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As filed with the Securities and Exchange Commission on September 8, 1999 Registration No. 333-85909
333-85909-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pre-Effective Amendment No. 1
To
Form S-3
Registration Statement under the Securities Act of 1933
-----------------
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LOCAL FINANCIAL CORPORATION LOCAL FINANCIAL CAPITAL TRUST I
(Exact name of Registrant as specified in its (Exact name of Registrant as specified
charter) in its trust agreement)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
--------- ---------
6719
6711 (Primary Standard Industrial
(Primary Standard Industrial Classification Code Number)
Classification Code Number)
73-6316302
65-0424192 (I.R.S. Employer
(I.R.S. Employer Identification No.)
Identification No.)
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-----------------
Local Financial Corporation
3601 N.W. 63rd Street
Oklahoma City, Oklahoma 73116
(405) 841-2100
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
-----------------
Alan L. Pollock
Senior Vice President,
Secretary and
General Counsel
Local Financial Corporation
3601 N.W. 63rd Street
Oklahoma City, Oklahoma 73116
(405) 841-2100
(Name, address, including zip code, and telephone number, including area code,
of agents for service)
-----------------
Copies to:
Norman B. Antin, Esq. Edward S. Best, Esq.
Jeffrey D. Haas, Esq. Brian W. Smith, Esq.
Elias, Matz, Tiernan & Herrick L.L.P. Mayer, Brown & Platt
734 15th Street, N.W. 190 South LaSalle Street
Washington, D.C. 20005 Chicago, IL 60603
(202) 347-0300 (312) 782-0600
Fax: (202) 347-2172 Fax: (312) 701-7711
-----------------
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462 under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ] __________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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` Amount Proposed Maximum Amount of
Title of Each Class of Securities to be Proposed Maximum Aggregate Registration
to be Registered Registered Offering Price (1) Offering Price (1) Fee (2)
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Cumulative Trust Preferred Securities of Local
Financial Capital Trust I $30,000,000 100% $30,000,000 $8,340
- --------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Deferrable Interest Debentures of
Local Financial Corporation (2) $30,000,000 100% $30,000,000 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Local Financial Corporation Guarantee with respect
to the Trust Preferred Securities (3) N/A N/A N/A N/A
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Total $30,000,000 (4) 100% $30,000,000 (4) $8,340 (5)
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(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Junior Subordinated
Deferrable Interest Debentures of Local Financial Corporation (the
"Junior Subordinated Debentures") which may be distributed upon a
liquidation of Local Financial Capital Trust I.
(3) No separate consideration will be received for the Local Financial
Corporation Guarantee.
(4) Such amount represents the liquidation amount of the Local Financial
Capital Trust I Trust Preferred Securities and the principal amount of
Junior Subordinated Debentures that may be distributed to holders of
such Trust Preferred Securities upon a liquidation of Local Financial
Capital Trust I.
(5) Previously paid.
-----------------
The Registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 1999
1,100,000 % CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
LOCAL FINANCIAL CAPITAL TRUST I
FULLY AND UNCONDITIONALLY GUARANTEED BY
[LOGO] LOCAL
FINANCIAL
CORPORATION
------------------------------------------
Local Financial Capital Trust I is offering 1,100,000 cumulative trust preferred
securities that Local Financial Corporation will guarantee, pursuant to the
terms of a guarantee, a trust agreement and an indenture. We have applied to
have the trust preferred securities quoted on the Nasdaq National Market under
the symbol 'LFINP.'
------------------------------------------
INVESTING IN THE TRUST PREFERRED SECURITIES INVOLVES RISKS.
SEE 'RISK FACTORS' BEGINNING ON PAGE 11.
------------------------------------------
PRICE $25.00 PER TRUST PREFERRED SECURITY
------------------------------------------
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Per Security Total
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Public offering price.................................................. $25.00 $27,500,000
Underwriting discounts and commissions payable by Local Financial
Corporation....................................................... $ $
Proceeds to Local Financial Capital Trust I............................ $25.00 $27,500,000
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Because the trust will use all of the proceeds from the sale of the trust
preferred securities to purchase junior subordinated debentures of Local
Financial Corporation, Local Financial Corporation will pay all underwriting
discounts and commissions. We have granted the underwriters the option to
purchase up to an additional 100,000 trust preferred securities to cover
over-allotments. The underwriters expect to deliver the trust preferred
securities in book-entry form only through The Depository Trust Company on or
about , 1999.
These securities are not deposits or other obligations of a bank and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
------------------------------------------
A.G. EDWARDS & SONS, INC.
FRIEDMAN BILLINGS RAMSEY
KEEFE, BRUYETTE & WOODS, INC.
Prospectus dated , 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Securities and Exchange Commision declares
our registration statement effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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TABLE OF CONTENTS
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PAGE
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Summary.................................................................................................... 3
Risk Factors............................................................................................... 11
Forward Looking Statements................................................................................. 18
Where You Can Find More Information........................................................................ 19
Ratios of Earnings to Fixed Charges........................................................................ 20
Use of Proceeds............................................................................................ 20
Capitalization............................................................................................. 21
Local Financial Capital Trust I............................................................................ 22
Description of Trust Preferred Securities.................................................................. 22
Description of Junior Subordinated Debentures.............................................................. 35
Description of Guarantee................................................................................... 45
Book-Entry Issuance........................................................................................ 47
Relationship Among the Trust Preferred Securities, the Junior Subordinated Debentures and the Guarantee.... 49
Certain Federal Income Tax Consequences.................................................................... 50
ERISA Considerations....................................................................................... 53
Underwriting............................................................................................... 55
Legal Matters.............................................................................................. 57
Experts.................................................................................................... 57
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WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO
PROVIDE YOU WITH DIFFERENT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL,
NOR IS IT SEEKING AN OFFER TO BUY, THESE TRUST PREFERRED SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS
COMPLETE AND ACCURATE AS OF THE DATE ON THE FRONT COVER, BUT THE INFORMATION MAY
HAVE CHANGED SINCE THAT DATE.
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SUMMARY
The items in the following summary are described in more detail later in
this prospectus. This summary provides an overview of selected information and
does not contain all the information you should consider. Therefore, you should
also read the more detailed information set out in this prospectus or
incorporated herein by reference. Unless we indicate otherwise, the information
in this prospectus assumes that the underwriters' over-allotment option will not
be exercised.
OUR COMPANY
General. We are the bank holding company for Local Oklahoma Bank, National
Association ('Local' or the 'Bank'), a national banking association
headquartered in Oklahoma City, Oklahoma which operates 50 branches across the
state of Oklahoma, with concentrations in Oklahoma City, Tulsa and Lawton.
Founded in 1908 as Local Building and Loan Association, the Bank is evolving its
business platform from its savings and loan origin into that of a full service
commercial bank.
At June 30, 1999, we had consolidated assets of $2.2 billion, substantially
all of which is comprised of our 100% ownership interest in the Bank,
consolidated liabilities of $2.1 billion, including consolidated deposits of
$1.6 billion and consolidated stockholders' equity of $125.8 million. Ranked by
in-market deposits, Local was the fifth largest bank in Oklahoma at June 30,
1999.
New Management's Initiatives. In August 1997, a group led by Mr. Edward A.
Townsend, our present Chairman of the Board and Chief Executive Officer,
negotiated a purchase of the Company from its prior owners. Following the
purchase of the Company, management undertook a series of initiatives to
establish the foundation of our business strategy. Management reduced total
assets by over $1 billion through the sale of the bulk of the Bank's investments
in floating-rate collateralized mortgage obligations tied to the Eleventh
District Cost of Funds Index, the elimination of the sub-prime automobile loan
portfolio and the discontinuation of the practice of buying portfolios of
residential mortgages. In addition, management eliminated all swap and hedge
contracts outstanding at the time of the purchase. While these measures resulted
in planned substantial losses on the sale and write-down of assets and
disposition of hedge positions, we believe we have strengthened our financial
condition and better positioned ourselves for future growth. During the year
ended December 31, 1998, the first full year of operations following our
restructuring initiatives, we had net income of $18.4 million. During the six
months ended June 30, 1999, we had net income of $10.7 million and grew assets
and stockholders' equity by $75.4 million and $7.0 million, respectively.
Strategy for Growth. Our business strategy is to provide our customers with
the range of banking products and services of a regional bank while retaining
the appeal and level of individualized service of a community bank. In pursuit
of this strategy, we are shifting our activities from those of a traditional
savings institution to those generally associated with a commercial bank. Our
management believes the ongoing consolidation among financial institutions in
Oklahoma has created significant gaps in the ability of large regional and
nationwide banks to serve certain customers, primarily our targeted customer
base of small and medium-sized businesses (up to $100 million in annual sales),
professionals and other individuals. Our management believes that as a result of
our strong commitment to highly personalized, relationship-oriented customer
service, our varied products, our strategic branch locations and the
long-standing community presence of our managers, lending officers and branch
personnel, we are well positioned to attract new customers and to increase our
market share of loans and deposits.
Specific milestones achieved by management towards the realization of our
strategic goals are:
o Converted the Bank to a national bank charter in May 1999;
o Created a corporate lending unit, which had 45 commercial lenders and
staff at June 30, 1999;
o Issued commitments for the origination of $307.8 million in commercial
real estate and commercial business loans during the six months ended
June 30, 1999;
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o Increased transaction accounts from $319.2 million, or 19.9% of total
deposits at December 31, 1997, to $449.5 million, or 27.9% of total
deposits, at June 30, 1999; and
o Improved our generation of non-interest income from $6.6 million during
the six months ended June 30, 1998, to $9.1 million during the six months
ended June 30, 1999, an increase of 37.2%.
We have also grown through strategic acquisitions. In February 1998, we
acquired Green Country Bank which had three branch offices in northeastern
Oklahoma. In October 1998, we acquired Citizens Bank, with five offices in
Lawton and one in Norman. These two acquisitions contributed $281.5 million in
assets and $270.2 million in liabilities as of the respective acquisition dates.
These institutions now operate under our Local Oklahoma Bank name. In May 1999,
we entered into an agreement to acquire Guthrie Savings Bank with one office in
north central Oklahoma holding $36.0 million in deposits at June 30, 1999. We
expect to close this acquisition during the fourth quarter of this year. We
intend to continue to evaluate financial information about companies which may
lead to the acquisition of such companies. However, we currently have no
agreements or understandings to acquire all or part of any other company.
Our principal executive office is located at 3601 N.W. 63rd Street,
Oklahoma City, Oklahoma 73116. Our telephone number is (405) 841-2100.
LOCAL FINANCIAL CAPITAL TRUST I
Local Financial Capital Trust I, the issuer of the % Cumulative Trust
Preferred Securities (the 'Trust Preferred Securities'), is a statutory business
trust formed by us under the Delaware Business Trust Act. The Trust exists for
the sole purpose of: (i) issuing common securities of the Trust (the 'Common
Securities') and the Trust Preferred Securities (the Trust Preferred Securities
and the Common Securities are referred to in this prospectus as the 'Trust
Securities') for cash and investing the proceeds in an equivalent amount of
% Junior subordinated deferrable interest debentures due , 2029
(the 'Junior Subordinated Debentures') issued by us; and (ii) engaging in other
activities that are necessary or incidental to the issuance of the Trust
Securities and the investment in the Junior Subordinated Debentures. We will be
the only purchaser of the Common Securities.
The Trust has no separate financial statements. We do not believe that the
statements would be significant to you because the Trust is a direct
wholly-owned subsidiary of the Company, has no independent operations and exists
solely for the reasons summarized above.
The Trust's principal office is located at 3601 N.W. 63rd Street, Oklahoma
City, Oklahoma 73116. The Trust's telephone number is (405) 841-2100.
RISK FACTORS
Prior to making an investment decision, you should carefully consider all
of the information in this prospectus, and, in particular, you should evaluate
the risk factors set forth under the caption 'Risk Factors,' which are described
immediately following this Summary.
THE OFFERING
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Issuer of the Trust
Preferred Securities.................... Local Financial Capital Trust I, a Delaware statutory business trust.
Securities offered........................ 1,100,000 % Trust Preferred Securities (1,200,000 Trust
Preferred Securities if the underwriters' over-allotment option is
exercised in full). The Trust Preferred Securities represent
preferred undivided beneficial interests in the Trust's assets, which
will consist solely of the Junior Subordinated Debentures and
payments under the Junior Subordinated Debentures.
The Trust will sell the Trust Preferred Securities to the public and
the Common Securities to us. The Trust will use the proceeds
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from the sale of the Trust Securities to buy the Junior Subordinated
Debentures from us.
Distributions............................. If you purchase the Trust Preferred Securities, you will be entitled
to receive cumulative cash distributions at a % annual rate.
Distributions will accumulate from the date the Trust issues the
Trust Preferred Securities, and will be paid quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year,
beginning on December 31, 1999. Distributions on the Trust Preferred
Securities may be deferred, as described below. The initial cash
distribution payable on December 31, 1999, will equal $ for
each Trust Preferred Security. Subsequent cash distributions will
equal $ for each Trust Preferred Security.
Maturity of Junior Subordinated
Debentures.............................. The Junior Subordinated Debentures will mature on , 2029
unless we shorten the maturity date to a date not earlier than
, 2004. We will not shorten the maturity date unless we
have received prior regulatory approval if such approval is then
required. The Trust must redeem the Trust Preferred Securities when
the Junior Subordinated Debentures are paid on the maturity date, or
following any earlier redemption of the Junior Subordinated
Debentures, at the redemption prices discussed under 'Description of
Junior Subordinated Debentures--Redemption.'
Redemption................................ We may redeem all or a part of the Junior Subordinated Debentures on
and after , 2004 at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures so
redeemed to the date fixed for redemption, plus % of the
principal amount thereof, declining ratably each year to 100% of the
principal amount thereof at any time on and after ,
2009.
In addition, we may redeem all of the Junior Subordinated Debentures
at a redemption price equal to the accrued and upaid interest on the
Junior Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof at our option:
o if certain tax events occur;
o if there is a change in the Investment Company Act of 1940 that
requires the Trust to register under that law; or
o if there is a change in, among other things, the regulatory capital
adequacy guidelines that apply to us.
These circumstances are collectively referred to as 'Special Events.'
We will not redeem the Junior Subordinated Debentures before they
mature without approval by the regulatory agencies which supervise us
if such approval is then required.
Upon any redemption of the Junior Subordinated Debentures, the Trust
will use the cash proceeds of such redemption to pay you a
liquidation amount for the Trust Preferred Securities and to pay a
liquidation amount to the holders of the Common Securities. The
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liquidation amount you will receive will be equal to the redemption
price described above and will be distributed pro rata to the holders
of the Trust Securities.
Deferral of distributions................. The Trust relies solely on payments made by us on the Junior
Subordinated Debentures to pay distributions on the Trust Preferred
Securities. If no event of default under the Junior Subordinated
Debentures has occurred and is continuing, we have the right, at one
or more times, to defer interest payments on the Junior Subordinated
Debentures for up to 20 consecutive calendar quarters, but not beyond
the maturity date of the Junior Subordinated Debentures. If we defer
interest payments on the Junior Subordinated Debentures:
o the Trust will also defer distributions on the Trust Preferred
Securities;
o your distributions will continue to accrue at an annual rate of
% of the liquidation amount of $25 per Trust Preferred Security;
and
o you will accumulate additional distributions at the same rate,
compounded quarterly, on any unpaid distributions (to the extent
permitted by law).
When a deferral period ends, we will be required to pay to the Trust
all accumulated and unpaid interest due on the Junior Subordinated
Debentures and, when the Trust receives this payment, it will be
required to pay all accumulated and unpaid distributions on the Trust
Securities.
If we defer payments of interest on the Junior Subordinated
Debentures, the Trust Preferred Securities will be treated as being
issued with original issue discount for United States federal income
tax purposes. This means that you will still be required to include
income in your gross income for United States federal income tax
purposes before you receive any corresponding cash distribution, even
if you are a cash basis taxpayer.
We have agreed to certain restrictions if we exercise our right to
defer interest payments. During any period in which we defer interest
payments on the Junior Subordinated Debentures, we will not be
permitted to (with limited exceptions described under 'Description of
Junior Subordinated Debentures--Certain Covenants We Have Made'):
o declare or pay dividends or make other distributions on, redeem,
purchase or acquire, or make liquidation payments with respect to,
our capital stock;
o pay interest, principal or premium on, or repay, repurchase or
redeem any of our debt securities that rank equal with or junior to
the Junior Subordinated Debentures; or
o make guarantee payments with respect to the debt securities of any
of our subsidiaries if such guarantee ranks equal or junior in
right of payment to the Junior Subordinated Debentures.
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Guarantee................................. We will fully and unconditionally guarantee the Trust Preferred
Securities based on:
o our obligations to make payments on the Junior Subordinated
Debentures;
o our obligations under a guarantee executed for your benefit (the
'Guarantee'); and
o our obligations under the Trust Agreement, which sets forth the
terms of the Trust Securities.
If we do not make payments on the Junior Subordinated Debentures, the
Trust will not have sufficient funds to make payments on the Trust
Preferred Securities. The Guarantee does not cover payments when the
Trust does not have sufficient funds. Instead, you (to the fullest
extent of the law) or the property trustee may enforce the Trust's
rights, as holder, under the Junior Subordinated Debentures, directly
against us.
Distribution of the Junior Subordinated
Debentures.............................. We may dissolve the Trust at any time and distribute the Junior
Subordinated Debentures to you, subject to any required approval by
the regulatory agencies which supervise us. If the Junior
Subordinated Debentures are distributed, we will use our best efforts
to list or quote them on the Nasdaq National Market or such other
stock exchange or automated quotation system, if any, on which the
Trust Preferred Securities are then listed or quoted.
Ranking................................... Our obligations under the Junior Subordinated Debentures are
unsecured and will rank junior in priority of payment to our current
and any future senior and subordinated indebtedness and will be
effectively subordinated to all existing and future liabilities and
obligations of our subsidiaries, including the Bank. As of June 30,
1999, our subsidiaries had total liabilities (excluding liabilities
owed to us) of $2.0 billion. In addition, as of such date, the
aggregate amount of our liabilities that would have effectively
ranked senior to the Junior Subordinated Debentures was $80.0
million, comprised of our senior notes.
Our obligations under the Guarantee are unsecured and will rank in
priority of payment:
o junior to all of our indebtedness, except for those liabilities
made equal or subordinate to the Guarantee by their terms;
o equal to any senior preferred stock which may be issued in the
future; and
o senior to our capital stock.
Voting rights............................. Except in limited circumstances, you as a holder of the Trust
Preferred Securities will have no voting rights.
Quotation................................. We have applied to have the Trust Preferred Securities quoted on the
Nasdaq National Market under the symbol 'LFINP.'
Book-entry................................ The Trust Preferred Securities will be represented by a global
security that will be deposited with and registered in the name of
The Depository Trust Company, New York, New York or its nominee. This
means that you will not receive a certificate for your Trust
Preferred Securities.
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Use of proceeds........................... The Trust plans to use the proceeds from the sale of the Trust
Securities to purchase the Junior Subordinated Debentures from us. We
intend to use the net proceeds from the sale of the Junior
Subordinated Debentures for general corporate purposes, which may
include:
o capital contributions to the Bank to support its growth strategy
and for working capital; and
o acquisitions by either us or the Bank, although neither we nor the
Bank presently have any understandings that have not been announced
with respect to any such acquisitions.
Initially, we may use the net proceeds to make short-term
investments.
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
Our summary consolidated financial data set forth below should be read in
conjunction with, and is qualified in its entirety by, our Consolidated
Financial Statements, including the related Notes, incorporated by reference
herein. In June 1998, we changed our fiscal year end from June 30 to December
31.
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DECEMBER 31, JUNE 30,
-------------------------- ------------------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
JUNE 30,
1999
----------
(UNAUDITED) ($ IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and due from banks...... $ 31,125 $ 27,180 $ 34,152 $ 15,904 $ 13,640 $ 14,497
Loans receivable, net........ 1,553,306 1,362,272 953,470 1,013,824 1,018,135 804,610
Securities available for
sale....................... 504,163 570,964 518,107 985,565 1,741,725 361,402
Securities and other
investments held to
maturity................... -- -- -- 408,207 392,324 1,983,756
Equity securities available
for sale................... -- -- -- -- 11,604 12,287
Non-performing assets(1)..... 8,073 4,270 921 12,570 16,185 10,889
Total assets................. 2,204,366 2,128,979 1,881,365 2,625,181 3,278,511 3,264,850
Deposits..................... 1,608,625 1,668,074 1,602,533 1,644,356 1,602,460 1,577,821
Securities sold under
agreements to repurchase... -- -- -- 310,801 1,079,194 779,626
Promissory note payable...... -- -- -- 7,010 14,020 21,030
Senior notes payable......... 80,000 80,000 80,000 -- -- --
FHLB advances................ 350,518 220,033 80,136 531,161 439,011 703,202
Total liabilities............ 2,078,569 2,010,173 1,798,740 2,522,552 3,170,452 3,121,631
Stockholders' equity......... 125,797 118,806 82,625 102,629 108,059 143,219
OTHER DATA:
Number of full service
customer facilities........ 50 50 41 41 41 41
Approximate number of full-
time equivalent
employees.................. 773 694 525 546 536 471
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SIX MONTHS YEARS ENDED
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ENDED DECEMBER 31, JUNE 30,
------------------------- -------------------------- ------------------ -----------
1999 1998 1998 1997 1997 1997
----------- ----------- ----------- ------------ ------------------ -----------
(UNAUDITED)
(UNAUDITED) ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
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OPERATIONS DATA:
Interest and dividend
income................. $ 79,667 $ 70,516 $ 147,204 $ 188,768 $ 85,204 $ 222,664
Interest expense........ 44,489 46,227 92,438 137,022 59,823 169,761
----------- ----------- ----------- ------------ ---------- -----------
Net interest income..... 35,178 24,289 54,766 51,746 25,381 52,903
Provision for loan
losses................. (1,000) (450) (1,450) (44,272)(2) (25,578)(2) (28,428)(2)
----------- ----------- ----------- ------------ ---------- -----------
Net interest income
(loss) after provision
for loan losses........ 34,178 23,839 53,316 7,474 (197) 24,475
Noninterest income
(loss)................. 9,062 6,607 14,782 (126,458) (107,149)(3) (17,124)(3)
Noninterest expense..... 26,477 16,914 39,407 42,569 22,685 49,256
----------- ----------- ----------- ------------ ---------- -----------
Income (loss) before
provision (benefit) for
income taxes........... 16,763 13,532 28,691 (161,553) (130,031) (41,905)
Provision (benefit) for
income taxes........... 6,077 4,758 10,254 (52,362) (44,075) (11,860)
----------- ----------- ----------- ------------ ---------- -----------
Net income (loss)....... $ 10,686 $ 8,774 $ 18,437 $ (109,191) $ (85,956) $ (30,045)
=========== =========== =========== ============ ============ ===========
Basic net income (loss)
per share(4)........... $ 0.52 $ 0.43 $ 0.90 $ (6.52) $ (4.76) $ (1.95)
Diluted net income
(loss) per share(4).... $ 0.52 $ 0.42 $ 0.89 $ (6.52) $ (4.76) $ (1.95)
Weighted average shares
outstanding-basic...... 20,537,209 20,324,438 20,431,698 16,754,795 18,066,000 15,400,000
Weighted average shares
outstanding-diluted.... 20,537,209 20,649,630 20,607,119 16,754,795 18,066,000 15,400,000
Dividends declared per
share.................. $ -- $ -- $ -- $ -- $ -- $ --
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1996 1995
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OPERATIONS DATA:
Interest and dividend
income................. $ 236,156 $ 214,558
Interest expense........ 187,488 162,590
----------- -----------
Net interest income..... 48,668 51,968
Provision for loan
losses................. (5,117) (1,157)
----------- -----------
Net interest income
(loss) after provision
for loan losses........ 43,551 50,811
Noninterest income
(loss)................. 10,316 16,632
Noninterest expense..... 35,427 46,460
----------- -----------
Income (loss) before
provision (benefit) for
income taxes........... (18,440) 20,983
Provision (benefit) for
income taxes........... 4,872 6,568
----------- -----------
Net income (loss)....... $ 13,568 $ 14,415
=========== ===========
Basic net income (loss)
per share(4)........... $ 0.88 $ 0.94
Diluted net income
(loss) per share(4).... $ 0.88 $ 0.94
Weighted average shares
outstanding-basic...... 15,400,000 15,400,000
Weighted average shares
outstanding-diluted.... 15,400,000 15,400,000
Dividends declared per
share.................. $ -- $ --
9
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS AT OR FOR THE AT OR FOR THE SIX AT OR FOR THE
ENDED YEARS ENDED MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30,
--------------- ---------------------- ----------------- ----------------
1999 1998 1998 1997 1997 1997 1996
----- ----- ----- ------------ ----------------- ------ -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS(5):
Return on assets......................... 1.01% 0.92% 0.93% (4.35)% (3.84)% (0.98)% 0.41%
Return on common equity.................. 17.52 18.39 17.73 (117.17) (101.45) (28.77) 10.00
Net interest spread(6)................... 2.96 2.40 2.57 1.91 2.13 1.57 1.36
Net interest margin(7)................... 3.46 2.70 2.91 2.13 2.34 1.78 1.52
Noninterest expense to average
assets(8).............................. 2.41 1.73 1.90 1.64 0.99 1.56 1.04
Efficiency ratio(9)(10).................. 58.24 53.96 54.61 64.46 N/A 56.14 57.07
CAPITAL RATIOS OF LOCAL(11):
Leverage capital......................... 4.8 N/A N/A N/A N/A N/A N/A
Core capital............................. 6.7 N/A N/A N/A N/A N/A N/A
Total capital............................ 8.0 N/A N/A N/A N/A N/A N/A
CAPITAL RATIOS OF THE BANK(11):
Leverage or tangible capital............. 8.09 8.09 7.61 6.89 6.89 5.17 4.94
Core capital............................. 11.37 8.13 7.63 6.98 6.98 5.25 5.04
Total or risk-based capital.............. 12.64 15.24 13.08 14.14 14.14 12.34 12.71
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at
end of period(1)....................... 0.37 0.11 0.20 0.05 0.05 0.48 0.49
Nonperforming loans to total loans at end
of period(1)........................... 0.45 0.12 0.26 0.06 0.06 0.38 0.51
Allowance for loan losses to total loans
at end of period....................... 1.79 2.15 2.00 2.09 2.09 1.10 0.31
Allowance for loan losses to
nonperforming loans at end of
period(1).............................. 3.93 17.45 7.80 32.72 32.72 2.91 0.60
</TABLE>
1995
------
PERFORMANCE RATIOS(5):
Return on assets......................... 0.43%
Return on common equity.................. 10.59
Net interest spread(6)................... 1.32
Net interest margin(7)................... 1.59
Noninterest expense to average
assets(8).............................. 1.36
Efficiency ratio(9)(10).................. 72.75
CAPITAL RATIOS OF LOCAL(11):
Leverage capital......................... N/A
Core capital............................. N/A
Total capital............................ N/A
CAPITAL RATIOS OF THE BANK(11):
Leverage or tangible capital............. 4.89
Core capital............................. 5.03
Total or risk-based capital.............. 13.22
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at
end of period(1)....................... 0.33
Nonperforming loans to total loans at end
of period(1)........................... 0.38
Allowance for loan losses to total loans
at end of period....................... 0.56
Allowance for loan losses to
nonperforming loans at end of
period(1).............................. 1.48
- ------------------
(1) Nonperforming loans consist of nonaccrual loans and loans delinquent 90
days or more but still accruing interest. Nonperforming assets consist of
nonperforming loans, real estate acquired through foreclosure or
deed-in-lieu thereof and repossessions, net of writedowns and reserves.
(2) Primarily reflects provisions established by management to cover realized
and inherent losses with respect to the Company's portfolio of indirect
automobile receivables which were sold as of December 31, 1997. See
'Summary--Our Company--Strategy for Growth.'
(3) Primarily reflects losses incurred by the Company relating to the
liquidation or disposition of certain hedging contracts and the disposition
of investment securities and adjustments to reflect market values. See
'Summary--Our Company--Strategy for Growth.'
(4) Basic and diluted net income (loss) per share is based upon the basic and
diluted weighted average number of shares outstanding during the period,
respectively.
(5) With the exception of end of period ratios, all ratios are based on average
monthly balances during the periods presented. All ratios are annualized
where appropriate.
(6) Net interest spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(7) Net interest margin represents net interest income as a percent of average
interest-earning assets.
(8) Noninterest expense excludes the amortization of intangibles.
(9) Efficiency ratio represents noninterest expense (exclusive of amortization
of intangibles) divided by the aggregate of net interest income before
provision for loan losses and noninterest income (exclusive of gains and
losses on sales of assets).
(10) For the year ended June 30, 1997, and the six months ended December 31,
1996, the efficiency ratio excludes the $10.3 million one-time special
assessment (before applicable tax benefits) to recapitalize the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation.
(11) The Bank became subject to Office of the Comptroller of the Currency
('OCC') regulatory authority in May 1999. Data presented as of June 30,
1999 is based on OCC regulatory requirements while data as of prior periods
is based on Office of Thrift Supervision ('OTS') regulatory requirements.
In calculating leverage capital, the OCC uses total average assets while
the OTS uses tangible assets. In calculating core capital, the OCC uses
risk-weighted assets while the OTS uses adjusted tangible assets.
10
<PAGE>
RISK FACTORS
You should carefully read the following risk factors before you decide to
buy any Trust Preferred Securities. You should also consider the other
information included or incorporated by reference into this prospectus.
RISKS RELATED TO AN INVESTMENT IN THE TRUST PREFERRED SECURITIES
PAYMENTS ON THE TRUST PREFERRED SECURITIES ARE ENTIRELY DEPENDENT ON OUR MAKING
PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES; THE GUARANTEE COVERS PAYMENTS
ONLY IF THE TRUST HAS CASH AVAILABLE.
The Trust's ability to timely pay distributions (including the $25 per
Trust Preferred Security liquidation distribution) is entirely dependent on our
making the related payments on the Junior Subordinated Debentures when due. If
we do not make payments on the Junior Subordinated Debentures, the Trust will
not have sufficient funds to pay distributions or the $25 per Trust Preferred
Security liquidation amount. Because the Guarantee does not cover payments when
the Trust does not have sufficient funds, you will not be able to rely upon the
Guarantee for payment of these amounts. Instead, you may directly sue us or seek
other remedies to collect your pro rata share of payments owed or rely on the
property trustee to enforce the Trust's rights under the Junior Subordinated
Debentures directly against us.
WE ARE A BANK HOLDING COMPANY AND ARE DEPENDANT ON OUR SUBSIDIARIES TO PROVIDE
FUNDS TO US; THE JUNIOR SUBORDINATED DEBENTURES ARE EFFECTIVELY SUBORDINATED TO
ALL EXISTING AND FUTURE LIABILITIES OF OUR SUBSIDIARIES.
The Junior Subordinated Debentures and the Guarantee will be exclusively
our obligations. We are a bank holding company regulated by the Board of
Governors of the Federal Reserve System and substantially all of our assets are
held by our subsidiaries. Our ability to make payments on the Junior
Subordinated Debentures depends primarily on the results of operations of our
subsidiaries and their ability to provide funds to us. Our subsidiaries are
separate and distinct legal entities and have no obligations to pay any amounts
due under the Junior Subordinated Debentures or to make funds available, whether
by dividend, loan or otherwise, for such purpose. In addition, there are various
legal limitations on the extent to which certain of our subsidiaries may extend
credit, pay dividends or otherwise supply funds to, or engage in transactions
with, us or some of our subsidiaries. The Trust will be unable to make payments
to you if we do not receive funds from our subsidiaries which allow us to pay
interest on or the principal of the Junior Subordinated Debentures. In addition,
our senior notes, which were issued in 1997 and had an outstanding principal
balance of $80.0 million at June 30, 1999, constitute senior indebtedness under
the Indenture and will be prior in right of payment to our obligations under the
Junior Subordinated Debentures.
Our right to participate in any distribution of the assets of any
subsidiary, including the Bank, upon a subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of that
subsidiary, except to the extent that we may be recognized as a creditor of that
subsidiary. As a consequence, the Junior Subordinated Debentures and the
Guarantee will be effectively subordinated to all existing and future
liabilities of our subsidiaries. As of June 30, 1999, our subsidiaries had total
liabilities (excluding liabilities owed to us) of $2.0 billion. Holders of the
Junior Subordinated Debentures and beneficiaries of the Guarantee should look
only to our assets for payments on the Junior Subordinated Debentures or under
the Guarantee, as the case may be. There is no limit under the Trust Preferred
Securities, the Junior Subordinated Debentures or the Guarantee as to our
subsidiaries' ability to incur additional indebtedness.
OUR OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES WILL
BE SUBORDINATED IN RIGHT OF PAYMENT TO OUR CURRENT AND FUTURE SENIOR AND
SUBORDINATED INDEBTEDNESS.
Our obligations under the Guarantee are unsecured and will rank in priority
of payment:
o junior to all of our indebtedness, except for those liabilities made
equal or subordinate to the Guarantee by their terms;
o equal to any senior preferred stock which may be issued in the
future; and
o senior to our capital stock.
11
<PAGE>
This means that we cannot make any payments on the Guarantee if we default
on a payment of any of our other liabilities, except those liabilities made
equal with or subordinate to the Guarantee by their terms. In the event of our
bankruptcy, liquidation or dissolution, our assets would be available to pay
obligations under the Guarantee only after all payments have been made on our
other liabilities, except those liabilities made equal with or subordinate to
the Guarantee by their terms.
Our obligations under the Junior Subordinated Debentures are unsecured and
will rank junior in priority of payment to our current and future senior and
subordinated indebtedness, and will be effectively subordinated to all existing
and future liabilities and obligations of our subsidiaries, including the Bank.
This means that we cannot make any payments of principal (including redemption
payments) or interest on the Junior Subordinated Debentures if we default on a
payment on any of our senior indebtedness or subordinated indebtedness. In the
event of our bankruptcy, liquidation or distribution, our assets would be
available to pay obligations under the Junior Subordinated Debentures only after
all payments have been made on our senior indebtedness and our subordinated
indebtedness. As of June 30, 1999, the aggregate amount of our senior
indebtedness (comprised of our senior notes issued in 1997) was $80.0 million.
There is no limit under the Trust Preferred Securities, the Junior Subordinated
Debentures or the Guarantee as to our ability to incur additional indebtedness,
including indebtedness that ranks senior in priority of payment to the Junior
Subordinated Debentures and the Guarantee.
OUR ABILITY TO DEFER INTEREST PAYMENTS HAS ADVERSE TAX CONSEQUENCES FOR YOU AND
MAY AFFECT THE TRADING PRICE FOR THE TRUST PREFERRED SECURITIES.
So long as no event of default under the Junior Subordinated Debentures has
occurred and is continuing, we may defer interest payments one or more times on
the Junior Subordinated Debentures for up to 20 consecutive calendar quarters,
but not beyond the maturity date of the Junior Subordinated Debentures.
If we defer interest payments on the Junior Subordinated Debentures, the
Trust will also defer distributions on the Trust Preferred Securities. During a
deferral period, you will be required to accrue income (in the form of original
issue discount) for United States federal income tax purposes equal to the
interest that accrues on your pro-rata share of the Junior Subordinated
Debentures held by the Trust. As a result, you must include the accrued but
unpaid income in your gross income for United States federal income tax purposes
before you receive cash, even if you are a cash basis taxpayer. You will also
not receive the cash related to any accrued and unpaid interest from the Trust
if you sell the Trust Preferred Securities before the end of any deferral
period. The Trust Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the Junior Subordinated
Debentures.
During a deferral period, your tax basis in the Trust Preferred Securities
will increase by the amount of accrued but unpaid distributions. If you sell the
Trust Preferred Securities during a deferral period, your increased tax basis
will decrease the amount of any capital gain or increase the amount of any
capital loss that you may have otherwise realized on the sale. A capital loss,
except in certain limited circumstances, cannot be applied to offset ordinary
income. As a result, deferral of distributions could result in ordinary income,
and a related tax liability for the holder, and a capital loss that may only be
used to offset a capital gain.
We do not currently intend to exercise our right to defer interest payments
on the Junior Subordinated Debentures. However, if we exercise our right in the
future, we expect that the market price of the Trust Preferred Securities would
be adversely affected. If you sell the Trust Preferred Securities during a
deferral period, you may not receive the same return on your investment as
someone who continues to hold the Trust Preferred Securities.
WE MAY REDEEM THE TRUST PREFERRED SECURITIES AT ANY TIME UPON THE OCCURRENCE OF
A SPECIAL EVENT.
At any time that a Special Event occurs and continues, we may redeem all of
the Junior Subordinated Debentures within 90 days. A Special Event means a Tax
Event, an Investment Company Event or a Regulatory Capital Event and is more
fully described under 'Description of Trust Preferred Securities-- Redemption'
and defined under 'Description of Trust Preferred Securities--Redemption--
Definitions.' If there is a Special Event and we redeem the Junior Subordinated
Debentures, the Trust must redeem the Trust
12
<PAGE>
Securities at a redemption price equal to the liquidation amount of $25 per
Trust Security, plus accrued and unpaid distributions. We may exercise this
right only if we receive any required approval by the regulatory agencies which
supervise us.
WE MAY SHORTEN THE STATED MATURITY OF THE JUNIOR SUBORDINATED DEBENTURES TO
, 2004 OR REDEEM SOME OR ALL OF THE JUNIOR SUBORDINATED DEBENTURES ON
AND AFTER , 2004, WHICH WILL CAUSE THE TRUST TO REDEEM SOME OR ALL OF
THE TRUST PREFERRED SECURITIES.
We may shorten the maturity of the Junior Subordinated Debentures to a date
not earlier than , 2004 or redeem some or all of the Junior Subordinated
Debentures on and after , 2004, which will cause the Trust to redeem
some or all of the Trust Preferred Securities on that date. Under such
circumstances, the redemption price will be as set forth under 'Description of
Junior Subordinated Debentures--Redemption.' You should assume that we will
shorten the maturity of the Junior Subordinated Debentures or exercise our
redemption option if we are able to refinance our obligations at a lower
interest rate or if it is otherwise in our interest to redeem the Junior
Subordinated Debentures. If less than all of the Junior Subordinated Debentures
are redeemed, the Trust must redeem an amount of Trust Securities having an
aggregate liquidation value equal to the principal amount of the Junior
Subordinated Debentures that we have redeemed. We can exercise this right only
if we receive any required approval by the regulatory agencies which supervise
us.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES COULD ADVERSELY AFFECT THE
MARKET PRICE FOR THE TRUST PREFERRED SECURITIES AND HAVE TAX CONSEQUENCES FOR
YOU.
We may dissolve the Trust at any time before the maturity of the Junior
Subordinated Debentures on , 2029. As a result, and subject to the terms
of the Trust Agreement, the trustees may distribute the Junior Subordinated
Debentures to the holders of Trust Preferred Securities. Although we have agreed
to use our best efforts to list or quote the Junior Subordinated Debentures on
the Nasdaq National Market or such other stock exchange or automated quotation
system, if any, on which the Trust Preferred Securities are then listed or
quoted if this occurs, there can be no assurance that the Junior Subordinated
Debentures will be approved for listing or that a trading market will exist for
the Junior Subordinated Debentures.
We cannot predict the market prices for the Junior Subordinated Debentures
that may be distributed. Accordingly, the Junior Subordinated Debentures that
you receive upon a distribution, or the Trust Preferred Securities you hold
pending such a distribution, may trade at a price that is less than the price
you paid to purchase the Trust Preferred Securities. Because you may receive
Junior Subordinated Debentures, you must also make an investment decision with
regard to the Junior Subordinated Debentures. You should carefully review all
the information regarding the Junior Subordinated Debentures contained in this
prospectus.
Under current United States federal income tax laws, a distribution of the
Junior Subordinated Debentures to you upon the dissolution of the Trust would
not be a taxable event to you. Nevertheless, if the Trust is classified for
United States federal income tax purposes as an association taxable as a
corporation at the time it is dissolved, the distribution of the Junior
Subordinated Debentures would be a taxable event to you. In addition, if there
is a change in law, a distribution of the Junior Subordinated Debentures upon
the dissolution of the Trust could be a taxable event to you.
THE HOLDERS OF THE TRUST PREFERRED SECURITIES AND THE JUNIOR SUBORDINATED
DEBENTURES ARE NOT PROTECTED BY COVENANTS IN THE INDENTURE OR THE TRUST
AGREEMENT.
Neither the Indenture, which sets forth the terms of the Junior
Subordinated Debentures, nor the Trust Agreement, which sets forth the terms of
the Trust Securities, protects holders of Junior Subordinated Debentures or
Trust Preferred Securities, respectively, in the event we experience significant
adverse changes in our financial condition or results of operations. In
addition, neither the Indenture nor the Trust Agreement limits our ability or
the ability of our subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior to the Junior Subordinated Debentures and the
Guarantee. Therefore, the provisions of these governing instruments should not
be considered a significant factor in evaluating whether we will be able to
comply with our obligations under the Junior Subordinated Debentures or the
Guarantee.
13
<PAGE>
YOU WILL HAVE LIMITED VOTING RIGHTS.
As a holder of Trust Preferred Securities, you will have limited voting
rights. Your voting rights will relate only to the modification of the Trust
Preferred Securities and the exercise of the Trust's rights as holder of the
Junior Subordinated Debentures. In general, only we can replace or remove any of
the Trustees. The property trustee, the administrative trustees and we may amend
the Trust Agreement without your consent for certain things, including to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust. You also will have no voting rights on matters submitted to
a vote of our stockholders. However, if an event of default under the Trust
Agreement occurs and is continuing, the holders of at least a majority in
aggregate liquidation amount of the Trust Preferred Securities may replace the
property trustee and the Delaware trustee.
POTENTIAL TAX LAW CHANGES COULD REQUIRE US TO REDEEM THE TRUST PREFERRED
SECURITIES.
From time to time, certain tax law changes have been proposed that would
deny interest deductions to corporate issuers of debt instruments with terms
that include certain of the terms of the Junior Subordinated Debentures. In
addition, the Internal Revenue Service ('IRS') has challenged taxpayers'
treatment as indebtedness of securities issued with characteristics similar to
the Junior Subordinated Debentures. To date, such tax law change proposals have
not been enacted and the only known challenge that has advanced as far as
litigation was settled short of trial, with resolution favorable to the
taxpayer's position. However, if any similar tax law change were enacted or any
such challenge by the IRS were upheld, such event could give rise to a Tax Event
(as defined under 'Description of Trust Preferred Securities--Redemption') which
could result in an early redemption of the Trust Preferred Securities.
THERE MAY BE NO ACTIVE OR LIQUID MARKET FOR THE TRUST PREFERRED SECURITIES.
Before this offering, there has been no market for the Trust Preferred
Securities. We have applied to have the Trust Preferred Securities quoted on the
Nasdaq National Market. We cannot predict whether an active and liquid trading
market for the Trust Preferred Securities will develop or whether a continued
quotation of the Trust Preferred Securities will be available on the Nasdaq
National Market. Although the underwriters (as defined under 'Underwriting')
have informed the Trust and us that they intend to make a market in the Trust
Preferred Securities, they are not obligated to do so and any such market-making
activity may be terminated at any time without notice. Future trading prices of
the Trust Preferred Securities will depend on many factors including, among
other things, prevailing interest rates, our operating results and financial
condition, and the market for similar securities.
RISKS RELATING TO OUR COMPANY
OUR EXPOSURE TO CREDIT RISK IS INCREASING AS A CONSEQUENCE OF THE INCREASE IN
OUR COMMERCIAL BANKING ACTIVITIES.
We have significantly shifted our emphasis from lending on single-family
residential properties to commercial real estate lending (including loans
secured by multi-family residential properties) and lending for commercial
business and consumer purposes. Commercial real estate loans, commercial
business loans and consumer loans amounted to $754.4 million, $338.2 million and
$129.4 million, respectively, at June 30, 1999, compared to $694.8 million,
$232.9 million and $101.7 million, respectively, at December 31, 1998, and
$646.5 million, zero and $38.7 million, respectively, at December 31, 1997. As
we increase our focus on commercial banking and increase our net interest
margin, an increase in our consolidated credit risk is likely to occur. We
generally charge higher interest rates on commercial and consumer loans than we
do on single-family residential mortgage loans, because we expect higher loan
losses. Generally, commercial real estate loans are considered to be riskier
than single-family residential loans because they have larger balances to a
single borrower or group of related borrowers. In addition, the borrower's
ability to repay a commercial loan depends on the successful operation of the
business or the property securing the loan. Consumer lending collections are
dependent on the borrower's continuing financial stability, and are more likely
to be adversely affected by job loss, divorce, illness and personal bankruptcy.
If we experience loan losses that are higher than our allowance for loan losses,
our profits and financial condition could be adversely affected.
14
<PAGE>
CHANGES IN INTEREST RATES COULD NEGATIVELY IMPACT OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Our ability to make a profit, like that of most financial institutions,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
loans and investment securities) and the interest expense we pay on our
interest-bearing liabilities (such as deposits and borrowings). Certain assets
and liabilities, however, may react in different degrees to changes in market
interest rates. Further, interest rates on some types of assets and liabilities
may fluctuate prior to changes in broader market interest rates, while rates on
other types may lag behind. Additionally, some of our assets, such as
adjustable-rate mortgages, have features, including payment and rate caps, which
restrict changes in their interest rates.
Factors such as inflation, recession, unemployment, money supply,
international disorders, instability in domestic and foreign financial markets,
and other factors beyond our control may affect interest rates. Changes in
market interest rates will also affect the level of voluntary prepayments on our
loans and the receipt of payments on our mortgage-backed securities resulting in
the receipt of proceeds that may be reinvested at a lower rate than the loan or
mortgage-backed security being prepaid. Although we pursue an asset-liability
management strategy designed to control our risk from changes in market interest
rates, changes in interest rates can still have a material adverse effect on our
profitability.
OUR ALLOWANCE FOR LOAN LOSSES MAY BE INADEQUATE TO COVER LOSSES ACTUALLY
INCURRED, WHICH COULD AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE JUNIOR
SUBORDINATED DEBENTURES.
We maintain an allowance for loan losses in an amount we believe is
sufficient to provide for known and inherent risks in our loan portfolio. If the
Bank incurs actual losses on its loans in excess of its allowance for loan
losses, it may have insufficient income to extend credit, pay dividends or
otherwise supply funds to us. If this occurs, we may be unable to make payments
of interest and principal on the Junior Subordinated Debentures, and the Trust
may be unable to make payments of interest and principal to you.
A SIGNIFICANT AMOUNT OF OUR MORTGAGE LOANS ARE CONCENTRATED IN OKLAHOMA, AND
ADVERSE CONDITIONS IN OKLAHOMA COULD NEGATIVELY IMPACT OUR OPERATIONS.
Although we previously purchased and currently hold in our loan portfolio a
substantial amount of loans secured by properties located outside of Oklahoma,
more recently, substantially all of the loans we originate are secured by
properties located in or are made to businesses which operate in Oklahoma.
Because of the current concentration of our loan origination activities in
Oklahoma, our mortgage loans may be subject to a greater risk of default than
other comparable mortgage loans in the event of adverse economic, political or
business developments or natural hazards that may affect Oklahoma and the
ability of property owners in Oklahoma to make payments of principal and
interest on the underlying mortgages, which could have an adverse effect on our
results of operations or financial condition.
WE HAVE OUTSTANDING SIGNIFICANT LITIGATION WITH THE FDIC.
We and the Bank currently have one outstanding significant legal
proceeding. The pending case is between the Bank and the Federal Deposit
Insurance Corporation ('FDIC') and concerns certain claims and liabilities
arising out of an assistance agreement (the 'Assistance Agreement') which was
entered into by the Bank in conjunction with its acquisition of a predecessor
institution during 1989 (the 'FDIC Case'). Very recently, we settled another
significant legal proceeding which had been pending between the Bank and the two
individuals who were formerly our sole stockholders (the 'Selling
Stockholders'), with regard to certain claims, liabilities and disputes which
had arisen between us with regard to the terms and conditions of the Redemption
Agreement we entered into with them in September 1997 (the 'Redemption
Agreement') in connection with our redemption (the 'Redemption') of all of their
shares of our common stock (the 'Redemption Agreement Case'). The Redemption
Agreement Case was completely settled and dismissed by the agreement of the
Selling Stockholders and us pursuant to a settlement agreement executed on
August 26, 1999, effective as of May 27, 1999 (the 'Settlement Agreement'), the
essential terms of which are briefly described below.
15
<PAGE>
FDIC Case. In the FDIC Case, the Bank filed a lawsuit in 1996 against the
United States in which it asserted that the United States had breached the terms
of the Assistance Agreement and other related agreements by, among other things,
changing certain federal income tax laws that had provided financial assistance
and incentives to the Bank in connection with the Assistance Agreement (and
possibly certain related agreements). In the lawsuit, the Bank seeks to recover
for the loss of these tax benefits and for certain other claims (the 'FDIC
Claim').
Under the Assistance Agreement, the FDIC is entitled to receive payments
from the Bank for certain portions of tax benefits attributable to the acquired
net operating loss carry forwards and other tax benefits which were realized by
the Bank from certain items for which assistance was provided to the Bank under
the Assistance Agreement. The FDIC has filed a counterclaim against the Bank in
the FDIC Case (the 'FDIC Counterclaim') claiming that the Bank owes the FDIC a
substantial amount of money with regard to the tax benefits realized by the Bank
for which it had not paid the FDIC pursuant to the terms of the Assistance
Agreement (the 'Tax Benefits Payment'). Our management, after consultation with
legal counsel and based on available proceedings to date, has determined that
the Bank will have some significant liability to the FDIC with respect to the
FDIC Counterclaim. At December 31, 1998, we estimated this liability to be
approximately $13.0 million, which has been reserved and is included in other
liabilities in our Consolidated Statements of Financial Condition as of June 30,
1999.
We believe that as of December 31, 1998, the FDIC's estimate of this
liability was approximately $23.0 million. Pursuant to the Redemption Agreement,
as reaffirmed and amplified in the Settlement Agreement, the Selling
Stockholders have agreed to indemnify us with respect to the Tax Benefits
Payment under the Assistance Agreement by agreeing to be individually liable for
and to fully pay any and all amounts for which we are ultimately found to be
liable to the FDIC on the FDIC Counterclaim for the Tax Benefits Payment which
are in excess of the amount we have reserved (the 'FDIC Reserve'). In this
regard, we deposited $10.0 million of the redemption price to be paid to the
Selling Stockholders for the Redemption of their stock into an escrow account to
be available for such payment by the Selling Stockholders of the FDIC
Counterclaim (the 'Escrow'), if necessary. All attorney fees and costs of
handling the FDIC Case which are incurred by our counsel in the FDIC Case are
also to be paid out of the Escrow.
Settlement of Redemption Agreement Case. Under the terms of the Settlement
Agreement, the Selling Stockholders consented to our reducing the FDIC Reserve
on our books to the sum of $7.7 million while confirming their individual
liability for and obligation to fully pay any amounts which we are ultimately
required to pay to the FDIC on the FDIC Counterclaim to the extent such amounts
exceed the FDIC Reserve and the Escrow. Since the Selling Stockholders could
have liability on the FDIC Counterclaim for the Tax Benefits Payment, the
Redemption Agreement, as affirmed by the Settlement Agreement, requires that all
actions taken by us with regard to the litigation of the FDIC Case be consented
to by the Selling Stockholders and that any settlement of the FDIC Case and/or
of the FDIC Counterclaim be mutually agreed to by us and the Selling
Stockholders. However, the Settlement Agreement authorizes the Selling
Stockholders to unilaterally settle the FDIC Case and the FDIC Counterclaim
provided they pay us, in cash, the full amount of any sum which would be owing
to the FDIC on the FDIC Counterclaim in excess of the FDIC Reserve and the
Escrow before we would become bound by any such settlement. The Settlement
Agreement also requires that an initial settlement offer must be made
immediately by our counsel to the FDIC upon terms already agreed to by the
Selling Stockholders and us. Resolution of the Redemption Agreement Case will
permit the Selling Stockholders and us to actively pursue a complete settlement
of the FDIC Case with the FDIC.
The Settlement Agreement completely resolved all issues and disputes
between us and the Selling Stockholders with regard to the Redemption Agreement.
The Selling Stockholders and we mutually released and discharged each other of
any and all claims with regard to the Redemption. As a consequence of the
settlement, our stockholders' equity at September 30, 1999 will be reduced by
$1.8 million with a corresponding increase to the amount shown under treasury
shares on our consolidated statement of financial condition.
16
<PAGE>
COMPETITION WITH OTHER FINANCIAL INSTITUTIONS COULD ADVERSELY AFFECT OUR
PROFITABILITY.
We face substantial competition in originating loans and in attracting
deposits. This competition in originating loans comes principally from other
banks, savings institutions, mortgage banking companies, consumer finance
companies, insurance companies and other institutional lenders and purchasers of
loans. In attracting deposits, we compete with insured depository institutions
such as savings institutions, credit unions and banks, as well as institutions
offering uninsured investment alternatives including money market funds. These
competitors may offer higher interest rates than we do, which could result in
either our attracting fewer deposits or in our being required to increase our
rates in order to attract deposits. Increased deposit competition could increase
our cost of funds and adversely affect our ability to generate the funds
necessary for our lending operations, thereby adversely affecting our results of
operations. A number of institutions with which we compete have significantly
greater assets, capital and other resources. In addition, many of our
competitors are not subject to the same extensive federal regulation that
governs our business. As a result, many of our competitors have advantages over
us in conducting certain businesses and providing certain services.
IF OUR COMPUTER SYSTEMS DO NOT PROPERLY WORK ON AND AFTER JANUARY 1, 2000, OUR
BUSINESS OPERATIONS WILL BE DISRUPTED.
The Year 2000 issue is the result of computer programs being able to use
only two digits rather than four to define the applicable year. Thus,
date-sensitive software may recognize a date using '00' as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations,
causing disruptions of operations, including, among others, a temporary
inability to process deposit and loan transactions, effect financings or engage
in normal business activities. We have established an enterprise-wide program to
prepare our computer systems and applications for the Year 2000, and we are
utilizing both internal and external resources to identify, correct and test our
systems for Year 2000 compliance. We had substantially completed our
reprogramming as of December 31, 1998 and testing efforts were completed June
30, 1999. Further validation through testing will be continued throughout the
remainder of 1999.
We do not rely on in-house data processing or computer programming for our
main-frame banking applications. Our primary data processing vendor, AllTel,
Inc., has a history of producing high quality banking applications and has
assured us that its core applications will be capable of handling the Year 2000
issue. We continued to test these applications in their own environment to
validate these assurances.
Because third party failures could have a material impact on our ability to
conduct business, questionnaires have been sent to business-critical vendors and
large commercial borrowers to certify that plans are being developed to address
the Year 2000 issue. We are currently assessing the returned questionnaires
which we are categorizing based upon readiness for the Year 2000 issues and
prioritizing based upon significance to our business. To the extent that
business-critical vendors do not provide us with satisfactory evidence of their
readiness to handle Year 2000 issues, contingency plans have been developed.
Furthermore, information has been provided to large commercial borrowers
regarding the potential business risks associated with the Year 2000 issue. We
intend to make every reasonable effort to assess the Year 2000 readiness of
these critical business partners and to create action plans to address the
identified risks.
We have completed an assessment of the Year 2000 compliance status of all
of our information technology and non-information equipment and will continue to
address the Year 2000 compliance of such equipment.
Testing and remediation of all of our systems and applications is expected
to incrementally cost approximately $500,000 in 1999, excluding cost of our
employees involved in Year 2000 compliance activities. All estimated costs have
been budgeted and are expected to be funded by cash flows from operations.
We do not believe the costs and efforts related to the Year 2000 compliance
project will be material to our financial position or results of operations.
However, we cannot give assurances that we will discover and remediate all Year
2000 problems or that our third-party vendors and customers will have
satisfactorily resolved all of their Year 2000 issues, and the failure to do so
could have a material adverse effect on our results of operations and financial
condition.
17
<PAGE>
CHANGES IN STATUTES AND REGULATIONS COULD ADVERSELY AFFECT US.
We are subject to extensive regulation and supervision by federal and state
authorities. Such supervision and regulation establish a comprehensive framework
of activities in which an institution may engage, and are intended primarily for
the protection of the federal deposit insurance fund and the Bank's depositors.
This regulatory structure also provides our regulators with significant
discretion in the performance of their supervisory and enforcement duties. Any
change in such regulation, whether by our regulators or as a result of
legislation subsequently enacted by the Congress of the United States, could
have a substantial impact on the Bank and its operations. Additional legislation
and regulations may be enacted or adopted in the future that could significantly
affect our powers, authority and operations, which could have a material adverse
effect on our operations.
FORWARD LOOKING STATEMENTS
This document contains and incorporates by reference certain forward
looking statements regarding our financial condition, results of operations and
business. These statements are not historical facts and include statements about
our
o confidence;
o strategies;
o earnings;
o new and existing programs and products;
o relationships;
o opportunities;
o technology; and
o market conditions.
You may identify these statements by looking for
o forward looking terminology, like 'expect,' 'believe' or 'anticipate;'
o expressions of confidence like 'strong' or 'on-going;' or
o similar statements or variations of those terms.
These forward looking statements involve certain risks and uncertainties. Actual
results may differ materially from the results the forward looking statements
contemplate because of, among others, the following possibilities:
o competitive pressure in the banking and financial services industry
increases significantly;
o changes occur in the interest rate environment;
o our Year 2000 compliance program does not effectively address Year 2000
computer problems; and
o general economic conditions, either nationally or in the state of
Oklahoma, are less favorable than expected.
18
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any documents we file with the
SEC at its public reference facilities at 450 Fifth Street, NW, Washington, DC
20549, 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You
can also obtain copies of the documents at prescribed rates by writing to the
Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities. Our SEC filings are also available
at the office of the Nasdaq National Market. For further information on
obtaining copies of our public filings at the Nasdaq National Market, you should
call (301) 590-6500.
The trust is not subject to the information reporting requirements of the
Securities Exchange Act of 1934. The trust will become subject to such
requirements upon the effectiveness of the registration statement that contains
this prospectus, although we intend to seek and expect to receive an exemption
therefrom.
We and the trust have filed with the SEC a registration statement on Form
S-3 (together with all amendments thereto, the 'registration statement'), of
which this prospectus is a part, under the Securities Act of 1933 with respect
to the Trust Preferred Securities, the Junior Subordinated Debentures and the
Guarantee. This prospectus does not contain all of the information set forth in
the registration statement, certain portions of which have been omitted as
permitted by the rules and regulations of the SEC. For further information with
respect to us, the Trust, the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee, reference is made to the registration
statement, including its exhibits. The registration statement may be inspected
without charge at the principal office of the SEC in Washington, D.C., and
copies of all or part of it may be obtained from the SEC upon payment of the
prescribed fees.
We 'incorporate by reference' into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and information that we file subsequently
with the SEC will automatically update this prospectus. We incorporate by
reference the documents listed below and any filings we make with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, after the initial
filing of the registration statement that contains this prospectus and prior to
the time that we sell all the securities offered by this prospectus:
o Annual Report on Form 10-K for the year ended December 31, 1998;
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999; and
o Current Reports on Form 8-K filed with the SEC on February 19, 1999,
April 1, 1999, April 28, 1999, May 18, 1999, May 28, 1999, July 9, 1999
and July 29, 1999.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing to or telephoning us at the following address: 3601 N.W.
63rd Street, Oklahoma City, Oklahoma 73116, Attention: Corporate Secretary,
telephone (405) 841-2100.
19
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER SIX MONTHS
SIX MONTHS 31, ENDED YEARS ENDED JUNE 30,
ENDED JUNE 30, --------------------- DECEMBER 31, -----------------------------------------
1999 1998 1997 1997 1997 1996 1995 1994
-------------- --------- --------- ------------ -------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratios of earnings to fixed
charges:
Including interest on
deposits..................... 1.38x 1.31x N/A N/A N/A 1.10x 1.13x 1.71x
Excluding interest on
deposits..................... 5.79x 6.85x N/A N/A 1.48x 1.94x 1.95x 3.63x
Dollar amount of excess
(deficiency) of earnings to
fixed charges:
Including interest on
deposits..................... $ 16,763 $ 28,691 $(161,553) $ (130,031) $(41,905) $ 18,440 $ 20,983 $ 73,710
Excluding interest on
deposits..................... $ 50,676 $103,434 $ (79,009) $ (89,359) $ 41,186 $ 99,613 $ 89,218 $129,057
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
represent income (loss) before cumulative effect of change in accounting
principles and income taxes plus fixed charges. Fixed charges, excluding
interest on deposits, includes gross interest expense less interest on deposits.
Fixed charges, including interest on deposits, includes all gross interest
expense.
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Preferred Securities,
together with proceeds of the Common Securities, will be invested by the Trust
in the Junior Subordinated Debentures to be issued by us. We intend to use the
estimated net proceeds from the sale of the Junior Subordinated Debentures of
approximately $ million ($ million if the underwriters' over-allotment
option is exercised in full) for general corporate purposes, including capital
contributions to the Bank to support its growth strategy and for working
capital. We may also use a portion of the net proceeds for acquisitions by
either us or the Bank, although neither we nor the Bank presently have any
understandings that have not been announced with respect to any such
acquisition. Initially, the net proceeds may be used to make short-term
investments.
20
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as
of June 30, 1999, and as adjusted to reflect the sale of the Trust Preferred
Securities, the issuance of the Junior Subordinated Debentures and the
application of the estimated net proceeds as described in 'Use of Proceeds.' You
should also read the more detailed information included or incorporated by
reference in this prospectus, including the financial statements and related
notes.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Total deposits........................................................................ $1,608,625 $ 1,608,625
Borrowings:
Advances from the Federal Home Loan Bank of Topeka.................................. 350,518 350,518
Senior Notes(1)..................................................................... 80,000 80,000
Other liabilities................................................................... 39,426 39,426
---------- -----------
Total borrowings................................................................. 469,944 469,944
---------- -----------
Company-obligated mandatorily redeemable trust preferred securities of subsidiary
trust holding solely junior subordinated debentures of the Company (2).............. -- 27,500
---------- -----------
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized;
none outstanding................................................................. -- --
Common stock, par value $0.01, 25,000,000 shares authorized, 20,537,269 shares
issued and 20,537,209 shares outstanding......................................... 205 205
Additional paid-in capital.......................................................... 206,758 206,758
Retained earnings................................................................... 60,883 60,883
Treasury stock, 60 shares, at cost.................................................. (149,436) (149,436)
Accumulated other comprehensive income.............................................. 7,387 7,387
---------- -----------
Total stockholders' equity....................................................... 125,797 125,797
---------- -----------
Total capitalization........................................................... $2,204,366 $ 2,231,866
========== ===========
</TABLE>
- ------------------
(1) Subsequent to June 30, 1999, we repurchased and retired $3,250,000 of senior
notes.
(2) Reflects the issuance of Trust Preferred Securities at their issue price of
$25 per Trust Preferred Security assuming no exercise of the Underwriters'
over-allotment option. The sole assets of the Trust, which is our
subsidiary, will be the Junior Subordinated Debentures which will mature on
, 2029. We will own all of the Common Securities issued by the
Trust.
21
<PAGE>
LOCAL FINANCIAL CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law upon the
filing of a certificate of trust with the Delaware Secretary of State. The Trust
will be governed by the terms of the Trust's Amended and Restated Declaration of
Trust (the 'Trust Agreement') which will be qualified as an indenture under the
Trust Indenture Act of 1939, as amended (the 'Trust Indenture Act'). The Trust
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to acquire
the Junior Subordinated Debentures and (iii) engaging in other activities that
are incidental or necessary to these purposes. The Junior Subordinated
Debentures will be the sole assets of the Trust, and, accordingly, payments
under the Junior Subordinated Debentures will be the sole revenues of the Trust.
All of the Common Securities will be owned by us. We will acquire Common
Securities with a $25 Liquidation Amount, equal to at least 3% of the total
capital of the Trust. While the Common Securities will have terms equal in
priority of payment with the Trust Preferred Securities, if we default on the
Junior Subordinated Debentures, then cash distributions and liquidation,
redemption and other amounts payable on the Common Securities will be
subordinated to the Trust Preferred Securities in priority of payment.
The Trust has a term of approximately 31 years, but may be dissolved
earlier as provided in the Trust Agreement. The Trust's business and affairs are
conducted by the Issuer Trustees, who are appointed by us as holder of the
Common Securities. The trustees for the Trust will be The Bank of New York, as
the Property Trustee (the 'Property Trustee'), The Bank of New York (Delaware),
as the Delaware Trustee (the 'Delaware Trustee') and three Administrative
Trustees who are our officers (each, an 'Administrative Trustee' and
collectively, the 'Administrative Trustees'). The Property Trustee, the Delaware
Trustee and the Administrative Trustees are collectively referred to as the
'Issuer Trustees' in this prospectus. The Property Trustee will act as sole
indenture trustee under the Trust Agreement. The Bank of New York will also act
as trustee under the Guarantee and the Indenture. The duties and obligations of
each Issuer Trustee are governed by the Trust Agreement. The holder of the
Common Securities of the Trust or, if an event of default under the Trust
Agreement has occurred and is continuing, the holders of not less than a
majority in liquidation amount of the Trust Preferred Securities, will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the Trust Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, whose
voting rights will be vested exclusively in the holder of the Common Securities.
We will pay all fees, expenses, debts and obligations related to the Trust
and the offering of the Trust Preferred Securities and will pay, directly or
indirectly, all ongoing costs and expenses of the Trust, except the Trust's
obligations with respect to the Trust Preferred Securities and the Common
Securities.
For financial reporting purposes, the Trust will be treated as our
subsidiary and, accordingly, the accounts of the Trust will be included in our
Consolidated Financial Statements. We will present the Trust Preferred
Securities as a separate line item in our consolidated Statement of Financial
Condition entitled 'Company-Obligated Mandatorily Redeemable Trust Preferred
Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of
the Company' and we will include appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures in
the notes to our Consolidated Financial Statements. For financial reporting
purposes, we will record distributions payable on the Trust Preferred Securities
as interest expense in our Consolidated Statements of Operations.
DESCRIPTION OF TRUST PREFERRED SECURITIES
This summary of certain provisions of the Trust Preferred Securities, the
Common 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, and
the Trust Indenture Act. The form of the Trust Agreement has been filed as an
exhibit to the Registration Statement of which this prospectus forms a part. The
Trust Agreement will be qualified under the Trust Indenture Act.
22
<PAGE>
GENERAL
The Issuer Trustees will issue the Trust Preferred Securities on behalf of
the Trust pursuant to the terms of the Trust Agreement. We will own all of the
Common Securities. The Trust Preferred Securities will represent preferred
undivided beneficial interests in the assets of the Trust and the holders of the
Trust Preferred Securities will be entitled to a preference in certain
circumstances with respect to Distributions (as defined below) and amounts
payable on redemption or liquidation over the Common Securities, as well as
other benefits as described in the Trust Agreement. The Trust Agreement
prohibits the issuance by the Trust of any securities other than the Trust
Securities or the incurrence of any indebtedness by the Trust.
The Trust Preferred Securities will rank equal in priority of payment, and
payments will be made thereon pro rata with the Common Securities except under
certain circumstances. See '--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 Trust Securities. The Guarantee will
not guarantee payment of Distributions or amounts payable on redemption of the
Trust Preferred Securities or liquidation of the Trust when the Trust does not
have funds on hand legally available for such payments.
DISTRIBUTIONS
Payment of Distributions. Distributions on each Trust Preferred Security
will be cumulative, will accrue from , 1999 and will be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1999, at the annual rate of % of the stated
Liquidation Amount of $25 per Trust Preferred Security ('Distributions'). The
initial Distribution will equal $ for each Trust Preferred Security.
Subsequent Distributions will equal $ for each Trust Preferred
Security. Distributions in arrears for more than one quarter will (to the extent
permitted by law) accrue interest at the rate per annum of % thereof
compounded quarterly. Distributions will be made to the holders of the Trust
Preferred Securities on the relevant record date which will be the fifteenth 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 and, for any period of less than a
full calendar quarter, on the basis of the actual number of days elapsed in the
quarter. In the event that any date on which Distributions are payable on the
Trust Preferred Securities is not a Business Day (as defined below), payment of
the Distribution payable 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), except that if the next succeeding Business Day falls in the next
succeeding calendar year, the payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date (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, New York or Oklahoma City, Oklahoma are authorized or required by
law or executive order to close.
Deferral Period. So long as no Debenture Event of Default shall have
occurred and be continuing, we will have the right under the Indenture to defer
the payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive calendar quarters
with respect to each deferral period (each, a 'Deferral Period'), provided that
no Deferral Period shall end on a date other than an Interest Payment Date (as
defined herein) or extend beyond , 2029, which is the 'Stated
Maturity Date.' Upon any such election, quarterly Distributions on the Trust
Preferred Securities will be deferred by the Trust during such Deferral Period.
Distributions to which holders of the Trust Preferred Securities are entitled
during any such Deferral Period will accumulate additional Distributions thereon
at the rate per annum of % thereof, compounded quarterly from the relevant
Distribution Date. The term 'Distributions,' as used herein, shall include any
such additional Distributions.
Prior to the termination of any such Deferral Period, we may further extend
such Deferral Period, provided that such extension will only be permitted under
the Trust Agreement to the extent that such Deferral Period, together with all
other extensions occurring both before and after such extension, does not exceed
20 consecutive calendar quarters, end on a date other than an Interest Payment
Date or extend beyond the Stated Maturity Date. Upon the termination of any such
Deferral Period and the payment of all amounts then due on any Interest Payment
Date, we may elect to begin a new Deferral Period, subject to the above
23
<PAGE>
requirements. No interest shall be due and payable during a Deferral Period,
except at the end of the period. If Distributions are deferred, the deferred
Distributions and accrued interest will be paid to holders of the Trust
Preferred Securities as they appear on the books and records of the Trust on the
record date for Distributions due at the end of the Deferral Period. We must
give the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of our election of any such Deferral Period (or an extension thereof) at
least five Business Days prior to the earlier of (i) the date the Distributions
on the Trust Preferred Securities would have been payable except for the
election to begin such Deferral Period and (ii) the date the Administrative
Trustees are required to give notice to any securities exchange or automated
quotation system or to holders of such Trust Preferred 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 we may elect to begin a Deferral Period.
During any such Deferral Period, we may not:
o declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our
capital stock;
o make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities (including any other
debentures ('Other Debentures')) that rank equal with or junior in right
of payment to the Junior Subordinated Debentures; or
o make any guarantee payments with respect to any guarantee made by us of
the debt securities of any of our subsidiaries of (including other
guarantees) if such guarantee ranks equal with or junior in right of
payment to the Junior Subordinated Debentures.
However, we will not violate the first bullet point above if we:
o declare or pay dividends or make distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, our common
stock;
o declare a dividend in connection with the implementation of a
stockholders' rights plan, or issue stock under any such plan in the
future, or redeem or repurchase of any such rights pursuant to any such
plan;
o make payments under the Guarantee;
o purchase any fractional shares as a result of a reclassification of our
capital stock;
o purchase any fractional interests in shares of our capital stock pursuant
to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged therefor; or
o purchase common stock as a result of the issuance of common stock or
rights under any of our benefit plans for directors, officers or
employees or any of our dividend reinvestment plans.
We do not currently intend to exercise our option to defer payments of
interest on the Junior Subordinated Debentures.
Source of Distribution. The Trust's funds available for distribution to
holders of the Trust Preferred Securities will be limited to payments under the
Junior Subordinated Debentures. If we do not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Trust Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds on hand legally
available for the payment of such Distributions) will be guaranteed by us.
REDEMPTION
Mandatory Redemption of the Trust Preferred Securities. Upon the repayment
or redemption at any time, in whole or in part, of any Junior Subordinated
Debentures, the proceeds from such repayment or redemption will be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the 'Redemption Date'), at a redemption price equal to $25 per Trust
Preferred Security plus any accrued and unpaid Distributions thereon to the
Redemption Date. If less than all of the Junior Subordinated Debentures are to
be prepaid on a Redemption Date, then the proceeds of such prepayment will be
allocated pro rata to the Trust Preferred Securities and the Common Securities,
as described below.
24
<PAGE>
Optional Redemption of the Junior Subordinated Debentures. On and after
, 2004, we will have the right to redeem the Junior Subordinated
Debentures in whole at any time or in part from time to time at a redemption
price equal to the accrued and unpaid interest on the Junior Subordinated
Debentures so redeemed to the date fixed for redemption, plus % of the
principal amount thereof, declining ratably each year to 100% of the principal
amount thereof at any time on and after , 2009. We would redeem the
Junior Subordinated Debentures upon not less than 30 nor more than 60 days
written notice, in each case subject to receipt of prior approval if it is then
required under applicable regulatory requirements. If we redeem the Junior
Subordinated Debentures, the Trust Securities will be redeemed as described in
the preceding paragraph.
Special Event or Distribution of Junior Subordinated Debentures. If a
Special Event (as defined below) occurs and is continuing, we will have the
right upon not less than 30 nor more than 60 days written notice to redeem the
Junior Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
redemption price within 90 days following the occurrence of such Special Event,
in each case subject to receipt of prior approval if it is then required under
applicable regulatory requirements. If a Special Event has occurred and is
continuing and we do not elect to redeem the Junior Subordinated Debentures (and
thereby cause a mandatory redemption of the Trust Securities) or to dissolve the
Trust and, after satisfaction of creditors as required by applicable law, cause
the Junior Subordinated Debentures to be distributed to holders of the Trust
Securities, the Trust Securities will remain outstanding and Additional Sums (as
defined below) may be payable on the Junior Subordinated Debentures.
Definitions. The terms described in the preceding paragraph have the
following meanings:
'Additional Sums' means the additional amounts as may be necessary to be
paid by us with respect to the Junior Subordinated Debentures in order that the
amount of Distributions then due and payable by the Trust on the outstanding
Trust Securities will not be reduced as a result of any additional taxes, duties
and other governmental charges to which the Trust has become subject.
An 'Investment Company Event' means the receipt by us of an opinion of
counsel experienced in such matters to the effect that, as a result of any
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Trust is or will be
considered an 'investment company' that is required to be registered under the
Investment Company Act of 1940 (the 'Investment Company Act'), which change
becomes effective on or after the original issuance of the Trust Preferred
Securities.
'Like Amount' means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, allocated to the Common Securities
and to the Trust Preferred Securities based upon the relative Liquidation
Amounts of such classes and the proceeds of which will be used to pay the
redemption price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holders to whom such Junior Subordinated Debentures are
distributed.
'Liquidation Amount' means the stated amount of $25 per Trust Security.
'Regulatory Capital Event' means receipt by us of an opinion of independent
bank regulatory counsel experienced in such matters to the effect that, as a
result of (a) any amendment to, or change (including any announced prospective
change) in, the laws or any regulations of the United States or any rules,
guidelines or policies of applicable regulatory agencies or (b) any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of the Trust
Agreement, there is more than an insubstantial risk that the Trust Preferred
Securities do not constitute, or within 90 days of the date thereof, will not
constitute, Tier 1 Capital (or its then equivalent) for purposes of the capital
adequacy guidelines of the Board of Governors of the Federal Reserve (or any
successor regulatory authority with jurisdiction over bank holding companies),
or any capital adequacy guidelines as then in effect and applicable to us. The
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distribution of the Junior Subordinated Debentures in connection with the
dissolution of the Trust by us will not in and of itself constitute a Regulatory
Capital Event.
'Special Event' means a Tax Event, an Investment Company Event or a
Regulatory Capital Event, as the case may be.
'Tax Event' means the receipt by us 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 of the United States or of any political subdivision or taxing
authority, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of the Trust Agreement, 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 us on the Junior Subordinated Debentures is not, or within 90 days of the
date of such opinion will not be, deductible by us, 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 minor amount
of other taxes, duties or other governmental charges.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
We will have the right at any time to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust as required by applicable
law, to cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. This right is
subject to (i) our having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Trust Preferred
Securities and (ii) prior approval by the applicable regulatory authorities if
it is then required under applicable regulatory requirements.
After the date is fixed for any distribution of Junior Subordinated
Debentures to holders of the Trust Securities, (i) the Trust Securities will no
longer be deemed to be outstanding, (ii) The Depository Trust Company ('DTC' or
'Depositary') or its nominee will receive, in respect of each registered global
certificate, if any, representing Trust Securities held by it, a registered
global certificate or certificates representing the Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Trust Securities not held by DTC or its nominee will be deemed to
represent Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Trust Securities with an interest rate indentical to
the distribution rate of, and accrued and unpaid interest equal to the
accumulated and unpaid Distributions on, such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon we will issue to such holder, and the Debenture Trustee
will authenticate, a certificate representing such Junior Subordinated
Debentures.
We can give no assurance as to the market prices for the Trust Preferred
Securities, or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Securities, if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Trust Preferred Securities that you may
purchase, or the Junior Subordinated Debentures that you may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that you paid to purchase the Trust Preferred Securities.
If the Junior Subordinated Debentures are distributed to the holders of
Trust Preferred Securities, we will use our best efforts to list or quote the
Junior Subordinated Debentures on the Nasdaq National Market or such other
exchange or automated quotation system if, any, on which the Trust Preferred
Securities are then listed or quoted.
REDEMPTION PROCEDURES
If applicable, Trust Securities will be redeemed at the redemption price
with the proceeds from the contemporaneous repayment or redemption of the Junior
Subordinated Debentures. Any redemption of Trust Securities will be made and the
redemption price shall be payable on the Redemption Date only to the extent that
the Trust has funds legally available for the payment of such redemption price.
The Trust may not redeem fewer than all of the outstanding Trust Preferred
Securities unless all accrued and unpaid Distributions have been paid on all
Trust Preferred Securities for all quarterly Distribution periods
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terminating on or prior to the date of redemption. If a partial redemption of
the Trust Preferred Securities would result in the delisting of the Trust
Preferred Securities by a national securities exchange or other organization on
which the Trust Preferred Securities are listed, then, pursuant to the
Indenture, we may only redeem the Junior Subordinated Debentures in whole and,
as a result, the Trust may only redeem the Trust Preferred Securities in whole.
If the Trust gives a notice of redemption in respect of the Trust Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the Redemption Date, to the extent that we have deposited with the
Property Trustee by 10:00 a.m., New York City time, funds sufficient to pay the
redemption price with respect to the Trust Preferred Securities held by DTC or
its nominees, the Property Trustee will deposit or cause the Paying Agent (as
defined herein) to deposit irrevocably with DTC funds sufficient to pay the
redemption price and will give DTC or its nominees irrevocable instructions and
authority to pay the redemption price to the holders of such Trust Preferred
Securities. See 'Book-Entry Issuance.' If such Trust Preferred Securities are no
longer in book-entry form, the Property Trustee, to the extent we have deposited
with the Property Trustee funds sufficient to pay the redemption price, will
irrevocably deposit with the Paying Agent for such Trust Preferred Securities
funds sufficient to pay the aggregate redemption price and will give such Paying
Agent irrevocable instructions and authority to pay the redemption price to the
holders thereof upon surrender of their certificates evidencing such Trust
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date shall be payable to the holders of such Trust
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of the
Trust Preferred Securities called for redemption will cease, except the right of
the holders of such Trust Preferred Securities to receive the redemption price,
but without interest on such redemption price and such Trust Preferred
Securities will cease to be outstanding. In the event that any Redemption Date
of Trust Preferred Securities is not a Business Day, then the redemption price
payable on such date will be paid on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such next succeeding Business Day falls in the next calendar
year, such payment shall be made on the immediately preceding Business Day. In
the event that we fail to repay the Junior Subordinated Debentures on maturity
or payment of the redemption price is improperly withheld or refused and not
paid either by the Trust or by us pursuant to the Guarantee as described under
'Description of Guarantee,' (i) Distributions on Trust Preferred Securities will
continue to accrue at the then applicable rate from the Redemption Date
originally established by the Trust to the date such redemption price is
actually paid and (ii) the actual payment date will be the Redemption Date for
purposes of calculating the redemption price.
Subject to the Trust Agreement and applicable law (including, without
limitation, United States federal securities law), we or our subsidiaries may at
any time and from time to time purchase outstanding Trust Preferred Securities
by tender, in the open market or by private agreement.
Payment of the redemption price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities will be made on the Redemption Date.
If less than all of the Trust Securities issued by the Trust are to be
redeemed on a Redemption Date, then the aggregate redemption price for such
Trust Securities to be redeemed will be allocated pro rata to the Trust
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of the Trust Securities or such other method as the Trustee shall deem
appropriate, not more than 60 days prior to the date fixed for redemption. The
particular Trust Preferred Securities to be redeemed will be selected by the
Property Trustee from the outstanding Trust Preferred Securities not previously
called for redemption, by such method as the Property Trustee deems fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple thereof) of the Liquidation Amount of
Trust Preferred Securities. The Property Trustee will promptly notify the
security registrar in writing of the Trust Preferred Securities selected for
redemption and, in the case of any Trust Preferred Securities selected for
partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Trust Preferred Securities shall relate
to the portion of the aggregate Liquidation Amount of Trust Preferred Securities
which has been or is to be redeemed.
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Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless we default in payment of the redemption 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 Trust
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of the Trust Securities. However, if on any Distribution Date or
Redemption Date a Debenture Event of Default (as described in 'Description of
Junior Subordinated Debentures--Debenture Events 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, will be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of the outstanding Trust Preferred Securities for
all Distribution periods terminating on or prior to the Debenture Event of
Default, or in the case of payment of the redemption price, the full amount of
such redemption price shall have been made or provided for, and all funds
available to the Property Trustee will first be applied to the payment in full
in cash of all Distributions on, or redemption price of, the Trust Preferred
Securities then due and payable.
In the case of any Event of Default under the Trust Agreement relating to a
Debenture Event of Default (as described in '--Events of Default; Notice'), as
holder of the Common Securities, we will be deemed to have waived any right to
act with respect to such Event of Default until the effect of such Event of
Default has been cured, waived or otherwise eliminated. Until any such Event of
Default has been so cured, waived or otherwise eliminated, the Property Trustee
will act solely on behalf of the holders of the Trust Preferred Securities and
not on behalf of us as holder of the Common Securities, and only the holders of
the Trust Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
We will have the right at any time to dissolve the Trust and cause the
Junior Subordinated Debentures to be distributed to the holders of the Trust
Securities. Our right is subject to (i) our having received an opinion of an
independent tax counsel experienced in such matters to the effect that such
distribution will not be a taxable event to holders of Trust Preferred
Securities for United States federal income tax purposes, and (ii) our having
received prior approval if it is then required under applicable regulatory
requirements. See '--Distribution of Junior Subordinated Debentures.'
In addition, the Trust will automatically dissolve upon the first to occur
of: (i) certain events of our bankruptcy, dissolution or liquidation; (ii) the
distribution of a Like Amount of the Junior Subordinated Debentures to the
holders of the Trust Securities, if we have given written direction to the
Property Trustee to dissolve the Trust (which direction is optional and, except
as described above, wholly within our discretion); (iii) redemption of all of
the Trust Securities; (iv) expiration of the term of the Trust; and (v) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust will be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing to the holders of
the Trust Securities, after satisfaction of liabilities to creditors of the
Trust, a Like Amount of the Junior Subordinated Debentures. However, if such a
distribution is determined by the Property Trustee not to be practicable, the
holders will be entitled to receive out of the assets of the Trust legally
available for distribution, after satisfaction of liabilities to creditors of
the Trust, an amount equal to the aggregate of the Liquidation Amount plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the 'Liquidation Distribution'). If such Liquidation Distribution can be
paid only in part because the Trust has insufficient assets on hand legally
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Trust Securities shall be paid on a
pro rata basis. However, if a Debenture Event of Default has occurred and is
continuing, the Trust Preferred Securities will have a priority over the Common
Securities. See '--Subordination of Common Securities.'
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If we elect not to redeem the Junior Subordinated Debentures prior to
maturity in accordance with their terms and either elect not to or are unable to
liquidate the Trust and distribute the Junior Subordinated Debentures to holders
of the Trust Securities, the Trust Securities will remain outstanding until the
repayment of the Junior Subordinated Debentures on the Stated Maturity Date.
If we elect to dissolve the Trust and thereby cause the Junior Subordinated
Debentures to be distributed to holders of the Trust Preferred Securities in
liquidation of the Trust, we shall continue to have the right to shorten the
maturity of the Junior Subordinated Debentures, subject to certain conditions.
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an 'Event of Default' under the Trust Agreement (an 'Event of
Default') with respect to the Trust Preferred Securities, regardless of the
reason for such Event of Default and whether it occurs voluntary or involuntary
or by operation of law or pursuant to any order, rule or regulation:
o the occurrence of a Debenture Event of Default (see 'Description of
Junior Subordinated Debentures--Debenture Events of Default');
o default by the Trust in the payment of any Distribution when it becomes
due and payable, and continuation of such default for a period of 30
days;
o default by the Trust in the payment of the redemption price of any Trust
Security when it becomes due and payable;
o 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 default or breach in the performance of a covenant or warranty
which is addressed in the second or third clause above), and continuation
of the 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 Trust Preferred Securities, a written notice
specifying the default or breach and requiring it to be remedied and
stating that the notice is a 'Notice of Default' under the Trust
Agreement; or
o the occurrence of certain events of bankruptcy or insolvency with respect
to the Property Trustee and the failure by us to appoint a successor
Property Trustee within 60 days of the event.
Within 90 days after the occurrence of any Event of Default known to the
Property Trustee, the Property Trustee will transmit notice of the Event of
Default to the holders of the Trust Preferred Securities, the Administrative
Trustees and us, unless the Event of Default has been cured or waived. We and
the Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not we or 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 Trust
Preferred Securities will have a preference over the Common Securities. See
'--Subordination of Common Securities' and '--Liquidation Distribution Upon
Dissolution.' Upon a Debenture Event of Default, unless the principal of all the
Junior Subordinated Debentures has already become due and payable, either the
Property Trustee or the holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debentures then outstanding may declare all of
the Junior Subordinated Debentures to be due and payable immediately by giving
notice in writing to us (and to the Property Trustee, if notice is given by
holders of the Junior Subordinated Debentures). If the Property Trustee or the
holders of the Junior Subordinated Debentures fail to declare the principal of
all of the Junior Subordinated Debentures due and payable upon a Debenture Event
of Default, the holders of at least 25% in Liquidation Amount of the Trust
Preferred Securities then outstanding will have the right to declare the Junior
Subordinated Debentures immediately due and payable. In either event, payment of
principal and interest on the Junior Subordinated Debentures will remain
subordinated to the extent provided in the Indenture. In addition, holders of
the Trust Preferred Securities have the right in certain circumstances to bring
a direct action ('Direct Action'). See 'Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Trust Preferred
Securities.'
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REMOVAL OF ISSUER TRUSTEES
Unless an Event of Default has occurred and is continuing, any Issuer
Trustee may be removed at any time by the holder of the Common Securities. If an
Event of Default has occurred and is continuing, the Property Trustee and the
Delaware Trustee may be removed by the holders of a majority in Liquidation
Amount of the outstanding Trust Preferred Securities. In no event will the
holders of the Trust Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees, which voting rights are vested
exclusively in us, 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
Unless an Event of Default has occurred and is 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 property of the Trust may at the time be
located, we, as the holder of the Common Securities, and the Administrative
Trustees shall have the right 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
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 the 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 an Event of Default has occurred and is continuing, the
Property Trustee alone will have power to make the appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Issuer Trustee is a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Issuer Trustee, will be the successor of such Issuer Trustee under the
Trust Agreement, provided the Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below or as otherwise described under '-- Distribution of
Junior Subordinated Debentures.' The Trust may, at our request, with the consent
of the Administrative Trustees but without the consent of the holders of the
Trust Preferred Securities, the Property Trustee or the Delaware Trustee, merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to a trust organized under the laws of any State; provided, that (i) the
successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (b) substitutes for the Trust
Securities other securities having substantially the same terms as the Trust
Securities (the 'Successor Securities'), so long as the Successor Securities
rank the same as the Trust Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) we
expressly appoint a trustee of such successor entity possessing the same powers
and duties as the Property Trustee with respect to the Junior Subordinated
Debentures, (iii) the Trust Preferred Securities or 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
Trust Preferred Securities are then listed or quoted, if any, (iv) if the Trust
Preferred Securities (including any Successor Securities) are rated by any
nationally recognized statistical rating organization prior to the transaction,
the merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Trust Securities (including any Successor Securities)
or, if the Junior Subordinated Debentures are so rated, the Junior Subordinated
Debentures, to be downgraded by any such nationally recognized statistical
rating organization, (v) the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities),
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(vi) the successor entity has a purpose substantially identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from independent
counsel to the Trust experienced in such matters to the effect that (a) the
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Trust Securities (including any Successor Securities) in any material
respect (other than any dilution of such holders' interests in the new entity),
(b) following the 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, and (c)
the Trust will continue to be, or the successor entity will be, classified as a
grantor trust for federal income tax purposes, (viii) we 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 and (ix) the
Property Trustee is given an officer's certificate and an opinion of counsel
each to the effect that all conditions precedent in the Trust Agreement to the
transactions have been satisfied. Notwithstanding the foregoing, the Trust will
not, except with the consent of holders of 100% in Liquidation Amount of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by
or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if the consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity not to be classified as a grantor trust for United
States federal income tax purposes or each holder of the Trust Securities not to
be treated as owning an undivided interest in the Junior Subordinated
Debentures.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under '--Mergers, Consolidations,
Amalgamations or Replacements of the Trust' and 'Description of
Guarantee--Amendments and Assignment' and as otherwise required by law and the
Trust Agreement, the holders of the Trust Preferred Securities will have no
voting rights.
The Trust Agreement may be amended from time to time by us, the Property
Trustee and the Administrative Trustees, without the consent of the holders of
the Trust Securities (i) to cure any ambiguity, correct or supplement any
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. However, the amendment to
the Trust Agreement under these circumstances may not adversely affect the
interests of the holders of the Trust Securities. Any amendments of the Trust
Agreement under these circumstances will become effective when notice is given
to the holders of the Trust Securities. The Trust Agreement may be amended by
the Issuer Trustees and us (i) with the consent of holders representing a
majority (based upon Liquidation Amount) of the outstanding Trust Securities and
(ii) upon receipt by the Issuer Trustees of an opinion of counsel experienced in
such matters 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. However, 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 reduce the amount payable
on redemption thereof 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 payment on or after the specified
date. Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified as other than a grantor trust for United States federal income tax
purposes, (ii) reduce or otherwise adversely affect the powers of the Property
Trustee (without the consent of the Property Trustee) or (iii) cause a Special
Event.
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So long as any Junior Subordinated Debentures are held by the Property
Trustee, subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in Liquidation Amount of the Trust
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee, or
direct the exercise of any trust or power conferred on the Property Trustee with
respect to the Junior Subordinated Debentures, including the right to direct the
Property Trustee, as holder of the Junior Subordinated Debentures, to (i)
exercise the remedies available under the Indenture with respect to the Junior
Subordinated Debentures, (ii) waive any past defaults under the Indenture that
are available under the Indenture, (iii) exercise any right to rescind or annul
a declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where the
consent will be required. However, where a consent under the Indenture would
require the consent of each affected holder of Junior Subordinated Debentures,
no consent may be given by the Property Trustee without the prior approval of
each holder of the Trust Preferred Securities. The Issuer Trustees will not
revoke any action previously authorized or approved by a vote of the holders of
the Trust Preferred Securities except by subsequent vote of those holders. The
Property Trustee will notify each holder of Trust Preferred Securities within 90
days of any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of the holders of
the Trust Preferred Securities prior to taking any of the foregoing actions,
except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the Issuer Trustees will obtain an opinion of counsel
experienced in such matters to the effect that the Trust will not be classified
as an association taxable as a corporation for United States federal income tax
purposes on account of such action.
Any required approval of holders of Trust Preferred Securities may be given
at a meeting of the holders convened for that purpose or pursuant to written
consent without prior notice. The Property Trustee will cause a notice of any
meeting at which holders of Trust Preferred Securities are entitled to vote to
be given to each holder of record of Trust Preferred Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Trust Preferred Securities will be
required for the Trust to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by us, the Trustees or any affiliate
of us or any Trustees, will, for purposes of such vote or consent, be treated as
if they were not outstanding.
GLOBAL TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of DTC or its nominee (a 'Global Trust
Preferred Security'). Beneficial interests in the Trust Preferred Securities
will be shown on, and transfer thereof will be effected only through, records
maintained by persons that have accounts with such Depositary ('Participants').
Except as described below, Trust Preferred Securities in the certificated form
will not be issued in exchange for the global certificates. See 'Book-Entry
Issuance.'
A global security will be exchangeable for certificates representing Trust
Preferred Securities registered in the names of persons other than the
Depositary or its nominee only if (i) the Depositary notifies us that it is
unwilling or unable to continue as a depositary for the global security and no
successor depositary shall have been appointed, or if at any time the Depositary
ceases to be a clearing agency registered under the Exchange Act, at a time when
the Depository is required to be so registered to act as such depository, (ii)
the Trust in its sole discretion determines that the global security may be so
exchangeable, or (iii) there shall have occurred and be continuing a Debenture
Event of Default. Any global security that is exchangeable as described in the
preceding sentence will be exchangeable for definitive certificates registered
in the names as the Depositary shall direct. We expect that the instructions
will be based upon directions received by the Depositary with respect to
ownership of beneficial interests in the global security. In the event that
Trust Preferred Securities are issued in definitive form, the Trust Preferred
Securities will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
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Unless and until it is exchanged in whole or in part for individual Trust
Preferred Securities, a Global Trust Preferred Security may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor Depositary or any nominee of
the successor.
Payments on Trust Preferred Securities represented by a global security
will be made to the Depositary, as the depositary for the Trust Preferred
Securities. In the event the Trust Preferred Securities are issued in definitive
form, Distributions will be payable, the transfer of the Trust Preferred
Securities will be registrable, and Trust Preferred Securities will be
exchangeable for Trust Preferred Securities of other denominations of a like
aggregate Liquidation Amount, at the corporate office of the Property Trustee,
or at the offices of any paying agent or transfer agent appointed by the
Administrative Trustees by check mailed to the address of the persons entitled
thereto or by wire transfer. For a description of the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other manners, See 'Book-Entry Issuance.'
Upon the issuance of a Global Trust Preferred Security, and the deposit of
the Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for the Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
the Global Trust Preferred Securities to the accounts of Participants. These
accounts will be designated by the dealers, underwriters or agents with respect
to the Trust Preferred Securities. Ownership of beneficial interests in a Global
Trust Preferred Security will be limited to Participants or persons that may
hold interests through Participants. Ownership of beneficial interests in the
Global Trust Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of the securities in definitive form. These
limits and laws may impair the ability to transfer beneficial interest in a
Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owner of the Global Trust Preferred Security, the
Depositary or the nominee, as the case may be, will be considered the sole owner
or holder of the Trust Preferred Securities represented by the Global Trust
Preferred Security for all purposes under the Trust Agreement governing such
Trust Preferred Securities. Except as provided below, owners of beneficial
interest in a Global Trust Preferred Security will not be entitled to have any
of the individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Trust Preferred Securities in definitive
form and will not be considered the owners or holders under the Trust Agreement.
Neither the Property Trustee, any Paying Agent (as defined below), the
Securities Registrar (as defined below) for the Trust Preferred Securities nor
we will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
Global Trust Preferred Security representing the Trust Preferred Securities or
for maintaining supervising or reviewing any records relating to the beneficial
ownership interests.
We expect that the Depositary for Trust Preferred Securities or its
nominee, upon receipt of any payment of the Liquidation Amount or Distributions
in respect of a permanent Global Trust Preferred Security, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate Liquidation Amount of such
Global Trust Preferred Security as shown on the records of such Depositary or
its nominee. We also expect that payments by Participants to owners of
beneficial interests in such Global Trust Preferred Security held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in 'street name.' These payments will be the responsibility
of such Participants.
If the Depositary for the Trust Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by us within 90 days, the Trust will issue
certificates representing Trust Preferred Securities in exchange for the Global
Trust Preferred Security. In addition, the Trust may at any time and in its sole
discretion, subject to any limitations described herein relating to the Trust
Preferred Securities, determine not to have any Trust Preferred Securities
represented by
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one or more Global Trust Preferred Securities and, in that event, will issue
individual Trust Preferred Securities in exchange for the Global Trust Preferred
Security. In any such instance, an owner of a beneficial interest in a Global
Trust Preferred Security will be entitled to physical delivery of individual
Trust Preferred Securities represented by the Global Trust Preferred Security
equal in Liquidation Amount to the beneficial interest and to have the Trust
Preferred Securities registered in its name. Individual Trust Preferred
Securities so issued will be issued in denominations, unless otherwise specified
by us, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments on the Trust Preferred Securities held in global form will be made
to the Depositary, which will credit the relevant accounts at the Depositary on
the applicable Distribution Dates. Payments on the Trust Preferred Securities
that are not held by the Depositary will be made by check mailed to the address
of the holder entitled thereto as the address which appears on the register. The
paying agent (the 'Paying Agent') will initially be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and us. The Paying Agent will be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees. In the
event that the Property Trustee will no longer be the Paying Agent, the
Administrative Trustees will appoint a successor (which will be a bank or trust
company acceptable to the Administrative Trustees and us) to act as Paying
Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will initially act as registrar and transfer agent for
the Trust Preferred Securities (the 'Securities Registrar'). Registration of
transfers of the Trust Preferred 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 Trust Preferred 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 the duties as are specifically
set forth in the Trust Agreement and, during the existence of an Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of Trust
Securities unless it is offered reasonable indemnity or security against the
costs, expenses and liabilities that might be incurred. If no Event of Default
has occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the Trust
Agreement or is unsure of the application of any provision of the Trust
Agreement, and the matter is not one on which holders of the Trust Securities
are entitled under the Trust Agreement to vote, then the Property Trustee may
take the action as is directed by and, if not so directed, may take 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. The Property Trustee also serves as trustee under the indenture
pursuant to which the Company's senior notes were issued.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an investment company required to be registered under the
Investment Company Act or classified as other than a grantor trust for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated by us as indebtedness for United States federal
income tax purposes. In this connection, we and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Trust Agreement, that we and the
Administrative Trustees determine in our discretion to be necessary or desirable
for these purposes, as long as the action does not adversely affect the
interests of the holders of the Trust Securities or vary the terms thereof.
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Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture, as
supplemented from time to time (as so supplemented, the 'Indenture'), between
The Bank of New York, as trustee (the 'Debenture Trustee') and us. The Debenture
Trustee will act as the indenture trustee for purposes of complying with the
Trust Indenture Act. The Indenture will be 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 is qualified
in its 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. The form of the
Indenture has been filed as an exhibit to the Registration Statement.
Concurrently with the issuance of the Trust Preferred Securities, the Trust
will invest the proceeds, together with the consideration paid by us for the
Common Securities, in Junior Subordinated Debentures issued by us. The Junior
Subordinated Debentures will be issued as unsecured debt under the Indenture.
We may at any time dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, cause the Junior Subordinated Debentures
to be distributed to the holders of the Trust Securities in liquidation of the
Trust. If the Junior Subordinated Debentures are distributed to the holders of
the Trust Preferred Securities, we will use our best efforts to list or quote
the Junior Subordinated Debentures on the Nasdaq National Market or such other
stock exchange or automated quotation system, if any, on which the Trust
Preferred Securities are than listed or quoted.
GENERAL
The Junior Subordinated Debentures will bear interest at the annual rate of
% of the principal amount thereof, payable quarterly in arrears on the last
day of March, June, September and December of each year (each, an 'Interest
Payment Date'), commencing December 31, 1999, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, on
the fifteenth day of the month in which the relevant Interest Payment Date
occurs. The amount of each interest payment due with respect to the Junior
Subordinated Debentures will include amounts accrued through the date the
interest payment is due. We anticipate that, until the dissolution, if any, of
the Trust, each Junior Subordinated Debenture will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Trust Preferred
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months and, for any period of less
than a full calendar quarter, on the basis of the actual number of days elapsed
per 90-day quarter. In the event that any date on which interest is payable on
the Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay), except
that if the next succeeding Business Day falls in the next succeeding calendar
year, then the payment will be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the rate per annum of % thereof, compounded quarterly. The term 'interest,'
as used herein, includes quarterly interest payments, interest on quarterly
interest payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2029 (such
date, as it may be shortened as hereinafter described (the 'Stated Maturity
Date'). The Stated Maturity Date may be shortened once at any time by us to any
date not earlier than , 2004 subject to our having received prior
approval if it is then required under applicable regulatory requirements. Under
such circumstances, the redemption price will be as set forth under
'--Redemption.' In the event that we elect to shorten the Stated Maturity Date
of the Junior Subordinated Debentures, we will give notice to the Debenture
Trustee, and the
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Debenture Trustee will give notice of the shortening to the holders of the
Junior Subordinated Debentures no less than 90 days prior to the effectiveness
thereof.
The Junior Subordinated Debentures will rank equal with all Other
Debentures and will be unsecured and will rank subordinate and junior in right
of payment to all Senior and Subordinated Indebtedness (as defined under
'Description of Junior Subordinated Debentures--Subordination') to the extent
and in the manner set forth in the Indenture.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, we
will have the right under the Indenture to defer the payment of interest on the
Junior Subordinated Debentures at any time and from time to time for a period
not exceeding 20 consecutive calendar quarters, provided that no Deferral Period
may end on a date other than an Interest Payment Date or extend beyond the
Stated Maturity Date. At the end of such Deferral Period, we must pay all
interest then accrued and unpaid (together with interest thereon) at the annual
rate of %, compounded quarterly, to the extent permitted by applicable law.
During a Deferral Period, interest will continue to accrue and, if the Junior
Subordinated Debentures have been distributed to holders of the Trust Preferred
Securities, holders of Junior Subordinated Debentures (or holders of the Trust
Preferred Securities while Trust Preferred Securities are outstanding) will be
required to accrue such deferred interest income for United States federal
income tax purposes prior to the receipt of cash attributable to such income.
See 'Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount.'
During a Deferral Period, we will not undertake any of the actions set
forth below under '--Certain Covenants We Have Made.'
Prior to the termination of any such Deferral Period, we may further extend
such Deferral Period, provided that such extension does not cause such Deferral
Period together with all previous and further extensions within the Deferral
Period to exceed 20 consecutive calendar quarters, end on a date other than an
Interest Payment Date or extend beyond the Stated Maturity Date. Upon the
termination of any such Deferral Period and the payment of all amounts then due
on any Interest Payment Date, we may elect to begin a new Deferral Period,
subject to the above requirements. No interest will be due and payable during a
Deferral Period, except at the end of that period. We must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of
election of any Deferral Period (or an extension thereof) at least five Business
Days prior to the earlier of (i) the next succeeding date on which Distributions
on the Trust Preferred Securities are payable or (ii) the date the Trust is
required to give notice to any securities exchange or to holders of Trust
Preferred Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to the record
date. The Debenture Trustee will give notice of our election to begin or extend
a new Deferral Period to the holders of the Trust Preferred Securities.
ADDITIONAL SUMS
If the Trust or the Property Trustee is required to pay any additional
taxes, duties, assessments or other governmental charges, we will pay Additional
Sums as required so that the Distributions payable by the Trust shall not be
reduced as a result of any such additional taxes, duties, assessments or other
governmental charges.
REDEMPTION
Subject to our having received any prior approval required under applicable
regulatory requirements, the Junior Subordinated Debentures are redeemable prior
to maturity at our option on and after , 2004, in whole (at any
time) or in part (from time to time), at a redemption price equal to the
percentage of the outstanding principal amount of the Junior Subordinated
Debentures specified below, plus in each case,
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accrued and unpaid interest on the Junior Subordinated Debentures to the date of
redemption, if redeemed during the 12-month period beginning of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------ ------------------------------------
<S> <C>
2004 %
2005 %
2006 %
2007 %
2008 %
2009 and thereafter 100.00%
</TABLE>
The Junior Subordinated Debentures are also redeemable prior to maturity at
any time in whole (but not in part), within 90 days following the occurrence of
a Special Event, in each case at a redemption price equal to the accrued and
unpaid interest on the Junior Subordinated Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount. If a partial redemption
of the Trust Preferred Securities resulting from a partial redemption of the
Junior Subordinated Debentures would result in a delisting of the Trust
Preferred Securities, then we may redeem the Junior Subordinated Debentures in
whole only.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at the holder's registered address. Unless we default
in payments of the redemption price, on and after the redemption date, interest
ceases to accrue on the Junior Subordinated Debentures or portions called for
redemption.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
Under certain circumstances involving the dissolution of the Trust, the
Junior Subordinated Debentures may be distributed to the holders of the Trust
Preferred Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust. See 'Description of Trust Preferred
Securities--Liquidation Distribution Upon Dissolution.' If distributed to
holders of the Trust Preferred Securities in liquidation, the Junior
Subordinated Debentures will initially be issued in the form of one or more
global securities and the Depositary or any successor depositary for the Trust
Preferred Securities will act as depositary for the Junior Subordinated
Debentures. We anticipate that the depositary arrangements for the Junior
Subordinated Debentures be substantially identical to those in effect for the
Trust Preferred Securities. If the Junior Subordinated Debentures are
distributed to the holders of Trust Preferred Securities upon the liquidation of
the Trust, we will use our best efforts to list the Junior Subordinated
Debentures on the Nasdaq National Market or such other stock exchanges or
automated quotation system, if any, on which the Trust Preferred Securities are
then listed or quoted. We can give no assurance as to the market price of any
Junior Subordinated Debentures that may be distributed to the holders of Trust
Preferred Securities.
CERTAIN COVENANTS WE HAVE MADE
If at any time (1) there shall have occurred any event that (a) is, or with
the giving of notice or the lapse of time, or both, would be, a Debenture Event
of Default and (b) in respect of which we shall not have taken reasonable steps
to cure, (2) we are in default with respect to our payment of any obligations
under the Guarantee, or (3) we shall have given notice of our election of a
Deferral Period as provided in the Indenture and shall not have rescinded such
notice, and such Deferral Period, or any extension thereof, shall have commenced
and be continuing, then we will not:
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of our capital stock;
o make any payment of principal, interest or premium, if any, on
or repay or repurchase or redeem any of our debt securities
(including Other Debentures) that rank equal with or junior in
right of payment to the Junior Subordinated Debentures; or
o make any guarantee payments with respect to any guarantee by us
of the debt securities of any of our subsidiaries (including
under other guarantees) if such guarantee ranks equal or junior
in right of payment to the Junior Subordinated Debentures.
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However, we will not violate the first bullet point above if we:
o declare or pay dividends or make distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares
of our common stock;
o declare a dividend in connection with the implementation of a
stockholders' rights plan, or issue stock under any plan in the
future, or redeem or repurchase any rights under such a plan;
o make payments under the Guarantee;
o purchase fractional shares as a result of a reclassification of
our capital stock;
o purchase fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of our capital
stock or the security being converted or exchanged; or
o purchase common stock as a result of the issuance of common
stock or rights under any of our benefit plans for directors,
officers or employees or any of our dividend reinvestment plan.
So long as the Trust Securities remain outstanding, we also have agreed (i)
to maintain 100% direct or indirect ownership of the Common Securities;
provided, however, that any permitted successor to us under the Indenture may
succeed to our ownership of such Common Securities, (ii) to not voluntarily
dissolve, wind-up or terminate the Trust, except in connection with the
distribution of the Junior Subordinated Debentures or certain mergers,
consolidations or amalgamations, each as permitted by the Trust Agreement, (iii)
to timely perform our duties as sponsor of the Trust, (iv) to use our reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with the distribution of Junior Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement, and (b) to otherwise continue to be
classified as a grantor trust for United States federal income tax purposes and
(v) to use our reasonable efforts to cause each holder of Trust Securities to be
treated as owning an undivided beneficial interest in the Junior Subordinated
Debentures.
SUBORDINATION
In the Indenture, we have covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Indebtedness to the extent
provided in the Indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency, debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding which we are the subject of, the holders of
Senior and Subordinated Indebtedness will first be entitled to receive payment
in full of principal of all Allocable Amounts (as defined below) on such Senior
and Subordinated Indebtedness before the holders of Junior Subordinated
Debentures will be entitled to receive or retain any payment in respect thereof.
As of June 30, 1999, we had $80.0 million of Senior Indebtedness, comprised of
our senior notes, and no Subordinated Indebtedness.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior and Subordinated Indebtedness outstanding
at the time of such acceleration will first be entitled to receive payment in
full of such amounts due thereon (including any amounts due upon acceleration)
before the holders of Junior Subordinated Debentures will be entitled to receive
or retain any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal, or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to any Senior and Subordinated
Indebtedness, or an event of default with respect to any Senior and Subordinated
Indebtedness resulting in the acceleration of the maturity thereof, or if any
judicial proceeding shall be pending with respect to any default.
We are a holding company and almost all of our operating assets are owned
by our subsidiaries. We are a legal entity separate and distinct from our
subsidiaries. Holders of Junior Subordinated Debentures should look only to us
for payments on the Junior Subordinated Debentures. The principal sources of our
income are dividends, interest and fees from our subsidiaries. We rely primarily
on dividends from the Bank to meet our
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obligations for payment of principal and interest on our corporate expenses.
There are regulatory limitations on the payment of dividends directly or
indirectly to us from the Bank. As of June 30, 1999, under applicable banking
statutes, the total capital available for payment of dividends by the Bank to us
was approximately $10.4 million. However, bank regulatory authorities have the
power to prohibit any act, including the payment of dividends, if such act would
reduce bank capital to a point that, in the opinion of such regulatory
authorities, would render the Bank undercapitalized and thus constitute an
unsafe or unsound banking practice. In addition, the Bank is subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, us and certain affiliates, and on investments in stock
or other securities. These restrictions prevent us and our affiliates from
borrowing from the Bank unless the loans are secured by various types of
collateral. Further, secured loans, other transactions and investments by the
Bank are generally limited in amount as to us and as to each of our affiliates
to 10% of the Bank's capital and surplus and as to us and all of our other
affiliates to an aggregate of 20% of the Bank's capital and surplus.
Because we are a holding company, our right 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 Trust
Preferred Securities to benefit indirectly from such distribution), is subject
to the prior claims of creditors of that subsidiary (including depositors, in
the case of the Bank), except to the extent we may be recognized as a creditor
of that subsidiary. At June 30, 1999, our subsidiaries had total liabilities
(excluding liabilities owed to us) of $2.0 billion. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of our subsidiaries and all liabilities of any of our future
subsidiaries. The Indenture does not limit our or our subsidiaries' ability to
incur or issue other secured or unsecured debt, including Senior and
Subordinated Indebtedness.
Definitions. For purposes of the foregoing paragraphs, the following
definitions apply:
'Allocable Amounts,' when used with respect to any Senior and Subordinated
Indebtedness, means all amounts due or to become due on the Senior and
Subordinated Indebtedness less, if applicable, any amount which would have been
paid to, and retained by, the holders of the Senior and Subordinated
Indebtedness (whether as a result of the receipt of payments by the holders of
such Senior and Subordinated Indebtedness from us or any other obligated party
or from any holders of, or trustee in respect of, other indebtedness that is
subordinate and junior in right of payment to the Senior and Subordinated
Indebtedness) but for the fact that such Senior and Subordinated Indebtedness is
subordinated or junior in right of payment to (or subject to a requirement that
amounts received on such Senior and Subordinated Indebtedness be paid over to
obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.
'Indebtedness' means with respect to any person, whether recourse is to all
or a portion of the assets of such person and whether or not contingent: (i)
every obligation of any person for money borrowed; (ii) every obligation of the
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of the person with
respect to letters of credit, banker's acceptances or similar facilities issued
for the account of the person; (iv) every obligation of the person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of the person; (vi) all
indebtedness of the person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another person and all dividends
of another person the payment of which, in either case, the person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
'Senior and Subordinated Indebtedness' means the principal of (and premium,
if any) and interest, if any (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to us whether or
not the claim for post-petition interest is allowed in such proceeding), on our
Indebtedness whether incurred on or prior to the date of the Indenture or
thereafter incurred, unless in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that the obligations
are not superior in right of payment to the Junior Subordinated Debentures or to
other
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Indebtedness which is equal with, or subordinated to, the Junior Subordinated
Debentures. However, Senior and Subordinated Indebtedness does not include (i)
any of our Indebtedness which when incurred and without respect to any election
under section 1111(b) of the United States Bankruptcy Reform Act of 1978, as
amended, was without recourse to us, (ii) any Indebtedness we have to any of our
subsidiaries, (iii) Indebtedness to any of our employees, and (iv) any other
debt securities issued pursuant to the Indenture.
DENOMINATIONS, REGISTRATION AND TRANSFER
If the Junior Subordinated Debentures are distributed to the holders of the
Trust Preferred Securities, the Junior Subordinated Debentures will be
represented by global certificates registered in the name of the Depositary or
its nominee (the 'Global Subordinated Debenture'). Beneficial interests in the
Junior Subordinated Debentures will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary. Except as described
below, Junior Subordinated Debentures in certificated form will not be issued in
exchange for the global certificates. See 'Book-Entry Issuance.'
Unless and until a Global Subordinated Debenture is exchanged in whole or
in part for the individual Junior Subordinated Debentures, it may not be
transferred except as a whole by the Depositary for the Global Subordinated
Debenture to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of the successor.
A Global Subordinated Debenture will be exchangeable for Junior
Subordinated Debentures registered in the names of persons other than the
Depositary or its nominee only if (i) the Depositary notifies us that it is
unwilling or unable to continue as a depositary for such Global Subordinated
Debenture and no successor shall have been appointed, or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act, at
a time when the Depositary is required to be so registered to act as such
depositary, (ii) we in our sole discretion determine that the Global
Subordinated Debenture will be so exchangeable or (iii) there shall have
occurred and be continuing a Debenture Event of Default with respect to the
Global Subordinated Debenture. Any Global Subordinated Debenture that is
exchangeable pursuant to the preceding sentence will be exchangeable for
definitive certificates registered in such names as the Depositary shall direct.
It is expected that the instructions will be based upon directions received by
the Depositary from its Participants with respect to ownership of beneficial
interests in the Global Subordinated Debenture. In the event that Junior
Subordinated Debentures are issued in definitive form, the Junior Subordinated
Debentures will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a Global
Subordinated Debenture will be made to the Depositary, as the depositary for the
Junior Subordinated Debentures. In the event Junior Subordinated Debentures will
be registrable, Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate office of the Debenture Trustee, or at the offices of
any paying agent or transfer agent appointed by us, provided that payment of
interest may be made at our option by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Junior Subordinated
Debentures are issued in certificated form, the record dates for payment of
interest will be the first day of the month in which such payment is to be made.
For a description of the Depositary and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see 'Book-Entry Issuance.'
We will appoint the Debenture Trustee as securities registrar under the
Indenture (the 'Securities Registrar'). Junior Subordinated Debentures may be
presented for exchange as provided above, and may be presented for registration
of transfer (with the form of transfer endorsed thereon, or a satisfactory
written instrument of transfer, duly executed), at the office of the Securities
Registrar. We may at any time rescind the designation of any transfer agent or
approve a change in the location through which any transfer agent acts, provided
that we maintain a transfer agent in the place of payment. We may at any time
designate additional transfer agents with respect to the Junior Subordinated
Debentures.
In the event of any redemption, neither we nor the Debenture Trustee shall
be required to (i) issue, register the transfer of or exchange Junior
Subordinated Debentures during a period beginning at the opening
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of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures and ending at the close of business on the day of
mailing of the relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except, in the case
of any Junior Subordinated Debentures being redeemed in part, any portion
thereof not to be redeemed.
GLOBAL SUBORDINATED DEBENTURES
Upon the issuance of the Global Subordinated Debenture and the deposit of
such Global Subordinated Debenture with or on behalf of the Depositary, the
Depositary for the Global Subordinated Debenture or its nominee will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the individual Junior Subordinated Debentures represented by the
Global Subordinated Debenture to the accounts of persons that have accounts with
such Depositary ('Participants'). Ownership of beneficial interests in a Global
Subordinated Debenture will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Subordinated Debenture will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants). The laws of some states
require that certain purchasers of securities take physical delivery of the
securities in definitive form. These limits and laws may impair the ability to
transfer beneficial interests in a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of the Global Subordinated Debenture, the
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Junior Subordinated Debentures represented by the Global
Subordinated Debenture for all purposes under the Indenture governing the Junior
Subordinated Debentures. Except as provided below, owners of beneficial
interests in a Global Subordinated Debenture will not be entitled to have any of
the individual Junior Subordinated Debentures represented by such Global
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated Debentures
in definitive form and will not be considered the owners or holders under the
Indenture.
Payments of principal of and interest on individual Junior Subordinated
Debentures represented by a Global Subordinated Debenture registered in the name
of the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner of the Global Subordinated Debenture
representing the Junior Subordinated Debentures. Neither we nor the Debenture
Trustee, any Paying Agent, or the Securities Registrar for such Junior
Subordinated Debentures will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Subordinated Debenture representing the Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by us within
90 days after we receive notice or otherwise become aware of the situation, we
will issue individual Junior Subordinated Debentures in exchange for the Global
Subordinated Debenture. In addition, we may at any time and in our sole
discretion, determine not to have the Junior Subordinated Debentures represented
by one or more Global Subordinated Debenture and, in such event, we will issue
individual Junior Subordinated Debentures in exchange for the Global
Subordinated Debenture. In any such instance, an owner of a beneficial interest
in a Global Subordinated Debenture will be entitled to physical delivery of
individual Junior Subordinated Debentures registered in its name. Individual
Junior Subordinated Debentures so issued will be issued in denominations, unless
otherwise specified by us, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on Junior Subordinated Debentures
will be made at the office of the Debenture Trustee in the City of New York or
at the office of such Paying Agent or Paying Agents as we may designate from
time to time, except that at our option, payment of any interest may be made,
except in the case of Junior Subordinated Debentures in global form, (i) by
check mailed to the address of the Person entitled thereto as the address
appears in the register for Junior Subordinated Debentures or (ii) by
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transfer to an account maintained by the Person as specified in the 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. We may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however we will at all times be required to maintain a Paying Agent in
each place of payment for the Junior Subordinated Debentures.
We expect that the Depositary or its nominee, upon receipt of any payment
of principal or interest in respect of a permanent Global Subordinated Debenture
representing the Junior Subordinated Debentures, immediately will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of the Global
Subordinated Debenture as shown on the records of such Depositary or its
nominee. We also expect that payments by Participants to owners of beneficial
interests in such Global Subordinated Debenture held through the Participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in 'street name.' These payments will be the responsibility of such
Participants.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by us in trust, for the payment of the principal of or interest on any
Junior Subordinated Debenture and remaining unclaimed for two years after such
principal or interest has become due and payable will, at our request, be repaid
to us and the holder of such Junior Subordinated Debenture will thereafter look,
as a general unsecured creditor, only to us for payment thereof.
MODIFICATION OF INDENTURE
From time to time we 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 action does not
adversely affect the interest of the holders of Junior Subordinated Debentures),
and qualifying, or maintaining the qualification of, the Indenture under the
Trust Indenture Act. The Indenture contains provisions permitting us and the
Debenture Trustee, with the consent of the holders of a majority in principal
amount of Junior Subordinated Debentures, to modify the Indenture in a manner
affecting the rights of the holders of Junior Subordinated Debentures; provided
that no such modification may, without the consent of the holders of each
outstanding Junior Subordinated Debenture so affected, (i) change the Stated
Maturity Date, or reduce the principal amount of, or reduce any amount payable
on redemption of, the Junior Subordinated Debentures or reduce the rate or
extend the time of payment of interest except pursuant to our right under the
Indenture to defer the payment of interest or make the principal of, or interest
on, the Junior Subordinated Debentures payable in any coin or currency other
than U.S. dollars, or impair or affect the right of any holder of Junior
Subordinated Debentures to institute suit for the payment thereof, or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures, the
holders of which are required to consent to any modification of the Indenture;
provided that so long as any of the Trust Preferred Securities remain
outstanding, no modification may be made that adversely affects the holders of
such Trust Preferred Securities, and no termination of the Indenture may occur,
and no waiver of any Debenture 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 Amount of the Trust
Preferred Securities unless and until the principal amount of the Junior
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions are satisfied. If the consent of the
Property Trustee, as holder of the Junior Subordination Debentures, is required
under the Indenture with respect to amendments, waivers or supplements of the
Indenture or the Junior Subordinated Debentures, the Property Trustee shall
request the direction of the holders of the Trust Securities with respect to
such amendments, waivers or supplements and shall vote as directed by a majority
in Liquidation Amount of the Trust Securities voting together as a single class.
Where a consent under the Indenture would require the consent of each holder of
Junior Subordinated Debentures, no such consent shall be given by the Property
Trustee without the prior consent of each holder of Trust Preferred Securities.
In addition, we 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.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
'Debenture Event of Default,' regardless of the reason and whether it is
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree, order, rule or regulation:
o failure for 30 days to pay any interest on the Junior
Subordinated Debentures or any Other Debentures, when due
(subject to the deferral of any due date in the case of an
Deferral Period);
o failure to pay any principal on the Junior Subordinated
Debentures or any Other Debentures when due whether at maturity,
upon redemption, by declaration of acceleration of maturity or
otherwise;
o failure to observe or perform certain other covenants contained
in the Indenture for 60 days after written notice to us from the
Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures;
or
o certain events of our bankruptcy, insolvency or reorganization.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have, subject to certain exceptions, the right to
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, with respect to the Junior Subordinated Debentures. The
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Junior Subordinated Debentures may declare the principal
amount of, and any interest on, the Junior Subordinated Debentures to be due and
payable immediately upon a Debenture Event of Default; provided that, in the
case of certain events of bankruptcy, insolvency or reorganization, such amounts
shall automatically become due and payable. If the Debenture Trustee or holders
of the Junior Subordinated Debentures fail to make the declaration, the Property
Trustee or the holders of at least 25% in the aggregate Liquidation Amount of
the Trust Preferred Securities will have the right. The holders of a majority in
aggregate outstanding principal amount of the Junior Subordinated Debentures may
annul the declaration and waive the default if the default (other than the
non-payment of the principal of the Junior Subordinated Debentures which has
become due solely by such acceleration) has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee. Should the holders
of the Junior Subordinated Debentures fail to annul such declaration and waive
the default, the holders of a majority in aggregate Liquidation Amount of the
Trust Preferred Securities shall have the right.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures may, on behalf of the holders of all the Junior
Subordinated Debentures, waive any past default, except a default in the payment
of principal on or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
In case a Debenture Event of Default occurs and is continuing as to Junior
Subordinated Debentures, the Property Trustee will have the right to declare the
principal of and the interest on such Junior Subordinated Debentures, and any
other amounts payable under the Indenture, to be due and payable and to enforce
its other rights as a creditor with respect to such Junior Subordinated
Debentures.
The Indenture requires the annual filing by us with the Debenture Trustee
of a certificate as to the absence of certain defaults under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and is
attributable to our failure to pay the principal of or interest on the Junior
Subordinated Debentures on the due date, a holder of Trust Preferred Securities
may institute a Direct Action. We may not amend the Indenture to remove the
right to bring a
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Direct Action without the prior written consent of the holders of all of the
Trust Preferred Securities. If the right to bring a Direct Action is removed,
the Trust may become subject to the reporting obligations under the Exchange Act
and the rules and regulations thereunder. Notwithstanding any payments made to a
holder of Trust Preferred Securities by us in connection with a Direct Action,
we will remain obligated to pay the principal of or interest on the Junior
Subordinated Debentures, and we will be subrogated to the rights of the holder
of such Trust Preferred Securities with respect to payments on the Trust
Preferred Securities to the extent of any payments made by us to such holder in
any Direct Action.
The holders of the Trust Preferred Securities will not be able to exercise
directly any remedies available to the holders of the Junior Subordinated
Debentures, other than those set forth in the preceding paragraph, unless there
shall have been an Event of Default under the Trust Agreement. See 'Description
of Trust Preferred Securities--Events of Default; Notice.'
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that we will not consolidate with or merge into any
other Person or convey, transfer or lease its properties as an entirety, or
substantially as an entirety, to any Person, unless: (i) we are the surviving
Person, or the Person formed by or surviving any consolidation or merger (if
other than us) or to which the sale, conveyance, transfer or lease of property
is made is a Person organized and existing under the laws of the United States
or any state thereof or the District of Columbia; (ii) upon any consolidation,
merger, sale, conveyance, transfer or lease, the due and punctual payment of the
principal of and interest on the Junior Subordinated Debentures according to
their tenor and the due and punctual performance and observance of all the
covenants and conditions of the Indenture to be kept or performed by us will be
expressly assumed, by supplemental indenture (which shall conform to the
provisions of the Trust Indenture Act, as then in effect) satisfactory in form
to the Debenture Trustee executed and delivered to the Debenture Trustee by the
Person formed by the consolidation, or into which we will have been merged, or
by the Person which will have acquired our property, as the case may be; (iii)
after giving effect to the consolidation, merger, sale, conveyance, transfer or
lease, no Default or Event of Default, or any event which, after notice or lapse
of time or both, would become a Default or an Event of Default, will have
occurred and be continuing; (iv) the consolidation, merger, sale, conveyance,
transfer or lease does not cause the Junior Subordinated Debentures to be
downgraded by a nationally recognized statistical rating organization; and (v)
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 us 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 maturity or called for redemption within one year, and we deposit or cause 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 interest to the Stated Maturity Date, then
the Indenture will cease to be of further effect (except as to our obligations
to pay all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and we will be deemed
to have satisfied and discharged the Indenture. We will only be permitted to
take such action if, among other things, we deliver to the Debenture Trustee an
opinion of counsel (who may be counsel for us) to the effect that the holders of
the Junior Subordinated Debentures will not recognize income, gain or loss for
federal income tax purposes as a result of our actions and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and will 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 Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by The Bank of New York (the
'Guarantee Trustee') and us concurrently with the issuance by the Trust of the
Trust Preferred Securities for the benefit of the holders from time to time of
the Trust Preferred Securities. The Guarantee will be qualified as an Indenture
under the Trust Indenture Act. This summary of certain provisions of the
Guarantee does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Guarantee and the
Trust Indenture Act. The form of the Guarantee has been filed as an exhibit to
the Registration Statement of which this prospectus forms a part.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Trust Preferred 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.
We will irrevocably agree to pay in full on a subordinated basis, the
Guarantee Payments (as defined below) to the holders of the Trust Preferred
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 Trust Preferred Securities,
to the extent not paid by or on behalf of the Trust (the 'Guarantee Payments'),
will be subject to the Guarantee: (i) any accrued and unpaid Distributions
required to be paid on the Trust Preferred Securities, to the extent that the
Trust has funds on hand legally available therefor at such time, (ii) the
applicable redemption price with respect to the Trust Preferred Securities
called for redemption, to the extent that the Trust has funds on hand legally
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Trust (other than in connection
with the distribution of the Junior Subordinated Debentures to holders of the
Trust Preferred Securities or the redemption of all Trust Preferred Securities),
the lesser of (a) the Liquidation Distribution, to the extent the Trust has
funds legally available therefor at the time, and (b) the amount of assets of
the Trust remaining available for distribution to holders of Trust Preferred
Securities after satisfaction of liabilities to creditors of the Trust as
required by applicable law. Our obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by us to the holders of the
Trust Preferred Securities or by causing the Trust to pay such amounts to such
holders.
We will, through the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the Trust
Preferred 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 Trust Preferred Securities. See 'Relationship
Among the Trust Preferred Securities, the Junior Subordinated Debentures and the
Guarantee.'
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STATUS OF THE GUARANTEE
If we do not make interest payments on the Junior Subordinated Debentures
held by the Trust, the Trust will not be able to pay Distributions on the Trust
Preferred Securities and will not have funds legally available therefor. Our
obligations under the Guarantee will be (i) subordinate and junior in right of
payment to all Senior and Subordinated Indebtedness, except for those
liabilities made equal or subordinate to the Guarantee by their terms, (ii) pari
passu with any senior preferred stock which may be hereafter issued, (iii)
senior to our capital stock and (iv) effectively subordinated to the liabilities
and obligations of our subsidiaries. Because we are a holding company, our right
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise is subject to the prior
claims of creditors of that subsidiary, except to the extent we may be
recognized as a creditor of that subsidiary. Accordingly, our obligations under
the Guarantee effectively will be subordinated to all existing and future
liabilities of our subsidiaries and all liabilities of any of our future
subsidiaries. Claimants should look only to our assets for payments under the
Guarantee. For more information, please refer to 'Description of Junior
Subordinated Debentures--General.'
The Guarantee will constitute a guarantee of payment and not of collection,
which means the guaranteed party may institute a legal proceeding directly
against us 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 Trust Preferred Securities. The Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by the Trust or upon distribution to the holders of the
Trust Preferred Securities of the Junior Subordinated Debentures. The Guarantee
does not limit our ability to incur or issue other secured or unsecured debt,
including Senior and Subordinated Indebtedness, whether under the Indenture, any
other indenture that we may enter into in the future or otherwise.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon our failure to
perform any of our payment or other obligations. The holders of a majority in
aggregate Liquidation Amount of the Trust Preferred Securities will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee. Any holder of the Trust Preferred Securities may institute
a legal proceeding directly against us to enforce the Guarantee Trustee's rights
under the Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, if we fail to make a payment under the Guarantee, a holder of Trust
Preferred Securities may directly institute a proceeding against us for
enforcement of the Guarantee for payment to the holder of the Trust Preferred
Securities of the holder's pro rata portion of the principal of or interest on
the Junior Subordinated Debentures on or after the due dates specified in the
Junior Subordinated Debentures.
We, as guarantor, will be required to file annually with the Guarantee
Trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the Guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the Trust Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of a majority of the aggregate Liquidation Amount of such outstanding
Trust Preferred Securities. All guarantees and agreements contained in the
Guarantee Agreement shall bind our successors, assigns, receivers, trustees and
representatives and shall inure to the benefit of the holders of the Trust
Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the Trust Preferred Securities, upon
full payment of the Liquidation Amount payable upon liquidation of the Trust or
upon distribution of Junior Subordinated Debentures to the holders of the Trust
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if
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at any time any holder of the Trust Preferred Securities must restore payment of
any sums paid under the Trust Preferred Securities or the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by us in performance of the Guarantee, will undertake to perform only
such duties as are specifically set forth in the Guarantee and, in case a
default with respect to the Guarantee has occurred, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee will be under no obligation to exercise any of the powers vested in it
by the Guarantee at the request of any holder of the Trust Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and the Junior Subordinated Debentures. The Trust Preferred
Securities and the Junior Subordinated Debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will be
issued for the Trust Preferred Securities and the Junior Subordinated Debentures
and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, as a 'banking organization' within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a 'clearing corporation'
within the meaning of the New York Uniform Commercial Code, and a 'clearing
agency' registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
'Direct Participants' include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The Depositary
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the Depositary system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ('Indirect Participants'). The rules applicable to
the Depositary and its Participants are on file with the SEC.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Securities and each Subordinated
Debenture ('Beneficial Owner') is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchases, but we expect that
Beneficial Owners will receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased Trust
Preferred Securities or Junior Subordinated Debentures. Transfers of ownership
interests in the Trust Preferred Securities or Junior Subordinated Debentures
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Trust Preferred Securities or Junior
Subordinated Debentures, except in the event that use of the book-entry system
for the Junior Subordinated Debentures is discontinued.
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The Depositary has no knowledge of the actual Beneficial Owners of the
Trust Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, the Property Trustee will determine by lot or pro rata the
amount of the Trust Preferred Securities of each Direct Participant to be
redeemed.
Although voting with respect to the Trust Preferred Securities or the
Junior Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, the Depository would mail
an omnibus proxy (the 'Omnibus Proxy') to the relevant Issuer Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Issuer Trustee to the
Depositary. The Depositary's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Issuer Trustee, the Trust or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the relevant
Issuer Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Issuer Trustee and us. In the event that a successor securities depositary is
not obtained, definitive Trust Preferred Securities or Junior Subordinated
Debentures certificates representing such Trust Preferred Securities or Junior
Subordinated Debentures are required to be printed and delivered. We, at our
option, may decide to discontinue use the system of book-entry transfers through
the Depositary (or a successor depositary). After a Debenture Event of Default,
the holders of a majority in liquidation preference of Trust Preferred
Securities or aggregate principal amount of Junior Subordinated Debentures may
determine to discontinue the system of book-entry transfers through the
Depositary. In any such event, definitive certificates for such Trust Preferred
Securities or Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Trust and
we believe to be accurate but neither the Trust nor we assume any responsibility
for the accuracy thereof. Neither the Trust nor we have any responsibility for
the performance by the Depositary or its Participants of their respective
obligations as described herein or under the rules and procedures governing
their respective operations.
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RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed by us as and to
the extent set forth under 'Description of Guarantee.' Taken together, our
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement and the Guarantee will provide, in the aggregate, a full, irrevocable
and unconditional guarantee of payments of Distributions and other amounts due
on the Trust Preferred 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 Trust Preferred Securities. If and to the extent
that we do not make the required payments on the Junior Subordinated Debentures,
the Trust will not have sufficient funds to make the related payments, including
Distributions, on the Trust Preferred Securities. The Guarantee will not cover
any such payment when the Trust does not have sufficient funds on hand legally
available therefor. In such event, the remedy of a holder of Trust Preferred
Securities is to institute a Direct Action. Our obligations under the Guarantee
will be (i) subordinate and junior in right of payment to all Senior and
Subordinated Indebtedness, except for those liabilities made equal or
subordinate to the Guarantee by their terms, (ii) pari passu with any senior
preferred stock which may be hereafter issued, (iii) senior to our capital stock
and (iv) effectively subordinated to the liabilities and obligations of our
subsidiaries.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities, because:
(i) the aggregate principal amount of the Junior Subordinated Debentures will be
equal to the sum of the aggregate Liquidation Amount of the Trust 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) we shall pay for all and any
costs, expenses and liabilities of the Trust except the Trust's obligations to
holders of Trust Securities under the Trust Securities; and (iv) the Trust
Agreement will provide that the Trust is not authorized to engage in any
activity that is not consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
A holder of any Trust Preferred Security may institute a legal proceeding
directly against us 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 and Subordinated
Indebtedness would not constitute a default or Event of Default under the Trust
Agreement. However, in the event of payment defaults under, or acceleration of,
Senior and Subordinated Indebtedness, the subordination provisions of the
Indenture will provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior and Subordinated 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 Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The Trust Preferred Securities will represent preferred beneficial
interests in the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures and engaging in other
activities that are necessary or incidental thereto. A principal difference
between the rights of a holder of a Trust Preferred Security and a holder of a
Junior Subordinated Debenture is that a holder of a Junior Subordinated
Debenture
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will be entitled to receive from us the principal amount of and interest on
Junior Subordinated Debentures held, while a holder of Trust Preferred
Securities is entitled to receive Distributions from the Trust (or, in certain
circumstances, from us under the Guarantee) if and to the extent the Trust has
funds on hand legally available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary dissolution, winding-up or
liquidation of the Trust, after satisfaction of the liabilities of creditors of
the Trust as required by applicable law, the holders of the Trust Preferred
Securities will be entitled to receive, out of assets held by the Trust, the
Liquidation Distribution in cash. See 'Description of Trust Preferred
Securities--Distribution of Junior Subordinated Debentures.' Upon our voluntary
or involuntary liquidation or bankruptcy, the Property Trustee, as holder of the
Junior Subordinated Debentures, would be a subordinated creditor of ours,
subordinated in right of payment to all Senior and Subordinated Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of principal
and interest, before any of our stockholders receive payments or distributions.
Since we will be the guarantor under the Guarantee and will agree 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 Trust
Preferred Securities and a holder of Junior Subordinated Debentures relative to
other creditors and to our stockholders in the event of our liquidation or
bankruptcy will be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Elias, Matz, Tiernan & Herrick L.L.P., special counsel to
the Trust and us ('Tax Counsel'), the following is a summary of certain of the
material United States federal income tax consequences of the purchase,
ownership and disposition of Trust Preferred Securities held as capital assets
by a holder who purchases such Trust Preferred Securities upon initial issuance.
It does not deal with special classes of holders such as banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, United States Alien
Holders (as defined below) engaged in a U.S. trade or business or persons that
will hold the Trust Preferred Securities as a position in a 'straddle,' as part
of a 'synthetic security' or 'hedge,' as part of a 'conversion transaction' or
other integrated investment, or as other than a capital asset. This summary also
does not address the tax consequences to persons that have a functional currency
other than the U.S. dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Trust Preferred Securities. Further, it does not
include any description of any alternative minimum tax consequences or the tax
laws of any state or local government or of any foreign government that may be
applicable to the Trust Preferred Securities. This summary is based on the
Internal Revenue Code of 1986, as amended (the 'Code'), Treasury regulations
thereunder and the administrative and judicial interpretations thereof, as of
the date hereof, all of which are subject to change, possibly on a retroactive
basis. An opinion of Tax Counsel is not binding on the Internal Revenue Service
('IRS') or the courts. No rulings have been or are expected to be sought from
the IRS with respect to any of the transactions described herein and no
assurance can be given that the IRS will not take contrary positions. Moreover,
no assurance can be given that the opinions expressed herein will not be
challenged by the IRS or, if challenged, that a challenge would not be
successful.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
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CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Junior Subordinated Debentures, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures will be classified for
United States federal income tax purposes as our indebtedness. We, the Trust and
the holders of the Trust Preferred Securities (by acceptance of a beneficial
interest in a Trust Preferred Security) will agree to treat the Junior
Subordinated Debentures as our indebtedness for all United States federal income
tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Trust Preferred Securities, Tax
Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Trust Agreement
and the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Trust Preferred Securities generally will be considered
the owner of an undivided interest in the Junior Subordinated Debentures, and
each holder will be required to include in its gross income a pro rata share of
any interest (or original issue discount ('OID') accrued) with respect to its
allocable share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the 'Regulations'), if the terms and
conditions of a debt instrument make the likelihood that stated interest will
not be timely paid a 'remote' contingency, such contingency will be ignored in
determining whether a debt instrument is issued with OID. We believe that the
likelihood of our exercising our option to defer payments of interest is remote,
because exercising the option would, among other things, prevent us from
declaring dividends on any class of our equity securities. Based on this
conclusion by us, Tax Counsel has rendered its opinion that the Junior
Subordinated Debentures will not be considered to be issued with OID and,
accordingly, stated interest on the Junior Subordinated Debentures generally
will be taxable to a holder as ordinary income at the time it is paid or accrued
in accordance with such holder's method of tax accounting.
Under the Regulations, if we were to exercise our option to defer payments
of stated interest, the Junior Subordinated Debentures would, at such time, be
treated as redeemed and reissued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
related thereto would not be reported as taxable income. Consequently, a holder
of Trust Preferred Securities would be required to include in gross income OID
even though we would not make actual cash payments during a Deferral Period.
The Regulations have not yet 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 described herein. If the option to defer
the payment of interest was determined not to be 'remote,' the Junior
Subordinated Debentures would be treated as having been originally issued with
OID. In that event, all of a holder's taxable interest income with respect to
the Junior Subordinated Debentures would be accounted for on an economic accrual
basis regardless of the holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
CHARACTERIZATION OF INCOME
Because income on the Trust Preferred Securities will constitute interest
or OID, corporate holders of the Trust Preferred Securities will not be entitled
to a dividends-received deduction with respect to any income recognized with
respect to the Trust Preferred Securities.
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DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
We will have the right at any time to liquidate the Trust and cause the
Junior Subordinated Debentures to be distributed to the holders of the Trust
Securities. The distribution, for United States federal income tax purposes,
would be treated as a nontaxable event to each holder, and each holder would
receive an aggregate tax basis in the Junior Subordinated Debentures equal to
the holder's aggregate tax basis in its Trust Preferred Securities. For United
States federal income tax purposes, a holder's holding period in the Junior
Subordinated Debentures so received in liquidation of the Trust would include
the period during which the Trust Preferred Securities were held by the holder.
Under certain circumstances described herein, the Junior Subordinated
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Trust Preferred Securities. Such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Trust Preferred Securities, and a holder
could recognize gain or loss as if it sold such redeemed Trust Preferred
Securities for cash.
SALES OF TRUST PREFERRED SECURITIES
A holder that sells Trust Preferred Securities (including a redemption of
the Trust Preferred Securities by us) will recognize gain or loss equal to the
difference between its adjusted tax basis in the Trust Preferred Securities and
the amount realized on the sale of such Trust Preferred Securities (other than
with respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax basis
in the Trust Preferred Securities generally will be its initial purchase price
increased by OID (if any) previously includable in such holder's gross income to
the date of disposition and decreased by payments (if any) received on the Trust
Preferred Securities in respect of OID. The gain or loss generally will be a
capital gain or loss and generally will be a long-term capital gain or loss if
the Trust Preferred Securities have been held for more than one year.
The Trust Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. A holder who uses the accrual method
of accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debenture are deemed to have been issued with OID) who disposes of
his Trust Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Junior Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or, if applicable, OID), and to add the amount
to his adjusted tax basis in his pro rata share of the underlying Junior
Subordinated Debentures deemed disposed of. To the extent the selling price is
less than the holder's adjusted tax basis (which will include all accrued but
unpaid interest) a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a 'United States Alien Holder' is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A 'U.S. Holder' is a holder of Trust Preferred Securities who or which is
(i) a citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includable in its gross income for federal income tax purposes
without regard to its source or (iv) a trust over which (A) a court within the
United States is able to exercise primary supervision over the administration of
the trust and (B) one or more United States persons have the authority to
control all substantial decisions of the trust.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Trust Preferred Security
who or which is a United States Alien Holder will not be subject to United
States federal withholding tax; provided that, (a) the beneficial owner of the
Trust Preferred Security does not actually or constructively own 10 percent or
more of the total combined voting power of
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all of our classes of stock entitled to vote, (b) the beneficial owner of the
Trust Preferred Security is not a controlled foreign corporation that is related
to us through stock ownership, (c) the beneficial owner is not a bank whose
receipt of interest is described in Section 881(c)(3)(A) of the Code, and (d)
either (A) the beneficial owner of the Trust Preferred Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a U.S. Holder and
provides its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a 'Financial Institution'), and holds the Trust
Preferred Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and furnishes the Trust or its agent with a copy thereof; and (ii) a United
States Alien Holder of a Trust Preferred Security will not be subject to United
States federal withholding tax on any gain realized upon the sale or other
disposition of a Trust Preferred Security. Under Treasury regulations finalized
in 1997, the certification requirement referred to in clause (i)(d) above may be
satisfied with other documentary evidence for interest paid after December 31,
2000 with respect to offshore accounts or through certain foreign
intermediaries.
POTENTIAL TAX LAW CHANGES
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are possible,
and could adversely affect our ability to deduct the interest payable on the
Junior Subordinated Debentures. Moreover, any such legislation could adversely
affect United States Alien Holders by characterizing income derived from the
Junior Subordinated Debentures as dividends, generally subject to a 30% income
tax (on a withholding basis) when paid to a United States Alien Holder, rather
than as interest which, as discussed above, is generally exempt from income tax
in the hands of a United States Alien Holder.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Trust Preferred Securities will be reported to
holders on IRS Form 1099, which forms should be mailed to holders of Trust
Preferred Securities by January 31 following each calendar year.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Trust Preferred Securities to
registered owners who are not 'exempt recipients' and who fail to provide
certain identifying information (such as the registered owner's taxpayer
identification number) in the required manner. Generally, individuals are not
exempt recipients, whereas corporations and certain other entities generally are
exempt recipients. Payments made in respect of the Trust Preferred Securities to
a U.S. Holder must be reported to the IRS, unless the U.S. Holder is an exempt
recipient or establishes an exemption. Compliance with the identification
procedures described in the 'United States Alien Holders' section would
establish an exemption from backup withholding for those United States Alien
Holders who are not exempt recipients.
In addition, upon the sale of the Trust Preferred Securities to (or
through) a broker, the broker must withhold 31% of the entire purchase price,
unless either (i) the broker determines that the seller is a corporation or
other exempt recipient or (ii) the seller provides, in the required manner,
certain identifying information and, in the case of a United States Alien
Holder, certifies that such seller is a United States Alien Holder (and certain
other conditions are met). Such a sale must also be reported by the broker to
the IRS, unless either (i) the broker determines that the seller is an exempt
recipient or (ii) the seller certifies its United States Alien Holder status
(and certain other conditions are met). Certification of the registered owner's
United States Alien Holder status would be made normally on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
ERISA CONSIDERATIONS
We, as the obligor with respect to the Junior Subordinated Debentures held
by the Trust, and our affiliates and the Property Trustee may be considered a
'party in interest' (within the meaning of the Employment Retirement Income
Security Act of 1974, as amended ('ERISA')) or a 'disqualified person'
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(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans that are subject to ERISA and/or certain employee benefit-related
provisions of the Code ('Plans'). The purchase and/or holding of Trust Preferred
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975 of the Code
(including individual retirement arrangements and other plans described in
Section 4975(e)(1) of the Code) and with respect to which we, the Property
Trustee or any affiliate is a service provider (or otherwise is a party in
interest or a disqualified person) may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Trust Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ('PTCE') 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95-60
(an exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions determined by an
in-house asset manager).
In order to avoid prohibited transactions that may result from the purchase
and/or holding of the Trust Preferred Securities, each purchaser of a Trust
Preferred Security shall be deemed to represent to us and the Property Trustee
that either (a) no part of the funds being used to pay the purchase price of the
Trust Preferred Security constitutes 'plan assets,' or (b) if the funds being
used to pay the purchase price of the Trust Preferred Security include 'plan
assets,' that its purchase and holding of the Trust Preferred Security will not
result in a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code (or, in the case of a governmental plan, any substantially similar
Federal, State or local law) for which an exemption is not available.
The U.S. Department of Labor has promulgated a regulation, 29 C.F.R.
Section 2510.3-101 (the 'Plan Asset Regulation'), describing what constitutes
the assets of a Plan with respect to the Plan's investment in an entity for
purposes of certain provisions of ERISA and the Code, including the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests in an 'equity interest' of an entity that is neither a 'publicly offered
security' nor a security issued by an investment company registered under the
Investment Company Act, the Plan's assets include both the equity interest and
an undivided interest in each of the entity's underlying assets, unless it is
established that the entity is an 'operating company' or that equity
participation in the entity by 'benefit plan investors' is not 'significant.'
Because the Trust Preferred Securities will represent beneficial interests
in the Trust, the Trust Preferred Securities are likely to be considered equity
interests in the Trust for purposes of the Plan Asset Regulation, with the
result that the assets of the Trust are likely to be treated as 'plan assets' of
the investing plans for purposes of ERISA and Section 4975 of the Code, unless
the Trust Preferred Securities qualify as 'publicly offered securities.'
A publicly-offered security is a security that is (a) freely transferable,
(b) part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ('Independent Investors') and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. For purposes of the 100
Independent Investor criterion, the Trust Preferred Securities should be deemed
to be a 'class' of securities that would be tested separately from any other
securities that may be issued by the Trust. It is anticipated that the Trust
Preferred Securities will meet the foregoing criteria for treatment as
'publicly-offered securities.' No restrictions will be imposed on the transfer
of the Trust Preferred Securities. It is expected that the Trust Preferred
Securities will be held by at least 100 Independent Investors at the conclusion
of the initial public offering although no assurance can be given, and no
monitoring or other measures will be taken to ensure, that such condition is
met. Also, the Trust Preferred Securities will be sold as part of an offering
pursuant to an effective registration statement under the Act and then will be
timely registered under the Exchange Act. As a result the Trust Preferred
Securities should qualify as publicly-offered securities and therefore will be
eligible for purchase by Plans.
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In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Trust Preferred Securities on behalf or with 'plan assets' of any
Plan should consult their own counsel regarding whether the Trust assets
represented by the Trust Preferred Securities would be considered 'plan assets,'
the consequences that would apply if the Trust's assets were considered 'plan
assets,' and the possibility of exemptive relief from the prohibited transaction
rules. In addition, based on the reasoning of the United States Supreme Court's
decision in John Hancock Mut. Life. Ins. Co. v. Harris Trust and Sav. Bank, 510
U.S. 86 (1993), under certain circumstances assets in the general account of an
insurance company may be deemed to be plan assets for certain purposes, and
under such a reasoning a purchase of the Trust Preferred Securities with assets
of an insurance company's general account may subject the insurance company to
the prohibited transaction and other fiduciary responsibility rules of ERISA
with respect to such assets. Insurance company general account investors should
also consider the effect of the enactment of Section 401(c) of ERISA and any
regulations issued under Section 401(c). Finally, Plan fiduciaries and other
Plan investors should consider whether the investment (i) satisfies the
diversification requirement of ERISA or other applicable law, (ii) is in
accordance with the Plan's governing instruments, and (iii) is prudent in light
of the 'Risk Factors' and other factors discussed herein.
THE SALE OF TRUST PREFERRED SECURITIES TO PLANS IS IN NO RESPECT A
REPRESENTATION BY THE TRUST, US, THE PROPERTY TRUSTEE, THE UNDERWRITERS OR ANY
OTHER PERSON ASSOCIATED WITH THE SALE OF THE TRUST PREFERRED SECURITIES THAT
SUCH SECURITIES MEET ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS
BY PLANS GENERALLY OR ANY PARTICULAR PLAN, OR THAT SUCH SECURITIES ARE OTHERWISE
APPROPRIATE FOR PLANS GENERALLY OR ANY PARTICULAR PLAN. ANY PURCHASER PROPOSING
TO ACQUIRE TRUST PREFERRED SECURITIES WITH ASSETS OF ANY PLAN SHOULD CONSULT
WITH ITS COUNSEL.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
among the Company, the Trust and the underwriters, each of the underwriters have
agreed severally to purchase from the Trust the number of Trust Preferred
Securities set forth opposite its name below at the offering price set forth on
the cover page of this prospectus.
<TABLE>
<CAPTION>
NUMBER
OF TRUST
PREFERRED
UNDERWRITERS SECURITIES
- ---------------------------------------------------------------------- -----------
<S> <C>
A.G. Edwards & Sons, Inc.
Friedman Billings Ramsey
Keefe, Bruyette & Woods, Inc.
-----------
Total............................................................ 1,100,000
===========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all such Trust Preferred Securities if any are
purchased. The underwriters are obligated to take and pay for all of the Trust
Preferred Securities offered hereby (other than those covered by the
over-allotment option) if any are taken.
The underwriters propose initially to offer the Trust Preferred Securities
directly to the public at the public offering price as set forth on the cover
page of this prospectus and to certain securities dealers at such price less a
concession of $ per Trust Preferred Security. The underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per Trust
Preferred Security to certain other brokers and dealers. After the Trust
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the underwriters.
We have granted to the underwriters an option exercisable for 30 days after
the date of this prospectus, to purchase up to an additional 100,000 Trust
Preferred Securities at the public offering price plus accrued Distributions, if
any, from , 1999. The underwriters may exercise this option only to
cover over-allotments, if any, made in connection with the sale of the Trust
Preferred Securities offered by this prospectus. To the extent that the
underwriters exercise this option, we will be obligated, pursuant to the option,
to sell such Trust Preferred Securities to the underwriters.
55
<PAGE>
Because the proceeds of the sale of the Trust Preferred Securities will be
used to purchase the Junior Subordinated Debentures, the underwriting agreement
provides that we will pay to the underwriters, on behalf of the Trust, as
compensation for their services, the following amounts assuming both no exercise
and full exercise of the underwriters' overallotment option:
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Trust Preferred Security................... $ $
Total.......................................... $ $
</TABLE>
We expect to incur expenses, on behalf of us and the Trust, of
approximately $ in connection with this offering.
We and the Trust have agreed that, during the period beginning on the date
of this prospectus and ending 30 days from the date of original issuance of the
Trust Preferred Securities, neither the Trust nor we will, without the prior
written consent of the underwriters, directly or indirectly, sell, offer to
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of, any Trust Preferred Securities, any security convertible into or
exchangeable into or exercisable for Trust Preferred Securities or the Junior
Subordinated Debentures or any debentures substantially similar to the Junior
Subordinated Debentures or any equity securities substantially similar to the
Trust Preferred Securities (except for the Junior Subordinated Debentures and
the Trust Preferred Securities offered hereby).
Application has been made to list the Trust Preferred Securities on the
Nasdaq National Market. The underwriters have advised the Trust that the
underwriters intend to make a market in the Trust Preferred Securities prior to
the commencement of trading on the Nasdaq National Market. The underwriters will
have no obligation to make a market in the Trust Preferred Securities, however,
and may terminate market making activities, if commenced, at any time. Prior to
this offering, there has been no public market for the Trust Preferred
Securities.
Until the distribution of the Trust Preferred Securities is completed,
rules of the SEC may limit the ability of the underwriters and certain selling
group members to bid for and purchase the Trust Preferred Securities. As an
exception to these rules, the underwriters are permitted to engage in certain
transactions that stabilize, maintain or otherwise affect the price of the Trust
Preferred Securities.
If the underwriters create a short position in the Trust Preferred
Securities in connection with the offering, i.e., if they sell a greater
aggregate number of Trust Preferred Securities than is set forth on the cover
page of this prospectus, the underwriters may reduce the short position by
purchasing Trust Preferred Securities in the open market. This is known as a
'syndicate covering transaction.' The underwriters may also elect to reduce any
short position by exercising all or part of the over-allotment option described
above.
The underwriters may also impose a penalty bid on certain selling group
members. This means that if the underwriters purchase Trust Preferred Securities
in the open market to reduce the selling group members' short position or to
stabilize the price of the Trust Preferred Securities it may reclaim the amount
of the selling concession from the selling group members who sold those Trust
Preferred Securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither we, the Trust nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Trust Preferred
Securities. In addition, neither we, the Trust nor any of the underwriters makes
any representation that the underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
We and the Trust have agreed to indemnify the underwriters against, or to
contribute to payments that the underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act.
Certain of the underwriters engage in transactions with, and, from time to
time, have performed services for, us and our affiliates in the ordinary course
of business.
56
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for us by Elias, Matz, Tiernan &
Herrick L.L.P., Washington, D.C., and for the underwriters by Mayer, Brown &
Platt, Chicago, Illinois. Certain matters of Delaware law relating to the
validity of the Trust Preferred Securities will be passed upon on behalf of the
Trust by Richards, Layton & Finger, P.A., special Delaware counsel to the Trust
and us.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997, and
for the year ended December 31, 1998, and for the six month period ended
December 31, 1997, have been incorporated by reference herein and in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein and upon the authority of said firm as experts
in accounting and auditing.
Our consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period ended June 30, 1997,
incorporated by reference in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report, with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
57
<PAGE>
================================================================================
1,100,000 % CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
LOCAL FINANCIAL CAPITAL TRUST I
FULLY AND UNCONDITIONALLY GUARANTEED BY
[LOGO] LOCAL
FINANCIAL
CORPORATION
------------------------------------
PROSPECTUS
------------------------------------
A.G. EDWARDS & SONS, INC.
FRIEDMAN BILLINGS RAMSEY
KEEFE, BRUYETTE & WOODS, INC.
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 8,340
NASD fee 3,500
Nasdaq fees 10,000
Legal fees and expenses 175,000*
Trustees' fees and expenses 10,000*
Accounting fees and expenses 30,000*
Printing expenses 75,000*
Miscellaneous expenses 13,160*
---------
Total $ 325,000
=========
- -----------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
Article IX of the Registrant's Bylaws provides as follows:
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article IX, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, and any appeal therein, whether civil, criminal,
administrative, arbitrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, trustee or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
another corporation, association, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding, and any appeal therein, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding, and any appeal
therein, by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
II-1
<PAGE>
Section 2. Power to Indemnify in Actions, suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article IX, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, trustee or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against amounts paid in
settlement and expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit, if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however, that
no indemnification shall be made against expenses in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
Corporation or against amounts paid in settlement unless and only to the extent
that there is a determination (as set forth in Section 3 of this Article IX)
that despite the adjudication of liability or the settlement, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses or amounts paid in settlement.
Section 3. Authorization of Indemnification. Any indemnification under
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because such director, officer, trustee, employee or agent
has met the applicable standard of conduct set forth in Section 1 or Section 2
of this Article IX and, if applicable, is fairly and reasonably entitled to
indemnity as set forth in the proviso in Section 2 of this Article IX, as the
case may be. Such determination shall be made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, (ii) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders. To the extent,
however, that a director, officer, trustee, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case. No director, officer, trustee, employee or
agent of the Corporation shall be entitled to indemnification in connection with
any action, suit or proceeding voluntarily initiated by such person unless the
action, suit or proceeding was authorized by a majority of the entire board of
directors.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article IX, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an
II-2
<PAGE>
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall mean any other corporation
or any association, partnership, joint venture, trust or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent. The provisions of this section 4
shall not be deemed to be exclusive or to limit in any way the circumstances in
which a person may be deemed to have met the applicable standards of conduct set
forth in Sections 1 or 2 of this Article IX, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director,
officer, trustee, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article IX. The basis of
such indemnification by a court shall be a determination by such court that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because he has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IX, as the case may be. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. Notwithstanding any of
the foregoing, unless otherwise required by law, no director, officer trustee,
employee or agent of the Corporation shall be entitled to indemnification in
connection with any action, suit or proceeding voluntarily initiated by such
person unless the action, suit or proceeding was authorized by a majority of the
entire board of directors.
Section 6. Expense Payable in Advance. Expenses incurred in connection
with a threatened or pending action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee or agent to repay such amount if it shall be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 7. Contract, Non-exclusivity and Survival of Indemnification.
The indemnification provided by this Article IX shall de deemed to be a contract
between the Corporation and each director, officer, employee and agent who
serves in such capacity at any time while this Article IX is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. Further, the indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any Certificate of Incorporation,
bylaw, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that, subject to the limitation in Section 3 of this Article IX
concerning voluntary initiation of actions, suits or proceedings,
indemnification of the persons specified in Sections 1 and 2 of this Article IX
II-3
<PAGE>
shall be made to the fullest extent permitted by law. The provisions of this
Article IX shall not be deemed to preclude the indemnification of any person who
is not specified in Sections 1 or 2 of this Article IX but whom the Corporation
has the power or obligation to indemnify under the provisions of the law of the
State of Delaware. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, trustee,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, association, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against such liability
under the provisions of this Article IX.
Section 9. Meaning of "Corporation" for Purposes of Article IX. For
purposes of this Article IX, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Item 16. Exhibits
Exhibit No. Description
- ----------- -----------
1 Form of Underwriting Agreement*
4.1 Form of Indenture of Registrant relating to the Junior
Subordinated Debentures*
4.2 Form of Certificate of Junior Subordinated Debenture (included as
Exhibit A to Exhibit 4.1)*
4.3 Certificate of Trust of Local Financial Capital Trust I*
4.4 Form of Amended and Restated Declaration of Trust of Local
Financial Capital Trust I*
4.5 Form of Trust Preferred Security Certificate for Local Financial
Capital Trust I (included as Exhibit A to Exhibit 4.4)*
4.6 Form of Guarantee of Registrant relating to the Trust Preferred
Securities*
5.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. as to the
legality of the Junior Subordinated Debentures and the
Guarantee to be issued by Registrant*
II-4
<PAGE>
5.2 Opinion of Richards, Layton & Finger, P.A. as to the legality of
the Trust Preferred Securities to be issued by Local Financial
Capital Trust I*
8.0 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. as to certain
federal income tax matters*
23.1 Consent of KPMG LLP*
23.2 Consent of Arthur Andersen LLP*
23.3 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibits 5.1 and 8)*
23.4 Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5.2)*
24 Power of Attorney of certain officers, directors and trustees of
the Registrant and Local Financial Capital Trust I, respectively
(located on the signature pages hereto)*
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act
as trustee under the Indenture*
25.2 Form T-1 Statement of Eligibility of The Bank of New York to act
as trustee under the Declaration of Trust of Local Financial
Capital Trust I*
25.3 Form T-1 Statement of Eligibility of The Bank of New York under
the Guarantee for the benefit of the holders of the Trust
Preferred Securities*
- -------------------
* Previously filed.
Item 17. Undertakings
Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, as
amended, each filing of a Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each undersigned Registrant pursuant to the provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by each undersigned Registrant
of expenses incurred or paid by a director, officer of controlling person of
each Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by the controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
II-5
<PAGE>
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Local Financial
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Oklahoma City, Oklahoma
on the 8th day of September 1999.
LOCAL FINANCIAL CORPORATION
By: /s/ Edward A. Townsend
--------------------------------
Edward A. Townsend
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Edward A. Townsend Chairman of the Board, President and
- ----------------------------- Chief-Executive-Officer September 8, 1999
Edward A. Townsend (Principal Executive Officer)
/s/ Jan A. Norton President and Director September 8, 1999
- -----------------------------
Jan A. Norton
/s/ Richard L. Park Executive Vice President September 8, 1999
- ----------------------------- (Principal-Accounting-Officer)
Richard L. Park
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert A. Kotecki* Director September 8, 1999
- -----------------------------
Robert A. Kotecki
/s/ Joseph A. Leone* Director September 8, 1999
- -----------------------------
Joseph A. Leone
/s/ George Nigh* Director September 8, 1999
- -----------------------------
George Nigh
/s/ Kenneth W. Townsend* Director September 8, 1999
- -----------------------------
Kenneth W. Townsend
/s/ J. David Rosenberg* Director September 8, 1999
- -----------------------------
J. David Rosenberg
- --------------
*By Richard L. Park pursuant to a Power of Attorney
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Local Financial
Capital Trust I certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Oklahoma City,
Oklahoma, on the 8th day of September 1999.
LOCAL FINANCIAL CAPITAL TRUST I
By: /s/ Edward A. Townsend
--------------------------------
Edward A. Townsend
Administrative Trustee
By: /s/ Jan A. Norton
--------------------------------
Jan A. Norton
Administrative Trustee
By: /s/ Richard L. Park
--------------------------------
Richard L. Park
Administrative Trustee
