.
USE OF PROCEEDS............................. Neither the Company nor the Trust
will receive any cash proceeds
from the issuance of the Exchange
Capital Securities offered
hereby. See "Use of Proceeds."
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS;
ERISA CONSIDERATIONS...................... Holders of Old Capital Securities
should review the information set
forth under "Certain Federal
Income Tax Considerations" and
"ERISA Considerations" prior to
tendering Old Capital Securities
in the Exchange Offer.
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<PAGE>
THE EXCHANGE CAPITAL SECURITIES
SECURITIES OFFERED.......................... Up to $200,000,000 aggregate
Liquidation Amount of the
Exchange Capital Securities which
have been registered under the
Securities Act (Liquidation
Amount $1,000 per Exchange
Capital Security). The Exchange
Capital Securities will be
issued, and the Old Capital
Securities were issued, under the
Trust Agreement. The Exchange
Capital Securities and any Old
Capital Securities which remain
outstanding after consummation of
the Exchange Offer will vote
together as a single class for
purposes of determining whether
holders of the requisite
percentage in outstanding
Liquidation Amount thereof have
taken certain actions or
exercised certain rights under
the Trust Agreement. See
"Description of Exchange
Securities-- Description of
Exchange Capital Securities--
Voting Rights; Amendment of the
Trust Agreement." The terms of
the Exchange Capital Securities
are identical in all material
respects to the terms of the Old
Capital Securities, except that
the Exchange Capital Securities
have been registered under the
Securities Act and will not
provide for any increase in the
Distribution rate thereon. See
"The Exchange Offer-- Purpose of
the Exchange Offer," "Description
of Exchange Securities" and
"Description of Old Securities."
DISTRIBUTION DATES.......................... June 15 and December 15 of each
year, commencing June 15, 1997.
EXTENSION PERIODS........................... Distributions on Capital
Securities will be deferred for
the duration of any Extension
Period elected by the Company
with respect to the payment of
interest on the Junior
Subordinated Debentures. No
Extension Period will exceed 10
consecutive semi-annual periods
or extend beyond the Stated
Maturity. See "Description of
Exchange Debentures - Option to
Defer Interest Payments" and
"Certain Federal Income Tax
Consequences - Interest Income
and Original Issue Discount."
RANKING..................................... The Exchange Capital Securities
will rank pari passu, and
payments thereon will be made pro
rata, with the Old Capital
Securities and the Common
Securities except as described
under "Description of Exchange
Capital Securities -
Subordination of Common
Securities." The Exchange
Debentures will rank pari passu
with all other junior
subordinated debentures to be
issued by the Company with
substantially similar
subordination terms ("Other
Debentures") and which may be
issued and sold (if at all) to
other trusts to be established by
the Company (if any) ("Other
Trusts"), and will be unsecured
and subordinate and junior in
right of payment to the extent
and in the manner set forth in
the Indenture to all Senior
Indebtedness (as defined herein).
Senior Indebtedness of the
Company includes existing and
future senior debt, senior
subordinated debt and
subordinated debt of the Company.
As of December 31, 1996, there
was $6.9 billion of Senior
Indebtedness of the Company
outstanding. See "Description of
Exchange Debentures." The
Guarantee ranks pari passu with
all other
15
<PAGE>
guarantees (if any), to be issued
by the Company with respect to
capital securities (if any), to
be issued by Other Trusts ("Other
Guarantees") and constitutes an
unsecured obligation of the
Company and ranks subordinate and
junior in right of payment to the
extent and in the manner set
forth in the Guarantee Agreement
to all Senior Indebtedness. See
"Description of Guarantee."
REDEMPTION.................................. The Exchange Capital Securities
are subject to mandatory
redemption (i) in whole but not
in part at the Stated Maturity
upon repayment of the Exchange
Debentures, (ii) in whole but not
in part at any time
contemporaneously with the
prepayment of the Exchange
Debentures upon the occurrence
and continuation of a Tax Event,
Investment Company Event or
Capital Treatment Event and (iii)
in whole or in part at any time
on or after December 15, 2006
contemporaneously with the
optional prepayment by the
Company of the Exchange
Debentures, in each case at the
applicable Redemption Price. See
"Description of Exchange Capital
Securities -- Redemption."
RATING...................................... The Exchange Capital Securities
have been rated "BBB" by Standard
& Poor's Ratings Services and
"Baa1" by Moody's Investors
Services, Inc. A security rating
is not a recommendation to buy,
sell or hold securities and may
be subject to revision or
withdrawal at any time by the
assigning rating organization.
ERISA CONSIDERATIONS........................ Prospective purchasers who
invested the assets of an
employee benefit plan subject to
Title I of ERISA or a plan or
individual retirement account
subject to Section 4975 of the
Code for their purchase of
Capital Securities should
carefully consider the
information set forth under
"ERISA Considerations."
ABSENCE OF MARKET FOR THE
EXCHANGE CAPITAL SECURITIES............... The Exchange Capital Securities
will be a new issue of securities
for which there currently is no
market. Although the Initial
Purchasers have informed the
Trust and the Company that they
each currently intend to make a
market in the Exchange Capital
Securities, the Initial
Purchasers are not obligated to
do so, and any such market making
may be discontinued at any time
without notice. Accordingly,
there can be no assurance as to
the development or liquidity of
any market for the Exchange
Capital Securities. The Trust
and the Company do not intend to
apply for listing of the Exchange
Capital Securities on any
securities exchange or for
quotation through the NASD
Automated Quotation System. See
"Offer and Resale."
USE OF PROCEEDS............................. The proceeds to the Trust from
the sale of the Capital
Securities were invested by the
Trust in the Junior Subordinated
Debentures. The Company is using
the net proceeds from the sale of
the Junior Subordinated
Debentures for general corporate
purposes. The Company expects
that the Capital Securities will
be eligible to
16
<PAGE>
qualify as Tier 1 capital under
the capital guidelines of the
Federal Reserve. See "Use of
Proceeds."
For additional information regarding the Exchange Capital Securities,
see "Description of Exchange Capital Securities," "Description of Exchange
Debentures," "Description of Guarantee" and "Certain Federal Income Tax
Consequences."
RISK FACTORS
Prospective investors should carefully consider the matters set forth
under "Risk Factors".
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Offering Memorandum and should particularly consider the
following matters.
RANKING OF OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED
DEBENTURES
The obligations of the Company under the Junior Subordinated Debentures
are unsecured and rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company. The obligations of the Company under the Guarantee
are unsecured and rank subordinate and junior in right of payment to all
liabilities of the Company, including obligations under the Junior Subordinated
Debentures, other than any liabilities which expressly by their terms are made
pari passu or subordinate to the obligations of the Company under the Guarantee.
At December 31, 1996, the aggregate outstanding Senior Indebtedness of the
Company was approximately $6.9 billion. None of the Indenture, the Guarantee or
the Trust Agreement places any limitation on the amount of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the Company. See
"Description of Guarantee -- Status of the Guarantee" and "Description of
Exchange Debentures -Subordination." The Company is a legal entity separate and
distinct from its principal subsidiary, Crestar Bank, and its other affiliates.
There are various legal limitations on the extent to which Crestar Bank may
extend credit, pay dividends or otherwise supply funds to the Company or various
of its affiliates. Since 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 (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Company may itself be a creditor of that subsidiary. Claims on
the Company's subsidiaries by creditors other than the Company include long-term
debt and substantial obligations in respect of federal funds purchased,
securities sold under repurchase agreements and certain other short-term
borrowings, as well as deposit liabilities. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, and holders of Junior Subordinated
Debentures should look only to the assets of the Company for payments on the
Junior Subordinated Debentures. See "Crestar Financial Corporation."
The ability of the Trust to pay amounts due on the Capital Securities
is solely dependent upon the Company making payments on the Junior Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Debenture Event of Default has occurred or 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 10 consecutive semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity. As a consequence of any such deferral, semi-annual Distributions on
the Capital Securities by the Trust will be deferred (and the amount of
Distributions to which holders of the Capital Securities are entitled will
accumulate additional Distributions thereon at the rate
17
<PAGE>
of 8.16% per annum, compounded semi-annually, but not exceeding the interest
rate then accruing on the Junior Subordinated Debentures), from the relevant
payment date for such Distributions during any such Extension Period. 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 or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company (including Other Debentures) 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 (including Other Guarantees) if such guarantee ranks
pari passu with or junior in interest to the Junior Subordinated Debentures
(other than (a) dividends or distributions in common stock of the Company, (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee and (d) 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). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period provided
that such extension does not cause such Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity. Upon
the termination of any Extension Period and the payment of all interest then
accrued and unpaid on the Junior Subordinated Debentures (together with interest
thereon at the annual rate of 8.16%, compounded semi-annually, to the extent
permitted by applicable law), the Company may elect to begin a new Extension
Period subject to the above requirements. There is no limitation on the number
of times that the Company may elect to begin an Extension Period. See
"Description of Capital Securities -- Distributions" and "Description of Junior
Subordinated Debentures -- Option to Defer Interest Payments."
Should an Extension Period occur, a holder of Capital Securities will
continue to accrue income for United States federal income tax purposes (in the
form of original issue discount) in respect of its pro rata share of the Junior
Subordinated Debentures held by the Trust. As a result, a holder of Capital
Securities will include such income in gross income for United States federal
income tax purposes in advance of the receipt of cash, and will not receive the
cash related to such income from the Trust if the holder disposes of the Capital
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 Capital Securities."
The Company believes that the likelihood of its exercising its right to
defer payments of interest is remote. However, should the Company elect to
exercise such right in the future, the market price of the Capital Securities is
likely to be affected. A holder that disposes of its Capital Securities during
an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Capital Securities. In
addition, as a result of the existence of the Company's right to defer interest
payments, the market price of the Capital Securities (which represent preferred
beneficial interests in the Trust) may be more volatile than the market prices
of other securities on which original issue discount accrues that are not
subject to such deferrals.
TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and continuation of a Tax Event, Investment Company
Event or Capital Treatment Event, the Company has the right to prepay the Junior
Subordinated Debentures in whole (but not in part) within 90 days following the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event and therefore cause a mandatory redemption of the Capital Securities at
the Event Redemption Price. See "Description of Capital Securities --
Redemption." The exercise of such redemption right is subject to the Company
having received prior approval from the Federal Reserve to do so if then
required under applicable guidelines or policies of the Federal Reserve.
A "Tax Event" means the receipt by the Company and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing
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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 Issue Date, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States Federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or within
90 days of such opinion, will not be, deductible by the Company, in whole or in
part, for United States Federal income tax purposes, or (iii) the Trust is, or
will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
See "-- Possible Tax Law Changes Affecting the Capital Securities" for
a discussion of certain legislative proposals that, if adopted, could give rise
to a Tax Event, which may permit the Company to cause a redemption of the
Capital Securities prior to December 15, 2006.
A "Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence 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 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 pronouncement, action or decision
is announced on or after the date of issuance of the Capital Securities under
the Trust Agreement, there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company. See "Description of Capital Securities --
Redemption" and "Description of Junior Subordinated Debentures -- Optional
Prepayment." See also "Certain Federal Income Tax Consequences -- Possible Tax
Law Changes."
An "Investment Company Event" means the receipt by the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or 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
will be considered an investment company that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Capital
Securities.
EXCHANGE OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The Company will have the right upon the occurrence of a Tax Event,
Investment Company Event or Capital Treatment Event to terminate the Trust and,
after satisfaction of liabilities to creditors as required by applicable law,
cause the Junior Subordinated Debentures to be distributed to the holders of the
Capital Securities in liquidation of the Trust. The exercise of such right is
subject to the Company having received prior approval of the Federal Reserve if
then required under applicable capital guidelines or policies of the Federal
Reserve and subject to the Company having received an opinion of counsel to the
effect that such distribution will not be a taxable event to holders of Capital
Securities. See "Description of Capital Securities -- Liquidation of the Trust
and Distribution of Junior Subordinated Debentures."
MARKET PRICES
There can be no assurance as to the market prices for Capital
Securities or Junior Subordinated Debentures that may be distributed in exchange
for Capital Securities if a liquidation of the Trust occurs. Accordingly, the
Capital Securities that an investor may purchase whether pursuant to the offer
made hereby or in the secondary market, or the Junior Subordinated Debentures
that a holder of Capital Securities may receive in liquidation of the Trust, may
trade at a discount from the price that the investor paid to purchase the
Capital Securities offered hereby. Because holders of Capital Securities may
receive Junior Subordinated Debentures on termination of the Trust and
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because Distributions are otherwise limited to payments on the Junior
Subordinated Debentures, prospective purchasers of Capital 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. See "Description of Junior
Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as the Guarantee Trustee and will
hold the Guarantee for the benefit of the holders of the Capital Securities. The
Chase Manhattan Bank will also act as Debenture Trustee for the Junior
Subordinated Debentures and as Property Trustee under the Trust Agreement and
its affiliate Chase Manhattan Bank Delaware will act as Delaware Trustee under
the Trust Agreement. The Guarantee guarantees to the holders of the Capital
Securities the following payments, to the extent not paid by the Trust: (i) any
accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Trust has funds on hand available therefor at
such time, (ii) the redemption price with respect to any Capital Securities
called for redemption, to the extent that the Trust has funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary termination,
winding-up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accrued and unpaid
Distributions to the date of payment to the extent that the Trust has funds on
hand available therefor at such time and (b) the amount of assets of the Trust
remaining available for distribution to holders of the Capital Securities. The
holders of not less than a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of the Capital
Securities may institute a legal proceeding directly against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity. If the Company were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust would lack funds for the
payment of Distributions or amounts payable on redemption of the Capital
Securities or otherwise, and, in such event, holders of the Capital Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, in the event a Debenture Event of Default shall have occurred and be
continuing and such event is attributable to the failure of the Company to pay
interest on or principal of the Junior Subordinated Debentures on the payment
date on which such payment is due and payable, then a holder of Capital
Securities may institute a legal proceeding directly against the Company 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 Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of and interest on the Junior Subordinated Debentures, and
the Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action. Except as
described herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debentures or assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Exchange Debentures -- Enforcement
of Certain Rights by Holders of Capital Securities," "Description of Exchange
Debentures -- Debenture Events of Default" and "Description of Guarantee." The
Trust Agreement provides that each holder of Capital Securities by acceptance
thereof agrees to the provisions of the Guarantee Agreement and the Indenture.
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LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, and the exercise of
the Trust's rights as holder of Junior Subordinated Debentures. Holders of
Capital Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence of
certain events described herewith. The Issuer Trustees and the Company may amend
the Trust Agreement without the consent of holders of Capital Securities to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust even if such action adversely affects the interests
of such holders. See "Description of Exchange Capital Securities -- Voting
Rights; Amendment of the Trust Agreement" and "Description of Exchange Capital
Securities -- Removal of Issuer Trustees; Appointment of Successors."
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
The Clinton administration has proposed legislation (the "Proposal")
that would, among other things, deny interest deductions for interest on an
instrument issued by a corporation that has a maximum term of more than 15 years
and that is not shown as indebtedness on the separate balance sheet of the
issuer or, if the instrument is issued to a related party (other than a
corporation), where the holder or some other related party issues a related
instrument that is not shown as indebtedness on the issuer's consolidated
balance sheet. If such a provision were to apply to the Junior Subordinated
Debentures, the Company would be unable to deduct interest on the Junior
Subordinated Debentures. However, the above-described provision of the Proposal
is proposed generally to be effective only for instruments issued on or after
the date of first Congressional committee action, and under current law, the
Company is able to deduct interest on the Junior Subordinated Debentures. There
can be no assurance that future action on the Proposal or future legislative
proposals, future regulations or official administrative pronouncements, or
future judicial decisions will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. Such a change could give rise to
a Tax Event, which may permit the Company, upon approval of the Federal Reserve
if then required under applicable guidelines or policies of the Federal Reserve,
to cause a redemption of the Capital Securities before, as well as after,
December 15, 2006. See "Description of Capital Securities -- Redemption" and
"Certain Federal Income Tax Consequences - Possible Tax Law Changes."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions. Old
Capital Securities which remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreements (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Capital
Securities could be adversely affected.
The Exchange Capital Securities and any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Declaration."
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The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by May
30, 1997 and declared effective by June 29, 1997, the Distribution rate borne by
the Old Capital Securities, currently 8.16% per annum, commencing on June 29,
1997 will increase by 0.25% per annum until the Exchange Offer is consummated.
Upon consummation of the Exchange Offer, holders of Old Capital Securities will
not be entitled to any increase in the Distribution rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Old Capital Securities."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes the
Old Capital Securities are currently owned by, a relatively small number of
beneficial owners. The Old Capital Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the Exchange Capital Securities. Although the Exchange
Capital Securities generally may be resold or otherwise transferred by the
holders (who are not affiliates of the Company or the Trust) without compliance
with the registration requirements under the Securities Act, they will
constitute a new issue of securities with no established trading market. Both
Old Capital Securities and Exchange Capital Securities may be transferred by the
holders thereof only in blocks having a Liquidation Amount of not less than
$100,000 (100 Old Capital Securities) and in integral multiples of $1,000 (1 Old
Capital Security) in excess thereof. The Company and the Trust have been advised
by the Initial Purchasers that the Initial Purchasers presently intend to make a
market in the Exchange Capital Securities. However, the Initial Purchasers are
not obligated to do so and any market-making activity with respect to the
Exchange Capital Securities may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the Exchange Capital Securities or the Old Capital
Securities or as to the liquidity of or the trading market for the Exchange
Capital Securities or the Old Capital Securities. If an active public market
does not develop, the market price and liquidity of the Exchange Capital
Securities may be adversely affected.
If a public trading market develops for the Exchange Capital
Securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, the Company's financial results and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Capital Securities may trade at a
discount.
Notwithstanding the registration of the Exchange Capital Securities in
the Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of
the Securities Act) of the Company or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its
own account in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Capital Securities, a properly completed and
duly executed Letter of Transmittal or Agent's Message in lieu thereof and all
other required documents. Therefore, holders of the Old Capital Securities
desiring to tender such Old Capital Securities in exchange for Exchange Capital
Securities should allow sufficient time to ensure timely delivery. Neither the
Company nor the Trust is under any
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duty to give notification of defects or irregularities with respect to the
tenders of Old Capital Securities for exchange. See "The Exchange Offer."
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following sets forth the historical ratios of earnings to fixed
charges and the historical ratios of earnings to fixed charges and preferred
stock dividends of the Company for the periods indicated:
Year Ended
December 31,
1996 1995 1994 1993 1992
-------------------------------------
Earnings to
Fixed Charges
Including interest on deposits........ 1.5 1.5 1.6 1.6 1.3
Excluding interest on deposits........ 2.6 2.8 3.6 3.8 2.9
Earnings to
Combined Fixed Charges and Preferred
Stock Dividend Requirements
Including interest on deposits........ 1.5 1.5 1.6 1.5 1.3
Excluding interest on deposits........ 2.6 2.8 3.6 3.7 2.8
For purposes of computing the preceding ratios, earnings represent
pre-tax income from continuing operations plus fixed charges. Fixed charges
represent interest expense (exclusive of interest on deposits in one case and
inclusive of such interest in the other), capitalized interest, amortization of
debt issuance costs, and one-third (the amount deemed to represent an
appropriate interest factor) of rent expense (net of income from subleases)
under lease commitments. Preferred stock dividend requirements represent pre-tax
earnings that would be required to cover preferred stock dividends on
outstanding preferred stock.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities. In consideration for issuing
the Exchange Capital Securities in exchange for the Old Capital Securities as
described in this Prospectus, the Trust will receive Exchange Debentures in like
Liquidation Amount. The Old Capital Securities surrendered in exchange for the
Exchange Capital Securities will be retired and canceled.
The net proceeds to the Trust from the offering of the Capital
Securities was $200,000,000. All of the proceeds from the sale of Capital
Securities were invested by the Trust in Junior Subordinated Debentures. The net
proceeds from the sale of the Junior Subordinated Debentures are being used by
the Company for general corporate purposes, including the Company's working
capital needs, the funding of investments in, or extensions of credit to, the
Company's banking and nonbanking subsidiaries and possible acquisitions of other
financial institutions or ,other businesses of a type eligible for bank holding
companies. Pending such use, the Company may temporarily invest the net proceeds
in investment grade securities. Based upon its historical and anticipated future
growth, including future acquisitions, and the financial needs of its
subsidiaries, the Company may engage in additional financings of a character and
in amounts to be determined as the need arises.
CRESTAR FINANCIAL CORPORATION
Crestar Bank is the holding company for Crestar Bank, a Virginia
banking corporation. At December 31, 1996, the Company had approximately $22.9
billion in total assets, $15.7 billion in total deposits, and $1.8 billion in
total stockholders' equity.
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In 1963, six Virginia banks combined to form United Virginia Bankshares
Incorporated ("UVB"), a bank holding company formed under the Bank Holding
Company Act of 1956 (the "BHCA"). UVB (parent company of United Virginia Bank)
extended its operations into the District of Columbia by acquiring NS&T Bank,
N.A. on December 27, 1985 and into Maryland by acquiring Bank of Bethesda on
April 1, 1986. On September 1, 1987, UVB became Crestar Financial Corporation
and its bank subsidiaries adopted the Crestar name.
The Company serves customers through a network of 508 banking offices
and 496 automated teller machines (as of December 31, 1996). Crestar Bank offers
a broad range of banking services, including various types of deposit accounts
and instruments, commercial and consumer loans, trust and investment management
services, bank credit cards and international banking services. Crestar
Insurance Agency, Inc., offers a variety of personal and business insurance
products. Securities brokerage and investment banking services, including mutual
funds and annuities, are offered by Crestar Securities Corporation. Mortgage
loan origination, servicing and wholesale lending are offered by Crestar
Mortgage Corporation, and investment advisory services are offered by Capitoline
Investment Services Incorporated, both of which are subsidiaries of Crestar
Bank. These various Company subsidiaries provide banking and non-banking
services throughout Virginia, Maryland and Washington, D.C., as well as certain
non-banking services to customers in other states.
The executive offices of the Company are located at Crestar Center, 919
East Main Street, Richmond, Virginia 23219. The Company's Operations Center is
located in Richmond. Regional headquarters are located in Norfolk and Roanoke,
Virginia, Washington, D.C., and Baltimore, Maryland. The Company's telephone
number is (804) 782-5171.
RECENT DEVELOPMENTS
SAIF LEGISLATION. The Company's third quarter earnings were affected by
two special items relating to recently passed legislation regarding
recapitalization of the Savings Association Insurance Fund ("SAIF") and repeal
of the thrift bad debt recapture rule. Third quarter earnings were adversely
affected by a one-time assessment on deposits insured by the SAIF; as a result
of several thrift acquisitions during recent years, approximately 45% of the
Company's deposit base are SAIF insured. The one-time assessment, on an after
tax basis, was approximately $22 million. As a result of this one-time
assessment and based on announced rate schedules, future earnings of the Company
are expected to be augmented by a reduction in ongoing SAIF assessments of
approximately $6 million annually, on an after tax basis.
Partially offsetting this one-time SAIF assessment, the Company
recognized a one-time after tax gain of approximately $11 million in the third
quarter as a result of repeal of the tax law that required merging thrift
institutions to recapture into income pre-1988 loan loss reserves.
The combined effect of the two special items resulted in an after tax
charge to third quarter earnings of $11 million, or $.10 (post-split) per share.
COMBINATION OF SUBSIDIARY BANKS. On November 14, 1996, the Company
combined its subsidiary banks, Crestar Bank MD, Crestar Bank NA, and Crestar
Bank (Virginia), into one Virginia bank named Crestar Bank. A week earlier,
Crestar Bank FSB had merged into Crestar Bank MD.
The combination of its subsidiary banks into one bank is expected to
achieve synergies and other cost savings, although the savings will be modest
since the Company, for a number of years, has for all practical purposes
operated its subsidiary banks as if they were one combined banking enterprise.
The combination of the subsidiary banks into a Virginia bank is not expected to
have any effect on the services or products offered to customers or any other
substantive change in the way the Company does business.
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COMPLETED ACQUISITION. On December 31, 1996, the Company completed its
acquisition of Citizens Bancorp ("Citizens"), in a statutory merger in exchange
for Crestar Common Stock (the "Citizens Merger"). Citizens was the second
largest bank holding company headquartered in Maryland with assets of $4.1
billion as of December 31, 1996. The merger was accounted for as a pooling of
interests business combination. Accordingly, all consolidated financial
information reflects the results of the Company and Citizens, on a combined
basis, for all periods presented.
COMMON STOCK SPLIT. In December 1996, the Company's Board of Directors
declared a two-for-one common stock split, in the form of a stock dividend. The
two-for-one stock split was distributed on January 24, 1997. Per common share
data contained in this registration statement has been adjusted, for all periods
presented, to reflect the common stock split.
HOLDING COMPANY STATUS. Since the Company is a holding company, the
rights of the Company to participate in any distribution of assets of any
subsidiary upon its liquidation or reorganization or otherwise (and thus the
ability of holders of the Junior Subordinated Debentures to benefit indirectly
from such distribution) are subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be a creditor of
that subsidiary. Claims on the Company's subsidiaries by creditors other than
the Company include long-term debt and substantial obligations in respect of
federal funds purchased, securities sold under repurchase agreements and certain
other short-term borrowings, as well as deposit liabilities.
REGULATORY CAPITAL BENEFITS TO CRESTAR FINANCIAL CORPORATION
The Company is required by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board") to maintain certain levels of capital
for bank regulatory purposes. For these purposes, different capital instruments
are classified as either Tier 1 or Tier 2 capital, with Tier 1 being the more
favorable classification. The Federal Reserve Board has recently stated that
long-term cumulative preferred instruments issued by a special-purpose
subsidiary of a bank holding company and structured in the manner in which the
Capital Securities are structured normally will be accorded Tier 1 Capital
treatment. The Company believes that the Capital Securities qualify for Tier 1
capital treatment. Such treatment, together with the Company's ability to
deduct, for income tax purposes, the interest payable on the Junior Subordinated
Debentures, provide the Company with a more cost-effective means of obtaining
capital for regulatory purposes than if the Company itself were to issue
additional preferred stock.
As of the date of this Prospectus, the Company has authorized preferred
stock but has no series of preferred stock outstanding.
CRESTAR CAPITAL TRUST I
Crestar Capital Trust I is a statutory business trust created under
Delaware law pursuant to the filing of a certificate of trust with the Delaware
Secretary of State on December 20, 1996, which is governed by the Trust
Agreement executed by the Company, as Depositor, the Property Trustee, the
Delaware Trustee, and three individual Administrators. The Trust exists for the
exclusive purposes of (i) issuing and selling the Capital Securities, Common
Securities and Exchange Capital Securities, (ii) using the proceeds from the
sale of Capital Securities and Common Securities to acquire Junior Subordinated
Debentures issued by the Company, (iii) exchanging the Junior Subordinate
Debentures for Exchange Debentures in the Exchange Offer pursuant to the
Indenture and (iv) engaging in only those other activities necessary, advisable
or incidental thereto (such as registering the transfer of the Capital
Securities). Accordingly, the Junior Subordinated Debentures will be the sole
assets of the Trust, and payments by the Company under the Junior Subordinated
Debentures and the related Expense Agreement will be the sole revenue of the
Trust. All of the Common Securities are owned by the Company. The Common
Securities rank pari passu, and payments will be made thereon pro rata with the
Capital Securities except that upon the occurrence and continuance of an event
of default under the Trust Agreement
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resulting from a Debenture Event of Default, the rights of the Company as holder
of the Common Securities to payment in respect of Distributions and payments
upon liquidation, redemption or otherwise will be subordinated to the rights of
the holders of the Capital Securities. See "Description of Capital Securities --
Subordination of Common Securities". The Company has acquired Common Securities
in an aggregate liquidation amount equal to 3% of the total capital of the
Trust.
The Trust has a term of approximately 31 years, but may terminate
earlier as provided in the Trust Agreement. The Trust's business and affairs are
conducted by its administrators, each appointed by the Company as holder of the
Common Securities. Under the Trust Agreement, the trustees for the Trust are The
Chase Manhattan Bank, as the Property Trustee and Chase Manhattan Bank Delaware
as the Delaware Trustee, and, in addition, there are three individual
administrators (the "Administrators") who are employees or officers of or
affiliated with the Company the Property Trustee, the Delaware Trustee and the
Administrators, (collectively, the "Issuer Trustees"). The Chase Manhattan Bank
is also trustee under the Guarantee and the Indenture (each as defined herein).
See "Description of Guarantee" and "Description of Junior Subordinated
Debentures." The holder of the Common Securities of the Trust or the holders of
a majority in Liquidation Amount of Capital Securities if a Debenture Event of
Default has occurred under the Trust Agreement and is continuing will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the Capital Securities have the right
to vote to appoint, remove or replace the Administrators; such voting rights are
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the Trust Agreement. Pursuant
to the Expense Agreement, the Company pays all fees and expenses related to the
Trust and the offering of the Capital Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Trust.
Pursuant to the Expense Agreement, the Company has irrevocably and
unconditionally guaranteed to each person or entity to whom the Trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust, other than obligations of the Trust to pay to the holders of any
Capital Securities or other similar interests in the Trust of the amounts due
such holders pursuant to the terms of the Capital Securities or such other
similar interests, as the case may be.
The principal executive office of the Trust is P.O. Box 26665, 919 East
Main Street, Richmond, Virginia, 23261-6665 and its telephone number is (804)
782-5171.
OTHER COMPANY SECURITIES OFFERINGS
The Company has filed shelf registration statements (the "Shelf
Registration Statements") for approximately $300 million of securities which
include subordinated debt, preferred stock and common stock. The Shelf
Registration Statements (and any similar subsequent registration statements)
could be used by the Company to issue securities which are classified as Tier 1
capital and which rank pari passu with the Capital Securities, Junior
Subordinated Debentures and the Guarantee as well as senior to such securities.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Capital
Securities will either be presented as a separate line item in the consolidated
balance sheet of the Company, or presented as a component of long-term debt in
the consolidated balance sheet of the Company, and appropriate disclosures about
the Capital Securities, the Guarantee and the Junior Subordinated Debentures
will be included in the notes to the consolidated financial statements. For
financial reporting purposes, the Company will record Distributions payable on
the Capital Securities as an expense in the consolidated statement of income.
THE EXCHANGE OFFER
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PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company
and the Trust entered into the Registration Rights Agreement with the Initial
Purchasers pursuant to which the Company and the Trust agreed to file and to use
their reasonable efforts to cause to become effective with the Commission a
registration statement with respect to the exchange of the Old Capital
Securities for the Exchange Capital Securities. A copy of the Registration
Rights Agreement has been filed as an Exhibit to the Registration Statement of
which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and terms
of the Old Capital Securities except that the Exchange Capital Securities have
been registered under the Securities Act, and will not provide for any increase
in the Distribution rate thereon. In that regard, the Old Capital Securities
provide, among other things, that, if a registration statement relating to the
Exchange Offer has not been filed by May 30, 1997 and declared effective by June
29, 1997, the Distribution rate borne by the Old Capital Securities, currently
8.16%, commencing on June 29, 1997 will increase by 0.25% per annum until the
Exchange Offer is consummated. Upon consummation of the Exchange Offer, holders
of Old Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors -- Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Capital Securities."
The Exchange Offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of Old Capital Securities in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Capital Securities
are registered on the books of the Trust or any other person who has obtained a
properly completed bond power from such holder, or any participant in the
Depository Trust Company ("DTC") system whose name appears on a security
position listing as the holder of such Old Capital Securities and who desires to
deliver such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange promptly
after the Expiration Date, the Old Junior Subordinated Debentures, in an amount
corresponding to the Old Capital Securities accepted for exchange, for a like
aggregate principal amount of the Exchange Debentures. The Guarantee and
Exchange Debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $200,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$200,000,000 of Exchange Capital Securities in exchange for a like principal
amount of outstanding Old Capital Securities tendered and accepted in connection
with the Exchange Offer. Holders may tender their Old Capital Securities in
whole or in part in a Liquidation Amount of not less than $100,000 (100 Capital
Securities) or any integral multiple of $1,000 Liquidation Amount (1 Capital
Security) in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Capital Securities being tendered. As of the date of this
Prospectus, $200,000,000 aggregate Liquidation Amount of Old Capital Securities
is outstanding.
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Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Declaration, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Old Capital Securities"
and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Capital Securities in connection with the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "-- Fees and Expenses."
NEITHER THE COMPANY, ITS BOARD OF DIRECTORS NOR ANY ISSUER TRUSTEE OF
THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO TENDER BASED ON
SUCH HOLDERS OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on July
7, 1997 unless the Exchange Offer is extended by the Company or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old Capital Securities for exchange,
(ii) to terminate the Exchange Offer (whether or not any Old Capital Securities
have theretofore been accepted for exchange) if the Trust determines, in its
sole and absolute discretion, that any of the events or conditions referred to
under "-- Conditions to the Exchange Offer" have occurred or exist or have not
been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to withdraw
their tendered Old Capital Securities as described under "-- Withdrawal Rights,"
and (iv) to waive any condition or otherwise amend the terms of the Exchange
Offer in any respect. If the Exchange Offer is amended in a manner determined by
the Company and the Trust to constitute a material change, or if the Company and
the Trust waive a material condition of the Exchange Offer, the Company and the
Trust will promptly disclose such amendment by means of a prospectus supplement
that will be distributed to the holders of the Old Capital Securities, and the
Company and the Trust will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent and by making a public announcement thereof, and
such announcement in the case of an extension will be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company and
the Trust may choose to make any public announcement and subject to applicable
law, the Company and the Trust shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.
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ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Old Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Old Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) Old Capital Securities or a book-entry confirmation of a book-entry transfer
of Old Capital Securities into the Exchange Agent's account at DTC, (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or (in case of a book-entry
transfer) an Agent's Message in lieu of the Letter of Transmittal, and (iii) any
other documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of book-entry confirmation,
which states that DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by, and make the representations and warranties contained in,
the Letter of Transmittal and that the Trust and the Company may enforce such
Letter of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral (promptly confirmed in writing) or written notice to the Exchange Agent of
the Trust's acceptance of such Old Capital Securities for exchange pursuant to
the Exchange Offer. The Exchange Agent will act as agent for the Trust for the
purpose of receiving tenders of Old Capital Securities, Letters of Transmittal
and related documents, and as agent for tendering holders for the purpose of
receiving Old Capital Securities, Letters of Transmittal and related documents
and transmitting Exchange Capital Securities to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Capital
Securities tendered pursuant to the Exchange Offer is delayed (whether before or
after the Trust's acceptance for exchange of Old Capital Securities) or the
Trust extends the Exchange Offer or is unable to accept for exchange or exchange
Old Capital Securities tendered pursuant to the Exchange Offer, then, without
prejudice to the Trust's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Trust and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Old Capital Securities and such Old Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu
thereof, a holder of Old Capital Securities will warrant and agree in the Letter
of Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Trust will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges and encumbrances, and the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the Exchange
Agent to be necessary or desirable to complete the exchange, sale, assignment,
and transfer of the Old Capital Securities tendered pursuant to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
VALID TENDER. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees or (in the case of a book-entry transfer) an
Agent's Message in lieu of the Letter
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of Transmittal and any other required documents, must be received by the
Exchange Agent at one of its addresses set forth under "-- Exchange Agent," and
either (i) tendered Old Capital Securities must be received by the Exchange
Agent, or (ii) such Old Capital Securities must be tendered pursuant to the
procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a
tendering holder should fill in the amount of Old Capital Securities being
tendered in the appropriate box on the Letter of Transmittal or so indicate in
an Agent's Message in lieu of the Letter of Transmittal. The entire amount of
Old Capital Securities delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any
other required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under "-- Exchange Agent" on or prior to
the Expiration Date, or the guaranteed delivery procedures set forth below must
be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. Certificates for the Old Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (an "Eligible Institution"), unless surrendered on behalf of such
Eligible Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Capital
Securities pursuant to the Exchange Offer and the certificates for such Old
Capital Securities are not immediately available or time will not permit all
required documents to reach the Exchange Agent on or prior to the Expiration
Date, or the procedure for book-entry transfer cannot be completed on a timely
basis, such Old Capital Securities may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with:
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(a) such tenders are made by or through an Eligible
Institution;
(b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the Letter
of Transmittal, is received by the Exchange Agent, as provided below,
on or prior to the Expiration Date; and
(c) the certificates (or a book-entry confirmation)
representing all tendered Old Capital Securities, in proper form for
transfer, together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mailed to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Old Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile thereof
or Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of Exchange Capital Securities might not be made to
all tendering holders at the same time, and will depend upon when Old Capital
Securities, book-entry confirmations with respect to Old Capital Securities and
other required documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. The Company and the Trust reserve the absolute right, in their
sole and absolute discretion, to reject any and all tenders determined by them
not to be in proper form or the acceptance of which, or exchange for, may, in
the opinion of counsel to the Company and the Trust, be unlawful. The Company
and the Trust also reserve the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offer as set forth under "--
Conditions to the Exchange Offer" or any condition or irregularity in any tender
of Old Capital Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company, the
Trust, any affiliates or assigns of the Company or the Trust, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when
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signing, and unless waived by the Company and the Trust, proper evidence
satisfactory to the Company and the Trust, in their sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital
Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither the
Company nor the Trust sought its own interpretive letter and there can be no
assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the Company
and the Trust believe that Exchange Capital Securities issued pursuant to the
Exchange Offer in exchange for Old Capital Securities may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder who is
a broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Company or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Old Capital
Securities from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for Exchange Capital Securities, then such broker-dealer must deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resales of such Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company or the
Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. In addition, the Company and the Trust may
require such holder, as a condition to such holder's eligibility to participate
in the Exchange Offer, to furnish to the Company and the Trust (or an agent
thereof) in writing information as to the number of "beneficial owners" (within
the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such holder
holds the Old Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Old Capital
Securities for its own account as the result of market-making activities or
other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Capital Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the
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Company and the Trust believe that Participating Broker-Dealers who acquired Old
Capital Securities for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such Exchange Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
Exchange Capital Securities received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement, the Company and the Trust have agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Capital Securities for
a period ending 90- days after the Expiration Date (subject to extension under
certain limited circumstances described below) or, if earlier, when all such
Exchange Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "-- Exchange
Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company or
the Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Company or the Trust of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of
Exchange Capital Securities (or the Guarantee or the Exchange Debentures, as
applicable) pursuant to this Prospectus until the Company or the Trust has
amended or supplemented this Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company or the Trust has given notice that
the sale of the Exchange Capital Securities (or the Guarantee or the Exchange
Debentures, as applicable) may be resumed, as the case may be. If the Company or
the Trust gives such notice to suspend the sale of the Exchange Capital
Securities (or the Guarantee or the Exchange Debentures, as applicable), it
shall extend the 90-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the resale
of Exchange Capital Securities by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of Exchange Capital Securities (or the Guarantee or
the Exchange Debentures, as applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange
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Agent" on or prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person who tendered the Old Capital Securities to be
withdrawn, the aggregate principal amount of Old Capital Securities to be
withdrawn, and (if certificates for such Old Capital Securities have been
tendered) the name of the registered holder of the Old Capital Securities as set
forth on the Old Capital Securities, if different from that of the person who
tendered such Old Capital Securities. If Old Capital Securities have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Old Capital Securities, the tendering holder must
submit the serial numbers shown on the particular Old Capital Securities to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Old Capital Securities tendered for
the account of an Eligible Institution. If Old Capital Securities have been
tendered pursuant to the procedures for book-entry transfer set forth in "--
Procedures for Tendering Old Capital Securities," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Capital Securities, in which case a notice of withdrawal will
be effective if delivered to the Exchange Agent by written, telegraphic or
facsimile transmission. Withdrawals of tenders of Old Capital Securities may not
be rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "-- Procedures for Tendering Old Capital
Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Old Capital Securities
which have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are
accepted for exchange will not receive Distributions on such Old Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities accumulated from and including
December 15, 1996. Accordingly, holders of Exchange Capital Securities as of the
record date for the payment of Distributions on June 15, 1997 will be entitled
to receive Distributions accumulated from and including December 15, 1996.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be required
to accept for exchange, or to exchange, any Old Capital Securities for any
Exchange Capital Securities, and, as described below, may terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been accepted
for exchange) or may waive any conditions to or amend the Exchange Offer, if any
of the following conditions have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation
by the staff of the Commission which permits the Exchange Capital
Securities issued pursuant to the Exchange Offer in exchange for Old
Capital Securities to be offered for resale, resold and otherwise
transferred by holders thereof (other than broker-dealers and any such
holder which is an "affiliate" of the Company or the Trust within the
meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities
Act provided that such Exchange Capital Securities are acquired in the
ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the
distribution of such Exchange Capital Securities; or
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(b) any law, statute, rule or regulation shall have been
adopted or enacted which, in the judgment of the Company or the Trust,
would reasonably be expected to impair its ability to proceed with the
Exchange Offer; or
(c) a stop order shall have been issued by the Commission or
any state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been initiated or, to
the knowledge of the Company or the Trust, threatened for that purpose
or any governmental approval has not been obtained, which approval the
Company or the Trust shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Company or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company or the Trust
will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Capital
Securities and will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent by registered or certified mail or by hand or overnight
delivery as follows:
By Registered or Certified Mail or Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street, Room 234
North Building
New York, New York 10041
Attention: Carlos Esteves
Confirm By Telephone: (212) 638-0828
Facsimile Transmissions: (212) 638-7375 or (212) 344-9367
Delivery to other than the above addresses or facsimile numbers will
not constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Capital Securities, and in
handling or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Old Capital
Securities tendered, or if a transfer tax is
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imposed for any reason other than the exchange of Old Capital Securities in
connection with the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer Trustees has
issued the Capital Securities and the Common Securities and will issue the
Exchange Capital Securities pursuant to the Exchange Offer. The Exchange Capital
Securities will represent preferred beneficial interests in the Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption of the Trust
Securities or liquidation of the Trust over the Common Securities. See "--
Subordination of Common Securities." The Trust Agreement has been qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
This summary of certain provisions of the Exchange Capital Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms.
GENERAL
The Capital Securities (including the Old Capital Securities and the
Exchange Capital Securities) are limited to $200,000,000 aggregate Liquidation
Amount at any one time outstanding. The Capital Securities will rank pari passu,
and payments will be made thereon pro rata, with the Common Securities except as
described under "Subordination of Common Securities." Legal title to the Junior
Subordinated Debentures will be held by the Property Trustee in trust for the
benefit of the holders of the Capital Securities and Common Securities. The
Guarantee executed by the Company for the benefit of the holders of the Exchange
Capital Securities (the "Guarantee") will be a guarantee on a subordinated basis
but will not guarantee payment of Distributions or amounts payable on redemption
of the Capital Securities or on liquidation of the Trust when the Trust does not
have funds on hand available to make such payments. See "Description of
Guarantee."
DISTRIBUTIONS
Distributions on the Exchange Capital Securities will be cumulative,
will accumulate from December 15, 1996 and will be payable at the annual rate of
8.16% of the Liquidation Amount, and will be payable semi-annually in arrears on
June 15 and December 15 of each year, commencing June 15, 1997, to the holders
of the Exchange Capital Securities on the relevant record dates. The record
dates will be the first day of the month in which the relevant Distribution Date
(as defined below) occurs. 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 Capital Securities
is not a Business Day (as defined below), payment of the Distribution 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 to any such delay), 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 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
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
So long as no Debenture Event of Default 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
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time for a period not exceeding 10 consecutive semi-annual periods with respect
to each Extension Period, provided that no Extension Period may end on a date
other than an interest payment date or extend beyond the Stated Maturity. As a
consequence of any such election, semi-annual Distributions on the Capital
Securities will be deferred by the Trust during any such Extension Period.
Distributions to which holders of the Capital Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of 8.16%
thereof, compounded semi-annually from the relevant Distribution Date, but not
exceeding the interest rate then accruing on the Junior Subordinated Debentures.
The term "Distributions" as used herein shall include any such additional
Distributions. 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 (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including Other Debentures) 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 (including Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in common stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee and (d) 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). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period, provided
that such extension does not cause such Extension Period to exceed 10
consecutive semi-annual periods or to extend beyond the Stated Maturity. Upon
the termination of any such Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. The Company must give the Property Trustee, the
Administrators and the Debenture Trustee notice of its election of any such
Extension Period at least five Business Days prior to the earlier of (i) the
date the Distributions on the Capital Securities would have been payable except
for the election to begin such Extension Period or (ii) the date the
Administrators are required to give notice to any automated quotation system or
to holders of such Capital Securities of the record date or the date such
Distributions are payable but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Company may elect to begin an Extension Period. See "Description of Exchange
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "Description of Exchange Debentures -
General." 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 Capital Securities. The payment of Distributions (if
and to the extent the Trust has funds available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by the
Company on a subordinated basis as set forth herein under "Description of
Guarantee."
REDEMPTION
Upon the repayment in full at the Stated Maturity or prepayment in
whole (but not in part) of the Junior Subordinated Debentures, the proceeds from
such repayment or prepayment shall be applied by the Property Trustee to redeem
the Trust Securities, upon not less than 15 nor more than 60 days' notice of a
date of redemption (the "Redemption Date"), at the applicable Redemption Price,
which shall be equal to (i) in the case of the repayment of the Junior
Subordinated Debentures at the Stated Maturity, the Maturity Redemption Price
(equal to the principal of, and accrued interest on, the Junior Subordinated
Debentures), (ii) in the case of the prepayment of the Junior Subordinated
Debentures upon the occurrence and continuation of a Tax Event, Investment
Company Event or Capital Treatment Event, the Event Redemption Price (which is
equal to the Event Prepayment Price in respect of the Junior Subordinated
Debentures) (see "Description of Junior Subordinated Debentures - Tax Event,
Investment Company Event or Capital Treatment Event Prepayment") and (iii) in
the case of the optional prepayment of the
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Junior Subordinated Debentures, the Optional Redemption Price (equal to the
Optional Prepayment Price in respect of the Junior Subordinated Debentures). See
"Description of Exchange Debentures -- Optional Prepayment."
Upon the optional prepayment in part of the Junior Subordinated
Debentures on or after December 15, 2006, the proceeds from such prepayment
shall be applied by the Property Trustee to redeem Trust Securities upon not
less than 15 nor more than 60 days' notice of a date of redemption (the
"Redemption Date"), at the Optional Redemption Price. The Trust Securities to be
redeemed shall be selected by the Company pro rata, by lot or by any other
method determined by the Trustees to be equitable.
The Company will have the right to prepay the Junior Subordinated
Debentures in whole or in part (i) on or after December 15, 2006, in whole at
any time or in part from time to time at the applicable Optional Prepayment
Price (as defined under "Description of Exchange Debentures - Optional
Prepayment"), and (ii) at any time, in whole (but not in part) upon the
occurrence of a Tax Event, Investment Company Event or Capital Treatment Event,
at the Event Prepayment Price, in each case subject to receipt of prior approval
by the Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
Under regulations of the Federal Reserve, any perpetual preferred
securities with a feature permitting redemption at the option of the issuer can
qualify as Tier 1 capital only if the redemption is subject to prior approval of
the Federal Reserve. Therefore, any redemption of the Junior Subordinated
Debentures and attendant redemption of the Capital Securities will be subject to
the prior approval of the Federal Reserve if such regulations have not been
revised. Under current policies, the Federal Reserve may grant approval of a
redemption without a formal application or notice if (1) the redemption,
together with other redemptions and repurchases of securities in the preceding
12 months, constitutes less than 10% of the bank holding company's net worth or
(2) both before and after the redemption, the bank holding company is
well-capitalized and highly-rated.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF EXCHANGE DEBENTURES
The Company will have the right upon the occurrence of a Tax Event,
Investment Company Event or Capital Treatment Event to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Company having received prior approval of the Federal Reserve if
then required under applicable capital guidelines or policies of the Federal
Reserve and subject to the Company having received an opinion of counsel to the
effect that such distribution will not be a taxable event to holders of Capital
Securities.
Under current United States Federal income tax law and interpretations
and assuming, as expected, the Trust is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures will not be a taxable event
to holders of the Capital 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 Capital Securities. See
"Certain Federal Income Tax Consequences -- Distribution of Junior Subordinated
Debentures to Holders of Capital Securities."
The Trust shall automatically dissolve and its affairs shall be wound
up upon the first to occur of: (i) certain events of bankruptcy, a receivership
of the Company or the Bank, or dissolution of liquidation of the Company; (ii)
the written direction to the Property Trustee from the Depositor to dissolve the
Trust upon the occurrence of a Tax Event, Investment Company Event or Capital
Treatment Event; (iii) redemption of all of the Trust Securities as described
above under "- Redemption"; (iv) expiration of the term of the Trust; and (v)
the entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If an early dissolution occurs as described in clause (i), (ii) (iv),
or (v) above, the Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities
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a Like Amount (as defined below) of the Exchange 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 liquidation of the
assets of the Trust available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the Liquidation Amount plus 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 has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Capital Securities shall be paid on a pro rata basis. The holder(s) of the
Common Securities will be entitled to receive distributions upon any such
liquidation pro rata with the holders of the Capital Securities, except that if
a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a priority over the Common Securities. See "--
Subordination of Common Securities." If an early termination occurs as described
in clause (v) above, the Junior Subordinated Debentures will be subject to
optional prepayment in whole (but not in part).
"Like Amount" means Exchange Debentures having a principal amount equal
to the Liquidation Amount of the Trust Securities of the holder to whom such
Exchange Debentures are distributed.
If the Company elects not to prepay the Junior Subordinated Debentures
prior to the Stated Maturity and if there is no early dissolution of the Trust,
the Capital Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures at the Stated Maturity.
After the liquidation date is fixed for any distribution of Exchange
Junior Subordinated Debentures to holders of the Trust Securities (i) the
Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Capital Securities, will receive a
registered global certificate or certificates representing the Exchange
Debentures to be delivered upon such distribution and (iii) any certificates
representing Capital Securities not held by DTC or its nominee will be deemed to
represent Exchange Debentures having a principal amount equal to the Liquidation
Amount of such Capital Securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on such Capital Securities
until such certificates are presented to the Property Trustee or their agent for
cancellation whereupon the Company will issue to such holder, and the Debenture
Trustee will authenticate, a certificate representing such Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the Exchange
Capital Securities or the Exchange Debentures that may be distributed in
exchange for the Trust Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Exchange Capital Securities that an investor may
purchase, or the Exchange Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Exchange Capital Securities offered
hereby.
REDEMPTION PROCEDURES
Trust Securities shall be redeemed, if at all, at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Exchange Debentures. Redemptions of the Trust Securities shall
be made and the applicable Redemption Price shall be payable on the Redemption
Date only to the extent that the Trust has funds on hand available for the
payment of such applicable Redemption Price. See "-- Subordination of Common
Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, with respect to the Capital Securities held in
global form, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the applicable Redemption Price to the holders
of the Capital Securities. See "-- Form, Denomination, Book-Entry Procedures and
Transfer" and "- Payment and Paying Agency." With respect to the Capital
Securities held in certificated form, the Property Trustee, to the extent funds
are available, will irrevocably deposit with the paying agent for the Capital
Securities funds sufficient to pay the applicable Redemption Price and will give
such paying agent irrevocable instructions and
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authority to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Capital Securities. See "--
Payment and Paying Agency." Notwithstanding the foregoing, Distributions payable
on or prior to the Redemption Date shall be payable to the holders of such
Capital Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of the
Exchange Capital Securities will cease, except the right of the holders of the
Exchange Capital Securities to receive the applicable Redemption Price, but
without interest on such Redemption Price, and the Exchange Capital Securities
will cease to be outstanding. In the event that any date fixed for redemption of
Exchange Capital Securities is not a Business Day, then payment of the
applicable Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay). In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee as described
under "Description of Guarantee," Distributions on Capital Securities will
continue to accrue at the then applicable rate, from the Redemption Date
originally established by the Trust to the date such applicable Redemption Price
is actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the applicable Redemption Price.
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 Capital Securities by tender, in the open
market or by private agreement.
Payment of the applicable Redemption Price on, and any distribution of
Junior Subordinated Debentures to holders of, the Trust Securities shall be made
to the applicable recordholders thereof as they appear on the register therefor
on the relevant record date, which shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable.
Notice of any redemption will be mailed at least 15 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities at
its registered address. Unless the Company defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date Distributions will cease to accrue on the Trust
Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amounts of the Capital Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or applicable Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions on all of the outstanding
Capital Securities for all Distribution periods terminating on or prior thereto,
or in the case of payment of the applicable Redemption Price the full amount of
such Redemption Price on all of the outstanding Capital Securities, 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 Capital Securities then due and payable.
In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, 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 until the effect of all such Events of Default have been
cured, waived or otherwise eliminated. Until any such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Capital Securities and not on behalf of
the Company as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
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EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an Event of Default under
the Trust Agreement (an "Event of Default") (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):
(i) the occurrence of a Debenture Event of Default (see "Description of
Exchange Debentures - Debenture Events of Default"); or
(ii) default by 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
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust 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 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 addressed 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 Issuer Trustee or Trustees by
the holders of at least 25% in aggregate Liquidation Amount of the outstanding
Capital Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" 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 Capital Securities, the
Administrators and the Company, as Depositor, unless such Event of Default shall
have been cured or waived. The Company, as Depositor, and the Administrators 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 a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a preference over the Common Securities upon
termination of the Trust as described above. See "-- Liquidation of the Trust
and Distribution of Junior Subordinated Debentures."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer Trustee may be removed at any time by the holder of the
Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at such
time by the holders of a majority in Liquidation Amount of the outstanding
Capital Securities. In no event will the holders of the Capital Securities have
the right to vote to appoint, remove or replace the Administrators, which voting
rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
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Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust's
property may at the time be located, the Company, as the holder of the Common
Securities, and the Administrators shall have power to appoint one or more
persons either to act as a co-trustee, jointly with the Property Trustee, of all
or any part of such Trust's property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrator 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 Issuer Trustee shall be a party, or
any entity succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under the
Trust Agreement, provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity, except as
described below or pursuant to a liquidation as described above in "-Liquidation
of the Trust and Distribution of Exchange Debentures." The Trust may, at the
request of the Company, as Depositor, with the consent of the Administrators but
without the consent of the holders of the Capital Securities, merge with or
into, consolidate, amalgamate, or be replaced by or 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 with respect to
the Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Capital Securities are then listed, if any, (iv) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Capital 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 Capital 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 Company has
received an opinion from independent counsel to the Trust experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Capital Securities (including
any Successor Securities) in any material respect, and (b) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and (viii) the Company or any permitted successor or
assignee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace
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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. In
addition, the Property Trustee will be required pursuant to the Indenture to
exchange, as a part of the Exchange Offer, the Junior Subordinated Debentures
for the Exchange Debentures, which have terms identical in all material respects
to the Junior Subordinated Debentures except for the transfer restrictions under
the Securities Act and the provision for an increase in the interest rate
thereon under certain circumstances.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee -
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company and
the Issuer Trustees, without the consent of the holders of the Trust Securities
(i) 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 (ii) to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as shall be necessary to ensure that the Trust
will be classified for United States Federal income tax purposes as a grantor
trust at all times that any Trust Securities are outstanding or to ensure that
the Trust will not be required to register as an "investment company" under the
Investment Company Act; provided, however, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
holder of Trust Securities, and any amendments of the Trust Agreement shall
become effective when notice thereof is given to the holders of the Trust
Securities. The Trust Agreement may be amended by the Issuer Trustees and the
Company with (i) the consent of holders representing not less than a majority
(based upon Liquidation Amounts) of the outstanding Trust Securities, and (ii)
receipt by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Trust's status as a grantor
trust for United States Federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company Act,
provided that without the consent of each holder of Trust Securities, the 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 date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Trust,
the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on such 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 Capital
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Capital Securities. The Issuer Trustees
shall not revoke any action previously authorized or approved by a vote of the
holders of the Capital Securities except by subsequent vote of such holders. The
Property Trustee shall notify each holder of Capital Securities of any notice of
default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of such holders of the Capital Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that the Trust
will not be classified as an association taxable as a corporation for United
States Federal income tax purposes on account of such action.
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Any required approval of holders of Capital Securities may be given at
a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the Trust
Agreement.
No vote or consent of the holders of Capital Securities will be
required for the Trust to redeem and cancel the Capital Securities in accordance
with the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Company, the Issuer Trustees or any
affiliate of the Company or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Capital Securities may be represented by one or more
Exchange Capital Securities in registered, global form (collectively, the
"Global Capital Securities"). The Global Capital Securities will be deposited
upon issuance with the Property Trustee as custodian for DTC, in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below.
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial
Purchasers with beneficial interests in the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Capital Securities).
Investors in the Restricted Global Capital Securities may hold their
interests therein directly through DTC if they are participants in such system,
or indirectly through organizations which are participants in such system.
Investors in the Regulation S Global Capital Securities must initially hold
their interests therein through Euroclear or CEDEL, if they are participants in
such systems, or indirectly through organizations which are participants in such
systems. Euroclear and CEDEL will hold interests in the Regulation S Global
Capital Securities on behalf of
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their participants through customers' securities accounts in their respective
names on the books of their respective depositaries, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of CEDEL. The depositaries, in turn, will hold such
interests in the Regulation S Global Capital Securities in customers' securities
accounts in the depositaries' names on the books of DTC. All interest in a
Global Capital Security, including those held through Euroclear or CEDEL, may be
subject to the procedures and requirements of DTC. Those interests held through
Euroclear or CEDEL may also be subject to the procedures and requirements of
such system. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Capital
Security to pledge such interests to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such interests, may
be affected by the lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the Capital Securities, see
"-Exchange of Book-Entry Capital Securities for Certificated Capital
Securities," "-Exchange of Certificated Capital Securities for Book-Entry
Capital Securities" and "-Exchanges between Regulation S Capital Securities and
Rule 144A Capital Securities," below.
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Trust
Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating to
the beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the Company
that its current practice, upon receipt of any payment in respect of securities
such as the Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Capital
Securities will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants and
will not be the responsibility of DTC, the Property Trustee or the Trust.
Neither the Trust nor the Property Trustee will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the Capital
Securities, and the Trust and the Property Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
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Subject to compliance with the transfer restrictions applicable to the
Capital Securities described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or CEDEL participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Capital Securities in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and CEDEL
participants may not deliver instructions directly to the depositaries for
Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear
or CEDEL participant purchasing an interest in a Global Capital Security from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear or
CEDEL as a result of sales of interest in a Global Capital Security by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
aggregate Liquidation Amount of the Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Trust Agreement, DTC reserves the right to
exchange the Global Capital Securities for legended Capital Securities in
certificated form and to distribute such Capital Securities to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Trust and the
Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interest in the Regulation S Global
Capital Securities among participants in DTC, Euroclear and CEDEL, they are
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trust nor the
Property Trustee will have any responsibility for the performance by DTC,
Euroclear or CEDEL or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion elects to cause the issuance of the Capital
Securities in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default under the Trust Agreement. In all cases,
certificated Capital Securities delivered in exchange for any Global Capital
Security or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
Depositary (in accordance with its customary procedures) and will bear in the
case of the Restricted Global Capital Security the
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restrictive legend referred to in "Notice to Investors," unless the Property
Trustee determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED CAPITAL SECURITIES FOR BOOK-ENTRY CAPITAL SECURITIES
Other Capital Securities which will be issued in certificated form, may
not be exchanged for beneficial interests in any Global Capital Security unless
such exchange occurs in connection with a transfer of such Other Capital
Securities and the transferor first delivers to the Property Trustee a written
certificate (in the form provided in the Trust Agreement) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Capital Securities as set forth in Annex A hereto.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities held in global form shall
be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates or in respect of the Capital
Securities that are not held by the Depositary, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address shall
appear on the register. The paying agent (the "Paying Agent") shall initially be
the Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrators and the Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Property
Trustee and the Company. In the event that the Property Trustee shall no longer
be the Paying Agent, the Administrators shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrators and the Company) to
act as Paying Agent.
RESTRICTIONS ON TRANSFER
The Capital Securities will be issued, and may be transferred, only in
blocks having a Liquidation Amount of not less than $100,000 (100 Capital
Securities) and multiples of $1,000 (1 Capital Security) in excess thereof. Any
attempted transfer, sale or other disposition of Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be void and
of no legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Capital Securities for any purpose, including but not limited to
the receipt of Distributions on such Capital Securities, and such transferee
shall be deemed to have no interest whatsoever in such Capital Securities.
RATING
The Capital Securities have been rated "BBB" by Standard & Poor's
Rating Services and "Baa1" by Moody's Investor Services, Inc.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Capital Securities.
Registration of transfers of the Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Capital Securities after they have been called
for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the 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
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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 Trust Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. If no Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative courses 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 the Capital Securities or the Common Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrators are authorized and directed to conduct the affairs
of and to operate the Trust in such a way that the Trust will not be deemed to
be an "investment company" required to be registered under the Investment
Company Act or classified as an association taxable as a corporation for United
States Federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
Federal income tax purposes. In this connection, the Company and the
Administrators are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Trust Agreement,
that the Company and the Administrators determine in their discretion to be
necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Trust
Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any
of its assets.
DESCRIPTION OF EXCHANGE DEBENTURES
The Old Junior Subordinated Debentures were issued, and the Exchange
Debentures will be issued, as a separate series under the Indenture. The
Indenture has been qualified under the Trust Indenture Act. This summary of
certain terms and provisions of the Junior Subordinated Debentures and the
Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
GENERAL
Concurrently with the issuance of the Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Old Junior Subordinated Debentures issued
by the Company. Pursuant to the Exchange Offer, the Company will exchange the
Old Junior Subordinated Debenture in an amount corresponding to the Old Capital
Securities accepted for exchange, for a like principal amount of Exchange
Debentures. The Exchange Debentures will bear interest at the annual rate of
8.16% of the principal amount thereof, payable semi-annually in arrears on the
fifteenth day of June and December of each year (each, an "Interest Payment
Date"), commencing June 15, 1997, to the person in whose name each Exchange
Junior 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, each
Exchange Junior Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Exchange
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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) 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 8.16% thereof, compounded
semi-annually. The term "interest" as used herein shall include semi-annual
interest payments, interest on semi-annual interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined below), as
applicable.
The Exchange Debentures will be issued as a series of junior
subordinated debentures under the Indenture. The Exchange Debentures will mature
on December 15, 2026.
The Exchange Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Indebtedness of the Company.
Because the Company is a bank holding company, the right of the Company to
participate in any distribution of assets of any subsidiary, including Crestar
Bank, upon such subsidiary's liquidation or reorganization or otherwise (and
thus the ability of holders of the Capital Securities to benefit indirectly from
such distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be recognized as a
creditor of that subsidiary. Claims on the Company's subsidiaries by creditors
other than the Company include long-term debt and substantial obligations in
respect of federal funds purchased, securities sold under repurchase agreements
and certain other short-term borrowings, as well as deposit liabilities.
Accordingly, the Exchange Debentures will be subordinated to all Senior
Indebtedness of the Company and effectively subordinated to all existing and
future liabilities of the Company's subsidiaries, and holders of Exchange
Debentures should look only to the assets of the Company for payments on the
Exchange Debentures. The Indenture does not limit the incurrence or issuance of
other secured or unsecured debt of the Company, including Senior Indebtedness
whether under the Indenture or any existing or other indenture that the Company
may enter into in the future or otherwise, including the Company's Subordinated
Indentures entered into with The Chase Manhattan Bank (formerly known as
Chemical Bank). See "-- Subordination."
DENOMINATIONS, REGISTRATION AND TRANSFER
The Exchange Debentures will be represented by one or more certificates
registered in the name of The Chase Manhattan Bank as Property Trustee of the
Trust. If distributed to holders of Capital Securities in connection with a Tax
Event, Investment Company Event or Capital Treatment Event, the Exchange
Debentures will be represented by one or more global certificates registered in
the name of Cede & Co. as the nominee of DTC. Beneficial interests in the
Exchange Debentures will be shown on, and transfers thereof will be effected
only through, records maintained by participants in DTC. The global certificates
shall be exchangeable for Exchange Debentures in certificated form registered in
the names of persons other than Cede & Co. only if (i) DTC notifies the Company
that it is unwilling or unable to continue as a depositary for such global
security, or if at any time DTC ceases to be a "clearing agency" registered
under the Exchange Act, at a time when DTC is required to be so registered to
act as such depositary, and no successor depositary shall have been appointed by
the Company within 90 days (ii) the Company in its sole discretion determines
that such global security shall be so exchangeable, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for certificates registered in such names as DTC shall direct. It is expected
that such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Exchange Debentures are issued in certificated form,
such Exchange Debentures will be in minimum denominations of $100,000 and
integral multiples of $1,000 in excess thereof and may be transferred or
exchanged only in such minimum denominations and in the manner and at the
offices described below.
Payments on Exchange Debentures represented by a global security will
be made to DTC, as the depositary for the Exchange Debentures. In the event
Exchange Debentures are issued in certificated form, principal and interest will
be payable, the transfer of the Exchange Debentures will be registrable, and
Exchange Debentures will be exchangeable for Exchange Debentures of other
denominations of a like aggregate principal amount, at the
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corporate office of the Debenture Trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by the 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 or by wire transfer. In
addition, if the Exchange Debentures are issued in certificated form, the record
dates for payment of interest will be the first day of the last month of each
semi-annual period.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of Exchange Capital Securities Form,
Denomination, Book-Entry Procedures and Transfer." If the Exchange Debentures
are distributed to the holders of the Trust Securities upon the termination of
the Trust, the form, denomination, book-entry and transfer procedures with
respect to the Capital Securities as described under "Description of Exchange
Capital Securities -Form, Denomination, Book-Entry Procedures and Transfer,"
shall apply to the Exchange Debentures mutatis mutandis.
PAYMENT AND PAYING AGENTS
Payment of principal of (and premium, if any) and any interest on
Exchange Debentures will be made at the office of the Debenture Trustee in the
City of New York or at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that at the option of the
Company payment of any interest may be made, except in the case of Exchange
Debentures in global form, (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the register for Exchange
Debentures or (ii) by transfer to an account maintained by the Person entitled
thereto as specified in such register, provided that proper transfer
instructions have been received by the relevant Record Date.
Payment of any interest on any Junior Subordinated Debenture will be
made to the Person in whose name such Junior Subordinated Debenture is
registered at the close of business on the Record Date for such interest, except
in the case of defaulted interest. The 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 Exchange Debentures.
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 (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.
OPTION TO DEFER INTEREST PAYMENTS
So long as no Debenture Event of Default has occurred or is continuing,
the Company 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 10 consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period may end
on a date other than an interest payment date or extend beyond the Stated
Maturity. At the end of such Extension Period, the Company must pay all interest
then accrued and unpaid (together with interest thereon at the annual rate of
8.16%, compounded semi-annually, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and holders of
Junior Subordinated Debentures (and holders of the Capital Securities while
Capital Securities are outstanding) will 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 (which includes common and
preferred
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stock) 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 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 than (a) dividends or
distributions in common stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, and (d) 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). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and the payment of all amounts then due
on any Interest Payment Date, 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 Administrators and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrators are required to
give notice to any applicable self-regulatory organization or to holders of
Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to such record
date. The Administrators shall give notice of the Company's election to begin or
extend a new Extension Period to the holders of the Capital Securities. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period.
OPTIONAL PREPAYMENT
The Exchange Debentures will be prepayable, in whole or in part, at the
option of the Company at any time on or after December 15, 2006, subject to the
Company having received prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve, at a
prepayment price (the "Optional Prepayment Price") equal to the percentage of
the outstanding principal amount of the Junior Subordinated Debentures specified
below, plus, in each case, accrued interest thereon to the date of prepayment:
December 15, 2006 to December 14, 2007: 104.080%
December 15, 2007 to December 14, 2008: 103.672%
December 15, 2008 to December 14, 2009: 103.264%
December 15, 2009 to December 14, 2010: 102.856%
December 15, 2010 to December 14, 2011: 102.448%
December 15, 2011 to December 14, 2012: 102.040%
December 15, 2012 to December 14, 2013: 101.632%
December 15, 2013 to December 14, 2014: 101.224%
December 15, 2014 to December 14, 2015: 100.816%
December 15, 2015 to December 14, 2016: 100.408%
On or after December 15, 2016: 100.000%
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TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT PREPAYMENT
If a Tax Event, Investment Company Event or Capital Treatment Event (as
defined below) shall occur and be continuing, the Company may, at its option and
subject to receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve, prepay
the Junior Subordinated Debentures in whole (but not in part) at any time within
90 days of the occurrence of such Tax Event, Investment Company Event or Capital
Treatment Event, at a prepayment price (the "Event Prepayment Price") equal to
the greater of (i) 100% of the principal amount of such Junior Subordinated
Debentures or (ii) as determined by a Quotation Agent (as defined below), the
sum of the present values of the principal amount and premium that would be
payable as part of the Redemption Price with respect to an optional redemption
of such Junior Subordinated Debentures on December 15, 2006, together with the
present values of scheduled payments of interest from the prepayment date to
December 15, 2006 (the "Remaining Life"), in each case discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
interest thereon to but excluding the date of prepayment. However, if the
Company prepays Junior Subordinated Debentures as a result of a Tax Event,
Investment Company Event or Capital Treatment Event which occurs on or after
December 15, 2006, then the Event Prepayment Price shall be the Optional
Prepayment Price that would be payable on optional redemption of the Junior
Subordinated Debentures on the date of prepayment, which includes interest to
the date of prepayment.
"Adjusted Treasury Rate" means, with respect to any prepayment date,
the Treasury Rate plus (i) 1.00% if such prepayment date occurs on or before
December 15, 1997 or (ii) 0.50% if such prepayment date occurs after December
15, 1997.
"Treasury Rate" means (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities", for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date. The Treasury Rate shall be calculated on the third
Business Day preceding the prepayment date.
"Comparable Treasury Issue" means with respect to any prepayment date
the United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after December 15, 2006, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Quotation Agent" means Morgan Stanley & Co. Incorporated.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co.
Incorporated, Lehman Brothers Inc. and UBS Securities LLC and their respective
successors; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer;
and (ii) any other Primary Treasury Dealer selected by the Debenture Trustee
after consultation with the Company.
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"Comparable Treasury Price" means (A) the average of five Reference
Treasury Dealer Quotations for such prepayment date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Liquidation Amount" means the stated amount of $1,000 per Capital
Security.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.
on the third Business Day preceding such prepayment date.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
"Tax Event" means the receipt by the Company and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement 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 Issue Date, there
is more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States Federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the 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 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.
"Capital Treatment Event" means the reasonable determination by the
Company that, as a result of the occurrence 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 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 pronouncement, action or decision
is announced on or after the date of issuance of the Capital Securities under
the Trust Agreement, there is more than an insubstantial risk that the Company
will not be entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or 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
will be considered an investment company that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Capital
Securities.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Company defaults
in payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Junior Subordinated Debentures called for prepayment.
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If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will also pay any
Additional Sums on the Junior Subordinated Debentures.
RESTRICTIONS ON CERTAIN PAYMENTS
The Company will also covenant 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 (which includes common and
preferred stock) or (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
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 than (a) dividends or distributions in common stock of the Company, (b)
any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee and (d) 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) if at such time (i) there shall have
occurred any event of which the Company has actual knowledge that (a) with the
giving of notice or the lapse of time, or both, would constitute a "Debenture
Event of Default" and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) if such Junior Subordinated Debentures are held
by the Trust, the Company shall be in default with respect to its payment of any
obligations under the Guarantee or (iii) the Company shall have given notice of
its election of an Extension Period as provided in the Indenture 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 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 Junior
Subordinated Debentures or the holders of Capital Securities so long as they
remain outstanding) and qualifying, or maintaining 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 Junior Subordinated Debentures to execute supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of such Indenture or modifying the rights of the holders of Junior
Subordinated Debentures of each such series, provided that no such supplemental
indenture may (i) change the fixed maturity of any Junior Subordinated
Debentures, or reduce the rate or extend the time of payment of any interest
thereon or on any overdue principal amount, or reduce the principal amount
thereof, or reduce any amount payable upon any redemption thereof, or change the
currency of payment of principal of or any interest thereon or on any overdue
principal amount, without the consent of the holder of each Junior Subordinated
Debenture so affected, (ii) reduce the aforesaid percentage of Junior
Subordinated Debentures, the holders of which are required to consent to any
such supplemental indenture, (iii) modify certain provisions of the Indenture
relating to waiver of compliance with covenants, waiver of defaults or
modification of the Indenture, except to increase the percentage of holders
required for such waiver or modification, or (iv) modify the provisions of the
Indenture with respect to the subordination of outstanding Junior Subordinated
Debentures of any series in a manner adverse to the holders thereof without
consent of the holders of all outstanding Junior Subordinated Debentures under
such Indenture; provided further that, so long as any of the Capital Securities
remain outstanding, no such modification may be made that adversely affects the
holders of such Capital Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Event of Default or compliance
with any covenant under the Indenture may be effective, without the prior
consent of the holders of at least a majority of the aggregate liquidation
preference of such Capital Securities unless and until the principal of the
underlying
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Junior Subordinated Debentures and all accrued and unpaid interest thereon have
been paid in full and certain other conditions are satisfied.
In addition, the Company and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
DEBENTURE EVENTS OF DEFAULT
A Debenture Event of Default with respect to the Junior Subordinated
Debentures is defined in the Indenture as being: (a) default for 30 days in
payment of any installment of interest on the Junior Subordinated Debentures
(subject to the deferral of any due date in the case of an Extension Period);
(b) default in payment of any principal or premium, if any, on Junior
Subordinated Debentures; (c) default by the Company in performance in any
material respect of any of the covenants or agreements in the Indenture
specifically contained therein for the benefit of the Junior Subordinated
Debentures which shall not have been remedied for a period of 60 days after
written notice to the Company by the Debenture Trustee or to the Company and the
Debenture Trustee by the holders of not less than 25% in principal amount of the
Junior Subordinated Debentures outstanding; or (d) certain events of bankruptcy,
insolvency or reorganization of the Company or the Bank.
The Indenture provides that if a Debenture Event of Default under
clause (a), (b) or (c) above shall have occurred and be continuing either the
Debenture Trustee or the holders of not less than 25% in principal amount of the
then outstanding Junior Subordinated Debentures may declare the principal of all
the Junior Subordinated Debentures together with any accrued interest, to be due
and payable immediately. Should the Debenture Trustee or holders of such Junior
Subordinated Debentures fail to make such declaration, the holders of at least
25% in aggregate liquidation preference of the Capital Securities shall have
such right. The Indenture also provides that if a Debenture Event of Default
under clause (d) above shall have occurred and be continuing, the Junior
Subordinated Debentures shall be declared due and payable. Should the Debenture
Trustee or such holders of such Junior Subordinated Debentures fail to make such
declaration, the holders of at least 25% in aggregate liquidation preference of
the Capital Securities shall have such right. Upon certain conditions, such
declaration (including a declaration caused by a default in the payment of
principal or interest, the payment for which has subsequently been provided) may
be annulled by the holders of a majority in principal amount of the Junior
Subordinated Debentures. Should the holders of the Junior Subordinated
Debentures fail to annul such declaration and waive such default, the holders of
a majority in aggregate liquidation preference of the Capital Securities shall
have such right. In addition, past defaults may be waived by the holders of a
majority in principal amount of the Junior Subordinated Debentures, except a
default in the payment of principal of or interest on the Junior Subordinated
Debentures or in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of the holder of each Junior
Subordinated Debenture so affected. Should the holders of the Junior
Subordinated Debentures fail to waive such default, the holders of a majority in
aggregate liquidation preference of the Capital Securities shall have such
right.
The Indenture contains a provision entitling the Debenture Trustee,
subject to the duty of the Debenture Trustee during default to act with the
required standard of care, to be indemnified by the holders of Junior
Subordinated Debentures issued under the Indenture before proceeding to exercise
any right or power under the Indenture at the request of such holders. The
Indenture also provides that the holders of a majority in principal amount of
the outstanding Junior Subordinated Debentures issued thereunder may direct the
time, method and place of conducting any proceeding for any remedy available to
the Debenture Trustee, or exercising any trust or power conferred on the
Debenture Trustee.
The Indenture contains a covenant that the Company will file annually
with the Debenture Trustee a certificate as to the absence of any default or
specifying any default that exists.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
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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 Capital Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such related Junior Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the related Capital 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
Capital Securities. If the right to bring a Direct Action is removed following
the Exchange Offer, the Trust may become subject to reporting obligations under
the Securities Exchange Act of 1934, as amended. Notwithstanding any payments
made to a holder of Capital Securities by the Company in connection with a
Direct Action, the Company shall remain obligated to pay the principal of or
interest on the Junior Subordinated Debentures, and the Company shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the Capital Securities to the extent of any payments made by the
Company to such holder in any Direct Action.
The holders of the Capital Securities would 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 unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of Capital Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company may not merge or consolidate or
sell or convey all or substantially all of its assets unless (i) the successor
entity (if other than the Company) is a U.S. entity that assumes the Company's
obligations under such Indenture and on the Junior Subordinated Debentures
issued under such Indenture, and, after giving effect to such transaction, the
Company or the successor would not be in default under such Indenture; and (ii)
certain other conditions as prescribed in 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.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all 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 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 premium, if any) 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
obligations of the Company to make any payment of or on account of the principal
of and interest on the Junior Subordinated Debentures will be subordinate and
junior in right of payment to the Company's obligations to the holders of Senior
Indebtedness of the Company to the extent described in the next two paragraphs.
Senior Indebtedness of the Company with respect to the Junior Subordinated
Debentures will include the existing and future senior notes, senior
subordinated notes and subordinated notes of the Company and means (i) any
indebtedness of the Company for borrowed or purchased money, whether or not
evidenced by bonds, debentures, notes or other written instruments, (ii)
obligations under
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letters of credit, (iii) any indebtedness or other obligations of the Company
with respect to commodity contracts, interest rate and currency swap agreements,
cap, floor and collar agreements, currency spot and forward contracts, and other
similar agreements or arrangements designed to protect against fluctuations in
currency exchange or interest rates, and (iv) any guarantees, endorsements
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business) or other similar contingent obligations in respect
of obligations of others of a type described in (i), (ii) or (iii) above,
whether or not such obligation is classified as a liability on a balance sheet
prepared in accordance with generally accepted accounting principles, in each
case listed in (i), (ii), (iii) and (iv) above, whether outstanding on the date
of execution of the Indenture or thereafter incurred, other than obligations
"ranking on a parity" with the Junior Subordinated Debentures or "ranking
junior" to the Junior Subordinated Debentures (as those terms are defined in the
Indenture); provided, however, that the Junior Subordinated Debentures will not
be subordinate and junior in right of payment to trade creditors. As of
September 30, 1996, there was $4.8 billion of Senior Indebtedness of the Company
outstanding. The Indenture does not limit the amount of future increase in
Senior Indebtedness of the Company. The Company expects from time to time to
issue additional indebtedness constituting Senior Indebtedness. For purposes of
this definition, "claim" shall have the meaning assigned thereto in Section
101(4) of the United States Bankruptcy Code of 1978, as amended.
No payments on account of principal (or premium, if any) 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.
In the case of any insolvency, receivership, conservatorship,
reorganization, readjustment of debt, marshalling of assets and liabilities or
similar proceedings or any liquidation or winding-up of or relating to the
Company as a whole, whether voluntary or involuntary, all obligations of the
Company to holders of Senior Indebtedness of the Company shall be entitled to be
paid in full before any payment shall be made on account of the principal of or
interest on the Junior Subordinated Debentures. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness of the Company, the holders of the Junior Subordinated Debentures,
together with the holders of any obligations of the Company ranking on a parity
with the Junior Subordinated Debentures, shall be entitled to be paid from the
remaining assets of the Company the amount at the time due and owing on account
of unpaid principal of and interest on the Junior Subordinated Debentures before
any payment or other distribution, whether in cash, property or otherwise, shall
be made on account of any capital stock or any obligations of the Company
ranking junior to the Junior Subordinated Debentures. By reason of such
subordination, in the event of the insolvency of the Company, holders of Senior
Indebtedness of the Company may receive more, ratably, and holders of the Junior
Subordinated Debentures having a claim pursuant to the Junior Subordinated
Debentures may receive less, ratably, than the other creditors of the Company.
Such subordination will not prevent the occurrence of any Event of Default in
respect of the Junior Subordinated Debentures.
RESTRICTIONS ON TRANSFER
The Exchange Debentures will be issued, and may be transferred only, in
minimum denominations of not less than $100,000 and multiples of $1,000 in
excess thereof. Any transfer, sale or other disposition of Exchange Debentures
in a denomination of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Exchange Debentures for any purpose, including but not limited to
the receipt of payments on such Exchange Debentures, and such transferee shall
be deemed to have no interest whatsoever in such Exchange Debentures.
GOVERNING LAW
The Indenture and the Exchange Debentures will be governed by and
construed in accordance with the laws of the State of New York except that the
rights and duties of the Trustee are governed by the laws of the State of the
Trustee's principal place of business.
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INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Following the Exchange Offer and the qualification of the Indenture
under the Trust Indenture Act, the Debenture Trustee shall have and be subject
to all the duties and responsibilities specified with respect to an indenture
trustee under the Trust Indenture Act. Subject to such provisions, the Debenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement was executed and delivered by the Company
concurrently with the issuance by the Trust of the Old Capital Securities for
the benefit of the holders from time to time of the Old Capital Securities. The
Guarantee Agreement also provides a Guarantee as herein described for the
Guarantee for the benefit of the holders from time to time of the Exchange
Capital Securities. The Guarantee Agreement has been qualified under the Trust
Indenture Act. The Chase Manhattan Bank acts as Guarantee Trustee. This summary
of certain provisions of the Guarantee Agreement 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 Agreement, including the definitions therein of
certain terms. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Exchange Capital Securities.
GENERAL
The Company has irrevocably agreed 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 Exchange Capital Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may have or
assert other than the defense of payment. The following payments with respect to
the Exchange Capital Securities, to the extent not paid by or on behalf of the
Trust (the "Guarantee Payments"), are subject to the Guarantee: (i) any accrued
and unpaid Distributions required to be paid on Capital Securities, to the
extent that the Trust has funds on hand available therefor at such time, (ii)
the applicable Redemption Price with respect to Capital Securities called for
redemption to the extent that the Trust has funds on hand available therefor at
such time, or (iii) upon a voluntary or involuntary termination, dissolution,
winding up or liquidation of the Trust, the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of the Trust remaining available for
distribution to holders of Capital Securities. 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 Exchange Capital Securities or by causing
the Trust to pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Exchange Capital Securities, but will apply
only to the extent that the Trust has funds sufficient to make such payments,
and is not a guarantee of collection. If the Company does not make interest
payments on Junior Subordinated Debentures held by the Trust, the Trust will not
be able to pay Distributions on its Capital Securities and will not have funds
legally available therefor. In such event, holders of the Capital Securities
would not be able to rely on the Guarantee for such payments.
The Guarantee ranks subordinate and junior in right of payment to all
liabilities of the Company, other than any liabilities which expressly by their
terms are made pari passu or subordinate to the obligations of the Company under
the Guarantee. See "-- 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
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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. Claims on the Company's subsidiaries by creditors
other than the Company include long-term debt and substantial obligations in
respect of federal funds purchased, securities sold under repurchase agreements
and certain other short-term borrowings, as well as deposit liabilities. There
are various legal limitations on the extent to which Crestar Bank, which is the
Company's principal subsidiary, may extend credit, pay dividends or otherwise
supply funds to the Company or its affiliates. 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. See "Crestar
Financial Corporation." The Guarantee does not limit the incurrence or issuance
of other secured or unsecured debt of the Company, including Senior
Indebtedness, whether under the Indenture, any other indenture that the Company
may enter into in the future or otherwise.
The Company has, through the Guarantee, the Guarantee Agreement, the
Exchange Trust Agreement, the Exchange Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed on
a subordinated basis all of the Trust's obligations under the Exchange Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Exchange Capital Securities. See "Relationship Among the Exchange Capital
Securities, the Exchange Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and
ranks subordinate and junior in right of payment to all liabilities of the
Company, other than any liabilities which expressly by their terms are made pari
passu or subordinate to the obligations of the Company under the Guarantee.
The Guarantee ranks pari passu with all Other Guarantees issued by the
Company. The Guarantee constitutes 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 Exchange Capital Securities. The
Guarantee will not be discharged except by payment of the Guarantee Payments in
full to the extent not paid by the Trust or upon distribution to the holders of
the Exchange Capital Securities or the Exchange Debentures. The Guarantee does
not place a limitation on the amount of additional Senior Indebtedness that may
be incurred by the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Exchange Capital Securities (in which case
no vote will be required), the Guarantee Agreement 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 Exchange Capital Securities. The manner
of obtaining any such approval will be as set forth under "Description of
Exchange Capital Securities - Voting Rights; Amendment of the Trust Agreement."
All guarantees and agreements contained in the Guarantee Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Exchange Capital Securities
then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
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Amount of the Exchange Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee
Agreement.
To the extent permitted by law, any holder of the Exchange Capital
Securities may institute a legal proceeding directly against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity.
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 Agreement.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Guarantee Agreement 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
case 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 expressly assumes the Company's obligations on the
Guarantee; (ii) immediately after giving effect thereto, no event of default
under the Guarantee Agreement, and no event which, after notice or lapse of time
or both, would become an event of default under the Guarantee Agreement, shall
have happened and be continuing; and (iii) certain other conditions as
prescribed in the Guarantee Agreement are met.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee
Agreement and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee Agreement at the request of any holder of the Exchange Capital
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the applicable Redemption Price of the Exchange Capital
Securities, upon full payment of the amounts payable upon liquidation of the
Trust or upon distribution of Exchange Debentures to the holders of the Exchange
Capital Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Exchange
Capital Securities must restore payment of any sums paid under the Exchange
Capital Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York; provided, however that the rights and duties of
the Guarantee Trustee shall be construed in accordance with the laws of the
State of the Guarantee Trustee's principal place of business.
THE EXPENSE AGREEMENT
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Pursuant to an 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 becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust, other than obligations of the Trust to pay to the holders of any
Trust Securities or other similar interests in the Trust of the amounts due such
holders pursuant to the terms of the Trust Securities or such other similar
interests, as the case may be.
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RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES,
THE EXCHANGE DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust 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 Guarantee." Taken together, the Company's
obligations under the Exchange Debentures, the Indenture, the Exchange Trust
Agreement, the Expense Agreement, the Guarantee Agreement and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Exchange Capital
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Exchange Capital Securities. If and to the extent that the Company does not make
payments on the Exchange Debentures, the Trust will not pay Distributions or
other amounts due on the Exchange Capital Securities. The Guarantee does not
cover payment of Distributions when the Trust does not have sufficient funds to
pay such Distributions. In such event, the remedy of a holder of Exchange
Capital Securities is to institute a Direct Action. The obligations of the
Company under the Guarantee are subordinate and junior in right of payment to
all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Exchange Debentures, such payments will be sufficient to cover Distributions
and other payments due on the Exchange Capital Securities, primarily because:
(i) the aggregate principal amount or Prepayment Price of the Exchange
Debentures will be equal to the sum of the aggregate Liquidation Amount or
Redemption Price, as applicable, of the Exchange Capital 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 Trust Securities; (iii) under the Expense
Agreement, the Company shall pay for all and any costs, expenses and liabilities
of the Trust except the Trust's obligations to holders of Trust Securities under
such Trust Securities; and (iv) the Exchange Trust Agreement further provides
that the Trust will not engage in any activity that is not consistent with the
limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Exchange Trust Agreement.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Exchange Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default under the Exchange Trust
Agreement.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities evidence a beneficial interest in the
Trust, and the Trust exists for the sole purpose of issuing the Trust Securities
and investing the proceeds of the Trust Securities in Junior Subordinated
Debentures and exchanging the Junior Subordinated Debentures in the Exchange
Offer pursuant to the Indenture.
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A principal difference between the rights of a holder of a Capital Security and
a holder of a Junior Subordinated Debenture is that a holder of a Junior
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 Capital Securities is entitled to receive Distributions from the Trust
(or from the Company under the Guarantee) if and to the extent the Trust has
funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of the Trust involving the liquidation of the Junior Subordinated
Debentures, after satisfaction of liabilities to creditors as required by
applicable law, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of Exchange Capital Securities -- Liquidation of the Trust and
Distribution of Exchange Debentures." 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 Indebtedness 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 under the
Expense Agreement to pay for all costs, expenses and liabilities of the Trust
(other than the Trust's obligations to the holders of its Trust Securities), the
positions of a holder of Exchange Capital Securities and a holder of Exchange
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 Exchange Offer and the purchase, ownership and
disposition of Capital Securities to the beneficial owners of Capital Securities
(the "Securityholders"). The statements of law and legal conclusions set forth
in this summary regarding the tax consequences are based on the opinion of
Hunton & Williams, counsel to the Company and the Trust. This summary does not
address all tax consequences that may be applicable to a Securityholder, nor
does it address the tax consequences to (i) 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, tax-exempt organizations and dealers in securities or
currencies, (ii) persons that will hold Capital 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, (iii) except with
respect to the discussion under the caption "United States Alien
Securityholders," persons whose functional currency is not the United States
dollar or (iv) persons that do not hold Capital Securities as capital assets.
This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service (the "IRS")
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
Capital Securities. In particular, legislation has been proposed that could
adversely affect the Company's ability to deduct interest on the Junior
Subordinated Debentures, which may in turn permit the Company to cause a
redemption of the Capital Securities. See "-- Possible Tax Law Changes."
The authorities on which this summary is based (including authorities
distinguishing debt from equity) are subject to various interpretations, and it
is therefore possible that the federal income tax treatment of the Capital
Securities may differ from the treatment described below. No ruling has been
received from the IRS regarding the tax consequences of the Capital Securities.
Counsel's opinion regarding such tax consequences represents only counsel's best
legal judgment based on current authorities and is not binding on the IRS or the
courts.
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INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN LIGHT
OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for Exchange Capital Securities
will not be a taxable event to Securityholders for United States federal income
tax purposes. Accordingly, the Exchange Capital Securities will have the same
issue price as the Old Capital Securities, and a Securityholder will have the
same adjusted tax basis and holding period for Exchange Capital Securities as
the holder had for Old Capital Securities immediately before the exchange.
CLASSIFICATION OF THE TRUST
Under current law and assuming compliance with the terms of the Trust
Agreement, the Trust will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each Securityholder will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures.
Accordingly, each Securityholder will be required to include in its gross income
its pro rata share of the interest income, including original issue discount,
paid or accrued with respect to the Junior Subordinated Debentures whether or
not cash is actually distributed to the Securityholders. See "-- Interest Income
and Original Issue Discount." No amount included in income with respect to the
Capital Securities will be eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury Regulations applicable to debt instruments issued on or
after August 13, 1996 (the "Treasury Regulations"), a "remote" contingency that
stated interest will not be timely paid will be ignored in determining whether a
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. Based on the
foregoing, in the opinion of counsel to the Company, the Junior Subordinated
Debentures are not to be considered issued with OID at the time of their
original issuance and, accordingly, a Securityholder should include in gross
income such Securityholder's allocable share of interest on the Junior
Subordinated Debentures (other than an amount of the first interest payment
attributable to pre-issuance accrued interest, which a Securityholder may treat
as a reduction of the issue price of the Junior Subordinated Debentures rather
than as gross income) in accordance with such Securityholder's method of tax
accounting.
Under the Treasury Regulations, if the Company should actually exercise
its option to defer any payment of interest, the Junior Subordinated Debentures
would at that time be treated as issued with OID, and all stated interest 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 taxable 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 payments of stated
interest would not be reported as taxable income. Consequently, a Securityholder
would be required to include in gross income OID even though the Company would
not make any cash payments during an Extension Period.
The Treasury Regulations have not been addressed in any rulings or
other interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation herein.
MARKET DISCOUNT AND AMORTIZABLE PREMIUM
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A secondary market purchaser of Capital Securities at a discount from
the adjusted issue price of the pro rata share of Junior Subordinated Debentures
represented by the Capital Securities (that is, the principal amount plus any
accrued but unpaid OID) acquires such Capital Securities with "market discount"
if the discount is not less than the product of (i) 0.25% of the adjusted issue
price multiplied by (ii) the number of complete years to maturity of the Junior
Subordinated Debentures after the date of purchase. A purchaser of Capital
Securities with market discount generally will be required to treat any gain on
the sale, redemption or other disposition of all or part of such Capital
Securities as ordinary income to the extent of accrued (but not previously
taxable) market discount. Market discount generally will accrue ratably during
the period from the date of purchase to the maturity date, unless the
Securityholder elects to accrue such market discount on the basis of a constant
interest rate. A Securityholder who acquires Capital Securities at a market
discount may be required to defer some interest deductions attributable to any
indebtedness incurred or continued to purchase or carry the Capital Securities.
A secondary market purchaser of Capital Securities at a premium over
the stated principal amount of the pro rata share of Junior Subordinated
Debentures (plus accrued interest) generally may elect to amortize such premium
("Section 171 premium"), under a constant yield method, as an offset to interest
income on the Junior Subordinated Debentures. If the Junior Subordinated
Debentures are deemed to be issued with OID and are acquired at a premium over
the adjusted issue price, the premium will not be Section 171 premium but will
be amortized as a reduction in the amount of OID includable in the
Securityholder's income.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
A distribution by the Trust of the Junior Subordinated Debentures as
described under the caption "Description of Capital Securities - Liquidation of
the Trust and Distribution of Junior Subordinated Debentures" is conditioned on
receipt by the Company of an opinion of counsel to the effect that such
distribution would be a non-taxable event to Securityholders for United States
federal income tax purposes. Under current law, such a distribution would be
non-taxable and would result in the Securityholder receiving directly his pro
rata share of the Junior Subordinated Debentures previously held indirectly
through the Trust, with a holding period and aggregate tax basis equal to the
holding period and aggregate tax basis such Securityholder had in its Capital
Securities before such distribution. A Securityholder would account for
interest, market discount and amortizable premium in respect of Junior
Subordinated Debentures received from the Trust as described above under "-
Interest Income and Original Issue Discount" and "- Market Discount and
Amortizable Premium."
SALES OR REDEMPTION OF CAPITAL SECURITIES
Upon a sale (including redemption) of Capital Securities, a
Securityholder will recognize gain or loss equal to the difference between its
adjusted tax basis in the Capital Securities and the amount realized on the sale
of such Capital Securities (excluding any amount attributable to any accrued
interest with respect to such Securityholder's pro rata share of the Junior
Subordinated Debentures not previously included in income, which will be taxable
as ordinary income). Provided that the Company does not exercise its option to
defer payment of interest on the Junior Subordinated Debentures, and the Capital
Securities are not considered to be issued with OID, a Securityholder's adjusted
tax basis in the Capital Securities generally will be the Securityholder's
purchase price, increased by any market discount included in income and reduced
by any amortized Section 171 premium for such Capital Securities. If the Junior
Subordinated Debentures are deemed to be issued with OID as a result of the
Company's deferral of any interest payment, a Securityholder's tax basis in the
Capital Securities generally will be increased by OID previously includable in
such Securityholder's gross income to the date of disposition and decreased by
distributions or other payments received on the Capital Securities since and
including the commencement date of the first Extension Period. Such gain or
loss, except to the extent of any accrued market discount, generally will be a
capital gain or loss, and generally will be a long-term capital gain or loss if
the Capital Securities have been held for more than one year.
Should the Company exercise its option to defer any payment of interest
on the Junior Subordinated Debentures, the Capital Securities may trade at a
price that does not accurately reflect the value of accrued but
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unpaid interest with respect to the underlying Junior Subordinated Debentures.
As a result, and because a Securityholder will be required to include in income
accrued but unpaid interest on Junior Subordinated Debentures and to add such
amount to its adjusted tax basis, such Securityholder may recognize a capital
loss on a sale of Capital Securities during an Extension Period. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest paid and any OID accrued on the Junior
Subordinated Debentures to Securityholders (other than corporations and other
exempt Securityholders) will be reported to the IRS. It is expected that such
income will be reported to Securityholders on Form 1099 and mailed to
Securityholders by January 31 following each calendar year. "Backup" withholding
at a rate of 31% will apply to payments of interest and payments of disposition
(including redemption) proceeds to a non-exempt Securityholder unless the
Securityholder furnishes to the payor its taxpayer identification number,
certifies that such number is correct, and meets certain other conditions. Any
amounts withheld from a Securityholder under the backup withholding rules will
be allowable as a refund or a credit against such Securityholder's United States
federal income tax liability.
UNITED STATES ALIEN SECURITYHOLDERS
For purposes of this discussion, a United States Alien Securityholder
is any corporation, individual, partnership, estate or trust that for United
States federal income tax purposes is a foreign corporation, a non-resident
alien individual, a foreign partnership or a non-resident fiduciary of a foreign
estate or trust. This discussion assumes that income with respect to the Capital
Securities is not effectively connected with a trade or business in the United
States in which the United States Alien Securityholder is engaged.
Under current United States federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of
Capital Securities that is a United States Alien Securityholder
generally will not be subject to withholding or other United
States federal income tax, provided that, in the case of payments
with respect to interest (including OID), (a) the beneficial owner
of the Capital Securities 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 beneficial owner of
the Capital Securities is not a controlled foreign corporation
that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Capital Securities
certifies to the Trust or its agent, under penalties of perjury,
that it is a United States Alien Securityholder and provides its
name and address or (B) a securities clearing organization, bank
or other financial institution that holds customers' securities in
the ordinary courses of its trade or business (a "Financial
Institution") and holds the Capital Securities in such capacity
certifies to the Trust or its agent under penalties of perjury
that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial
owner and furnishes the Trust or its agent with a copy thereof;
and
(ii) a United States Alien Securityholder of Capital Securities
generally will not be subject to withholding or other United
States federal income tax on any gain realized upon the sale or
other disposition of Capital Securities.
POSSIBLE TAX LAW CHANGES
The Clinton administration has proposed legislation (the "Proposal")
that would, among other things, deny interest deductions for interest on an
instrument issued by a corporation that has a maximum term of more than 15 years
and that is not shown as indebtedness on the separate balance sheet of the
issuer or, if the instrument is issued to a related party (other than a
corporation), where the holder or some other related party issues a related
instrument
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that is not shown as indebtedness on the issuer's consolidated balance sheet. If
such a provision were to apply to the Junior Subordinated Debentures, the
Company would be unable to deduct interest on the Junior Subordinated
Debentures. However, the above-described provision of the Proposal is proposed
generally to be effective only for instruments issued on or after the date of
first Congressional committee action, and under current law, the Company is able
to deduct interest on the Junior Subordinated Debentures. There can be no
assurance that future action on the Proposal or future legislative proposals,
future regulations or official administrative pronouncements, or future judicial
decisions will not affect the ability of the Company to deduct interest on the
Junior Subordinated Debentures. Such a change could give rise to a Tax Event,
which may permit the Company, upon approval of the Federal Reserve if then
required under applicable guidelines or policies of the Federal Reserve, to
cause a redemption of the Capital Securities before, as well as after, December
15, 2006. See "Description of Capital Securities -- Redemption" and "Description
of Capital Securities - Liquidation of the Trust and Distribution of Junior
Subordinated Debentures."
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") should
consider fiduciary standards under ERISA in the context of the particular
circumstances of such plan before authorizing an investment in the Exchange
Capital Securities. Such fiduciary should consider whether the investment
satisfies ERISA's diversification and prudence requirements, whether the
investment constitutes unauthorized delegation of fiduciary authority and
whether the investment is in accordance with the documents and instruments
governing the plan. In addition, ERISA and the Code prohibit a wide range of
transactions ("Prohibited Transactions") involving the assets of a plan subject
to ERISA or the assets of an individual retirement account or plan subject to
Section 4975 of the Code (hereinafter an "ERISA Plan") and persons who have
certain specified relationships to the ERISA Plan ("parties in interest," within
the meaning of ERISA, and "disqualified persons," within the meaning of the
Code). Such transactions may require "correction" and may cause the ERISA Plan
fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes.
The acquisition of any Exchange Capital Security by any person who is
using for such acquisition the assets of an ERISA Plan shall constitute a
representation by such person to the Company that (i) if the Company or a
subsidiary or affiliate of the Company is a "party in interest" or a
"disqualified person" with respect to such ERISA Plan, then such security is
being acquired pursuant to an exemption from the Prohibited Transaction rules
under ERISA and the Code, and (ii) neither the Company nor a subsidiary or
affiliate of the Company is a "fiduciary," within the meaning of Section 3(21)
of ERISA and the regulations thereunder, with respect to such person's interest
in the Exchange Capital Securities or the Exchange Debentures.
Governmental plans and certain church plans (each as defined under
ERISA) are not subject to the Prohibited Transaction rules. Such plans may,
however, be subject to federal, state or local laws or regulations which may
affect their investment in the Exchange Capital Securities. Any fiduciary of
such a governmental or church plan considering an investment in the Exchange
Capital Securities should determine the need for, and the availability, if
necessary, of any exemptive relief under such laws or regulations.
The discussion herein of ERISA is general in nature and is not intended
to be all inclusive. Any fiduciary of an ERISA Plan, governmental plan or church
plan considering an investment in the Exchange Capital Securities should consult
with its legal advisors regarding the consequences of such investment.
PROHIBITED TRANSACTIONS
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The Company (or a subsidiary or affiliate of the Company) may be a
party in interest or a disqualified person with respect to an ERISA Plan
investing in the Exchange Capital Securities, and, therefore, such investments
by an ERISA Plan may give rise to a Prohibited Transaction. Consequently, before
investing in the Exchange Capital Securities, any person who is, or who in
acquiring such securities is using the assets of, an ERISA Plan should determine
that either a statutory or an administrative exemption from the Prohibited
Transaction rules discussed below or otherwise available is applicable to such
person's investment in the Exchange Capital Securities, or that its investment
in such securities will not result in a Prohibited Transaction.
Certain statutory or administrative exemptions from the Prohibited
Transaction rules under ERISA and the Code may be available to an ERISA Plan
which is investing in the Exchange Capital Securities. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by qualified professional asset managers; PTCE 96-23,
regarding transactions effected by in-house asset managers; or PTCE 95-60,
regarding investments by insurance company general accounts.
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Labor
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA. The Labor Regulations provide that, as a general rule, when
an ERISA Plan acquires an equity interest in an entity and such interest does
not represent a "publicly offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
ERISA Plan's assets include both the equity interest and an undivided interest
in each of the underlying assets of the entity, unless it is established either
that the entity is an operating company or that equity participation in the
entity by "benefit plan investors" is not "significant." For purposes of the
Labor Regulations, the Trust will not be an investment company nor an operating
company and the Capital Securities will not constitute a "publicly offered
security." As discussed below, the Exchange Capital Securities may qualify as
"publicly offered securities" for purposes of the Labor Regulations, but such
result cannot be assured.
Under the Labor Regulations, equity participation by benefit plan
investors will not be considered "significant" on any date only if, immediately
after the most recent acquisition of Capital Securities, the aggregate interest
in the Capital Securities held by benefit plan investors will be less than 25%
of the value of the Capital Securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Labor Regulations, such result cannot be assured.
Consequently, if ERISA Plans or investors using plan assets of ERISA plans
purchase the Capital Securities, the Trust's assets could be deemed to be "plan
assets" of such ERISA Plans for purposes of the fiduciary responsibility
provisions of ERISA and the Code. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of
an ERISA Plan is considered to be a fiduciary of such ERISA Plan. For example,
the Property Trustee could therefore become a fiduciary of the ERISA Plans that
invest in the Capital Securities and be subject to the general fiduciary
requirements of ERISA in exercising its authority with respect to the management
of the assets of the Trust. However, the Property Trustee will have only limited
discretionary authority with respect to the Trust's assets and the remaining
functions and responsibilities performed by the Property Trustee will be for the
most part custodial and ministerial in nature. Inasmuch as the Property Trustee
or another person with authority or control respecting the management or
disposition of the Trust assets may become a fiduciary with respect to the ERISA
Plans that will purchase the Capital Securities, there may be an improper
delegation by such ERISA Plans of the responsibility to manage plan assets.
The Exchange Capital Securities are being distributed pursuant to an
effective registration statement under the Securities Act and subsequently will
be registered under the Exchange Act. The Exchange Capital Securities may
qualify as "publicly offered securities" under the Labor Regulations if, in
addition to such distribution and registration, at the time of the Exchange
Offer they are also "widely held" and "freely transferable". Under the Labor
Regulations, a class of securities is "widely held" only if it is a class of
securities that is owned by 100 or more investors independent of the issuer and
of one another. Although it is possible that the Exchange Capital
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Securities will be "widely held," such result cannot be assured. Whether a
security is "freely transferable" for purposes of the Labor Regulations is a
factual question to be determined on the basis of all relevant facts and
circumstances. If at the time of the Exchange Offer the Exchange Capital
Securities qualify as "publicly offered securities," the assets of the Trust
should not be "plan assets" as of such time. If the Exchange Capital Securities
do not qualify as "publicly offered securities," the "plan asset" considerations
discussed in the immediately preceding paragraph in connection with the Capital
Securities could also be applicable in connection with the investment by ERISA
Plans in the Exchange Capital Securities.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its
own account in connection with the Exchange Officer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Capital
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of Exchange Capital Securities received in
exchange for Old Capital Securities if such Old Capital Securities were acquired
by such Participating Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities. The Company and the Trust
have agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of such Exchange Capital Securities for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such Exchange Capital Securities have
been disposed of by such Participating Broker-Dealer. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." See "The Exchange Offer -- Resales of Exchange Capital
Securities."
Neither the Company nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. Exchange Capital
Securities received by broker-dealers for their own accounts in connection with
the Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commission or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Capital Securities.
Any broker-dealer that resells Exchange Capital Securities that were
received by it for its own account in connection with the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Capital
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of Exchange Capital Securities
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a prospectus
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
VALIDITY OF NEW SECURITIES
The validity of the Guarantee and the Exchange Debentures will be
passed upon for the Company by Hunton & Williams, Richmond, Virginia. Certain
matters relating to United States federal income tax considerations will be
passed upon for the Company by Hunton & Williams, Richmond, Virginia. Certain
matters of Delaware law
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relating to the validity of the Exchange Capital Securities will be passed upon
on behalf of the Trust by Richards, Layton & Finger, P.A., special Delaware
counsel to the Trust.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, incorporated by reference herein, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Our report refers
to our reliance on another auditors' report with respect to amounts related to
Citizens Bancorp included in the aforementioned consolidated financial
statements.
The consolidated financial statements of Citizens Bancorp which have
been consolidated with those of the Company in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, have been audited by Deloitte &
Touche LLP as stated in their report. The incorporation by reference herein of
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
has been so incorporated in reliance upon the report of Deloitte & Touche LLP,
independent auditors, given upon their authority as experts in accounting and
auditing.
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