<PAGE>
As filed with the Securities and Exchange Commission on September 22, 1998.
Registration No. 333-61667
Registration No. 333-61667-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WINTRUST FINANCIAL CORPORATION WINTRUST CAPITAL TRUST I
(Exact Name of Registrant and Co-Registrant as Specified in Charters)
Illinois 36-3873352 Delaware 36-7243755
(State or Other (I.R.S. Employer (State or Other (I.R.S. Employer
Jurisdiction of Identification Jurisdiction of Identification
Incorporation or No.) Incorporation or No.)
Organization) Organization)
727 North Bank Lane 727 North Bank Lane
Lake Forest, Illinois 60045-1951 Lake Forest, Illinois 60045-1951
(847) 615-4096 (847) 615-4096
(Address(es), including zip code(s), and telephone number(s), including area
code(s), of registrant's and co-registrant's principal executive offices)
David A. Dykstra
Executive Vice President and Chief Financial Officer
727 North Bank Lane
Lake Forest, Illinois 60045
(847) 615-4096
(Name(s), address(es), including zip code(s), and
telephone number(s), including area code(s), of agent(s) for service)
Copies to:
Jennifer R. Evans, Esq. Edwin S. del Hierro, Esq.
Vedder, Price, Kaufman & Kammholz Barack Ferrazzano Kirschbaum Perlman &
222 North LaSalle Street Nagelberg
Chicago, Illinois 60601-1003 333 West Wacker Drive
(312) 609-7500 Chicago, Illinois 60606
(312) 984-3100
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or 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
reinvest plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration 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 number of the earlier effective registration statement for the same
offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
================================================================================
<PAGE>
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1998
PROSPECTUS , 1998
- --------------------------------------------------------------------------------
1,100,000 Trust Preferred Securities
WINTRUST CAPITAL TRUST I
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
Fully and Unconditionally Guaranteed, as Described Herein, by
WINTRUST FINANCIAL CORPORATION
____________________
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of Wintrust Capital Trust I, a statutory business trust created
under the laws of the State of Delaware ("Capital Trust"). Wintrust Financial
Corporation, an Illinois corporation (the "Company"), will own all of the common
securities (the "Common Securities" and, together with the Trust Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of Capital Trust. Wilmington Trust Company is the Property Trustee
(as defined herein) of Capital Trust. Capital Trust exists for the exclusive
purposes of issuing the Trust Securities, investing the proceeds thereof in an
equivalent amount of % Subordinated Debentures (the "Subordinated
Debentures") of the Company, and engaging in only those other activities
necessary, advisable or incidental thereto. The Subordinated Debentures will
mature on September __, 2028, which date may be (i) shortened to a date not
earlier than September 30, 2003, or (ii) extended to a date not later than
September __, 2047,
(continued on next page)
The Company has made application seeking approval of the Trust Preferred
Securities for quotation on the Nasdaq National Market(SM) under the symbol
"WTFCP."
____________________
See "Risk Factors" beginning on page 11 for a discussion of certain factors
that should be considered by prospective purchasers of the Trust Preferred
Securities offered hereby.
____________________
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS OR DEPOSIT ACCOUNTS,
ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NON BANKING AFFILIATE OF
THE COMPANY (EXCEPT TO THE EXTENT THAT TRUST PREFERRED SECURITIES ARE GUARANTEED
BY THE COMPANY AS DESCRIBED HEREIN), ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=====================================================================================
Price to Underwriting Proceeds to
Public Commissions/(1)/ Capital Trust/(2)(3)/
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Trust Preferred Security $25.00 (2) $25.00
- -------------------------------------------------------------------------------------
Total/(4)/ $27,500,000 (2) $27,500,000
=====================================================================================
</TABLE>
(1) Capital Trust and the Company have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) In view of the fact that all of the proceeds from the sale of the Trust
Preferred Securities will be used to purchase the Subordinated Debentures,
the Company has agreed to pay the Underwriters as compensation for arranging
the investment therein of such proceeds, $ per Trust Preferred
Security, or $ in the aggregate ($ if the
Underwriters' over-allotment option is exercised in full). See
"Underwriting."
(3) Before deducting offering expenses payable by the Company, estimated at
$275,000.00. See "Use of Proceeds."
(4) Capital Trust and the Company have granted to the Underwriters an option,
exercisable within 30 days from the date of this Prospectus, to purchase up
to an aggregate of 142,000 additional Trust Preferred Securities on the same
terms and conditions set forth above to cover over-allotments, if any. If
the Underwriters exercise such option in full, the total price to public and
proceeds to Capital Trust will be $31,050,000 and $31,050,000, respectively.
See "Underwriting."
____________________
The Trust Preferred Securities are offered by the Underwriters named
herein, subject to prior sale, when, as and if issued by Capital Trust and
delivered to and accepted by the Underwriters and subject to certain prior
conditions including the right of the Underwriters to reject any order in whole
or in part. It is expected that delivery of the Trust Preferred Securities will
be through the facilities of The Depository Trust Company, New York, New York,
on or about __________, 1998.
EVEREN Securities, Inc.
ABN AMRO Incorporated
Piper Jaffray Inc.
<PAGE>
Wintrust Financial Corporation
- --------------------------------------------------------------------------------
[Map of greater Chicago metropolitan area depicting locations of
Company's banking facilities]
- --------------------------------------------------------------------------------
ii
<PAGE>
(continued from previous page)
in each case if certain conditions are met (including, in the case of shortening
the Stated Maturity (as defined herein), the Company having received prior
approval of the Board of Governors of the Federal Reserve System ("Federal
Reserve") to do so if then required under applicable capital guidelines,
policies or regulations of the Federal Reserve). The Trust Preferred Securities
will have a preference under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise over
the Common Securities. See "Description of the Trust Preferred Securities--
Subordination of Common Securities" and "Risk Factors--Risk Factors Relating to
the Trust Preferred Securities--Shortening or Extension of Stated Maturity of
Subordinated Debentures."
Holders of Trust Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of % of the liquidation
amount of $25 per Trust Preferred Security (the "Liquidation Amount"),
accumulating from the date of original issuance and payable quarterly in arrears
on the last day of March, June, September and December of each year, commencing
December 31, 1998 (the "Distributions"). The Company has the right, so long as
no Debenture Event of Default (as defined herein) has occurred and is
continuing, to defer payment of interest on the Subordinated Debentures at any
time or from time to time for a period not to exceed 20 consecutive quarters
with respect to each deferral period (each, an "Extended Interest Payment
Period"); provided that no Extended Interest Payment Period may extend beyond
the Stated Maturity of the Subordinated Debentures or end on a date other than
an Interest Payment Date (as defined herein). Upon the termination of any such
Extended Interest Payment Period and the payment of all amounts then due, the
Company may elect to begin a new Extended Interest Payment Period subject to the
requirements set forth herein. If interest payments on the Subordinated
Debentures are so deferred, Distributions on the Trust Preferred Securities will
also be deferred, and the Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to its capital stock or debt securities that rank pari passu with or
junior to the Subordinated Debentures. During an Extended Interest Payment
Period, interest on the Subordinated Debentures will continue to accrue (and the
amount of Distributions to which holders of the Trust Preferred Securities are
entitled will continue to accumulate) at the rate of % per annum,
compounded quarterly, and holders of the Trust Preferred Securities will be
required to include accrued interest income in their gross income for United
States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. A holder of Trust
Preferred Securities that disposes of its Trust Preferred Securities between
record dates for payments of Distributions (and consequently does not receive a
Distribution from Capital Trust for the period prior to such disposition) will
nevertheless be required to include accrued but unpaid interest on the
Subordinated Debentures through the date of disposition in income as ordinary
income and to add such amount to its adjusted tax basis in its pro rata share of
the underlying Subordinated Debentures deemed disposed of. See "Description of
the Subordinated Debentures--Option to Extend Interest Payment Period," "Certain
Federal Income Tax Consequences--Potential Extension of Interest Payment Period
and Original Issue Discount," "Certain Federal Income Tax Consequences--
Disposition of Trust Preferred Securities" and "Risk Factors--Risk Factors
Relating to the Trust Preferred Securities--Option to Extend Interest Payment
Period; Tax Consequences of a Deferral of Interest Payments; Market Price
Consequences."
The Company and Capital Trust believe that, taken together, the obligations
of the Company under the Guarantee, the Trust Agreement, the Subordinated
Debentures, the Indenture and the Expense Agreement (each as defined herein),
provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, of all of the obligations of Capital Trust under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Subordinated Debentures and the Guarantee--Full and Unconditional
Guarantee." Under the Guarantee, the Company guarantees the payment of
Distributions and payments upon liquidation or redemption of the Trust Preferred
Securities, but only in each case to the extent of funds held by Capital Trust,
as described herein. See "Description of the Guarantee--General," "Risk Factors
- --Risk Factors Relating to the Trust Preferred Securities--Rights Under the
Guarantee" and "--Subordination of Obligations under the Guarantee and the
Subordinated Debentures." If the Company does not make interest payments on the
Subordinated Debentures held by Capital Trust, Capital Trust will have
insufficient funds to pay Distributions on the Trust Preferred Securities. The
Guarantee does not cover payments of Distributions when Capital Trust does not
have sufficient funds to pay such Distributions. In such event, a holder of
Trust Preferred Securities may institute a legal proceeding directly against the
Company pursuant to the terms of the Indenture to enforce payments of amounts
equal to such Distributions to such holder. See "Description of the Subordinated
Debentures--Enforcement of Certain Rights by Holders of the Trust Preferred
Securities." The obligations of the Company under the Guarantee and the Trust
Preferred Securities are subordinate and junior in right
iii
<PAGE>
(continued from previous page)
of payment to all Senior Debt, Subordinated Debt and Additional Senior
Obligations (each as defined herein) of the Company. The Subordinated Debentures
are unsecured obligations of the Company and are subordinated to all Senior
Debt, Subordinated Debt and Additional Senior Obligations of the Company. The
obligations of the Company under the Guarantee, the Subordinated Debentures and
other documents described herein will rank pari passu with the Company's future
obligations under debt securities (and guarantees in respect of those debt
securities) initially issued to any trust, or a trustee of a trust, partnership
or other entity affiliated with the Company that is, directly or indirectly, a
financing vehicle of the Company in connection with the issuance by that entity
of preferred securities or other securities which are intended to qualify for
Tier 1 capital treatment.
The Trust Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Subordinated Debentures at maturity or
their earlier redemption. Subject to Federal Reserve approval, if then required
under applicable capital guidelines, policies or regulations of the Federal
Reserve, the Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) on or after September 30, 2003, in whole at any time
or in part from time to time, or (ii) at any time, in whole (but not in part),
within 180 days following the occurrence of a Tax Event, an Investment Company
Event or a Capital Treatment Event (each as defined herein), in each case at a
redemption price equal to the accrued and unpaid interest on the Subordinated
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof. See "Description of the Trust Preferred Securities--
Redemption or Exchange" and "Risk Factors--Risk Factors Relating to the Trust
Preferred Securities--Tax Event, Investment Company Event or Capital Treatment
Event; Redemption."
The Company has the right at any time to dissolve, wind-up or terminate
Capital Trust subject to the Company having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines,
policies or regulations of the Federal Reserve. In the event of the voluntary or
involuntary dissolution, winding up or termination of Capital Trust, after
satisfaction of liabilities to creditors of Capital Trust as required by
applicable law, the holders of Trust Preferred Securities will be entitled to
receive a Liquidation Amount of $25 per Trust Preferred Security, plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a distribution of such amount of Subordinated Debentures
having an aggregate principal amount equal to the Liquidation Amount of such
Trust Preferred Securities (and carrying with it accumulated interest in an
amount equal to the accumulated and unpaid Distributions then due on such Trust
Preferred Securities), subject to certain exceptions. See "Description of the
Trust Preferred Securities--Redemption or Exchange," and "--Liquidation
Distribution Upon Termination" and "Risk Factors--Risk Factors Relating to the
Trust Preferred Securities--Redemption; Exchange of Trust Preferred Securities
for Subordinated Debentures."
The Trust Preferred Securities will be represented by one or more global
certificates ("Global Trust Preferred Securities") registered in the name of The
Depository Trust Company ("DTC") or its nominee. Beneficial interests in the
Trust Preferred Securities will be shown on, and transfers thereof will be
effected only through, records maintained by participants in DTC. Except as
described herein, Trust Preferred Securities in definitive form will not be
issued in exchange for Global Trust Preferred Securities. See "Book-Entry
Issuance."
----------
The Company will make available to the holders of the Trust Preferred
Securities quarterly reports containing unaudited financial information and
annual reports containing financial statements audited by the Company's
independent auditors to the same extent provided to holders of the Company's
common stock. The Company will also furnish annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge to holders of the Trust Preferred
Securities who so request in writing addressed to the Secretary of the Company.
----------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST
PREFERRED SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE OVER-
ALLOTMENT, STABILIZING AND THE PURCHASE OF TRUST PREFERRED SECURITIES TO COVER
SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information incorporated herein by reference or appearing elsewhere in this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. Actual results could differ materially from those
addressed in the forward-looking statements as a result of certain factors,
including those described under "Risk Factors" and elsewhere in this Prospectus.
The Company
Wintrust Financial Corporation, an Illinois corporation (the "Company"), is
a financial services holding company headquartered in Lake Forest, Illinois,
with total assets of approximately $1.2 billion at June 30, 1998. The Company
engages in the community banking and the specialty finance businesses through
its operating subsidiaries: Lake Forest Bank and Trust Company ("Lake Forest
Bank"); Hinsdale Bank and Trust Company ("Hinsdale Bank"); North Shore Community
Bank and Trust Company ("North Shore Bank"); Libertyville Bank and Trust Company
("Libertyville Bank"); Barrington Bank and Trust Company, N.A. ("Barrington
Bank"); Crystal Lake Bank and Trust Company, N.A. ("Crystal Lake Bank"); First
Insurance Funding Corporation (formerly First Premium Services, Inc.) ("FIFC"),
a commercial insurance premium finance company; and Wintrust Asset Management
Company ("WAMC"), a trust company subsidiary in organization and pending
regulatory approval. In September 1996, each of the banking subsidiaries then
existing and FIFC, which were previously affiliated but separately owned, became
subsidiaries of the Company as a result of a transaction which joined their
respective holding companies under one parent company.
Each of the Company's banking subsidiaries (collectively, the "Banks") was
founded as a de novo banking organization (i.e., started new) within the last
seven years. The organizational efforts began in 1991, when a group of
experienced bankers and local business people identified an unfilled niche in
the Chicago metropolitan area community banking market. As large banks acquired
smaller ones and personal service was subjected to consolidation strategies,
opportunities arose in affluent suburbs for locally owned and operated banks
emphasizing personal service. In pursuit of this strategic opportunity, the
group founded Lake Forest Bank in December 1991 to service the Lake Forest and
Lake Bluff communities. Thereafter, as desirable locations were procured in
other attractive communities where management successfully recruited locally
known, experienced bank officers, the other Banks were organized with the
participation of local residents and business leaders of those communities.
Today, the Company provides community-oriented, personal and commercial banking
services primarily to individuals and small to mid-size businesses through 19
banking facilities. The table below provides information regarding each of the
Banks and their respective markets.
<TABLE>
<CAPTION>
Total Assets Chicago-Area Average
at June 30, 1998 Communities Number of Household
Bank Date Opened (in thousands) Served Facilities Income/(1)/
---- ----------- ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Lake Forest Bank December 1991 $390,154 Lake Forest 4 $142,688
Lake Bluff 1 105,999
Hinsdale Bank October 1993 245,131 Hinsdale 2 106,288
Clarendon Hills/(2)/ 1 63,927
Western Springs/(3)/ 1 78,364
Burr Ridge 120,071
North Shore Bank September 1994 289,558 Wilmette 3 105,095
Kenilworth 215,611
Glencoe 2 164,254
Winnetka 1 174,957
Libertyville Bank October 1995 147,108 Libertyville 2 72,815
Mundelein 50,466
Vernon Hills 53,722
Barrington Bank December 1996 98,956 Barrington 1 81,125
Barrington Hills 178,096
Lake Barrington 114,979
North Barrington 151,677
South Barrington 170,271
Inverness 147,962
Crystal Lake Bank December 1997 27,805 Crystal Lake 1 50,977
Cary 54,395
</TABLE>
- ----------------------
(1) Provided by Northeastern Illinois Planning Commission derived from 1989
information reported in 1990 U.S. Census Data.
(2) Operates in this community as Clarendon Hills Bank, a branch of Hinsdale
Bank.
(3) Operates in this community as Community Bank of Western Springs, a branch
of Hinsdale Bank.
1
<PAGE>
Through FIFC, the Company originates commercial insurance premium finance
loans on a national basis. Currently, all of these loans are being purchased by
the Banks in order to increase their loan-to-deposit ratios. The loans
originated by FIFC provide the Banks with attractive yielding assets as a
supplement to their lending activities. FIFC, which commenced operations
approximately eight years ago, is headquartered in Deerfield, Illinois. Based
on limited industry data available and FIFC management's experience in the
industry, management estimates that FIFC is one of the largest premium finance
companies operating in the United States. FIFC's loan volume exceeded $425
million for the 12 months ended June 30, 1998. Loans are originated by FIFC's
own sales force, working with medium and large insurance agents and brokers
throughout the United States. Insurance premiums are financed primarily for
commercial customers' purchases of liability, property and casualty and other
commercial insurance.
Currently, the Company conducts trust operations at Lake Forest Bank. In
1998, the Company commenced the organization of WAMC as a separate subsidiary to
expand the Company's trust services in the communities served by the Banks.
WAMC has applied for a trust company charter with the Office of the Comptroller
of the Currency and expects receipt of all requisite regulatory approvals within
the next few weeks. The Company has recently added experienced trust personnel
and expects to begin to offer trust services at other Banks, first at North
Shore Bank, followed quickly at Hinsdale Bank, beginning in the fourth quarter
of 1998. The Company plans to offer on-site trust services through WAMC at each
of the remaining Banks within the next few years.
The historical financial performance of the Company has been affected by
the high costs associated with growing market share in deposits and loans,
opening new banking facilities and building an experienced management team. The
Company's financial performance over the past five years reflects the improving
financial performance of the Banks as they mature, adjusted for the significant
costs of opening new banks and branch offices. The Company's experience has been
that it generally takes from 13 to 24 months for new banking facilities to first
achieve operational profitability. Similarly, management currently expects a
start-up phase for WAMC of approximately two years before the trust operations
become profitable.
In order to minimize the time lags typically experienced by de novo banks
in redeploying deposits into assets that provide attractive yields, since its
formation the Company has focused on the development of specialized earning
asset niches. Because management believes that the Banks, like many community
banks, are not likely over time to generate loans to local customers for more
than about half of their respective lending capacities, it is anticipated that
the Company will continue to pursue specialized asset niches to allow the
Company to generate large volumes of homogenous assets that can be retained for
investment, or sold into the secondary market or securitized to generate fee
income or for liquidity management purposes. To date, the Company has identified
and finances loans in several such asset niches to enhance its loan-to-deposit
ratio, including premium finance loans originated by FIFC, indirect auto loans,
mortgage warehouse lending and, more recently, medical and municipal equipment
leasing.
While committed to a continuing growth strategy, management's current focus
is to balance further asset growth with earnings growth. To this end, the
Company is seeking to more fully leverage the existing capacity of its operating
subsidiaries to support internal growth. Additionally, the Company is continuing
to pursue specialized earning-asset niches to shift the mix of earning assets to
higher-yielding loans. The Company is also focusing on controlling costs of
funds as the maturing Banks achieve more established customer bases.
Operational Strategy
Since the first Bank was opened in 1991, the Company has been committed to
the same fundamental operational strategy, the key elements of which are:
. Maintaining decision-making authority locally within each of the Banks
and providing a high level of personal and professional service. The Company's
community banking philosophy is driven by its emphasis on local independence
intended to maintain decision-making authority within each of the Banks. While
senior management of the Company provides expertise to each of the subsidiaries
in the areas of capital planning, long-term strategic planning, marketing and
advertising, financial management, investment and asset/liability management,
and technology, the separate management teams of each of the Banks, FIFC and
WAMC have full managerial responsibilities with respect to customer service and
the ongoing day-to-day operations of their respective organizations. Management
believes that local authority and management allow the Banks to emphasize highly
responsive and personalized attention to customer service as a top priority. The
Banks enjoy the competitive advantages of being able to tailor products and
services to
2
<PAGE>
meet the differing needs of the customers that they serve, to make decisions
affecting customers quickly, and to participate actively in their communities.
To ensure a high level of personal and professional service to commercial and
retail customers of the Banks, the Company emphasizes the recruitment and
training of competent and highly motivated employees at all levels of the
organization, seeking to minimize employee turnover.
. Employing fewer, but more highly qualified and productive individuals at
relatively high compensation rates and focusing on low net overhead ratios. Key
to the Company's growth and profitability is management's extensive experience
in providing community banking services. The Banks' presidents and chief
executive officers were selected not only for their years of banking experience
but also for their business development skills and their strong ties to the
communities they serve. The Company's practices of employing fewer, but more
highly qualified and productive individuals at all levels of the organization is
key to the maintenance of its decentralized management structure, and are
designed to promote and support local autonomy at the Company's operating
subsidiaries while at the same time enhancing overall Company performance.
Management believes its organizational structure and a strong commitment to cost
control throughout the organization will allow the Company to continue to
improve and maintain favorable net overhead ratios as the Banks, FIFC and WAMC
mature.
. Marketing innovative deposit and loan products. Each of the Banks has
developed a niche within the communities that it serves through the utilization
of innovative community-oriented marketing programs. The Company expects to
continue to exploit this community banking approach as it pursues expansion into
new communities, whether through branching, additional de novo bank formations
or selective acquisitions. The Banks have offered local residents highly
competitive retail products designed to attract customers and to provide the
Banks the opportunity to introduce their full range of personalized banking
services. To be more responsive to the needs of consumers in their specific
markets, the Banks have introduced a variety of innovative deposit and loan
products to appeal to the unique needs of different types of Bank customers,
such as different age groups and other special segments of the target markets.
The Banks market their products aggressively through creative newspaper and
other advertising, special promotions and frequently sponsored community events.
In addition, each of the Banks has a large board of directors comprised of
influential business persons and prominent individuals within the respective
communities who assist the banking officers with business development for the
Banks.
Growth Strategy
Key elements of the Company's growth strategy are:
. Internal growth. Due to the relative start-up nature of its operations,
the Company believes it has not yet realized the full deposit and asset
generation potential in the communities now served by its existing banking
facilities and believes the Banks' existing infrastructures can support
significant additional business while maintaining a high level of personalized
customer service and responsiveness. As the rapid pace of consolidation in the
financial services industry persists, management expects that more individuals
and small businesses will become disenchanted with the perceived lower level of
service offered by the larger institutions, providing continuing market share
opportunity for the Company.
. Expanding into attractive markets with limited local banking competition.
The Company may seek to expand operations of the existing Banks by opening
branch facilities in nearby communities where management believes targeted
customers would be attracted to a community banking alternative. The Company
also plans to continue its geographic expansion, possibly through the formation
of additional de novo banks in and around the Chicago area, where the Company
believes it can leverage its experience. Management has identified several
attractive markets as possibilities for new banks, although future bank
locations have yet to be determined. In addition, the Company intends to
explore and will consider potential acquisitions of other community-oriented
financial institutions that are already operating in desirable markets. In this
regard, management believes there are a number of recently organized banks in
and around the Chicago area in need of capital or managerial resources to
continue their growth which may be attracted to the Company's commitment to
local operational autonomy and may desire to provide their investors the
liquidity that could be offered by the Company's publicly traded stock.
. Augmenting the loan portfolio with specialized asset niches which allow
the Banks to more fully utilize their lending capacity. Currently, the Banks
invest in premium finance loans generated by FIFC, indirect auto loans, mortgage
warehouse loans, and, since completion of the Company's recent acquisition of a
small business engaged in
3
<PAGE>
medical and municipal equipment leasing, equipment leases. In order to expand
the Company's opportunities to invest in specialized earning asset niches, the
Company may pursue acquisitions or development of specialty finance businesses
engaged in asset generation suitable for bank investment and/or secondary market
sales. While the Company is not currently negotiating the terms of any pending
acquisitions of specialty finance businesses, management has evaluated several
potential acquisition candidates and will continue to explore various commercial
and consumer finance activities.
. Growth of trust services provided to small and mid-size businesses and
affluent individuals. The Company has for several years been providing
investment management and trust services to small businesses and individuals
residing in Lake Forest Bank's target market area through the trust department
of that Bank. With the formation of WAMC, the Company plans to market its trust
services more aggressively to customers in all the Banks' communities in an
effort to expand its market share and increase the Company's fee income. The
Company intends to introduce on-site trust services in the other Bank locations
over the next few years as the Company identifies qualified, experienced trust
personnel who have the potential to attract new trust accounts and asset
management business to WAMC. Management believes WAMC can successfully compete
for trust business by targeting newly affluent customers and customers whose
trust needs command the personalized attention offered by the Company's service-
oriented Banks.
The Company's principal executive offices are located at 727 North Bank
Lane, Lake Forest, Illinois, 60045, and its telephone number is (847) 615-4096.
Capital Trust
Capital Trust is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of August 14, 1998, executed by the
Company, as depositor, and the trustees of Capital Trust (together with the
Property Trustee, the "Trustees"), and (ii) a certificate of trust filed with
the Secretary of State of the State of Delaware on August 14, 1998. The initial
trust agreement will be amended and restated in its entirety (as so amended and
restated, the "Trust Agreement") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Trust
Preferred Securities, the purchasers thereof will own all of the Trust Preferred
Securities. The Company will acquire all of the Common Securities which will
represent an aggregate liquidation amount equal to at least 3.0% of the total
capital of Capital Trust. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Trust Preferred Securities,
except that upon the occurrence and during the continuance of an Event of
Default (as defined herein) under the Trust Agreement resulting from a Debenture
Event of Default, the rights of the Company as holder of the Common Securities
to payment in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. See "Description of the Trust Preferred Securities--
Subordination of Common Securities." Capital Trust exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of Capital Trust, (ii) investing the gross proceeds of
the Trust Securities in the Subordinated Debentures issued by the Company, and
(iii) engaging in only those other activities necessary, advisable, or
incidental thereto. The Subordinated Debentures will be the only assets of
Capital Trust and payments under the Subordinated Debentures will be the only
revenue of Capital Trust. Capital Trust has a term of 55 years, but may
terminate earlier as provided in the Trust Agreement. The principal executive
office of Capital Trust is 727 North Bank Lane, Lake Forest, Illinois 60045 and
its telephone number is (847) 615-4096.
The number of the Trustees will, pursuant to the Trust Agreement, initially
be five. Three of the Trustees (the "Administrative Trustees") will be persons
who are employees or officers of, or who are affiliated with, the Company. The
fourth trustee will be a financial institution that is unaffiliated with the
Company, which trustee will serve as institutional trustee under the Trust
Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). Wilmington Trust
Company, a Delaware banking corporation, will be the Property Trustee until
removed or replaced by the Company, as holder of the Common Securities. For
purposes of compliance with the provisions of the Trust Indenture Act,
Wilmington Trust Company will also act as trustee (the "Guarantee Trustee")
under the Guarantee and as Debenture Trustee (as defined herein) under the
Indenture. The fifth trustee will be an entity that maintains its principal
place of business in the State of Delaware (the "Delaware Trustee"). Wilmington
Trust Company, a Delaware banking corporation, will act as Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and in such capacity will have
the power to exercise all rights, powers and privileges under the Indenture.
4
<PAGE>
The Property Trustee will also maintain exclusive control of a segregated non-
interest-bearing bank account (the "Property Account") to hold all payments made
in respect of the Subordinated Debentures for the benefit of the holders of the
Trust Securities. The Property Trustee will make payments of Distributions and
payments upon liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Trust Preferred
Securities. The Company, as the holder of all the Common Securities, will have
the right to appoint, remove or replace any Trustee and to increase or decrease
the number of the Trustees. The Company will pay all fees and expenses related
to Capital Trust and the offering of the Trust Preferred Securities.
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Trust Agreement, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Trust Preferred Securities."
The Offering
Trust Preferred Securities Issuer.... Wintrust Capital Trust I
Securities Offered................... 1,100,000 Trust Preferred Securities
having a Liquidation Amount of $25
per Trust Preferred Security. The
Trust Preferred Securities represent
preferred undivided beneficial
interests in the assets of Capital
Trust, which will consist solely of
the Subordinated Debentures and
rights to payments thereunder.
Capital Trust and the Company have
granted the Underwriters an option,
exercisable within 30 days after the
date of this Prospectus, to purchase
up to an additional 142,000 Trust
Preferred Securities at the initial
offering price, solely to cover
over-allotments, if any. See
"Underwriting."
Offering Price...................... $25 per Trust Preferred Security
Book-Entry Only Registration........ The Trust Preferred Securities will
be represented by one or more fully
registered global certificates. The
global certificate will be deposited
with, or on behalf of, DTC and
registered in its name or in the name
of Cede & Co., its nominee. No
person acquiring a beneficial
ownership interest in the Trust
Preferred Securities will be entitled
to receive a Trust Preferred Security
in definitive form representing such
person's interest in Capital Trust,
except in the limited circumstances
described in "Book-Entry Issuance."
Payment of Distributions............ The Distributions payable on each
Trust Preferred Security will be
fixed at a rate per annum of %
of the Liquidation Amount of $25 per
Trust Preferred Security, will be
cumulative, will accumulate from
September __, 1998, the date of
issuance of the Trust Preferred
Securities, and will be payable
quarterly in arrears, on March 31, June
30, September 30 and December 31 of each
year, commencing December 31, 1998. See
"Description of the Trust Preferred
Securities--Distributions--Payment of
Distributions."
Extension of Interest Payment Period. The Company has the right, at any
time, so long as no Debenture Event
of Default has occurred and is
continuing, to defer payments of
interest on the Subordinated
Debentures for a period not exceeding
20 consecutive quarters; provided,
that no Extended Interest Payment
Period may extend beyond the Stated
Maturity of the Subordinated
Debentures or end on a date other
5
<PAGE>
than an Interest Payment Date (as
defined herein). As a consequence
of the extension by the Company of
the interest payment period,
quarterly Distributions on the Trust
Preferred Securities will be
deferred (though such Distributions
will continue to accumulate interest
thereon compounded quarterly, since
interest will continue to accrue and
compound on the Subordinated
Debentures). During any such
Extended Interest Payment Period,
the Company will be prohibited,
subject to certain exceptions
described herein, from declaring or
paying any cash distributions with
respect to its capital stock or debt
securities that rank pari passu with
or junior to the Subordinated
Debentures. Upon the termination of
any Extended Interest Payment Period
and the payment of all amounts then
due, the Company may commence a new
Extended Interest Payment Period,
subject to the foregoing
requirements. See "Description of
the Trust Preferred
Securities--Distributions--Extended
Interest Payment Period" and
"Description of the Subordinated
Debentures--Option to Extend
Interest Payment Period."
Should an Extended Interest Payment
Period occur, holders of Trust
Preferred Securities will be
required to include accrued interest
income in their gross income for
United States federal income tax
purposes in advance of receipt of
the cash distributions with respect
to such deferred interest payments.
See "Certain Federal Income Tax
Consequences--Potential Extension of
Interest Payment Period and Original
Issue Discount," and "Risk
Factors--Risks Factors Relating to
the Trust Preferred
Securities--Option to Extend
Interest Payment Period; Tax
Consequences of a Deferral of
Interest Payments; Market Price
Consequences."
Maturity............................ The Subordinated Debentures will
mature on September ___, 2028, which
date may be (i) shortened to a date
not earlier than September 30, 2003,
or (ii) extended to a date not later
than September ___, 2047, in each
case if certain conditions are met
(including in the case of shortening
the Stated Maturity (as defined
herein), the Company having received
prior approval of the Federal
Reserve to do so if then required
under applicable capital guidelines,
policies or regulations of the
Federal Reserve).
Redemption........................... The Trust Preferred Securities are
subject to mandatory redemption, in
whole or in part, upon repayment of
the Subordinated Debentures at
maturity or their earlier
redemption. Subject to Federal
Reserve approval, if then required
under applicable capital guidelines,
policies or regulations of the
Federal Reserve, the Subordinated
Debentures are redeemable prior to
maturity at the option of the
Company (i) on or after September
30, 2003, in whole at any time or in
part from time to time, or (ii) at
any time, in whole (but not in
part), within 180 days following the
occurrence of a Tax Event, an
Investment Company Event or a
Capital Treatment Event, in each
case at the redemption price equal
to 100% of the principal amount of
the Subordinated Debentures,
together with any accrued but unpaid
interest to the date fixed for
redemption. See "Description of the
Subordinated Debentures--Redemption
or Exchange."
6
<PAGE>
Distribution of Subordinated
Debentures........................... The Company has the right at any time
to terminate Capital Trust and cause
the Subordinated Debentures to be
distributed to holders of Trust
Preferred Securities in liquidation
of Capital Trust, subject to the
Company having received prior
approval of the Federal Reserve to
do so if then required under
applicable capital guidelines,
policies or regulations of the
Federal Reserve. See "Description of
the Trust Preferred
Securities--Redemption or Exchange"
and "--Liquidation Distribution Upon
Termination."
Guarantee............................ The Company has guaranteed the
payment of Distributions and
payments upon liquidation or
redemption of the Trust Preferred
Securities, but only in each case to
the extent of funds held by Capital
Trust, as described herein. The
Company and Capital Trust believe
that, taken together, the
obligations of the Company under the
Guarantee, the Trust Agreement, the
Subordinated Debentures, the
Indenture and the Expense Agreement
provide, in the aggregate, a full,
irrevocable and unconditional
guarantee, on a subordinated basis,
of all of the obligations of Capital
Trust under the Trust Preferred
Securities. If the Company does not
make principal or interest payments
on the Subordinated Debentures,
Capital Trust will not have
sufficient funds to make
Distributions on the Trust Preferred
Securities; in which event, the
Guarantee will not apply to such
Distributions until Capital Trust
has sufficient funds available
therefor. See "Description of the
Guarantee."
Ranking.............................. The Trust Preferred Securities will
rank pari passu, and payments
thereon will be made pro rata, with
the Common Securities of Capital
Trust held by the Company, except as
described under "Description of the
Trust Preferred
Securities--Subordination of Common
Securities." The obligations of the
Company under the Guarantee and the
Subordinated Debentures are
unsecured and rank subordinate and
junior in right of payment to all
current and future Senior Debt,
Subordinated Debt and Additional
Senior Obligations of the Company,
if any, and will rank pari passu
with any trust preferred securities
issued in future which are intended
to qualify for Tier 1 capital
treatment. At June 30, 1998, Senior
Debt, Subordinated Debt and
Additional Senior Obligations of the
Company were approximately $26.6
million. The Company may cause
additional trust preferred
securities to be issued in the
future, and there is no limit on the
amount of Senior Debt, Subordinated
Debt, Additional Senior Obligations
or trust preferred securities that
may be issued in the future. In
addition, because the Company is a
holding company, all obligations of
the Company relating to the
securities described herein will be
effectively subordinated to all
existing and future liabilities of
the Company's subsidiaries,
including the Banks.
Voting Rights........................ The holders of the Trust Preferred
Securities will have no voting
rights except in limited
circumstances. See "Description of
the Trust Preferred
Securities--Voting Rights; Amendment
of Trust Agreement."
7
<PAGE>
Use of Proceeds...................... The proceeds from the sale of the
Trust Preferred Securities offered
hereby will be used by Capital Trust
to purchase Subordinated Debentures
issued by the Company. The Company
intends to apply the net proceeds
from the sale of the Subordinated
Debentures to repay borrowings
outstanding under the Company's
revolving line of credit. Following
such repayment, subject to the terms
and maturity thereof, additional
funds (which amounts may be used by
the Company from time to time for
general corporate purposes) will be
available to the Company for
borrowing under such facility. See
"Use of Proceeds."
Proposed Nasdaq National Market/(SM)/
Symbol............................... The Company has made application
seeking approval of the Trust
Preferred Securities for quotation
on the Nasdaq National Market/(SM)/
under the symbol "WTFCP."
ERISA Considerations................. Prospective purchasers should
carefully consider the restrictions
on purchase set forth in "ERISA
Considerations."
Absence of Prior Market for Trust
Preferred Securities................. The Trust Preferred Securities will
be a new issue of securities for
which no market currently exists.
Although each Underwriter has
informed the Company and Capital
Trust that it currently intends to
act as a market maker for the Trust
Preferred Securities, none is
obligated to do so, and any such
market-making may be discontinued at
any time without notice.
Accordingly, there can be no
assurance as to the development or
liquidity of any market for the
Trust Preferred Securities. See
"Underwriting."
Rating............................... The Trust Preferred Securities will
not be rated by a nationally
recognized statistical rating
organization and are not anticipated
to be rated in the future. See
"Risk Factors--Risks Factors
Relating to the Trust Preferred
Securities--Absence of Rating for
Trust Preferred Securities."
Risk Factors......................... An investment in the Trust Preferred
Securities involves substantial
risks that should be considered by
prospective purchasers. In
addition, because holders of the
Trust Preferred Securities may
receive Subordinated Debentures on
dissolution of Capital Trust, and
because payments on the Subordinated
Debentures are the sole source of
Distributions on, and redemptions
of, the Trust Preferred Securities,
prospective purchasers of the Trust
Preferred Securities are also making
an investment decision with regard
to the Subordinated Debentures and
should carefully review all of the
information relating to the
Subordinated Debentures contained in
this Prospectus. See "Risk Factors"
and "Description of the Subordinated
Debentures."
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial and other data presented herein have
been derived from the audited consolidated financial statements of the Company
(or its predecessors) as of and for each of the years in the five-year period
ended December 31, 1997, and the unaudited consolidated financial statements of
the Company as of and for the six-month periods ended June 30, 1998 and June 30,
1997, and should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated herein by reference. Results for
the six-month periods are unaudited, but in the opinion of management reflect
all necessary adjustments for a fair presentation of results as of the dates and
for the periods covered. Results for interim periods are not necessarily
indicative of results to be expected during the remainder of the year or for any
future period. Results shown for periods prior to September 1, 1996, the date of
the Company's reorganization transaction which was accounted for using the
pooling-of-interests method of accounting, reflect the consolidated historical
results of the Company and its predecessors.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Years ended December 31,
--------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995/(1)/ 1994/(1)/ 1993/(1)/
---------- -------- ---------- -------- ---------- ---------- --------
(unaudited)
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Interest income.............................. $ 41,347 $ 28,459 $ 65,111 $ 39,037 $ 25,472 $ 17,744 $ 8,239
Interest expense............................. 24,433 16,418 38,339 24,155 15,772 9,871 3,884
---------- -------- ---------- -------- ---------- ---------- --------
Net interest income......................... 16,914 12,041 26,772 14,882 9,700 7,873 4,355
Provision for possible
loan losses................................. 2,340 1,554 3,404 1,935 1,430 607 1,127
---------- -------- ---------- -------- ---------- ---------- --------
Net interest income after
provision for possible
loan losses................................. 14,574 10,487 23,368 12,947 8,270 7,266 3,228
---------- -------- ---------- -------- ---------- ---------- --------
Non-interest income:
Gain on sale of premium
finance loans............................... -- -- -- 3,078 4,421 -- --
Loan servicing fees.......................... 71 186 248 1,442 1,101 -- --
Fees on mortgage loans sold.................. 2,579 985 2,341 1,393 850 399 551
Trust fees................................... 368 309 626 522 399 202 92
Service charges on deposit
accounts.................................... 454 326 724 468 196 112 92
Securities gains, net........................ -- -- 111 18 -- 21 23
Other........................................ 200 714 894 611 1,577 752 386
---------- -------- ---------- -------- ---------- ---------- --------
Total non-interest income.................... 3,672 2,520 4,944 7,532 8,544 1,486 1,144
---------- -------- ---------- -------- ---------- ---------- --------
Non-interest expense:
Salaries and employee
benefits/(2)/............................... 9,788 6,869 14,204 11,551 8,011 5,319 3,536
Occupancy expense, net....................... 1,176 937 1,896 1,649 951 1,165 790
Data processing.............................. 794 643 1,337 1,014 624 335 177
Advertising and marketing.................... 756 572 1,309 1,102 682 288 150
Nonrecurring merger
related expenses............................ -- -- -- 891 -- -- --
Amortization of deferred
financing fee............................... -- 25 248 542 768 641 511
Other non-interest
expenses/(2)/............................... 4,885 3,732 8,260 6,013 4,776 3,004 2,354
---------- -------- ---------- -------- ---------- ---------- --------
Total non-interest
expense/(2)/................................ 17,399 12,778 27,254 22,762 15,812 10,752 7,518
---------- -------- ---------- -------- ---------- ---------- --------
Income (loss) from
continuing operations
before income taxes......................... 847 229 1,058 (2,283) 1,002 (2,000) (3,146)
Income tax benefit.......................... (1,158) (1,626) (3,788) (1,310) (512) -- --
---------- -------- ---------- -------- ---------- ---------- --------
Income (loss) from
continuing operations....................... 2,005 1,855 4,846 (973) 1,514 (2,000) (3,146)
Income (loss) from
operations and sale of
discontinued operations..................... -- -- -- -- (17) (236) (193)
---------- -------- ---------- -------- ---------- ---------- --------
Net income (loss)/(2)/...................... $ 2,005 $ 1,855 $ 4,846 $ (973) $ 1,497 $ (2,236) $ (3,339)
========== ======== ========== ======== ========== ========== ========
Common Share Data:
Net income (loss) per
common share
Basic /(2)/................................. $ 0.25 $ 0.25 $ 0.62 $ (0.16) $ 0.27 $ (0.56) $ (1.14)
========== ======== ========== ======== ========== ========== ========
Diluted /(2)/................................ $ 0.24 $ 0.24 $ 0.60 $ (0.16) $ 0.24 $ (0.56) $ (1.14)
========== ======== ========== ======== ========== ========== ========
Cash dividends per common share.............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
========== ======== ========== ======== ========== ========== ========
Selected Financial
Condition Data
(at end of period):
Total assets................................. $1,176,546 $856,945 $1,053,400 $706,037 $ 470,890 $ 354,158 $188,590
Total deposits............................... 1,063,590 772,174 917,701 618,029 405,658 221,985 98,264
Total loans.................................. 852,241 650,085 712,631 492,548 258,231 193,982 109,276
Notes payable and
subordinated debt........................... 26,603 11,253 20,402 22,057 10,758 6,905 4,837
Total shareholders' equity................... 70,983 64,964 68,790 42,620 40,487 25,366 17,227
</TABLE>
(footnotes on following page)
9
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Years Ended December 31,
---------------- -------------------------------------------------------
1998 1997 1997 1996 1995/(1)/ 1994/(1)/ 1993/(1)/
------ ------ ------ ------ --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Ratios
and Other Data:
Performance Ratios:
Net interest
margin/(3)(4)(5)/.......... 3.38% 3.49% 3.41% 2.91% 2.96% 3.35% 3.83%
Net interest
spread/(3)(5)(6)/.......... 2.94 3.01 2.92 2.40 2.41 3.07 3.30
Non-interest income to
average assets/(3)/........ 0.67 0.66 0.58 1.34 2.36 0.57 0.89
Non-interest expense to
average assets/(2)(3)(7)/.. 3.15 3.35 3.18 4.05 4.37 4.14 5.84
Net overhead
ratio/(2)(3)(8)/........... 2.49 2.69 2.60 2.71 2.01 3.57 4.95
Return on average
assets/(2)(3)(7)(9)/....... 0.36 0.49 0.56 (0.17) 0.40 (0.88) (2.60)
Return on average
equity/(2)(3)(7)(10)/...... 5.70 6.62 7.88 (2.33) 4.66 (12.20) (25.40)
Average loan-to-average
deposit ratio.............. 77.57 82.17 80.06 69.83 61.31 100.00 124.70
Average interest-earning
assets to average
interest-bearing
liabilities................109.06 110.22 109.93 110.73 111.37 106.61 115.42
Asset Quality Ratios:
Non-performing loans
to total loans............. 0.90% 0.28% 0.59% 0.36% 0.74% 0.01% 0.00%
Allowance for possible
loan losses to:
Total loans............... 0.69 0.68 0.72 0.74 1.07 0.88 1.24
Non-performing loans...... 76.53 243.78 121.64 204.15 143.91 N/M N/M
Net charge-offs to
average loans/(3)/......... 0.42 0.27 0.31 0.31 0.20 0.18 0.92
Non-performing assets
to total assets............ 0.65 0.21 0.40 0.25 0.41 0.01 0.00
Ratio of earnings to fixed
charges:
Including deposit interest.. 1.03x 1.01x 1.03x (a) 1.06x (a) (a)
Excluding deposit interest.. 2.02x 1.49x 2.10x (a) 1.60x (a) (a)
Other Data at end of period:
Number of:
Bank subsidiaries.......... 6 5 6 5 4 3 2
Banking facilities......... 19 15 17 14 11 5 3
</TABLE>
- ----------------
(a) Earnings were inadequate to cover fixed charges in the years ended
December 31, 1996, 1994 and 1993 by $2.3 million, $2.0 million and $3.1
million, respectively.
(1) Reflects results of those Banks then in operation or in organization,
results of finance and leasing subsidiary operations (some of which have
since been curtailed) and results of discontinued operations.
(2) In 1998 the Company recorded a nonrecurring $1.0 million pretax charge
related to severance amounts due to the Company's former chairman and chief
executive officer under the terms of his employment contract and related
legal expenses. Excluding this charge, net income for six months ended June
30, 1998, would have been $2.6 million, or $0.32 per basic common share and
$0.31 per diluted common share. The return on average assets and return on
average equity would have been 0.47% and 7.45%, respectively, and the non-
interest expense to average assets and net overhead ratios would have been
2.97% and 2.30%, respectively.
(3) Certain financial ratios for interim periods have been annualized.
(4) Net interest income divided by average interest-earning assets.
(5) Calculated on a tax-equivalent basis.
(6) Yield on average interest-earning assets less rate on average interest-
bearing liabilities.
(7) For the year ended December 31, 1996, the Company recorded nonrecurring
merger-related expenses of $891,000.
(8) Non-interest expense less non-interest income divided by average total
assets.
(9) Net income less preferred dividends divided by average total assets.
(10) Net income less preferred dividends divided by average common equity.
10
<PAGE>
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors before purchasing the Trust Preferred Securities offered
hereby. These risk factors are not intended to represent a complete list of the
general or specific risks that may affect the Trust Preferred Securities, the
Subordinated Debentures or the Company and Capital Trust. It should be
recognized that other risks including general economic factors and expansion
strategies may be significant, presently or in the future, and the risks set
forth below may affect the Company and Capital Trust to a greater extent than
indicated.
Risk Factors Relating to the Trust Preferred Securities
Subordination of Obligations Under the Guarantee and the Subordinated Debentures
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Trust Preferred Securities and under the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment to
all Senior Debt, Subordinated Debt and Additional Senior Obligations of the
Company. At June 30, 1998, the consolidated outstanding Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company was
approximately $26.6 million. The right of the Company to participate in any
distribution of assets of any of its subsidiaries 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, except to the
extent that the Company may itself be recognized as a creditor of that
subsidiary. The Subordinated Debentures, therefore, will be effectively
subordinated to all existing and future liabilities of the subsidiaries, and
holders of Subordinated Debentures and Trust Preferred Securities should look
only to the assets of the Company for payments on the Subordinated Debentures.
Neither the Indenture, the Guarantee nor the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt,
Subordinated Debt and Additional Senior Obligations, that may be incurred by the
Company. See "Description of the Guarantee--Status of the Guarantee" and
"Description of the Subordinated Debentures--Subordination."
Sources of Funds for Payment of Distributions; Holding Company Structure
The ability of Capital Trust to pay amounts due on the Trust Preferred
Securities is solely dependent upon the Company making payments on the
Subordinated Debentures as and when required. The Company presently anticipates
that the Company's principal source of funds for payments of interest on the
Subordinated Debentures (which is the sole source of funds for the payment of
Distributions) will be other borrowings, including future borrowings from time
to time under a revolving credit facility, and dividends, if and when received,
from its subsidiaries. Prospective investors should be aware that the Company's
existing revolving credit facility is short-term in nature, currently subject to
annual renewals, and there can be no assurance that the line will be renewed or
that amounts will be available under the credit facility for the payment of
interest on the Subordinated Debentures. As a holding company without
significant assets other than its equity interest in its subsidiaries, absent
the availability of funds under the revolving credit facility, the Company's
ability to pay interest on the Subordinated Debentures to Capital Trust (and
consequently Capital Trust's ability to pay Distributions on the Trust Preferred
Securities) and its ability to satisfy obligations under the Guarantee will
depend primarily upon receipt of cash dividends from subsidiaries. While the
Company has in the past received dividends from FIFC, and while the older Banks
are no longer subject to the three-year regulatory prohibition on payment of
dividends by de novo banks, to date none of the Banks has paid a dividend to the
Company, and each of the Banks is and will continue to be subject to applicable
regulatory restrictions which limit the amount of dividends that can be paid by
banking institutions. See "--Risk Factors Relating to the Company--Regulatory
Restrictions on Bank Dividends."
Option to Extend Interest Payment Period; Tax Consequences of a
Deferral of Interest Payments; Market Price Consequences
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extended
Interest Payment Period; provided that no Extended Interest Payment Period may
extend beyond the Stated Maturity of the Subordinated Debentures or end on
a
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date other than an Interest Payment Date. As a consequence of any such deferral,
quarterly Distributions on the Trust Preferred Securities by Capital Trust will
be deferred (and the amount of Distributions to which holders of the Trust
Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate of % per annum, compounded quarterly from the relevant
Distribution Date (as defined herein)) during any such Extended Interest Payment
Period. During any such Extended Interest Payment Period, the Company may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock (other than the reclassification of any class of the Company's
capital stock into another class of capital stock), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Subordinated Debentures or make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the outstanding Subordinated
Debentures or any of the Trust Preferred Securities. Prior to the termination of
any such Extended Interest Payment Period, provided no Debenture Event of
Default shall have occurred and be continuing, the Company may further defer the
payment of interest; provided that no Extended Interest Payment Period may
exceed 20 consecutive quarters, extend beyond the Stated Maturity of the
Subordinated Debentures or end on a date other than an Interest Payment Date.
Upon the termination of any Extended Interest Payment Period and the payment of
all interest then accrued and unpaid (together with interest thereon at the
annual rate of % compounded quarterly, to the extent permitted by applicable
law, and Additional Interest (as defined herein), if any is so required), the
Company may elect to begin a new Extended Interest Payment Period, subject to
the above requirements. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extended Interest Payment
Period. See "Description of the Trust Preferred Securities--Distributions--
Extended Interest Payment Period" and "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period."
Each holder of Trust Preferred Securities will be required to accrue and
recognize income (in the form of original issue discount) in respect of its pro
rata share of the interest accruing on the Subordinated Debentures held by
Capital Trust for United States federal income tax purposes. Should an Extended
Interest Payment Period occur, a holder of Trust Preferred Securities must, as a
result, include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash, and will not receive the cash
related to such income from Capital Trust if the holder disposes of the Trust
Preferred Securities prior to the record date for the payment of the related
Distributions. See "Certain Federal Income Tax Consequences--Potential Extension
of Interest Payment Period and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. However, the Company has not previously paid regular
quarterly dividends on its shares of common stock. While it is anticipated that
the Company may in the future commence payment of dividends out of funds legally
available therefor (provided the payment of dividends is not then restricted
under certain financial covenants in the Company's revolving line of credit),
until such time as the Company commences the payment of regular common stock
dividends, investors cannot rely on dividend payment history to be an effective
deterrent to the possible deferral of payments of interest on the Subordinated
Debentures.
Should the Company elect to exercise such deferral right in the future, the
market price of the Trust Preferred Securities is likely to be adversely
affected. A holder that disposes of its Trust Preferred Securities during an
Extended Interest Payment Period, therefore, might not receive the same return
on its investment as a holder that continues to hold its Trust Preferred
Securities. As a result of the existence of the Company's right to defer
interest payments, the market price of the Trust Preferred Securities may be
more volatile than the market prices of other securities on which original issue
discount accrues that are not subject to such optional deferrals.
Tax Event, Investment Company Event or Capital Treatment Event; Redemption
The Company has the right to redeem the Subordinated Debentures in whole
(but not in part) within 180 days following the occurrence of a Tax Event, an
Investment Company Event or a Capital Treatment Event (whether occurring before
or after September 30, 2003), for 100% of the principal amount together with
accrued but unpaid interest to the date fixed for redemption and, therefore, to
cause a mandatory redemption of the Trust Preferred Securities. The
exercise
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of such right is subject to the Company having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines,
policies or regulations of the Federal Reserve.
"Tax Event" means the receipt by the Company and Capital Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of issuance of
the Trust Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) Capital 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 Subordinated Debentures, (ii) interest
payable by the Company on the Subordinated Debentures is not, or, within 90 days
of such opinion, will not be, deductible by the Company, in whole or in part,
for United States federal income tax purposes, or (iii) Capital Trust is, or
will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties, assessments or other governmental
charges. The Company or Capital Trust must request and receive an opinion with
regard to such matters within a reasonable period of time after the Company or
Capital Trust becomes aware of the possible occurrence of any of the events
described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by the Company and Capital
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, Capital Trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), which
change becomes effective on or after the date of original issuance of the Trust
Preferred Securities. The Company or Capital Trust must request and receive an
opinion of counsel with regard to such matters within a reasonable period of
time after the Company or Capital Trust becomes aware of the possible occurrence
of any such event.
"Capital Treatment Event" means the receipt by the Company and Capital
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, in each case occurring on or after the date
of issuance of the Trust Preferred Securities, there is more than an
insubstantial risk of impairment of the Company's ability to treat the Trust
Preferred Securities (or any substantial portion thereof) as Tier 1 capital (or
the then equivalent thereof) for purposes of the capital adequacy guidelines of
the Federal Reserve, as then in effect and applicable to the Company. The
Company or Capital Trust must request and receive an opinion of counsel with
regard to such matters within a reasonable period of time after the Company or
Capital Trust becomes aware of the possible occurrence of any such event.
Shortening or Extension of Stated Maturity of Subordinated Debentures
The Company has the right, at any time, to shorten the maturity of the
Subordinated Debentures to a date not earlier than September 30, 2003. The
exercise of such right is subject to the Company having received prior approval
of the Federal Reserve if then required under applicable capital guidelines,
policies or regulations of the Federal Reserve. The Company also has the right
to extend the maturity of the Subordinated Debentures (whether or not Capital
Trust is terminated and the Subordinated Debentures are distributed to holders
of the Trust Preferred Securities) to a date no later than September ___, 2047.
Such right may only be exercised, however, if at the time such election is made
and at the time of such extension (i) the Company is not in bankruptcy,
otherwise insolvent or in liquidation, (ii) the Company is not in default in the
payment of any interest or principal on the Subordinated Debentures, and (iii)
Capital Trust is not in arrears on payments of Distributions on the Trust
Preferred Securities and no deferred Distributions are accumulated. See
"Description of the Subordinated Debentures--General."
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Rights Under the Guarantee
Under the Guarantee, the Company guarantees to the holders of the Trust
Preferred Securities, to the extent not paid by Capital Trust, (i) any accrued
and unpaid Distributions required to be paid on the Trust Preferred Securities,
to the extent that Capital Trust has funds available therefor at such time, (ii)
the Redemption Price (as defined herein) with respect to any Trust Preferred
Securities called for redemption, to the extent that Capital Trust has funds
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of Capital Trust (other than in
connection with the distribution of Subordinated Debentures to the holders of
Trust Preferred Securities or a redemption of all of the Trust Preferred
Securities), the lesser of (a) the amount of the Liquidation Distribution (as
defined herein), to the extent Capital Trust has funds available therefor at
such time, and (b) the amount of assets of Capital Trust remaining available for
distribution to holders of the Trust Preferred Securities in liquidation of
Capital Trust. The holders of not less than 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 Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Guarantee. Any holder of the
Trust Preferred Securities may institute and prosecute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against Capital Trust, the Guarantee
Trustee or any other Person (as defined in the Guarantee). If the Company were
to default on its obligation to pay amounts payable under the Subordinated
Debentures, Capital Trust would lack funds for the payment of Distributions or
amounts payable on redemption of the Trust Preferred Securities or otherwise,
and, in such event, holders of Trust Preferred Securities would not be able to
rely upon the Guarantee for such amounts. In the event, however, that a
Debenture Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest on or principal of
the Subordinated Debentures on the payment date on which such payment is due and
payable, then a holder of Trust Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, the Company will have a right of set-off under the Indenture to
the extent of any payment made by the Company to such holder of Trust Preferred
Securities in the Direct Action. Except as described herein, holders of Trust
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debentures or assert directly any
other rights in respect of the Subordinated Debentures. See "Description of the
Subordinated Debentures--Enforcement of Certain Rights by Holders of Trust
Preferred Securities," "--Debenture Events of Default" and "Description of the
Guarantee." The Trust Agreement provides that each holder of Trust Preferred
Securities by acceptance thereof agrees to the provisions of the Guarantee and
the Indenture.
No Voting Rights Except in Limited Circumstances
Holders of Trust Preferred Securities will have no voting rights except in
limited circumstances relating only to the modification of the Trust Preferred
Securities and the exercise of the rights of Capital Trust as holder of the
Subordinated Debentures and the Guarantee. Holders of Trust Preferred Securities
will not be entitled to vote to appoint, remove or replace the Property Trustee
or the Delaware Trustee, as such voting rights are vested exclusively in the
holder of the Common Securities (except upon the occurrence of certain events
described herein), and the holders of Trust Preferred Securities will in no
event be entitled to appoint, remove or replace the Administrative Trustees. The
Property Trustee, the Administrative Trustees and the Company may amend the
Trust Agreement without the consent of holders of Trust Preferred Securities to
ensure that Capital Trust will be classified for United States federal income
tax purposes as a grantor trust or to ensure that Capital Trust will not be
required to register as an investment company, even if such action adversely
affects the interests of such holders. See "Description of the Trust Preferred
Securities--Voting Rights; Amendment of Trust Agreement" and "--Removal of
Capital Trust Trustees."
Possible Tax Legislation
Congress and the Clinton Administration have in the past considered certain
proposed tax law changes that would, among other things, generally deny
corporate issuers a federal income tax deduction for payment of interest on
instruments with characteristics similar to the Subordinated Debentures.
Although such proposed tax law changes have not been enacted into law, there can
be no assurance that such tax law changes will not be reintroduced into future
legislation which, if enacted after the date hereof, may adversely affect the
federal income tax deductibility of interest
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payable on the Subordinated Debentures, potentially on a retroactive basis.
Accordingly, there can be no assurance that a Tax Event will not occur. A Tax
Event would permit the Company, upon approval of the Federal Reserve if then
required under applicable capital guidelines, policies or regulations of the
Federal Reserve, to cause a redemption of the Trust Preferred Securities by
electing to prepay the Subordinated Debentures. See "Description of the Trust
Preferred Securities--Redemption or Exchange--Tax Event Redemption, Investment
Company Event Redemption or Capital Treatment Event Redemption."
Redemption; Exchange of Trust Preferred Securities for Subordinated Debentures
The Company has the right at any time to dissolve, wind-up or terminate
Capital Trust and cause the Subordinated Debentures to be distributed to the
holders of the Trust Preferred Securities in exchange therefor in liquidation of
Capital Trust. The exercise of such right is subject to the Company having
received prior approval of the Federal Reserve if then required under applicable
capital guidelines, policies or regulations of the Federal Reserve. The Company
will have the right, in certain circumstances, to redeem the Subordinated
Debentures in whole or in part, in lieu of a distribution of the Subordinated
Debentures by Capital Trust, in which event Capital Trust will redeem the Trust
Preferred Securities on a pro rata basis to the same extent as the Subordinated
Debentures are redeemed by the Company. Any such distribution or redemption
prior to the Stated Maturity will be subject to prior approval of the Federal
Reserve if then required under applicable capital guidelines, policies or
regulations of the Federal Reserve. See "Description of the Subordinated
Debentures--Redemption or Exchange" and "Description of the Trust Preferred
Securities--Redemption or Exchange--Tax Event Redemption, Investment Company
Event Redemptions or Capital Treatment Redemption."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the liquidation of Capital Trust would not be a
taxable event to holders of the Trust Preferred Securities. If, however, Capital
Trust is characterized as an association taxable as a corporation at the time of
the dissolution of Capital Trust, the distribution of the Subordinated
Debentures may constitute a taxable event to holders of Trust Preferred
Securities. Moreover, upon the occurrence of a Tax Event, a dissolution of
Capital Trust in which holders of the Trust Preferred Securities receive cash
may be a taxable event to such holders. See "Certain Federal Income Tax
Consequences--Receipt of Subordinated Debentures or Cash Upon Liquidation of
Capital Trust."
If the Subordinated Debentures are distributed to the holders of Trust
Preferred Securities upon the liquidation of Capital Trust, the Company will use
its reasonable efforts to list the Subordinated Debentures on the Nasdaq
National Market/SM/ ("Nasdaq") or such stock exchanges, if any, on which the
Trust Preferred Securities are then listed.
Trading Price
The Trust Preferred Securities may trade at prices that do not fully
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder of Trust Preferred Securities that disposes of
its Trust Preferred Securities between record dates for payments of
Distributions (and consequently does not receive a Distribution from Capital
Trust for the period prior to such disposition) will nevertheless be required to
include in income accrued but unpaid interest on the Subordinated Debentures
through the date of disposition as ordinary income and to add such amount to its
adjusted tax basis in its pro rata share of the underlying Subordinated
Debentures deemed disposed of. Such holder will recognize a capital loss to the
extent the selling price (which may not fully reflect the value of accrued but
unpaid interest) is less than its adjusted tax basis (which will include all
accrued but unpaid interest). Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences--Disposition
of Trust Preferred Securities."
Absence of Prior Public Market for the Trust Preferred Securities
The Trust Preferred Securities will be a new issue, and thus no public
market for the Trust Preferred Securities currently exists. While the Company
has applied to have the Trust Preferred Securities approved for listing on
Nasdaq, there can be no assurance that an active and liquid trading market will
develop or that a continued listing of the Trust Preferred Securities will be
available on Nasdaq. Although each Underwriter has informed Capital Trust and
the Company that it intends to act as a market maker for the Trust Preferred
Securities, the Underwriters are not obligated to do so and any such market-
making activity may be terminated at any time without notice to the holders of
the Trust
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Preferred Securities. In the event that an active trading market for the Trust
Preferred Securities does not develop, the market price and liquidity of the
Trust Preferred Securities will be adversely affected.
Future trading prices of the Trust Preferred Securities may be subject to
significant fluctuations in response to prevailing interest rates, the operating
results and financial condition of the Company, the market for similar
securities and general market and economic conditions. The offering price and
rate of Distributions of the Trust Preferred Securities have been determined by
negotiations among representatives of the Company and the Underwriters, and the
offering price of the Trust Preferred Securities may not be indicative of the
market price following the offering. As a result of the existence of the
Company's right to (i) defer interest payments on or, subject to prior approval
of the Federal Reserve if then required under applicable capital guidelines,
policies or regulations of the Federal Reserve, shorten the Stated Maturity of
the Subordinated Debentures, and (ii) dissolve Capital Trust and distribute
Subordinated Debentures to the holders of Trust Preferred Securities, the market
price of the Trust Preferred Securities may be more volatile than the market
prices of debt securities that are not subject to such provisions. There can be
no assurance as to the market prices for the Trust Preferred Securities or the
Subordinated Debentures that a holder of the Trust Preferred Securities may
receive in liquidation of Capital Trust. Accordingly, such securities may trade
at a discount from the price that the investor paid to purchase the Trust
Preferred Securities. See "Description of the Trust Preferred Securities--
Liquidation Distribution Upon Termination."
Trust Preferred Securities Are Not Insured
The Trust Preferred Securities are not insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation or by any other governmental agency.
Limited Covenants
The covenants in the Indenture are limited, and there are no covenants
relating to the Company in the Trust Agreement. As a result, neither the
Indenture nor the Trust Agreement protects holders of Subordinated Debentures or
Trust Preferred Securities, respectively, in the event of a material adverse
change in the Company's financial condition or results of operations nor limits
the ability of the Company or any subsidiary to incur additional indebtedness.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or similar transaction involving the Company that may adversely
affect such holders.
Absence of Rating for Trust Preferred Securities
The Trust Preferred Securities are not rated by any rating agency and are
not anticipated to be rated in the future. The Company believes, however, that
if the Trust Preferred Securities were to be rated at this time, the rating
determined would be that of speculative grade.
Risk Factors Relating to the Company
Impact of De Novo Operations and Branch Openings on Profitability;
Enhancement of Recent Earnings from Recognition of Prior NOL's
The Company's historical results have been impacted by its strategy of de
novo bank formations and branch openings through which the Company has built an
infrastructure that management believes can support additional internal growth
in the Banks' respective markets. To expand into additional communities in and
around Chicago, the Company may undertake additional de novo bank formations or
branch openings. Based on the Company's experience, management believes that it
generally takes from 13 to 24 months for new banking facilities to first achieve
operational profitability, due to the impact of organizational and overhead
expenses, the start-up phase of generating deposits and the time lag typically
involved in redeploying deposits into attractively priced loans and other higher
yielding earning assets. For example, while the Company achieved first months of
profitable operations at Lake Forest Bank and Hinsdale Bank within 15 to 17
months, openings of additional full-service branches in Glencoe in 1995 and in
Winnetka in 1996 have extended the time for North Shore Bank to achieve
profitability. North Shore Bank, which commenced
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operations in September 1994, recorded net losses for 1994, 1995 and 1996.
Barrington Bank, which was opened in December 1996, and Crystal Lake Bank which
opened in December 1997, are still in initial phases of operations and are not
yet profitable. In addition, the Company has recently organized WAMC, a newly
formed subsidiary which is in the process of obtaining necessary regulatory
approvals to operate as a trust company providing trust services to customers of
all of the Banks. Due to significant investment in the necessary staffing and
other overhead, these start-up trust operations are not anticipated to become
profitable for at least two years while WAMC continues to add qualified
personnel in order to attract new trust accounts and develop increased
investment management business.
The level of reported net income, return on average equity and return on
average assets for the Company will in the near term continue to be impacted by
start-up costs associated with these de novo bank and branching operations and
the start-up of WAMC. To the extent the Company undertakes additional branching
and de novo bank and business formations, the Company is likely to continue to
experience the effects of higher operating expenses relative to operating income
from the new operations, which may limit increases in profitability, although
management currently intends to focus on balancing future growth with earnings
improvements and anticipates that future results of operations will reflect
greater leveraging of the investments the Company has made to date in the
infrastructures of the existing Banks.
In addition, since 1995 the Company's ability to recognize net operating loss
carryforwards ("NOL's") has had a positive impact on reported net income of the
Company. It is anticipated that at the end of 1998, the Company will have fully
recognized the value of prior NOL's for financial statement reporting purposes
and, accordingly, will not continue to benefit from this contribution to
earnings in future periods.
Acquisition Strategy
Although the Company has historically grown through de novo bank formations
and the establishment of new branch offices, the Company's strategic plan also
includes potential acquisition of other financial institutions in attractive
markets and potential acquisitions of specialty finance or commercial finance
businesses that offer unique earning asset niches. Growth through acquisition
may offer the Company the opportunity to increase market share in existing and
new markets without incurring the full earnings impact of start-up operations.
However, there can be no assurance that potential acquisitions will be available
on terms acceptable or favorable to the Company or that the required regulatory
approvals for any proposed acquisitions will be obtained. There also can be no
assurance that the Company will be able to successfully integrate, operate and
manage any business that it acquires so as to maintain or increase
profitability.
Dependence on Management; Recent Management Changes
The Company's success to date has been influenced strongly by its ability to
attract and to retain senior management experienced in banking and financial
services. The Company's ability to retain the current management teams of each
of the Banks, FIFC and WAMC, and, as the Company grows, to attract and retain
qualified additional senior and middle management will continue to be important
to successful implementation of the Company's strategies. The Company does not
currently maintain key-man life insurance policies. The unexpected loss of
services of any key management personnel, or the inability to recruit and retain
qualified personnel in the future, could have an adverse effect on the Company's
business and financial results. The Company recently implemented certain
management changes as a result of which its president and former chief operating
officer, Edward J. Wehmer, assumed the position of chief executive officer and
the former chairman and chief executive officer, Howard D. Adams, is no longer
an employee of the Company. No assurance can be given as to the possible effect
of these management changes. Mr. Adams continues to serve as a director of the
Company with a term expiring at the annual shareholders meeting in 2000.
The Company has entered into employment agreements with Edward J. Wehmer, who
has served as the Company's president since inception and, since May 1998, as
chief executive officer, and with its other senior management and senior
officers of subsidiaries. The agreements provide for, among other things,
certain non-competition agreements, severance arrangements and benefits.
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Allowance for Possible Loan Losses; Credit Risk
The Company's allowance for possible loan losses is established in
consultation with management of its operating subsidiaries and is maintained at
a level considered adequate by management to absorb anticipated loan losses. The
amount of future losses is susceptible to changes in economic, operating and
other conditions, including changes in interest rates, that may be beyond the
Company's control, and such losses may exceed current estimates. Rapidly growing
and de novo bank loan portfolios are by their nature unseasoned. As a result,
estimating loan loss allowances for the Banks is more difficult, and therefore
the Banks may be more susceptible to changes in estimates, and to losses
exceeding estimates, than banks with more seasoned loan portfolios. Although
management believes that the allowance for possible loan losses is adequate to
absorb losses on any existing loans that may become uncollectible, there can be
no assurance that the allowance for possible loan losses will prove sufficient
to cover actual loan losses in the future.
A portion of the Company's assets are concentrated in insurance premium
finance loans that the Company generates through FIFC. These loans, intended to
enhance the average yield of earning assets of the Banks, may involve a higher
level of risk of collection than generally associated with loan portfolios of
more traditional community banks.
Impact of Interest Rate Changes
The Company's results of operations are derived from the operations of its
subsidiaries and are principally dependent on net interest income, calculated as
the difference between interest earned on loans and investments and the interest
expense paid on deposits and other borrowings. Like other banks and financial
institutions, the Company's interest income and interest expense are affected by
general economic conditions and by the policies of regulatory authorities,
including the monetary policies of the Federal Reserve. While management has
taken measures intended to manage the risks of operating in a changing interest
rate environment, there can be no assurance that such measures will be effective
in avoiding undue interest rate risk.
Competition
The financial services business is highly competitive, and the Company
encounters strong direct competition for deposits, loans and other financial
services in all of its market areas. The Company's principal competitors include
other commercial banks, savings banks, savings and loan associations, mutual
funds, money market funds, finance companies, trust companies, insurers, leasing
companies, credit unions, mortgage companies, private issuers of debt
obligations and suppliers of other investment alternatives, such as securities
firms. Many of the Company's non-bank competitors are not subject to the same
degree of regulation as that imposed on bank holding companies, federally
insured banks and national or Illinois chartered banks. As a result, such non-
bank competitors have advantages over the Company in providing certain services.
In addition, in recent years, several major multi-bank holding companies have
entered or expanded in the Chicago metropolitan market. Generally, these
financial institutions are significantly larger than the Company and have
greater access to capital and other resources.
Regulatory Restrictions on Bank Dividends
The Company's sources of funds for payment of interest on the Subordinated
Debentures (which payments will be the sole source of funds available for
payment of Distributions on the Trust Preferred Securities) will consist
primarily of other borrowings (including amounts drawn down under its revolving
line of credit) and dividends, if and when received, from its direct and
indirect subsidiaries. None of the Company's banking subsidiaries has paid any
dividends to date. Under the provisions of the Illinois Banking Act, dividends
may not be declared by Lake Forest Bank, Hinsdale Bank, North Shore Bank, nor
Libertyville Bank except out of each Bank's net profits (as defined therein),
and unless each Bank has transferred to surplus at least one-tenth of its net
profits since the date of the declaration of the last preceding dividend, until
the amount of its surplus is at least equal to its capital. However, as Federal
Reserve member banks, dividends declared in any calendar year by any of the
Banks may not exceed its net profit for the year plus its retained net profits
for the preceding two years. In addition, each of Libertyville Bank, Barrington
Bank and Crystal Lake Bank is currently subject to additional restrictions
prohibiting the payment of dividends by a de novo bank in its first three years
of operations. The de novo period will end for Libertyville Bank in October
1998, for Barrington Bank in December 1999, and for Crystal Lake Bank in
December 2000. Subsequent to these dates, the Banks would be allowed to pay
dividends subject to the regulatory limitations that are applicable to all
state-chartered, Federal Reserve
18
<PAGE>
member banks, or in the case of Barrington Bank and Crystal Lake Bank, national
banks. As of June 30, 1998, based upon applicable regulatory limitations, Lake
Forest Bank and Hinsdale Bank had approximately $5.6 million and $1.9 million,
respectively, available to pay as dividends to the Company, subject to
regulatory capital maintenance requirements.
Financial Institution Regulation
The Company, the Banks and WAMC are subject to extensive federal and state
legislation, regulation and supervision. Recently enacted, proposed and future
legislation and regulations have had, will continue to have or may have
significant impact on the financial services industry. Some of the legislative
and regulatory changes may benefit the Company, the Banks and WAMC; others,
however, may increase their costs of doing business and thereby assist
competitors.
Year 2000 Compliance
A critical issue has emerged in the banking industry, and generally for all
industries that are heavily reliant upon computers, regarding how existing
software application programs and operating systems can accommodate the date
value for the Year 2000. The Year 2000 issue is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
As such, certain programs that have time-sensitive software may recognize a date
using "00" as the Year 1900 rather than the Year 2000. As a result, the year
1999 (i.e. "99") could be the maximum date value these systems will be able to
accurately process. During 1997, management began the process of working with
its outside data processor and other software vendors to ensure that the Company
is prepared for the Year 2000. That process has continued during 1998 and
current expectations are that testing will be completed in early 1999.
Regardless of the Year 2000 compliance of the Company's systems, there can be no
assurance that the Company will not be adversely affected by the failure of
others to become Year 2000 compliant. Such risks may include potential losses
related to loans made to third parties whose businesses are adversely affected
by the Year 2000 issue, the disruption or inaccuracy of data provided by non-
Year 2000 compliant third parties and business disruption caused by the failure
of service providers, such as security and data processing companies, to become
Year 2000 compliant. Because of these uncertainties, there can be no assurance
that the Year 2000 issue will not have a material financial impact in any future
period, although management does not anticipate a material adverse effect.
Forward-looking Statements
This Prospectus (including documents incorporated herein by reference)
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements may be deemed to
include, among other things, statements relating to anticipated improvements in
financial performance and management's long-term performance goals, as well as
statements relating to the Company's operational and growth strategies,
including anticipated internal growth and plans to pursue additional specialized
earning asset niches, to seek potential acquisitions of community banking
institutions in desirable markets or possible formation of additional de novo
banks and new branch offices, and to pursue potential development or acquisition
of specialty finance businesses. Actual results could differ materially from
those addressed in the forward-looking statements as a result of the factors
discussed above in this "Risk Factors" section and elsewhere in this Prospectus.
19
<PAGE>
USE OF PROCEEDS
Capital Trust will use the gross proceeds received from the sale of the Trust
Preferred Securities to purchase Subordinated Debentures from the Company. The
Company anticipates that, based on applicable Federal Reserve limitations,
approximately $24 million of the proceeds from the sale of the Trust Preferred
Securities will constitute Tier 1 capital of the Company upon consummation of
this offering.
The net proceeds to the Company from the sale of the Subordinated Debentures
are estimated to be $ million (assuming no exercise of the over-allotment
option and after deduction of underwriting commissions relating to this offering
and estimated offering expenses of approximately $275,000). The Company will use
such net proceeds to repay all or a portion of the amounts outstanding under the
Company's $40 million revolving line of credit with LaSalle National Bank, an
affiliate of ABN AMRO Incorporated. At September 1, 1998, approximately $27.9
million of indebtedness was outstanding under the line. Borrowings under the
line bear interest at a floating rate equal to, at the Company's option, either
the lender's prime rate or the London Inter-Bank Offered Rate ("LIBOR") plus 125
basis points. The weighted average rate at September 1, 1998, was 6.875%, and
loans drawn on the line mature on or before September 1, 1999. The revolving
line of credit is secured by a pledge of the stock of each of the Banks, other
than Crystal Lake Bank.
Following such repayment, the unused portion of the entire line will remain
available until its maturity and the Company may use the line for future
borrowings from time to time for general corporate purposes, including, without
limitation, payment of interest on the Subordinated Debentures and for continued
growth of the Company's banking and finance subsidiaries, for future branch
office openings and possible additional de novo bank formations, and for
potential future acquisitions of community banking organizations or specialty
finance companies or investments in businesses engaged in niche consumer lending
or selected commercial finance activities. While the Company is currently
exploring several possible acquisitions, the Company has not negotiated the
terms of any specific acquisition.
ACCOUNTING TREATMENT
Capital Trust will be treated, for financial reporting purposes, as a
subsidiary of the Company and, accordingly, the accounts of Capital Trust will
be included in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatory Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Subordinated Debentures," and appropriate disclosures about the Trust Preferred
Securities, the Guarantee and the Subordinated Debentures will be included in
the notes to consolidated financial statements. For financial reporting
purposes, the Company will record Distributions payable on the Trust Preferred
Securities as interest expense in the Consolidated Statement of Operations.
All future reports of the Company filed under the Exchange Act will (i)
present the Trust Preferred Securities issued by Capital Trust on the balance
sheet as a separate line-item entitled "Company Obligated Mandatory Redeemable
Preferred Securities of Subsidiary Trust Holding Solely Subordinated
Debentures," (ii) include in a footnote to the annual financial statements
disclosure that the sole assets of Capital Trust are the Subordinated Debentures
(including the outstanding principal amount, interest rate and maturity date of
such Subordinated Debentures), and (iii) include in a footnote to the annual
financial statements disclosure that the Company owns all of the Common
Securities of Capital Trust, and the Guarantee, the Trust Agreement, the
Subordinated Debentures, the Indenture and the Expense Agreement in the
aggregate constitute a full, irrevocable and unconditional guarantee, on a
subordinated basis, by the Company of the obligations of Capital Trust under the
Trust Preferred Securities.
20
<PAGE>
CAPITALIZATION
The following table sets forth the total deposits, total indebtedness
and capitalization of the Company as of June 30, 1998 (i) on an historical basis
and (ii) as adjusted, giving effect to the issuance of the Trust Preferred
Securities by Capital Trust (assuming no exercise of the Underwriters' over-
allotment option) and the application of the estimated net proceeds from the
sale thereof to purchase the Subordinated Debentures from the Company. See "Use
of Proceeds." This data should be read in conjunction with the summary
consolidated financial data of the Company included elsewhere in this Prospectus
and the consolidated financial statements, including the notes thereto,
incorporated herein by reference.
<TABLE>
<CAPTION>
June 30, 1998
-------------------------
Actual As Adjusted
---------- -----------
(in thousands)
<S> <C> <C>
Total deposits.................................................................. $1,063,590 $1,063,590
========== ==========
Indebtedness:
Notes payable................................................................... $ 26,603 $ --
Company Obligated Mandatory Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Subordinated Debentures.................................. -- 27,500
Shareholders' equity:
Preferred Stock, 20,000,000 shares authorized; no shares issued or outstanding.. -- --
Common Stock, without par value, $1.00 stated value; 30,000,000 shares
authorized; 8,148,772 shares issued and outstanding........................... 8,149 8,149
Common stock warrants; 155,430 warrants issued and outstanding.................. 100 100
Surplus......................................................................... 72,868 72,868
Retained deficit................................................................ (10,112) (10,112)
Accumulated other comprehensive income.......................................... (22) (22)
---------- ----------
Total shareholders' equity.................................................. 70,983 70,983
---------- ----------
Total capitalization........................................................ $ 97,586 $ 98,483
========== ==========
</TABLE>
The following table sets forth the Company's actual consolidated
regulatory capital ratios at June 30, 1998, and as adjusted at June 30, 1998, to
give effect to the application of the estimated net proceeds from this offering
(assuming no exercise of the Underwriters' over-allotment option). See "Use of
Proceeds."
<TABLE>
<CAPTION>
June 30, 1998
----------------------------------------------------------------------------
Actual As Adjusted
----------------------------------- --------------------------------------
"Well- Excess/ "Well-
capitalized" (Deficit) capitalized" Excess
Capital Standard/(1)/ Capital Capital/(2)/ Standard/(1)/ Capital
------- ------------- --------- ------------ ------------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Dollar basis:
Tier 1 leverage capital.......... $69,359 $ 56,773 $ 12,586 $ 92,479 $ 56,773 $35,706
Tier 1 risk-based capital........ 69,359 60,266 9,093 92,479 60,266 32,213
Total risk-based capital......... 75,215 100,443 (25,228) 102,715 100,443 2,272
Percentage basis:
Leverage ratio................... 6.11% 5.00% 8.14% 5.00%
Tier 1 risk-based capital ratio.. 6.91% 6.00% 9.21% 6.00%
Total risk-based capital ratio... 7.49% 10.00% 10.23% 10.00%
</TABLE>
- ---------------
(1) Reflects the minimum amount of capital necessary to meet the "well-
capitalized" regulatory standard. As of June 30, 1998, the Company exceeded
the minimum "well capitalized" standard for both Tier 1 leverage and Tier 1
risk-based capital, but the level of total risk-based capital was below the
"adequately capitalized" standard. Upon completion of the offering,
however, the Company will meet the "adequately capitalized" standard for
total risk-based capital. Due to growth in assets subsequent to June 30,
1998, the Company does not expect its total risk-based capital to exceed
the "well-capitalized" standard upon completion of the offering.
(2) Federal Reserve guidelines for calculation of Tier 1 capital limit the
aggregate amount of cumulative preferred stock, including securities
similar to the Trust Preferred Securities, which can be included in Tier 1
capital to 25% of total Tier 1 capital. As of June 30, 1998, approximately
$23.1 million of the aggregate amount of Trust Preferred Securities would
have been included as Tier 1 capital for the Company. The total aggregate
amount will, however, be included in total risk-based capital.
21
<PAGE>
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of
the Trust Agreement. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act. The Property Trustee, Wilmington Trust, will act as
indenture trustee for the Trust Preferred Securities under the Trust Agreement
for purposes of complying with the provisions of the Trust Indenture Act. The
terms of the Trust Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture Act.
The following summary of the material terms and provisions of the Trust
Preferred Securities and the Trust Agreement does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the Trust
Agreement, the Trust Act, and the Trust Indenture Act. Wherever particular
defined terms of the Trust Agreement are referred to, but not defined herein,
such defined terms are incorporated herein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
General
Pursuant to the terms of the Trust Agreement, an Administrative
Trustee, on behalf of Capital Trust, will issue the Trust Securities. All of the
Common Securities will be owned by the Company. The Trust Preferred Securities
will represent preferred undivided beneficial interests in the assets of Capital
Trust, and the holders thereof will be entitled to a preference in certain
circumstances with respect to Distributions 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 does not permit the issuance by
Capital Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by Capital Trust.
The Trust Preferred Securities will rank pari passu, and payments will
be made thereon pro rata, with the Common Securities, except as described under
"--Subordination of Common Securities." Legal title to the Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The Guarantee executed by the Company for the
benefit of the holders of the Trust Preferred Securities will be a guarantee on
a subordinated basis with respect to the Trust Preferred Securities, but will
not guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Trust Preferred Securities when Capital Trust does not have
funds on hand available to make such payments. Wilmington Trust Company, as
Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the
Trust Preferred Securities. See "Description of the Guarantee" and "Relationship
Among the Trust Preferred Securities, the Subordinated Debentures and the
Guarantee."
Distributions
Payment of Distributions. Distributions on each Trust Preferred
Security will be payable at the annual rate of % of the stated Liquidation
Amount of $25, payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, to the holders of the Trust Preferred Securities
on the relevant record dates (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). The record date will be
the 15th day of the month in which the relevant Distribution Date occurs.
Distributions will accumulate from the date of original issuance. The first
Distribution Date for the Trust Preferred Securities will be December 31, 1998.
The amount of Distributions payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
Distributions are payable on the Trust Preferred Securities is not a Business
Day, then payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any additional
Distributions, interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally due and payable. "Business Day" means any day other than a Saturday,
a Sunday, a day on which banking institutions in The City of New York are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Debenture
Trustee is closed for business.
Extended Interest Payment Period. The Company has the right under the
Indenture, so long as no Debenture Event of Default has occurred and is
continuing, to defer the payment of interest on the Subordinated Debentures at
any time, or from time to time (each, an "Extended Interest Payment Period"),
which right, if exercised, would defer quarterly Distributions on the Trust
Preferred Securities during any such Extended Interest Payment Period.
Distributions to which
22
<PAGE>
holders of the Trust Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of % thereof,
compounded quarterly from the relevant Distribution Date. "Distributions," as
used herein, includes any such additional Distributions. The right to defer the
payment of interest on the Subordinated Debentures is limited, however, to a
period not exceeding 20 consecutive quarters and no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Subordinated Debentures or
end on a date other than an Interest Payment Date. During any such Extended
Interest Payment Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (other than the
reclassification of any class of the Company's capital stock into another class
of capital stock), (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior in interest to the Subordinated Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Subordinated Debentures or any of the Trust Preferred Securities.
Prior to the termination of any such Extended Interest Payment Period, so long
as no Debenture Event of Default shall have occurred and be continuing, the
Company may further defer the payment of interest; provided that such Extended
Interest Payment Period may not exceed 20 consecutive quarters or extend beyond
the Stated Maturity of the Subordinated Debentures or end on a date other than
an Interest Payment Date. Upon the termination of any such Extended Interest
Payment Period and the payment of all amounts then due, the Company may elect to
begin a new Extended Interest Payment Period, subject to the above requirements.
Subject to the foregoing, there is no limitation on the number of times that the
Company may elect to begin an Extended Interest Payment Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
Source of Distributions. The funds of Capital Trust available for
distribution to holders of the Trust Preferred Securities will be limited to
payments under the Subordinated Debentures in which Capital Trust will invest
the proceeds from the issuance and sale of the Trust Securities. See
"Description of the Subordinated Debentures." Distributions will be paid through
the Property Trustee, who will hold amounts received in respect of the
Subordinated Debentures in the Property Account for the benefit of the holders
of the Trust Securities. If the Company does not make interest payments on the
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Trust Securities. The payment of Distributions (if and
to the extent Capital Trust has funds available for the payment of such
Distributions) is guaranteed by the Company. See "Description of the Guarantee."
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the register of holders of the Trust Preferred
Securities on the relevant record dates, which date will be the 15th day of the
month in which the relevant Distribution Date occurs. Subject to any applicable
laws and regulations and the provisions of the Trust Agreement, each such
payment will be made as described above under "--Distributions--Payment of
Distributions."
Redemption or Exchange
General. The Subordinated Debentures will mature on September __,
2028. The Company will have the right to redeem the Subordinated Debentures (i)
on or after September 30, 2003 in whole at any time or in part from time to
time, or (ii) at any time, in whole (but not in part), within 180 days following
the occurrence of a Tax Event, an Investment Company Event or a Capital
Treatment Event, in each case subject to receipt of prior approval by the
Federal Reserve if then required under applicable capital guidelines, policies
or regulations of the Federal Reserve. The Company will not have the right to
purchase the Subordinated Debentures, in whole or in part, from Capital Trust
until after September 30, 2003, except if a Tax Event, an Investment Company
Event or a Capital Treatment Event has occurred. See "Description of the
Subordinated Debentures--General."
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption will be applied by the Property Trustee to redeem a Like Amount (as
defined herein) of the Trust Securities, upon not less than 30 days nor more
than 60 days notice, at a redemption price (the "Redemption Price") equal to
100% of the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions
23
<PAGE>
and Additional Interest (as defined below) thereon (if any is required) to the
date of redemption (the "Redemption Date"). See "Description of the Subordinated
Debentures--Redemption or Exchange." If less than all of the Subordinated
Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds
from such repayment or redemption will be allocated to redemption of the Trust
Preferred Securities and redemption of the Common Securities pro rata.
Distribution of Subordinated Debentures. Subject to the Company having
received prior approval of the Federal Reserve if so required under applicable
capital guidelines, policies or regulations of the Federal Reserve, the Company
will have the right at any time to dissolve, wind-up or terminate Capital Trust
and, after satisfaction of the liabilities of creditors of Capital Trust as
provided by applicable law, cause the Subordinated Debentures to be distributed
to the holders of Trust Securities in liquidation of Capital Trust. See
"--Liquidation Distribution Upon Termination."
Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption. If a Tax Event, an Investment Company Event or
Capital Treatment Event in respect of the Trust Securities occurs, the Company
has the right to redeem the Subordinated Debentures in whole (but not in part)
and thereby cause a mandatory redemption of such Trust Securities in whole (but
not in part) at the Redemption Price within 180 days following the occurrence of
such Tax Event, Investment Company Event or Capital Treatment Event. In the
event a Tax Event, an Investment Company Event or Capital Treatment Event in
respect of the Trust Securities has occurred and the Company does not elect to
redeem the Subordinated Debentures and thereby cause a mandatory redemption of
such Trust Securities or to dissolve Capital Trust and cause the Subordinated
Debentures to be distributed to holders of such Trust Securities in liquidation
of Capital Trust as described below under "--Liquidation Distribution Upon
Termination," such Trust Preferred Securities will remain outstanding and
Additional Interest may be payable on the Subordinated Debentures.
"Additional Interest" means the additional amounts as may be necessary
to be paid by the Company in order that the amount of Distributions then due and
payable by Capital Trust on the outstanding Trust Securities will not be reduced
as a result of any additional taxes, duties and other governmental charges to
which Capital Trust has become subject.
"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 Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Subordinated Debentures to holders of Trust Securities in
connection with a termination or liquidation of Capital Trust, Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Subordinated Debentures are
distributed. Each Subordinated Debenture distributed pursuant to clause (ii)
above will carry with it accrued interest in an amount equal to the accrued and
unpaid interest then due on such Subordinated Debenture.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Securities.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Trust Preferred Securities (i) such Trust Preferred Securities
will no longer be deemed to be outstanding, and (ii) any certificates
representing Trust Preferred Securities will be deemed to represent the
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of such Trust Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on the
Trust Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Trust
Preferred Securities or the Subordinated Debentures that may be distributed in
exchange for Trust Preferred Securities if a dissolution and liquidation of
Capital Trust were to occur. The Trust Preferred Securities that an investor may
purchase, or the Subordinated Debentures that an investor may receive on
dissolution and liquidation of Capital Trust, may, therefore, trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
24
<PAGE>
Redemption Procedures
Trust Preferred Securities redeemed on each Redemption Date will be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Subordinated Debentures. Redemptions of the
Trust Preferred Securities will be made and the Redemption Price will be payable
on each Redemption Date only to the extent that Capital Trust has funds on hand
available for the payment of such Redemption Price. See "--Subordination of
Common Securities."
If Capital Trust gives a notice of redemption in respect of its Trust
Securities, then the Property Trustee, to the extent funds are available, will
irrevocably deposit with the depositary for the Trust Securities funds
sufficient to pay the aggregate Redemption Price and will give the depositary
for the Trust Securities irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Trust Securities. See "Book-Entry Issuance." If the Trust
Preferred Securities are no longer in book-entry form, the Property Trustee, to
the extent funds are available, will 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 for any
Trust Securities called for redemption will be payable to the holders of such
Trust Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption has been given and funds deposited as required,
then upon the date of such deposit, all rights of the holders of such Trust
Securities so called for redemption will cease, except the right of the holders
of such Trust Securities to receive the Redemption Price, but without interest
on such Redemption Price, and such Trust Securities will cease to be
outstanding. In the event that any date fixed for redemption of Trust Securities
is not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day (and without any
additional Distribution, interest or other payment in respect of any such delay)
except that, if such Business Day is in the next succeeding calendar year,
payment of such interest will be made on the immediately preceding Business Day,
in each case, with the same force and effect as if made on such date. In the
event that payment of the Redemption Price in respect of Trust Securities called
for redemption is improperly withheld or refused and not paid either by Capital
Trust, or by the Company pursuant to the Guarantee, Distributions on such Trust
Securities will continue to accumulate at the then applicable rate, from the
Redemption Date originally established by Capital Trust for such Trust
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of the
Guarantee."
Subject to applicable law (including, without limitation, United
States federal securities law), and further provided, that the Company has not
and is not continuing to exercise its right to defer interest payments, the
Company or its 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 Subordinated Debentures to holders of Trust Preferred
Securities will be made to the applicable recordholders thereof as they appear
on the register for the Trust Preferred Securities on the relevant record date,
which date will be the date 15 days prior to the Redemption Date or liquidation
date, as applicable.
If less than all of the Trust Securities are to be redeemed on a
Redemption Date, then the aggregate Liquidation Amount of such Trust Securities
to be redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts. 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 integral multiples of $25
in excess thereof) of the Liquidation Amount of Trust Preferred Securities of a
denomination larger than $25. The Property Trustee will promptly notify the
registrar for the Trust Preferred Securities 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 will relate to the portion of the aggregate Liquidation Amount of
Trust Preferred Securities which has been or is to be redeemed.
25
<PAGE>
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price on the Subordinated Debentures, on and after the Redemption
Date interest will cease to accumulate on such Subordinated Debentures or
portions thereof (and Distributions will cease to accrue on the related Trust
Securities or portions thereof) called for redemption.
Subordination of Common Securities
Payment of Distributions (including Additional Interest, if any is
required) on, and the Redemption Price of, the Trust Preferred Securities and
Common Securities, as applicable, will be made pro rata based on the Liquidation
Amount of the Trust Preferred Securities and Common Securities; provided,
however, that if on any Distribution Date or Redemption Date a Debenture Event
of Default has occurred and is continuing, no payment of any Distribution on, or
Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of such Common
Securities, will be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Interest, if any is required) on all
of the outstanding Trust Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the outstanding Trust
Preferred Securities then called for redemption, will 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 (including Additional Interest,
if any is required) on, or Redemption Price of, the Trust Preferred Securities
then due and payable.
In the case of the occurrence and continuance of any Event of Default
resulting from a Debenture Event of Default, the Company, as holder of the
Common Securities, will be deemed to have waived any right to act with respect
to any such Event of Default under the Trust Agreement until the effect of any
such Event of Default with respect to the Trust Preferred Securities has been
cured, waived or otherwise eliminated. Until any such Event of Default under the
Trust Agreement with respect to the Trust Preferred Securities 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 the
Company, 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 Termination
The Company will have the right at any time to dissolve, wind-up or
terminate Capital Trust and cause the Subordinated Debentures to be distributed
to the holders of the Trust Preferred Securities. Such right is subject,
however, to the Company having received prior approval of the Federal Reserve if
then required under applicable capital guidelines, policies or regulations of
the Federal Reserve.
Pursuant to the Trust Agreement, Capital Trust will automatically
terminate upon expiration of its term and will terminate earlier on the first to
occur of (i) certain events of bankruptcy, dissolution or liquidation of the
Company, (ii) the distribution of a Like Amount of the Subordinated Debentures
to the holders of its Trust Securities, if the Company, as depositor, has given
written direction to the Property Trustee to terminate Capital Trust (which
direction is optional and wholly within the discretion of the Company, as
depositor, subject to the Company's having received prior approval of the
Federal Reserve if so required under applicable guidelines, policies or
regulations thereof), (iii) redemption of all of the Trust Preferred Securities
as described under "--Redemption or Exchange--Mandatory Redemption" or (iv) the
entry of an order for the dissolution of Capital Trust by a court of competent
jurisdiction.
If an early termination occurs as described in clause (i), (ii) or
(iv) of the preceding paragraph, Capital Trust will be liquidated by the
Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of Capital Trust as
provided by applicable law, to the holders of Trust Securities a Like Amount of
the Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be
entitled to receive out of the assets of Capital Trust available for
distribution to holders, after satisfaction of liabilities to creditors of
Capital Trust as provided by applicable law, an amount equal to, in the case of
holders of Trust Securities, 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 Capital Trust has insufficient assets available to pay
in full the
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aggregate Liquidation Distribution, then the amounts payable directly by Capital
Trust on the Trust Securities will be paid to the Company, as the holder of the
Common Securities, and the holders of the Trust Preferred Securities on a pro
rata basis based on Liquidation Amounts, except that, 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."
Under current United States federal income tax law and interpretations
and assuming, as expected, that Capital Trust is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Trust Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences--Receipt of
Subordinated Debentures or Cash Upon Liquidation of Capital Trust." If the
Company elects neither to redeem the Subordinated Debentures prior to maturity
nor to liquidate Capital Trust and distribute the Subordinated Debentures to
holders of the Trust Preferred Securities, the Trust Preferred Securities will
remain outstanding until the repayment of the Subordinated Debentures.
If the Company elects to dissolve Capital Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Trust Preferred
Securities in liquidation of Capital Trust, the Company will continue to have
the right to shorten or extend the maturity of such Subordinated Debentures,
subject to certain conditions. See "Description of the Subordinated Debentures--
General."
Liquidation Value
The amount of the Liquidation Distribution payable on the Trust
Preferred Securities in the event of any liquidation of Capital Trust is $25 per
Trust Preferred Security plus accumulated and unpaid Distributions thereon to
the date of payment, which may be in the form of a distribution of such amount
in Subordinated Debentures, subject to certain exceptions. See "--Liquidation
Distribution Upon Termination."
Events of Default; Notice
Any one of the following events constitutes an event of default under
the Trust Agreement (an "Event of Default") with respect to the Trust Preferred
Securities (whatever the reason for such Event of Default and whether voluntary
or involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description
of the Subordinated Debentures--Debenture Events of Default"); or
(ii) default by Capital Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by Capital Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the
breach of which is dealt with in clauses (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the Trustee(s) by the
holders of at least 25% in aggregate Liquidation Amount of the outstanding
Trust Preferred Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
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Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and the Company, as depositor, unless
such Event of Default has been cured or waived. The Company, as depositor, and
the Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities will have a preference over the Common Securities upon
termination of Capital Trust. See "--Subordination of Common Securities" and
"--Liquidation Distribution Upon Termination." The existence of an Event of
Default does not entitle the holders of Trust Preferred Securities to accelerate
the maturity thereof, unless such Event of Default is caused by the occurrence
of a Debenture Event of Default and both the Debenture Trustee and holders of at
least 25% in principal amount of the Subordinated Debentures fail to accelerate
the maturity thereof.
Removal of Capital Trust Trustees
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
or the Delaware Trustee may be removed at such time by the holders of a majority
in Liquidation Amount of the outstanding Trust Preferred Securities. In no
event, however, 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 the Company as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will 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, for the purpose
of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property (as defined in the Trust
Agreement) may at the time be located, the Company, as the holder of the Common
Securities, will have power to appoint at any time or times, and upon written
request of the Property Trustee will appoint, one or more Persons (as defined in
the Trust Agreement) either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust Property, or to act as separate
trustee of any such Trust Property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such Person or Persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone will
have power to make such appointment.
Merger or Consolidation of 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 Trustee is a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of Capital Trust
Capital Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. Capital Trust may, at the request of the Company, with the
consent of the Administrative Trustees and 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 substantially as an entirety to a
trust organized as such under the laws of any State; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of Capital
Trust with respect to the Trust Preferred Securities, or (b) substitutes for the
Trust Preferred Securities other securities having substantially the same terms
as the Trust
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Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing substantially the same powers and duties as the Property
Trustee in its capacity as the holder of the Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Trust Preferred Securities are then listed (including,
if applicable, Nasdaq), if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, (v) such successor
entity has a purpose substantially identical to that of Capital Trust, (vi)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company has received an opinion from independent counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
Capital Trust nor such successor entity will be required to register as an
"investment company" under the Investment Company Act, and (vii) the Company
owns all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, Capital
Trust will not, except with the consent of holders of 100% in Liquidation Amount
of the Trust Preferred Securities, consolidate, amalgamate, merge with or into,
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause Capital Trust or the successor entity to be classified as other than
a grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided below and under "Description of the Guarantee--
Amendments and Assignment" and as otherwise required by the Trust Act 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 the Company and the
Trustees, without the consent of the holders of the Trust Preferred Securities
(i) with respect to acceptance of appointment by a successor trustee, (ii) to
cure any ambiguity, correct or supplement any provisions in such 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 (provided such amendment is not inconsistent with the other provisions
of the Trust Agreement), or (iii) to modify, eliminate or add to any provisions
of the Trust Agreement to such extent as is necessary to ensure that Capital
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 Capital Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of clause (ii), such action may not adversely affect in any material respect the
interests of any holder of Trust Securities, and any amendments of such Trust
Agreement will become effective when notice thereof is given to the holders of
Trust Securities. The Trust Agreement may be amended by the Trustees and the
Company (i) with the consent of holders representing not less than a majority in
aggregate Liquidation Amount of the outstanding Trust Securities, and (ii) upon
receipt by the Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect Capital Trust's status as a grantor trust
for United States federal income tax purposes or Capital Trust's exemption from
status as an "investment company" under the Investment Company Act.
Notwithstanding anything in this paragraph to the contrary, without the consent
of each holder of Trust Securities, the Trust Agreement may not be amended to
(a) change the amount or timing of any Distribution on the Trust Securities or
otherwise adversely affect the amount of any Distribution required to be made in
respect of the Trust Securities as of a specified date, or (b) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
The Trustees will not, so long as any Subordinated Debentures are held by
the Property Trustee, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal
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of all the Subordinated Debentures will be due and payable, or (iv) consent to
any amendment, modification or termination of the Indenture or the Subordinated
Debentures, where such consent is required, without, in each case, obtaining the
prior approval of the holders of a majority in aggregate Liquidation Amount of
all outstanding Trust Securities; provided, however, that where a consent under
the Indenture requires the consent of each holder of Subordinated Debentures
affected thereby, no such consent will be given by the Property Trustee without
the prior consent of each holder of the Trust Securities. The Trustees may not
revoke any action previously authorized or approved by a vote of the holders of
the Trust Securities except by subsequent vote of the holders of the Trust
Securities. The Property Trustee will notify each holder of Trust Securities of
any notice of default with respect to the Subordinated Debentures. In addition
to obtaining the foregoing approvals of the holders of the Trust Securities,
prior to taking any of the foregoing actions, the Trustees must obtain an
opinion of counsel experienced in such matters to the effect that Capital 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 Securities may be given at a
meeting of holders of Trust Securities convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Trust Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of Trust 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 Capital Trust to redeem and cancel its Trust Preferred Securities
in accordance with the Trust Agreement.
Notwithstanding the fact that holders of 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 the Company, the Trustees or
any affiliate of the Company or any Trustee, 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
Trust Preferred Securities registered in the name of DTC or its nominee.
Beneficial interests in the Global Trust Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described below, Trust Preferred Securities in
definitive form will not be issued in exchange for the Global Trust Preferred
Securities. See "Book-Entry Issuance."
No Global Trust Preferred Security may be exchanged for Trust Preferred
Securities registered in the names of persons other than DTC or its nominee
unless (i) DTC notifies the Indenture Trustee that it is unwilling or unable to
continue as a depositary for such Global Trust Preferred Security and the
Company is unable to locate a qualified successor depositary, (ii) the Company
executes and delivers to the Indenture Trustee a written order stating that it
elects to terminate the book-entry system through DTC, or (iii) there shall have
occurred and be continuing a Debenture Event of Default under the Indenture. Any
Global Trust Preferred Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in such
names as DTC shall direct. It is expected that such instructions will be based
upon directions received by DTC with respect to ownership of beneficial
interests in such Global Trust Preferred Security. In the event that Trust
Preferred Securities are issued in definitive form, such Trust Preferred
Securities will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by DTC to a nominee of DTC, by
a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to a
successor depositary or any nominee of such successor.
Payments on Global Trust Preferred Securities will be made to DTC, as the
depositary for the Global 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
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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, provided that payment of any Distribution may be made
at the option of the Administrative Trustees by check mailed to the address of
the persons entitled thereto or by wire transfer. In addition, if the Trust
Preferred Securities are issued in definitive form, the record dates for payment
of Distributions will be the 15th day of the month in which the relevant
Distribution Date occurs. For a description of the terms of DTC arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance."
Upon the issuance of one or more Global Trust Preferred Securities, and the
deposit of such Global Trust Preferred Security with or on behalf of DTC or its
nominee, DTC 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 such Global Trust Preferred Security
to the accounts of persons that have accounts with DTC ("Participants"). Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such 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
such 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 such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Trust Preferred Security.
So long as DTC or such other depositary, or its nominee, is the registered
owner of such Global Trust Preferred Security, such depositary or such nominee,
as the case may be, will be considered the sole owner or holder of the Trust
Preferred Securities represented by such Global Trust Preferred Security for all
purposes under the Trust Agreement. Except as described herein, owners of
beneficial interests 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 thereof
under the Trust Agreement.
None of the Company, the Property Trustee, any paying agent or the
securities registrar for such Trust Preferred Securities 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 such Trust Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
the Liquidation Amount or Distributions in respect of a 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 DTC or its nominee. The Company also expects 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."
Such payments will be the responsibility of such Participants. See "Book-Entry
Issuance."
Payment and Paying Agency
Payments in respect of the Trust Preferred Securities shall be made to DTC,
which shall credit the relevant accounts of Participants on the applicable
Distribution Dates, or, if any of the Trust Preferred Securities are not held by
DTC, such payments shall be made by check mailed to the address of the holder
entitled thereto as such address will appear on the register of holders of the
Trust Preferred Securities. The paying agent for the Trust Preferred Securities
will initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and the Company.
The paying agent for the Trust Preferred Securities may resign as paying agent
upon 30 days' written notice to the Administrative Trustees, the Property
Trustee and the Company. In the event that the Property Trustee no longer is the
paying agent for the Trust Preferred Securities, the Administrative Trustees
will appoint a successor (which must be a bank or trust company acceptable to
the Property Trustee and the Company) to act as paying agent.
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Registrar and Transfer Agent
The Property Trustee will act as the registrar and the transfer agent for
the Trust Preferred Securities. Registration of transfers of Trust Preferred
Securities will be effected without charge by or on behalf of Capital Trust, but
upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. Capital Trust and its registrar and
transfer agent will not be required to register or cause to be registered the
transfer of Trust Preferred Securities after such Trust Preferred Securities
have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, until the occurrence and continuance of an Event of
Default, undertakes to perform only such duties as are specifically set forth in
the Trust Agreement and, after such Event of Default, must exercise the same
degree of care and skill as a prudent Person, exercises or uses in the conduct
of its 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 Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. If no Event of Default has occurred and is continuing and the
Property Trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Trust Preferred Securities are entitled under the Trust
Agreement to vote, then the Property Trustee will take such action as is
directed by the Company and if not so directed, will take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate Capital Trust in such a way that Capital Trust will
not be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. The Company and the Administrative Trustees are
authorized, in this connection, to take any action, not inconsistent with
applicable law, the certificate of trust of Capital Trust or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes.
Holders of the Trust Preferred Securities have no preemptive or similar
rights.
The Trust Agreement and the Trust Preferred Securities will be governed by,
and construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the Trust Preferred Securities, Capital
Trust will invest the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in the Subordinated Debentures issued by
the Company. The Subordinated Debentures will be issued as unsecured debt under
the Indenture, to be dated as of September __, 1998 ("Indenture"), between the
Company and Wilmington Trust Company, as trustee (the "Debenture Trustee"). The
Indenture will be qualified as an indenture under the Trust Indenture Act. The
following summary of the material terms and provisions of the Subordinated
Debentures and the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Indenture and to the Trust
Indenture Act. Wherever particular defined terms of the Indenture are referred
to, but not defined herein, such defined terms are incorporated herein by
reference. The form of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
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General
The Subordinated Debentures will be limited in aggregate principal amount
to approximately $28 million (or approximately $32 million if the overallotment
option described under the heading "Underwriting" is exercised in full by the
Underwriters), such amount being the sum of the aggregate stated Liquidation
Amounts of the Trust Securities. The Subordinated Debentures will bear interest
at the annual rate of % of the principal amount thereof, payable quarterly
in arrears on the last calendar day of each of March, June, September and
December of each year (each, an "Interest Payment Date") beginning December 31,
1998, to the Person (as defined in the Indenture) in whose name each
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the 15th day of the month in which such Interest Payment
Date occurs. It is anticipated that, until the liquidation, if any, of Capital
Trust, the Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next succeeding
calendar year, payment of such interest will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on the date such payment was originally due and payable. Accrued interest that
is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at the rate per
annum of % thereof, compounded quarterly. 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 Interest, as
applicable.
The Subordinated Debentures will mature on September ___, 2028 (such date,
as it may be shortened or extended as hereinafter described, the "Stated
Maturity"). Such date may be shortened once at any time by the Company to any
date not earlier than September 30, 2003, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines, policies or regulations of the Federal Reserve. Such date may also
be extended once at any time at the election of the Company but in no event to a
date later than September ___, 2047, provided that at the time such election is
made and at the time of extension (i) the Company is not in bankruptcy,
otherwise insolvent or in liquidation, (ii) the Company is not in default in the
payment of any interest or principal on the Subordinated Debentures, and (ii)
Capital Trust is not in arrears on payments of Distributions on the Trust
Preferred Securities and no deferred Distributions are accumulated. In the event
that the Company elects to shorten or extend the Stated Maturity of the
Subordinated Debentures, it will give notice to the Debenture Trustee and
Capital Trust (unless Capital Trust is not the holder of the Subordinated
Debentures, in which case the Debenture Trustee will give notice to the holders
of the Subordinated Debentures), no more than 180 days and no less than 90 days
prior to the effectiveness thereof. The Company will not have the right to
redeem the Subordinated Debentures from Capital Trust until after September 30,
2003, except if a Tax Event, an Investment Company Event or a Capital Treatment
Event has occurred (in which case such redemption may be effected in whole, but
not in part).
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of the Company. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any of the Company's subsidiaries, upon any such subsidiary's liquidation or
reorganization or otherwise (and thus the ability of holders of the Subordinated
Debentures to benefit indirectly from such distribution), is subject to the
prior claim of creditors of such subsidiary, except to the extent that the
Company may itself be recognized as a creditor of such subsidiary. The
Subordinated Debentures will, therefore, be effectively subordinated to all
existing and future liabilities of the subsidiaries, and holders of Subordinated
Debentures should look only to the assets of the Company for payments on the
Subordinated Debentures. The Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Company, including Senior Debt,
Subordinated Debt and Additional Senior Obligations, whether under the Indenture
or any existing indenture or other indenture that the Company may enter into in
the future or otherwise. See "--Subordination."
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
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Option to Extend Interest Payment Period
The Company has the right under the Indenture at any time during the term
of the Subordinated Debentures, so long as no Debenture Event of Default has
occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an "Extended Interest Payment Period"). The right to
defer the payment of interest on the Subordinated Debentures is limited,
however, to a period, in each instance, not exceeding 20 consecutive quarters
and no Extended Interest Payment Period may extend beyond the Stated Maturity of
the Subordinated Debentures or end on a date other than an Interest Payment
Date. At the end of each Extended Interest Payment Period, the Company 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, and Additional Interest (if any is required)). During an Extended Interest
Payment Period, interest will continue to accrue and holders of Subordinated
Debentures (or the holders of Trust Preferred Securities if such securities are
then outstanding) will be required to accrue and recognize income for United
States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Potential Extension of Interest Payment Period and Original Issue
Discount."
During any such Extended Interest Payment Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (other than the reclassification of any class of the Company's capital
stock into another class of capital stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to the
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu or junior in interest to the Subordinated
Debentures (other than payments under the Guarantee), or (iii) redeem, purchase
or acquire less than all of the Subordinated Debentures or any of the Trust
Preferred Securities. Prior to the termination of any such Extended Interest
Payment Period, so long as no Debenture Event of Default shall have occurred and
be continuing, the Company may further defer the payment of interest; provided
that no Extended Interest Payment Period may exceed 20 consecutive quarters,
extend beyond the Stated Maturity of the Subordinated Debentures or end on a
date other than an Interest Payment Date. Upon the termination of any such
Extended Interest Payment Period and the payment of all amounts then due, the
Company may elect to begin a new Extended Interest Payment Period subject to the
above requirements. No interest will be due and payable during an Extended
Interest Payment Period, except at the end thereof. The Company has no present
intention of exercising its right to defer payments of interest on the
Subordinated Debentures. The Company must give the Property Trustee, the
Administrative Trustees and the Trustee of its selection, notice of its election
of such Extended Interest Payment Period at least two Business Days prior to the
earlier of (i) the next succeeding date on which Distributions on the Trust
Securities would have been payable except for the election to begin such
Extended Interest Payment Period, or (ii) the date Capital Trust or the Company
is required to give notice of the record date, or the date such Distributions
are payable, to Nasdaq (or other applicable self-regulatory organization) or to
holders of the Trust Preferred Securities, but in any event at least one
Business Day prior to such record date. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extended Interest Payment Period.
Additional Interest
If Capital Trust or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, the Company will pay Additional Interest on the Subordinated
Debentures such additional interest as may be required so that the net amounts
received and retained by Capital Trust after paying any such additional taxes,
duties or other governmental charges will not be less than the amounts Capital
Trust would have received had such additional taxes, duties or other
governmental charges not been imposed.
Redemption or Exchange
The Company will have the right to redeem the Subordinated Debentures prior
to maturity (i) on or after September 30, 2003, in whole at any time or in part
from time to time, or (ii) at any time in whole (but not in part), within 180
days following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event, in each case at a redemption price equal to the accrued
and unpaid interest on the Subordinated Debentures so redeemed to the date fixed
for redemption, plus 100% of the principal amount thereof. Any such redemption
prior to the Stated Maturity
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will be subject to prior approval of the Federal Reserve if then required under
applicable capital guidelines, policies or regulations of the Federal Reserve.
"Tax Event" means the receipt by Capital Trust and the Company of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Trust Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by the Company on the Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes, (ii) Capital Trust is, or will be within 90 days after the date of
such opinion of counsel, subject to United States federal income tax with
respect to income received or accrued on the Subordinated Debentures, or (iii)
Capital Trust is, or will be within 90 days after the date of such opinion of
counsel, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges. The Company or Capital Trust must
request and receive an opinion with regard to such matters within a reasonable
period of time after the Company or Capital Trust becomes aware of the possible
occurrence of any of the events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by Capital Trust and the
Company of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, Capital Trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act, which change becomes effective on or after the date of
original issuance of the Trust Preferred Securities. The Company or Capital
Trust must request and receive an opinion with regard to such matters within a
reasonable period of time after the Company or Capital Trust becomes aware of
the possible occurrence of any such event.
"Capital Treatment Event" means the receipt by Capital Trust and the
Company of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the Trust Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk of impairment of the Company's ability
to treat the Trust Preferred Securities (or any substantial portion thereof) as
Tier 1 capital (or the then equivalent thereof), for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Company. The Company or Capital Trust must request and receive an opinion
with regard to such matters within a reasonable period of time after the Company
or Capital Trust becomes aware of the possible occurrence of any such
event.
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 Subordinated Debentures to
be redeemed at its registered address. Redemption of less than all outstanding
Subordinated Debentures shall be effected pro rata, by lot or in such other
manner deemed to be fair by the Debenture Trustee. Unless the Company defaults
in payment of the redemption price for the Subordinated Debentures, on and after
the redemption date interest ceases to accrue on such Subordinated Debentures or
portions thereof called for redemption.
The Subordinated Debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described under "Description of the Trust Preferred Securities--
Liquidation Distribution Upon Termination," under certain circumstances, the
Subordinated Debentures may be distributed to the holders of the Trust Preferred
Securities in liquidation of Capital Trust after satisfaction of liabilities to
creditors of Capital Trust as provided by applicable law. Any such distribution
will be subject to receipt of prior approval by the Federal Reserve if then
required under applicable policies, guidelines or regulations of the Federal
Reserve. If the Subordinated Debentures are
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distributed to the holders of Trust Preferred Securities upon the liquidation of
Capital Trust, the Company will use its reasonable efforts to list the
Subordinated Debentures on Nasdaq or such stock exchanges, if any, on which the
Trust Preferred Securities are then listed. There can be no assurance as to the
market price of any Subordinated Debentures that may be distributed to the
holders of Trust Preferred Securities.
Restrictions on Certain Payments
If at any time (i) there has occurred a Debenture Event of Default, (ii)
the Company is in default with respect to its obligations under the Guarantee,
or (iii) the Company has given notice of its election of an Extended Interest
Payment Period as provided in the Indenture with respect to the Subordinated
Debentures and has not rescinded such notice, or such Extended Interest Payment
Period, or any extension thereof, is continuing, the Company will not (1)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock (other than the reclassification of any class of the Company's capital
stock into another class of capital stock), (2) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to the
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu or junior in interest to the Subordinated
Debentures (other than payments under the Guarantee), or (3) redeem, purchase or
acquire less than all of the Subordinated Debentures or any of the Trust
Preferred Securities.
Subordination
The Indenture provides that the Subordinated Debentures issued thereunder
are subordinated and junior in right of payment to all Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company. 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 proceedings of the Company, the
holders of Senior Debt, Subordinated Debt and Additional Senior Obligations of
the Company will first be entitled to receive payment in full of principal of
(and premium, if any) and interest, if any, on such Senior Debt, Subordinated
Debt and Additional Senior Obligations of the Company before the holders of
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt, Subordinated Debt and Additional
Senior Obligations of the Company outstanding at the time of such acceleration
will first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of the
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt, Subordinated Debt or
Additional Senior Obligations of the Company or an event of default with respect
to any Senior Debt, Subordinated Debt or Additional Senior Obligations of the
Company resulting in the acceleration of the maturity thereof, or if any
judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) and every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
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"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debentures
or to other Debt which is pari passu with, or subordinated to, the Subordinated
Debentures; provided, however, that Senior Debt will not be deemed to include
(i) any Debt of the Company which when incurred and without respect to any
election under section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (ii) any Debt of the Company to
any of its subsidiaries, (iii) any Debt to any employee of the Company, (iv) any
Debt which by its terms is subordinated to trade accounts payable or accrued
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such Debt by the holders of the Subordinated
Debentures as a result of the subordination provisions of the Indenture would be
greater than they otherwise would have been as a result of any obligation of
such holders to pay amounts over to the obligees on such trade accounts payable
or accrued liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject, and (v) Debt which
constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to be
junior and subordinate to other Debt of the Company (other than the Subordinated
Debentures); provided, however, that Subordinated Debt will not be deemed to
include (i) any Debt of the Company which when incurred and without respect to
any election under section 1111(b) of the United States Bankruptcy Code of 1978,
as amended, was without recourse to the Company, (ii) any Debt of the Company to
any of its subsidiaries, (iii) any Debt to any employee of the Company, (iv) any
Debt which by its terms is subordinated to trade accounts payable or accrued
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such Debt by the holders of the Subordinated
Debentures as a result of the subordination provisions of the Indenture would be
greater than they otherwise would have been as a result of any obligation of
such holders to pay amounts over to the obligees on such trade accounts payable
or accrued liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject, (v) Debt which
constitutes Senior Debt and (vi) any Debt of the Company under debt securities
(and guarantees in respect of these debt securities) initially issued to any
trust, or a trustee of a trust, partnership or other entity affiliated with the
Company that is, directly or indirectly, a financing vehicle of the Company in
connection with the issuance by that entity of preferred securities or other
securities which are intended to qualify for Tier 1 capital treatment.
"Additional Senior Obligations" means, with respect to the Company, all
indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for Claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations do not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Subordinated Debentures or to rank pari passu in right of payment
with the Subordinated Debentures. "Claim," as used herein, has the meaning
assigned thereto in Section 101(4) of the United States Bankruptcy Code of 1978,
as amended.
The Indenture places no limitation on the amount of additional Senior Debt,
Subordinated Debt or Additional Senior Obligations that may be incurred by the
Company. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt, Subordinated Debt and Additional Senior Obligations.
At June 30, 1998, the Company had consolidated Senior Debt, Subordinated Debt
and Additional Obligations of approximately $26.6 million. Because the Company
is a holding company, the Subordinated Debentures are effectively subordinated
to all existing and future liabilities of the Company's subsidiaries, including
obligations to depositors of the Banks.
Payment and Paying Agents
Payment of principal of and any interest on the Subordinated Debentures
will be made at the office of the Debenture Trustee in New York, New York,
except that, at the option of the Company, payment of any interest may be made
(i) by check mailed to the address of the Person entitled thereto as such
address appears in the register of holders of the Subordinated Debentures, or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified
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in the register of holders of the Subordinated Debentures, provided that proper
transfer instructions have been received by the regular record date. Payment of
any interest on Subordinated Debentures will be made to the Person in whose name
such Subordinated Debenture is registered at the close of business on the
regular record date for such interest, except in the case of defaulted interest.
The Company may at any time designate additional paying agents for the
Subordinated Debentures or rescind the designation of any paying agent for the
Subordinated Debentures; however, the Company will at all times be required to
maintain a paying agent in New York, New York, and each place of payment for the
Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Subordinated Debentures, or then held by the Company in trust, for the payment
of the principal of or interest on the Subordinated Debentures and remaining
unclaimed for two years after such principal or interest has become due and
payable will be repaid to the Company on May 31 of each year or (if then held in
trust by the Company) will be discharged from such trust and the holder of such
Subordinated Debenture will thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
Registrar and Transfer Agent
The Debenture Trustee will act as the registrar and the transfer agent for
the Subordinated Debentures. Subordinated Debentures may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the registrar. The Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts; provided that the Company maintains a transfer agent in New
York, New York. The Company may at any time designate additional transfer agents
with respect to the Subordinated Debentures. In the event of any redemption,
neither the Company nor the Debenture Trustee will be required to (i) issue,
register the transfer of or exchange Subordinated Debentures during a period
beginning at the opening of business 15 days before the day of selection for
redemption of 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 Subordinated Debentures so selected for redemption, except, in the
case of any Subordinated Debentures being redeemed in part, any portion thereof
not to be redeemed.
Modification of Indenture
The Company and the Debenture Trustee may, from time to time without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act or for any
other purpose that does not materially adversely affect the rights of the
holders of the Subordinated Debentures. The Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Subordinated Debentures, to modify the Indenture; provided, that no such
modification may, without the consent of the holder of each outstanding
Subordinated Debenture affected by such proposed modification, (i) extend the
fixed maturity of the Subordinated Debentures, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
or (ii) reduce the percentage of principal amount of Subordinated Debentures,
the holders of which are required to consent to any such modification of the
Indenture; provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that requires the consent of the
holders of the Subordinated Debentures, and no termination of the Indenture may
occur, and no waiver of any Debenture Event of Default 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.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated
Debentures, when due (subject to the deferral of any due date in the case
of an Extended Interest Payment Period); or
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(ii) failure to pay any principal on the Subordinated Debentures when
due whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company or dissolution of Capital Trust.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee, or the holders of not less than 25% in aggregate outstanding
principal amount of the Subordinated Debentures, may declare the principal due
and payable immediately upon a Debenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of the Subordinated
Debentures may annul such declaration and waive the default if the default
(other than the non-payment of the principal of the 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 Subordinated Debentures fail to annul such declaration
and waive such default, the holders of at least 25% in aggregate Liquidation
Amount of the Trust Preferred Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures, and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
Enforcement of Certain Rights by Holders of the Trust Preferred Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest on or
principal of the Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Trust Preferred Securities may
institute a Direct Action. In connection with such Direct Action, the Company
will have a right of set-off under the Indenture to the extent of any payment
made by the Company to such holder of Trust Preferred Securities with respect to
such Direct Action. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Trust Preferred Securities. If the right to bring a
Direct Action is removed, Capital Trust may become subject to the reporting
obligations under the Exchange Act.
The holders of the Trust Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there has been an
Event of Default under the Trust Agreement. See "Description of the Trust
Preferred Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Company may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, and no Person may consolidate with or merge into the Company or sell,
convey, transfer or otherwise dispose of its properties and assets substantially
as an entirety to the Company, unless (i) in the event the Company consolidates
with or merges into another Person or conveys or transfers its properties and
assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any State or the District of
Columbia, and such successor Person expressly assumes by supplemental indenture
the Company's obligations on the Subordinated Debentures issued under the
Indenture (or substitutes substantially similar securities therefor), and (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which,
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after notice or lapse of time, or both, would become a Debenture Event of
Default, has occurred and is continuing, and (iii) certain other conditions as
prescribed in the Indenture are met.
Satisfaction and Discharge
The Indenture will cease to be of further effect (except as to the
Company's obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and the Company will be deemed to have satisfied and discharged the
Indenture when, among other things, all Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation (i) have become due and
payable, or (ii) will become due and payable at their Stated Maturity within one
year or are to be called for redemption within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation, for the principal and interest to the date
of the deposit or to the Stated Maturity or redemption date, as the case may be.
Governing Law
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of Illinois.
Information Concerning the Debenture Trustee
The Debenture Trustee has and is 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 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.
Miscellaneous
The Company has agreed, pursuant to the Indenture, for so long as Trust
Preferred Securities remain outstanding, (i) to maintain directly or indirectly
100% ownership of the Common Securities of Capital Trust (provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Company's ownership of the Common Securities), (ii) not to voluntarily
terminate, wind up or liquidate Capital Trust, except upon prior approval of the
Federal Reserve if then so required under applicable capital guidelines,
policies or regulations of the Federal Reserve, and use its reasonable efforts
to cause Capital Trust (a) to remain a business trust (and to avoid involuntary
termination, winding up or liquidation), except in connection with a
distribution of Subordinated Debentures, the redemption of all of the Trust
Securities of Capital Trust or certain mergers, consolidations or amalgamations,
each as permitted by the Trust Agreement; and (b) to otherwise continue not to
be treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; and (iii) to use its reasonable efforts to
cause each holder of Trust Securities to be treated as owning an individual
beneficial interest in the Subordinated Debentures.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Trust Preferred
Securities and, in the event of the distribution of the Subordinated Debentures
to holders of Trust Preferred Securities, may act as securities depositary for
all of the Subordinated Debentures. Except as described herein, the Trust
Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more Global Trust
Preferred Securities will be issued for the Trust Preferred Securities and will
be deposited with DTC.
DTC is a limited purpose trust company organized under New York banking
law, a "banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation"
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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. DTC holds securities that its Participants deposit with DTC. DTC 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. DTC 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 DTC 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 DTC and its Participants are on file
with the Commission.
Purchases of Trust Preferred Securities within the DTC system must be made
by or through Direct Participants, which will receive a credit for the Trust
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each Trust Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participant's records. Beneficial Owners
will not receive written confirmation from the depositary of their purchases,
but Beneficial Owners are expected to 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. Transfers of ownership interests in the
Trust Preferred Securities 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 interest in Trust
Preferred Securities, except in the event that use of the book-entry system for
the Trust Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Trust Preferred Securities 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 DTC 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. If less than all of the Trust Preferred
Securities are being redeemed, the amount to be redeemed will be determined in
accordance with the Trust Agreement.
Although voting with respect to the Trust Preferred Securities is limited
to the holders of record of the Trust Preferred Securities, in those instances
in which a vote is required, neither DTC nor Cede & Co. will itself consent or
vote with respect to Trust Preferred Securities. Under its usual procedures, DTC
would mail an omnibus proxy (the "Omnibus Proxy") to the Property 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 are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities will be made by the
Property Trustee to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC 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 DTC, the
Property Trustee, Capital Trust or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of the Property Trustee, disbursement
of such payments to Direct Participants is the responsibility of DTC, and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Trust Preferred Securities at any time by giving
reasonable notice to the Property Trustee and the Company. In the event that a
successor
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securities depositary is not obtained, definitive Trust Preferred Securities
representing such Trust Preferred Securities are required to be printed and
delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary). After a
Debenture Event of Default, the holders of a majority in Liquidation Amount of
Trust Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for such Trust
Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Capital Trust and the Company believe to be
accurate, but Capital Trust and the Company assume no responsibility for the
accuracy thereof. Neither Capital Trust nor the Company has any responsibility
for the performance by DTC or its Participants of their respective obligations
as described herein or under the rules and procedures governing their respective
operations.
DESCRIPTION OF THE GUARANTEE
The Trust Preferred Securities Guarantee Agreement (the "Guarantee") will
be executed and delivered by the Company concurrently with the issuance of the
Trust Preferred Securities for the benefit of the holders of the Trust Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Guarantee Trustee will act as indenture trustee under the
Guarantee for purposes of complying with the provisions of the Trust Indenture
Act. The Guarantee Trustee, Wilmington Trust Company, will hold the Guarantee
for the benefit of the holders of the Trust Preferred Securities. The following
summary of the material terms and 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. Wherever
particular defined terms of the Guarantee are referred to, but not defined
herein, such defined terms are incorporated herein by reference. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
General
The Company will, pursuant to the Guarantee, irrevocably agree to pay in
full on a subordinated basis, to the extent set forth therein, 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
Capital 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 Capital 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 Capital Trust has
funds available therefor at such time, (ii) the Redemption Price with respect to
any Trust Preferred Securities called for redemption to the extent that Capital
Trust has funds available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of Capital Trust (other than
in connection with the distribution of Subordinated Debentures to the holders of
Trust Preferred Securities or a redemption of all of the Trust Preferred
Securities), the lesser of (a) the amount of the Liquidation Distribution, to
the extent Capital Trust has funds available therefor at such time, and (b) the
amount of assets of Capital Trust remaining available for distribution to
holders of Trust Preferred Securities in liquidation of Capital Trust. The
obligation of the Company to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the Trust
Preferred Securities or by causing Capital Trust to pay such amounts to such
holders.
The Guarantee will not apply to any payment of Distributions except to the
extent Capital Trust has funds available therefor. If the Company does not make
interest payments on the Subordinated Debentures held by Capital Trust, Capital
Trust will not pay Distributions on the Trust Preferred Securities and will not
have funds available therefor.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company in the same
manner as the Subordinated Debentures. The Guarantee does not place a limitation
on the amount of additional Senior
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Debt, Subordinated Debt or Additional Senior Obligations that may be incurred by
the Company. The Company expects from time to time to incur additional
indebtedness constituting Senior Debt, Subordinated Debt and Additional Senior
Obligations.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first instituting
a legal proceeding against any other Person or entity). The Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by Capital Trust or upon distribution of the Subordinated Debentures to
the holders of the Trust Preferred Securities. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent the Company may itself be recognized as a creditor of that
subsidiary. The Company's obligations under the Guarantee, therefore, will be
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, and claimants should look only to the assets of the Company for
payments thereunder.
Amendments and Assignment
Except with respect to any changes which do not materially 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 not less than a majority of the aggregate Liquidation Amount
of the outstanding Trust Preferred Securities. See "Description of the Trust
Preferred Securities--Voting Rights; Amendment of Trust Agreement."
Events of Default; Remedies
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation 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 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 Trust Preferred Securities may institute and prosecute a
legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against Capital Trust,
the Guarantee Trustee or any other Person.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Trust Preferred Securities, (b) full
payment of the amounts payable upon liquidation of Capital Trust, or (c)
distribution of the 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 at any time any holder of the Trust Preferred
Securities must restore payment of any sums paid under such Trust Preferred
Securities or the Guarantee.
Governing Law
The Guarantee will be governed by and construed in accordance with the laws
of the State of Illinois.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would
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exercise or use in the conduct of his or her own affairs. Subject to such
provisions, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Guarantee at the request of any holder of any Trust
Preferred Securities, unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
Expense Agreement
The Company will, pursuant to the Agreement as to Expenses and Liabilities
entered into by it under the Trust Agreement (the "Expense Agreement"),
irrevocably and unconditionally guarantee to each person or entity to whom
Capital Trust becomes indebted or liable, the full payment of any costs,
expenses or liabilities of Capital Trust, other than obligations of Capital
Trust to pay to the holders of the Trust Preferred Securities or other similar
interests in Capital Trust of the amounts due such holders pursuant to the terms
of the Trust Preferred Securities or such other similar interests, as the case
may be. Third party creditors of Capital Trust may proceed directly against the
Company under the Expense Agreement, regardless of whether such creditors had
notice of the Expense Agreement.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE SUBORDINATED
DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent Capital Trust has funds available for the payment of
such Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of the Guarantee." The Company and Capital
Trust believe that, taken together, the obligations of the Company under the
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment 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 obligations of Capital Trust under the Trust Preferred
Securities. If and to the extent that the Company does not make payments on the
Subordinated Debentures, Capital Trust will not pay Distributions or other
amounts due on the Trust Preferred Securities. The Guarantee does not cover
payment of Distributions when Capital Trust does not have sufficient funds to
pay such Distributions. In such event, the remedy of a holder of Trust Preferred
Securities is to institute a legal proceeding directly against the Company for
enforcement of payment of such Distributions to such holder. The obligations of
the Company under the Guarantee are subordinate and junior in right of payment
to all Senior Debt, Subordinated Debt and Additional Senior Obligations of the
Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover Distributions
and other payments due on the Trust Preferred Securities, primarily because (i)
the aggregate principal amount of the Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Trust Securities, (ii)
the interest rate and interest and other payment dates on the Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Trust Preferred Securities, (iii) the Company will pay for all and
any costs, expenses and liabilities of Capital Trust (except the obligations of
Capital Trust to pay to holders of the Trust Preferred Securities the amounts
due such holders pursuant to the terms of the Trust Preferred Securities), and
(iv) the Trust Agreement further provides that Capital Trust will not engage in
any activity that is not consistent with the limited purposes of Capital Trust.
Enforcement Rights of Holders of Trust Preferred Securities
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, Capital
Trust or any other Person. A default or event of default under any Senior Debt,
Subordinated Debt or Additional Senior Obligations of the Company would not
constitute a default or Event of Default under the Trust Agreement. In the
event,
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however, of payment defaults under, or acceleration of, Senior Debt,
Subordinated Debt or Additional Senior Obligations of the Company, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Subordinated Debentures until such Senior Debt, Subordinated
Debt or Additional Senior Obligations has been paid in full or any payment
default thereunder has been cured or waived. Failure to make required payments
on the Subordinated Debentures would constitute an Event of Default under the
Trust Agreement.
Limited Purpose of Capital Trust
The Trust Preferred Securities evidence preferred undivided beneficial
interests in the assets of Capital Trust. Capital Trust exists for the exclusive
purposes of issuing the Trust Securities, investing the proceeds thereof in
Subordinated Debentures and engaging in only those other activities necessary,
advisable or incidental thereto. A principal difference between the rights of a
holder of a Trust Preferred Security and the rights of a holder of a
Subordinated Debenture is that a holder of a Subordinated Debenture is entitled
to receive from the Company the principal amount of and interest accrued on
Subordinated Debentures held, while a holder of Trust Preferred Securities is
entitled to receive Distributions from Capital Trust (or from the Company under
the Guarantee) if and to the extent Capital Trust has funds available for the
payment of such Distributions.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or liquidation of
Capital Trust involving the liquidation of the Subordinated Debentures, the
holders of the Trust Preferred Securities will be entitled to receive, out of
assets held by Capital Trust, the Liquidation Distribution in cash. See
"Description of the Trust Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Subordinated Debentures, would
be a subordinated creditor of the Company, subordinated in right of payment to
all Senior Debt, Subordinated Debt and Additional Senior Obligations of the
Company (as set forth in the Indenture), but entitled to receive payment in full
of principal and interest before any shareholders of the Company receive
payments or distributions. Since the Company is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of
Capital Trust (other than the obligations of Capital Trust to pay to holders of
the Trust Preferred Securities the amounts due such holders pursuant to the
terms of the Trust Preferred Securities), the positions of a holder of the Trust
Preferred Securities and a holder of the Subordinated Debentures relative to
other creditors and to shareholders of the Company in the event of liquidation
or bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Trust Preferred
Securities represents the opinion of Vedder, Price, Kaufman & Kammholz, counsel
to the Company and Capital Trust insofar as it relates to matters of law and
legal conclusions. The conclusions expressed herein are based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change at any time, with possible retroactive
effect. Subsequent changes may cause tax consequences to vary substantially from
the consequences described below. Furthermore, the authorities on which the
following summary is based are subject to various interpretations, and it is
therefore possible that the United States federal income tax treatment of the
purchase, ownership, and disposition of Trust Preferred Securities may differ
from the treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Trust Preferred
Securities. Moreover, the discussion generally focuses on holders of Trust
Preferred Securities who are individual citizens or residents of the United
States and who acquire Trust Preferred Securities on their original issue at
their offering price and hold Trust Preferred Securities as capital assets. The
discussion has only limited application to dealers in securities, corporations,
estates, trusts or nonresident aliens and does not address all the tax
consequences that may be relevant to holders who may be subject to special tax
treatment, such as, for example, banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies,
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dealers in securities or currencies, tax-exempt investors, 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. The following 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. Accordingly, each
prospective investor should consult, and should rely exclusively on, such
investor's own tax advisors in analyzing the federal, state, local and foreign
tax consequences of the purchase, ownership or disposition of Trust Preferred
Securities.
Classification of the Subordinated Debentures
The Company intends to take the position that the Subordinated Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company under current law, and, by acceptance of a Trust Preferred
Security, each holder covenants to treat the Subordinated Debentures as
indebtedness and the Trust Preferred Securities as evidence of an indirect
beneficial ownership interest in the Subordinated Debentures. No assurance can
be given, however, that such position of the Company will not be challenged by
the Internal Revenue Service or, if challenged, that such a challenge will not
be successful. The remainder of this discussion assumes that the Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company.
Classification of Capital Trust
With respect to the Trust Preferred Securities, Vedder, Price, Kaufman &
Kammholz, counsel to the Company and Capital Trust, 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 Indenture, Capital 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 treated as owning an undivided beneficial interest
in the Subordinated Debentures, and each holder will be required to include in
its gross income any original issue discount ("OID") accrued with respect to its
allocable share of the Subordinated Debentures whether or not cash is actually
distributed to such holder.
Potential Extension of Interest Payment Period and Original Issue Discount
The Company has the option, under the terms of the Subordinated Debentures,
to defer payments (so long as no Debenture Event of Default has occurred and is
continuing) of interest by extending interest payment periods for up to 20
consecutive quarters. Under federal income tax regulation, all of the stated
interest payments on the Subordinated Debentures will be treated as OID unless
the Indenture or the Subordinated Debentures contain terms or conditions that
make the exercise of the deferral remote. Because the Company does not have a
policy of paying dividends on its common stock and instead reinvests its
earnings in its business, the covenant in the Indenture prohibiting the Company
from paying dividends during an Extended Interest Payment Period does not
provide an effective deterrent to the Company's exercise of the deferral option.
As a result, tax counsel to the Company is unable to conclude that the Indenture
or the Subordinated Debentures contain terms or conditions that make the
exercise of the deferral option remote. Accordingly, all of a holder's taxable
interest income with respect to the Subordinated Debentures will be accounted
for as OID. Holders of debt instruments issued with OID must include that
discount in income on an economic accrual basis before the receipt of cash
attributable to the interest, regardless of their method of tax accounting.
Actual payments and distributions of stated interest will not, however, be
separately reported as taxable income. The amount of OID that accrues in any
quarter will approximately equal the amount of the interest that accrues on the
Subordinated Debentures in that quarter at the stated interest rate. In the
event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at the
end of the extended interest payment period on an economic accrual basis over
the length of the extended interest payment period.
Because income on the Trust Preferred Securities will constitute interest,
corporate holders of 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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Market Discount and Acquisition Premium
Holders of Trust Preferred Securities other than a holder who purchased the
Trust Preferred Securities upon original issuance may be considered to have
acquired their undivided interests in the Subordinated Debentures with "market
discount" or "acquisition premium" as such phrases are defined for United States
federal income tax purposes. Such holders are advised to consult their tax
advisors as to the income tax consequences of the acquisition, ownership and
disposition of the Trust Preferred Securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of Capital Trust
Under certain circumstances, as described under "Description of the Trust
Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution
Upon Termination," the Subordinated Debentures may be distributed to holders of
Trust Preferred Securities upon a liquidation of Capital Trust. Under current
United States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder and would result in such holder having an
aggregate tax basis in the Subordinated Debentures received in the liquidation
equal to such holder's aggregate tax basis in the Trust Preferred Securities
immediately before the distribution. A holder's holding period in the
Subordinated Debentures so received in liquidation of Capital Trust would
include the period for which such holder held the Trust Preferred Securities.
If, however, a Tax Event occurs which results in Capital Trust being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Trust Preferred Securities.
Under certain circumstances described herein, the Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Trust Preferred Securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Trust Preferred Securities, and a holder
would recognize gain or loss as if the holder sold such Trust Preferred
Securities for cash. See "Description of the Trust Preferred Securities--
Redemption or Exchange" and "--Liquidation Upon Termination."
Disposition of Trust Preferred Securities
A holder that sells Trust Preferred Securities will recognize gain or loss
equal to the difference between the amount realized on the sale of the Trust
Preferred Securities and the holder's adjusted tax basis in such Trust Preferred
Securities. A holder's adjusted tax basis in the Trust Preferred Securities
generally will be its initial purchase price increased by OID previously
includible in such holder's gross income to the date of disposition and
decreased by payments received on the Trust Preferred Securities to the date of
disposition. Such gain or loss will generally be a capital gain or loss and
will be a long-term capital gain or loss if the Trust Preferred Securities have
been held for more than 12 months at the time of sale.
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 Subordinated Debentures. A holder that disposes of its Trust
Preferred Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Subordinated
Debentures through the date of disposition in income as ordinary income, and to
add such amount to its adjusted tax basis in its pro rata share of the
underlying Subordinated Debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which basis will include, in
the form of OID, 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.
Effect of Possible Changes in Tax Laws
Congress and the Clinton Administration have considered certain proposed
tax law changes in the past that would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations if such debt obligation have a maximum term in excess of 20 years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. Although such proposed tax law changes have not been enacted
into law, there can be no assurance that such tax law changes will not be
reintroduced into future legislation which, if enacted after the date hereof,
may adversely affect the federal income tax deductibility of interest payable on
the Subordinated Debentures. Accordingly, there can be no assurance that a Tax
Event will not occur. A Tax Event would permit the
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Company, upon approval of the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve, to cause a redemption of
the Preferred Securities before, as well as after, September 30, 2003. See
"Description of the Subordinated Debentures--Redemption or Exchange" and
"Description of the Trust Preferred Securities--Redemption or Exchange--Tax
Event Redemption or Investment Company Event Redemptions."
Backup Withholding and Information Reporting
The amount of OID accrued on the Trust Preferred Securities held of record
by individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Trust Preferred
Securities by January 31 following each calendar year. Payments made on, and
proceeds from the sale of, the Trust Preferred Securities may be subject to a
"backup" withholding tax (currently at 31%) unless the holder complies with
certain identification and other requirements. Any amounts withheld under the
backup withholding rules will be allowed as a credit against the holder's United
States federal income tax liability, provided the required information is
provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF TRUST PREFERRED SECURITIES. HOLDERS OF
TRUST PREFERRED SECURITIES 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.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Trust Preferred Securities, subject to the
investing fiduciary's determination that the investment in Trust Preferred
Securities satisfies ERISA's fiduciary standards and other requirements
applicable to investments by the Plan.
In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain plans
(generally, Plans maintained or sponsored by, or contributed to by, any such
persons with respect to which the Company or an affiliate is a fiduciary or
Plans for which the Company or an affiliate provides services). The acquisition
and ownership of Trust Preferred Securities by a Plan (or by an individual
retirement arrangement or other Plans described in Section 4975(e)(1) of the
Code) with respect to which the Company or any of its affiliates is considered 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.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Trust Preferred Securities unless such Trust Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any other Plans or
other entities whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire Trust Preferred Securities should consult with
their own counsel.
48
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement"), dated __________, 1998, between the Company, Capital
Trust, EVEREN Securities, Inc., ABN AMRO Incorporated and Piper Jaffray Inc.
(the "Underwriters"), Capital Trust has agreed to sell to the Underwriters, and
the Underwriters have agreed to purchase from Capital Trust, the number of Trust
Preferred Securities set forth opposite their respective names below at the
public offering price subject to the underwriting commissions set forth on the
cover page of this Prospectus.
<TABLE>
<CAPTION>
Number of Trust
Underwriter Preferred Securities
----------- --------------------
<S> <C>
EVEREN Securities, Inc.......................
ABN AMRO Incorporated........................
Piper Jaffray 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 of the Trust Preferred Securities offered hereby
if any of such Trust Preferred Securities are purchased.
The Underwriters have advised the Company and Capital Trust that they
propose to offer the Trust Preferred Securities directly to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $0.50 per Trust
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.25 per Trust Preferred Security to certain other
dealers. After the public offering, the public offering price, concession and
reallowance and other selling terms may be changed by the Underwriters. Because
the National Association of Securities Dealers, Inc. ("NASD") may view the Trust
Preferred Securities as interests in a direct participation program, the
offering of the Trust Preferred Securities is being made in compliance with the
applicable provisions of Rule 2810 of the NASD's Conduct Rules.
The Company and Capital Trust have granted the Underwriters an option,
exercisable within 30 days of the date of this Prospectus, to purchase up to an
additional 142,000 Trust Preferred Securities to cover over-allotments, if any,
at the public offering price plus accrued Distributions. The Underwriters may
exercise such option only for the purpose of covering over-allotments, if any,
made in connection with the distribution of the Trust Preferred Securities
offered hereby.
In view of the fact that the proceeds from the sale of the Trust Preferred
Securities will be used to purchase the Subordinated Debentures issued by the
Company, the Company has agreed to pay as compensation for the Underwriters'
arranging the investment therein of such proceeds an amount equal to $ per
Trust Preferred Security (or $ ($ if the over-allotment option is
exercised in full) in the aggregate). The Company has also agreed to reimburse
the Underwriters for out-of-pocket expenses relating to the offering of the
Trust Preferred Securities, provided that such reimbursement may not exceed
$5,000 without the Company's prior consent.
Each of the Company and Capital Trust has agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act or to contribute to payments the
Underwriters may be required to make in respect thereof.
In connection with the offering of Trust Preferred Securities, the
Underwriters may engage in transactions that are intended to stabilize, maintain
or otherwise affect the market price of the Trust Preferred Securities. Such
transactions may include an overallotment, creating a syndicate short position.
The Underwriters may also bid for and purchase Trust Preferred Securities.
These activities stabilize or maintain the market price of the Trust Preferred
Securities above independent market levels. The Underwriters are not required
to engage in these activities and may end these activities at any time.
EVEREN Securities, Inc. served as the underwriter in the initial public
offering of the Company's common stock completed in March 1997, and EVEREN
Securities, Inc. and ABN AMRO Incorporated have acted as market
49
<PAGE>
makers in the common stock since such time. In addition, the Underwriters may
provide in the future investment banking services to the Company and its
affiliates for which such Underwriters or their affiliates would expect to
receive customary fees and commissions.
LaSalle National Bank, an affiliate of ABN AMRO Incorporated, will receive
more than 10% of the net proceeds of the offering in repayment of amounts
outstanding under the Company's $40 million revolving line of credit, although
after such repayment the facility will remain available for future borrowings by
the Company from time to time. See "Use of Proceeds." Accordingly, the offering
is being made in conformity with Rule 2720 of the NASD's Conduct Rules. In
accordance with such rule, EVEREN Securities, Inc. has agreed to act as a
qualified independent underwriter pursuant to the requirements of 2720(c)(3) of
the NASD. In connection with Rule 2720(c)(3), the public offering price of the
Trust Preferred Securities will be set at a price which is no higher than that
recommended by EVEREN Securities, Inc., as a qualified independent underwriter.
Moreover, EVEREN Securities, Inc., as a qualified independent underwriter in
connection with the offering, has performed due diligence investigations and has
reviewed and participated in the preparation of this Prospectus.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the
formation of Capital Trust will be passed upon by Richards, Layton & Finger,
special Delaware counsel to the Company and Capital Trust. Certain legal
matters for the Company and Capital Trust, including the validity of the
Guarantee and the Subordinated Debentures, will be passed upon for the Company
and Capital Trust by Vedder, Price, Kaufman & Kammholz, Chicago, Illinois,
counsel to the Company and Capital Trust. Certain legal matters will be passed
upon for the Underwriters by Barack Ferrazzano Kirschbaum Perlman & Nagelberg.
Vedder, Price, Kaufman & Kammholz, and Barack Ferrazzano Kirschbaum Perlman &
Nagelberg, will rely on the opinion of Richards, Layton & Finger as to matters
of Delaware law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Vedder, Price, Kaufman &
Kammholz.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as stated in their report, which
report is incorporated herein by reference, and has been so incorporated in
reliance upon the authority of said firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
Securities and Exchange Commission pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998; and
(iii) the Company's Current Report on Form 8-K dated July 28, 1998.
All reports and any definitive proxy or information statements filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Trust Preferred Securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently
50
<PAGE>
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to David
A. Dykstra, Executive Vice President, Wintrust Financial Corporation, 727 North
Bank Lane, Lake Forest, Illinois 60045. Telephone requests may be directed to
(847) 615-4096.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and Capital Trust with the Commission under the
Securities Act, with respect to the Trust Preferred Securities and the
Subordinated Debentures. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, although
it does include a summary of the material terms of the Indenture, the Guarantee
and the Trust Agreement. Reference is made to such Registration Statement and
to the exhibits relating thereto for further information with respect to the
Company, Capital Trust, the Trust Preferred Securities and the Subordinated
Debentures. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission or incorporated by reference herein are not necessarily
complete, and, in each instance, reference is made to the copy of such document
so filed for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, and in accordance therewith, files reports, proxy statements and other
information with the Commission. Capital Trust is not currently subject to the
information reporting requirements of the Exchange Act and although Capital
Trust will become subject to such requirements upon the effectiveness of the
Registration Statement, it is not expected that Capital Trust will be filing
separate reports under the Exchange Act. The Company's reports, proxy
statements and other information can be inspected and copied at the following
public reference facilities maintained by the Commission: 450 Fifth Street,
N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300, New York, New
York 10048; and the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may also be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, upon payment of prescribed rates. The
Commission maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, reports, proxy statements and other
information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
No separate financial statements of Capital Trust have been included
herein. The Company does not consider that such financial statements would be
material to holders of Trust Preferred Securities because (i) all of the voting
securities of Capital Trust will be owned by the Company, a reporting company
under the Exchange Act, (ii) Capital Trust has no independent operations but
exists for the exclusive purposes of issuing securities representing undivided
beneficial interests in the assets of Capital Trust, investing the proceeds
thereof in Subordinated Debentures issued by the Company and engaging in only
those other activities necessary, advisable or incident thereto, and (iii) the
obligations of the Company described herein to provide certain indemnities in
respect of and be responsible for certain costs, expenses, debts and liabilities
of Capital Trust under the Indenture and pursuant to the Trust Agreement,
Guarantee, the Subordinated Debentures purchased by Capital Trust and the
related Indenture, taken together, constitute, in the belief of the Company and
Capital Trust, a full, irrevocable and unconditional guarantee of payments due
on the Trust Preferred Securities. See "Prospectus Summary -- Capital Trust,"
"Description of the Trust Preferred Securities," "Description of the
Subordinated Debentures" and "Description of the Guarantee."
51
<PAGE>
- ----------------------------------------------------
No dealer, salesperson or other person has been
authorized to give any information or to make any
representation other than those contained in this
Prospectus and, if given or made, such information or
representation must not be relied upon as having been
authorized by the Company, Capital Trust or any of the
Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy,
to any person in any jurisdiction in which such offer
or solicitation is not authorized, or in which the
person making the offer or solicitation is not
qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made
hereunder shall create any implication that the
information contained herein is correct as of any date
subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.............................. 1
Summary Consolidated Financial Data............. 9
Risk Factors.................................... 11
Use of Proceeds................................. 20
Accounting Treatment............................ 20
Capitalization.................................. 21
Description of the Trust Preferred Securities... 22
Description of the Subordinated Debentures...... 32
Book-Entry Issuance............................. 40
Description of the Guarantee.................... 42
Relationship among the Trust Preferred
Securities, the Subordinated
Debentures and the Guarantee.................. 44
Certain Federal Income Tax Consequences......... 45
ERISA Considerations............................ 48
Underwriting.................................... 49
Validity of Securities.......................... 50
Experts......................................... 50
Incorporation of Certain Documents by
Reference..................................... 50
Available Information........................... 51
</TABLE>
- ----------------------------------------------------
PROSPECTUS , 1998
- ----------------------------------------------------
1,100,000 Trust Preferred Securities
WINTRUST CAPITAL TRUST I
___% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred
Security)
Fully and Unconditionally
Guaranteed, as Described Herein, by
WINTRUST FINANCIAL
CORPORATION
-----------------
EVEREN Securities, Inc.
ABN AMRO Incorporated
Piper Jaffray Inc.
- ----------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering are as set forth in
the following table.
<TABLE>
<S> <C>
SEC registration fee.................... $ 9,159.00
NASD filing fee......................... 3,605.00
Nasdaq listing fee...................... 37,404.00
Reimbursable Underwriter expenses....... 5,000.00
Printing expenses....................... 30,000.00
Accounting fees and expenses............ 35,000.00
Legal fees and expenses................. 120,000.00
Trustee's fees.......................... 15,000.00
Postage and other miscellaneous costs... 19,822.00
-----------
$275,000.00
===========
</TABLE>
Item 15. Indemnification of Directors and Officers.
In accordance with the Illinois Business Corporation Act (being Chapter
805, Act 5 of the Illinois Compiled Statutes), Articles Eight and Nine of the
Registrant's Certificate of Incorporation provide as follows:
ARTICLE EIGHT: No director of the corporation shall be liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability (a) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (b) for acts or
omissions not in good faith or that involve intentional misconduct of a knowing
violation of law, (c) under Section 8.65 of the BCA, as the same exists or
hereafter may be amended, or (d) for any transaction from which the director
derived an improper personal benefit.
ARTICLE NINE, Paragraph 1: The corporation shall indemnify, to the full
extent that it shall have power under applicable law to do so and in a manner
permitted by such law, any person made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation, or who is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against liabilities and expenses reasonably incurred or paid by
such person in connection with such action, suit or proceeding. The corporation
may indemnify, to the full extent that it shall have power under applicable law
to do so and in a manner permitted by such law, any person made or threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against liabilities and expenses reasonably
incurred or paid by such person in connection with such action, suit or
proceeding. The words "liabilities" and "expenses" shall include, without
limitation: liabilities, losses, damages, judgments, fines, penalties, amounts
paid in settlement, expenses, attorneys' fees and costs. Expenses incurred in
defending a civil, criminal, administrative, investigative or other action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding in accordance with the provisions of Section
8.75 of the BCA.
The indemnification and advancement of expenses provided by this Article
shall not be deemed exclusive of any other rights to which any person
indemnified may be entitled under any statute, by-law, agreement, vote of
shareholders, or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding such
office, and shall continue as to a person who has ceased to be such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Paragraph 2: The corporation may purchase and maintain insurance on behalf
of any person referred to in the preceding paragraph against any liability
asserted against him or her and incurred by him or her in any such capacity,
II-1
<PAGE>
or arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under the
provisions of this Article or otherwise.
Paragraph 3: For purposes of this Article, 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, 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, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
Paragraph 4: The provisions of this Article shall be deemed to be a
contract between the corporation and each director or officer who serves in any
such capacity at any time while this Article and the relevant provisions of the
BCA, or other applicable law, if any, are in effect, and any repeal or
modification of any such law or of this Article 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 or
threatened based in whole or in part upon any such state of facts.
Paragraph 5: For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the corporation.
The Illinois Business Corporation Act provides for indemnification of
officers, directors, employees and agents as follows:
5/8.75 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. (a) A corporation may 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, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding, if
such person acted in good faith and in a manner he or she 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 or her conduct was unlawful. The termination of any action, suit or
proceeding 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 or she reasonably
believed to be in or not opposed to the best interests of the corporation or,
with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that his or her conduct was unlawful.
(b) A corporation may 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 such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit, if such person acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation, provided that no indemnification shall be
made with respect to any claim, issue, or matter as to which such person, has
been adjudged to have been liable to the corporation, unless, and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
II-2
<PAGE>
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding referred to in subsections (a) and (b), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) (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, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in subsections (a) or (b). Such determination
shall be made (1) 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,
or (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders.
(e) Expenses incurred in defending a civil or criminal 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, employee or agent to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
corporation as authorized in this Section.
(f) The indemnification and advancement of expenses provided by or granted
under the other subsections of this Section shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
(g) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of this Section.
(h) If a corporation has paid indemnity or has advanced expenses to a
director, officer, employee or agent, the corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders meeting.
(i) For purposes of this Section, references to "the corporation" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers, and employees or
agents, so that any person who was a director, officer, employee or agent of
such merging corporation, or was serving at the request of such merging
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section with respect to the surviving
corporation as such person would have with respect to such merging corporation
if its separate existence had continued.
(j) For purposes of this Section, reference to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries. A person who acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Section.
(k) The indemnification and advancement of expenses provided by or granted
under this Section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer,
II-3
<PAGE>
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of that person. (Last amended by P.A. 88-43, L. '93, eff. 1-1-
94.)
The Company has purchased $20 of million insurance policies which insures
the Company's directors and officers against liability which they may incur as a
result of actions taken in such capacities. In addition, the Company maintains
fiduciary liability coverage up to a $2 million limit and trust errors and
omissions coverage up to a limit of $5 million.
Item 16. Exhibits and Financial Statement Schedules
(a) The exhibits filed as a part of this Registration Statement are as
follows:
1.1 Form of Underwriting Agreement.*
3.1 Amended and Restated Articles of Incorporation of Wintrust
Financial Corporation (incorporated by reference to Exhibit 3.1
of the Company's Form S-1 Registration Statement (No. 333-18699)
filed with the Securities and Exchange Commission on December 24,
1996).
4.1 Form of Indenture.*
4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit
4.1).*
4.3 Certificate of Trust of Capital Trust dated as of August 14,
1998.*
4.4 Trust Agreement of Capital Trust dated as of August 14, 1998.*
4.5 Form of Amended and Restated Trust Agreement of Capital Trust.*
4.6 Form of Preferred Security Certificate of Capital Trust (included
as an exhibit to Exhibit 4.5).*
4.7 Form of Preferred Securities Guarantee Agreement for Capital
Trust.*
4.8 Form of Agreement as to Expenses and Liabilities (included as an
exhibit to Exhibit 4.5).*
5.1 Opinion of Vedder, Price, Kaufman & Kammholz re: legality of
Subordinated Debentures.*
5.2 Opinion of Richards, Layton & Finger re: validity of Trust
Preferred Securities.*
8.1 Opinion of Vedder, Price, Kaufman & Kammholz re: Tax Matters.*
12.1 Statement re: Computation of Ratios.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in
Exhibit 5.1).*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2).*
24.1 Powers of Attorney (included on Signature Page of Registration
Statement).*
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Indenture.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Amended and Restated Trust Agreement.*
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee under the Preferred Securities Guarantee
Agreement.*
- -----------------
* Previously filed.
II-4
<PAGE>
(b) Financial Statement Schedules -- none required.
Item 17. Undertakings
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' annual report pursuant to Section 13(a) or 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 the registration statement 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.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants 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, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(i) The undersigned Registrants hereby undertake that:
(1) 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 registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) 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.
(j) The undersigned Registrants hereby undertake to file an application for
the purposes of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company 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 Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Lake Forest, Illinois on September 21, 1998.
WINTRUST FINANCIAL CORPORATION
By: /s/ EDWARD J. WEHMER
--------------------
Edward J. Wehmer, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, Wintrust Capital Trust I 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 Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Lake Forest,
Illinois on September 21, 1998.
WINTRUST CAPITAL TRUST I
By: /s/ EDWARD J. WEHMER
--------------------
Edward J. Wehmer
By: /s/ DAVID A. DYKSTRA
--------------------
David A. Dykstra
By: /s/ RANDOLPH M. HIBBEN
----------------------
Randolph M. Hibben
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement on Form S-3 has been signed by the
following persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ EDWARD J. WEHMER Chief Executive Officer September 21, 1998
______________________ and Director
Edward J. Wehmer
/s/ DAVID A. DYKSTRA Chief Financial Officer September 21, 1998
______________________ (and principal accounting officer)
David A. Dykstra
/s/ JOHN S. LILLARD* Chairman September 21, 1998
______________________
John S. Lillard
/s/ ALAN W. ADAMS* Director September 21, 1998
______________________
Alan W. Adams
Director
______________________
Howard D. Adams
/s/ JOSEPH ALAIMO* Director September 21, 1998
______________________
Joseph Alaimo
/s/ PETER CRIST* Director September 21, 1998
______________________
Peter Crist
II-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ BRUCE K. CROWTHER*
- -------------------------------- Director September 21, 1998
Bruce K. Crowther
/s/ MAURICE F. DUNNE, JR*. Director September 21, 1998
- --------------------------------
Maurice F. Dunne, Jr.
/s/ WILLIAM C. GRAFT* Director September 21, 1998
- --------------------------------
William C. Graft
/s/ KATHLEEN R. HORNE* Director September 21, 1998
- --------------------------------
Kathleen R. Horne
/s/ JAMES E. MAHONEY* Director September 21, 1998
- --------------------------------
James E. Mahoney
/s/ JAMES B. MCCARTHY* Director September 21, 1998
- --------------------------------
James B. McCarthy
/s/ MARGUERITE SAVARD MCKENNA* Director September 21, 1998
- --------------------------------
Marguerite Savard McKenna
/s/ ALBIN F. MOSCHNER* Director September 21, 1998
- --------------------------------
Albin F. Moschner
/s/ HOLLIS W. RADEMACHER* Director September 21, 1998
- --------------------------------
Hollis W. Rademacher
/s/ PETER RUSIN* Director September 21, 1998
- --------------------------------
Peter Rusin
/s/ J. CHRISTOPHER REYES* Director September 21, 1998
- --------------------------------
J. Christopher Reyes
/s/ JOHN N. SCHAPER* Director September 21, 1998
- --------------------------------
John N. Schaper
/s/ JOHN J. SCHORNACK* Director September 21, 1998
- --------------------------------
John J. Schornack
/s/ INGRID S. STAFFORD* Director September 21, 1998
- --------------------------------
Ingrid S. Stafford
/s/ JANE R. STEIN* Director September 21, 1998
- --------------------------------
Jane R. Stein
/s/ KATHARINE V. SYLVESTER* Director September 21, 1998
- --------------------------------
Katharine V. Sylvester
/s/ LEMUEL H. TATE, JR.* Director September 21, 1998
- --------------------------------
Lemuel H. Tate, Jr.
/s/ LARRY WRIGHT* Director September 21, 1998
- --------------------------------
Larry Wright
* By: /s/ DAVID A. DYKSTRA
--------------------------
David A. Dykstra
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
1.1 Form of Underwriting Agreement.*
3.1 Amended and Restated Articles of Incorporation of Wintrust Financial
Corporation (incorporated by reference to Exhibit 3.1 of the Company's
Form S-1 Registration Statement (No. 333-18699) filed with the
Securities and Exchange Commission on December 24, 1996).
4.1 Form of Indenture.*
4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1).*
4.3 Certificate of Trust of Capital Trust dated as of August 14, 1998.*
4.4 Trust Agreement of Capital Trust dated as of August 14, 1998.*
4.5 Form of Amended and Restated Trust Agreement of Capital Trust.*
4.6 Form of Preferred Security Certificate of Capital Trust (included as an
exhibit to Exhibit 4.5).*
4.7 Form of Preferred Securities Guarantee Agreement for Capital Trust.*
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit
to Exhibit 4.5).*
5.1 Opinion of Vedder, Price, Kaufman & Kammholz re: legality of
Subordinated Debentures.*
5.2 Opinion of Richards, Layton & Finger re: validity of Trust Preferred
Securities.*
8.1 Opinion of Vedder, Price, Kaufman & Kammholz re: Tax Matters.*
12.1 Statement re: Computation of Ratios.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Vedder, Price, Kaufman & Kammholz (included in Exhibit 5.1).*
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2).*
24.1 Powers of Attorney (included on Signature Page of Registration
Statement).*
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Indenture.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement.*
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Preferred Securities Guarantee Agreement.*
- -----------------
* Previously filed.
II-8
<PAGE>
EXHIBIT 23.1
[KPMG PEAT MARWICK LLP LOGO]
The Board of Directors
Wintrust Financial Corporation
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in Amendment No.2 to the
Registration Statement.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
September 21, 1998
